Β
ExhibitΒ 2.1
EXECUTION COPY
by and among
Xxxx Medical Centers Health Plans, Inc.,
The Stockholders of Xxxx Medical Centers Health Plans, Inc.,
as Sellers,
and
NewQuest, LLC,
as Buyer,
and
AugustΒ 9, 2007
Β
Β
TABLE OF CONTENTS
Β |
Β |
Β |
Β |
Β |
Β |
Β |
SECTION 1. |
Β |
DEFINITIONS |
Β |
Β |
1 |
Β |
1.1. |
Β |
Certain Defined Terms |
Β |
Β |
1 |
Β |
1.2. |
Β |
Other Definitions |
Β |
Β |
7 |
Β |
SECTION 2. |
Β |
PURCHASE AND SALE OF STOCK |
Β |
Β |
9 |
Β |
2.1. |
Β |
Purchase and Sale of Company Stock |
Β |
Β |
9 |
Β |
2.2. |
Β |
Transfer of Stock |
Β |
Β |
9 |
Β |
SECTION 3. |
Β |
PURCHASE PRICE AND ESCROW MATTERS |
Β |
Β |
9 |
Β |
3.1. |
Β |
Purchase Price |
Β |
Β |
9 |
Β |
3.2. |
Β |
Payment of Purchase Price |
Β |
Β |
9 |
Β |
3.3. |
Β |
Adjustment to Purchase Price for Medical Claims Reserve |
Β |
Β |
10 |
Β |
3.4. |
Β |
Additional Xxxx Centers |
Β |
Β |
11 |
Β |
3.5. |
Β |
CMS Payments |
Β |
Β |
12 |
Β |
3.6. |
Β |
Pre-Closing Distribution |
Β |
Β |
13 |
Β |
SECTION 4. |
Β |
CLOSING |
Β |
Β |
14 |
Β |
SECTION 5. |
Β |
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY |
Β |
Β |
14 |
Β |
5.1. |
Β |
Organization and Qualification |
Β |
Β |
14 |
Β |
5.2. |
Β |
Authorization |
Β |
Β |
14 |
Β |
5.3. |
Β |
Capitalization |
Β |
Β |
14 |
Β |
5.4. |
Β |
Real Property |
Β |
Β |
15 |
Β |
5.5. |
Β |
Contracts and Commitments |
Β |
Β |
15 |
Β |
5.6. |
Β |
Permits |
Β |
Β |
17 |
Β |
5.7. |
Β |
Compliance Matters |
Β |
Β |
17 |
Β |
5.8. |
Β |
Governmental Audits and Investigations |
Β |
Β |
18 |
Β |
5.9. |
Β |
No Conflict or Violation; Third Party and Governmental Consents |
Β |
Β |
18 |
Β |
5.10. |
Β |
Financial Statements |
Β |
Β |
19 |
Β |
5.11. |
Β |
Absence of Certain Changes |
Β |
Β |
20 |
Β |
5.12. |
Β |
Litigation |
Β |
Β |
21 |
Β |
5.13. |
Β |
Undisclosed Liabilities |
Β |
Β |
21 |
Β |
5.14. |
Β |
Compliance with Law |
Β |
Β |
21 |
Β |
5.15. |
Β |
Proprietary Rights |
Β |
Β |
22 |
Β |
5.16. |
Β |
Employees |
Β |
Β |
22 |
Β |
5.17. |
Β |
Employee Benefit Plans |
Β |
Β |
22 |
Β |
Β
Β
Β |
Β |
Β |
Β |
Β |
Β |
Β |
5.18. |
Β |
Labor Relations |
Β |
Β |
24 |
Β |
5.19. |
Β |
Environmental, Health, and Safety |
Β |
Β |
24 |
Β |
5.20. |
Β |
Tax Matters |
Β |
Β |
25 |
Β |
5.21. |
Β |
Insurance, Banks, Powers of Attorney |
Β |
Β |
26 |
Β |
5.22. |
Β |
Subsidiaries; Affiliate Transactions |
Β |
Β |
26 |
Β |
5.23. |
Β |
Title to and Condition of Assets |
Β |
Β |
26 |
Β |
5.24. |
Β |
Change in Control Payments |
Β |
Β |
26 |
Β |
5.25. |
Β |
Brokers |
Β |
Β |
26 |
Β |
5.26. |
Β |
Books and Records |
Β |
Β |
27 |
Β |
5.27. |
Β |
Rate Caps and Guarantees |
Β |
Β |
27 |
Β |
5.28. |
Β |
IBNR Report |
Β |
Β |
27 |
Β |
SECTION 6. |
Β |
REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS |
Β |
Β |
27 |
Β |
6.1. |
Β |
Authorization |
Β |
Β |
27 |
Β |
6.2. |
Β |
No Conflict or Violation |
Β |
Β |
27 |
Β |
6.3. |
Β |
Company Stock |
Β |
Β |
28 |
Β |
6.4. |
Β |
Litigation |
Β |
Β |
28 |
Β |
6.5. |
Β |
Investment |
Β |
Β |
28 |
Β |
SECTION 7. |
Β |
REPRESENTATIONS AND WARRANTIES RELATING TO HEALTHSPRING AND BUYER |
Β |
Β |
28 |
Β |
7.1. |
Β |
Organization |
Β |
Β |
28 |
Β |
7.2. |
Β |
Authorization |
Β |
Β |
29 |
Β |
7.3. |
Β |
Capitalization |
Β |
Β |
29 |
Β |
7.4. |
Β |
No Conflict or Violation |
Β |
Β |
29 |
Β |
7.5. |
Β |
Consents |
Β |
Β |
29 |
Β |
7.6. |
Β |
Litigation |
Β |
Β |
29 |
Β |
7.7. |
Β |
Authorization of Shares |
Β |
Β |
29 |
Β |
7.8. |
Β |
SEC Reports |
Β |
Β |
30 |
Β |
7.9. |
Β |
Compliance with Law |
Β |
Β |
30 |
Β |
7.10. |
Β |
Governmental Audits and Investigations |
Β |
Β |
30 |
Β |
7.11. |
Β |
Financing |
Β |
Β |
30 |
Β |
7.12. |
Β |
Brokers |
Β |
Β |
30 |
Β |
7.13. |
Β |
Investment |
Β |
Β |
30 |
Β |
SECTION 8. |
Β |
AGREEMENTS PENDING THE CLOSING |
Β |
Β |
31 |
Β |
8.1. |
Β |
Conduct of the Business Pending the Closing |
Β |
Β |
31 |
Β |
ii
Β
Β |
Β |
Β |
Β |
Β |
Β |
Β |
8.2. |
Β |
Full Access; Diligence Matters |
Β |
Β |
31 |
Β |
8.3. |
Β |
Notices and Consents |
Β |
Β |
32 |
Β |
8.4. |
Β |
Further Assurances |
Β |
Β |
32 |
Β |
8.5. |
Β |
Errors and Omissions Insurance |
Β |
Β |
32 |
Β |
8.6. |
Β |
Financial Statements |
Β |
Β |
32 |
Β |
8.7. |
Β |
Notice of Investigations, Audits, Status of Approvals and Filings, etc |
Β |
Β |
32 |
Β |
8.8. |
Β |
Employee Matters |
Β |
Β |
33 |
Β |
8.9. |
Β |
Tax Matters |
Β |
Β |
33 |
Β |
8.10. |
Β |
Exclusivity |
Β |
Β |
34 |
Β |
8.11. |
Β |
Notice of Developments |
Β |
Β |
34 |
Β |
SECTION 9. |
Β |
OTHER COVENANTS AND AGREEMENTS |
Β |
Β |
34 |
Β |
9.1. |
Β |
Further Action |
Β |
Β |
34 |
Β |
9.2. |
Β |
Expenses |
Β |
Β |
34 |
Β |
9.3. |
Β |
Publicity |
Β |
Β |
35 |
Β |
9.4. |
Β |
Tax Matters |
Β |
Β |
35 |
Β |
9.5. |
Β |
Non-Compete; Non-Solicitation |
Β |
Β |
36 |
Β |
9.6. |
Β |
Transition |
Β |
Β |
38 |
Β |
9.7. |
Β |
Disclosure of Confidential Information |
Β |
Β |
38 |
Β |
9.8. |
Β |
Access to Information Following Closing |
Β |
Β |
38 |
Β |
9.9. |
Β |
Certificates Representing Shares |
Β |
Β |
38 |
Β |
9.10. |
Β |
Directorship |
Β |
Β |
39 |
Β |
9.11. |
Β |
Employee Matters |
Β |
Β |
39 |
Β |
SECTION 10. |
Β |
CONDITIONS TO CLOSING |
Β |
Β |
40 |
Β |
10.1. |
Β |
Conditions to Obligations of Each Party |
Β |
Β |
40 |
Β |
10.2. |
Β |
Additional Conditions to Obligations of HealthSpring and Buyer |
Β |
Β |
40 |
Β |
10.3. |
Β |
Additional Conditions to Obligations of Sellers |
Β |
Β |
43 |
Β |
10.4. |
Β |
Extension of Closing; Deposit Release Condition |
Β |
Β |
44 |
Β |
SECTION 11. |
Β |
INDEMNIFICATION |
Β |
Β |
45 |
Β |
11.1. |
Β |
Indemnification by the Parties |
Β |
Β |
45 |
Β |
11.2. |
Β |
Procedure for Indemnification Claims β Third Party Claims |
Β |
Β |
46 |
Β |
11.3. |
Β |
Effect of Waiver of Closing Condition |
Β |
Β |
48 |
Β |
11.4. |
Β |
Additional Limitations on Indemnification |
Β |
Β |
48 |
Β |
11.5. |
Β |
Manner of Payment |
Β |
Β |
49 |
Β |
11.6. |
Β |
Survival of Obligations |
Β |
Β |
49 |
Β |
iii
Β
Β |
Β |
Β |
Β |
Β |
Β |
Β |
11.7. |
Β |
Survival of Claims |
Β |
Β |
50 |
Β |
11.8. |
Β |
Representations and Warranties |
Β |
Β |
50 |
Β |
11.9. |
Β |
Certain Waivers; etc |
Β |
Β |
50 |
Β |
11.10. |
Β |
Exclusive Remedy |
Β |
Β |
51 |
Β |
11.11. |
Β |
Adjustment to Purchase Price |
Β |
Β |
51 |
Β |
11.12. |
Β |
Resolution of Disputes Regarding Indemnification |
Β |
Β |
51 |
Β |
SECTION 12. |
Β |
TERMINATION |
Β |
Β |
52 |
Β |
12.1. |
Β |
Right to Terminate |
Β |
Β |
52 |
Β |
12.2. |
Β |
Effect of Termination |
Β |
Β |
52 |
Β |
SECTION 13. |
Β |
MISCELLANEOUS |
Β |
Β |
53 |
Β |
13.1. |
Β |
Notices |
Β |
Β |
53 |
Β |
13.2. |
Β |
Binding Effect; Benefits |
Β |
Β |
54 |
Β |
13.3. |
Β |
Entire Agreement |
Β |
Β |
54 |
Β |
13.4. |
Β |
Governing Law |
Β |
Β |
55 |
Β |
13.5. |
Β |
Jurisdiction; Jury Trial Waiver |
Β |
Β |
55 |
Β |
13.6. |
Β |
Counterparts |
Β |
Β |
55 |
Β |
13.7. |
Β |
Waivers |
Β |
Β |
55 |
Β |
13.8. |
Β |
Survival |
Β |
Β |
56 |
Β |
13.9. |
Β |
Schedules and Exhibits |
Β |
Β |
56 |
Β |
13.10. |
Β |
Interest |
Β |
Β |
56 |
Β |
13.11. |
Β |
Severability |
Β |
Β |
56 |
Β |
13.12. |
Β |
Assignability |
Β |
Β |
56 |
Β |
13.13. |
Β |
Participation in Drafting |
Β |
Β |
57 |
Β |
13.14. |
Β |
Interpretation |
Β |
Β |
57 |
Β |
iv
Β
Table of Schedules and Exhibits
Β |
Β |
Β |
Schedules |
Β |
Β |
Β |
3.2
|
Β |
Allocation of Shares |
5.2
|
Β |
Authorization |
5.3
|
Β |
Capitalization |
5.4
|
Β |
Real Property |
5.5
|
Β |
Contracts and Commitments |
5.5-A
|
Β |
Provider List |
5.5-B
|
Β |
Member List |
5.6
|
Β |
Permits |
5.7
|
Β |
Compliance Matters |
5.8
|
Β |
Governmental Audits and Investigation |
5.9
|
Β |
No Conflict or Violation: Third Party and Governmental Consents |
5.10
|
Β |
Financial Statements |
5.11
|
Β |
Absence of Certain Changes |
5.12
|
Β |
Litigation |
5.13
|
Β |
Undisclosed Liabilities |
5.14
|
Β |
Compliance with Law |
5.15
|
Β |
Proprietary Rights |
5.16
|
Β |
Employees |
5.17
|
Β |
Employee Benefit Plans |
5.20
|
Β |
Tax Matters |
5.21
|
Β |
Insurance, Banks, Powers of Attorney |
5.22
|
Β |
Subsidiaries; Affiliate Transactions |
5.23
|
Β |
Title to and Condition of Assets |
5.26
|
Β |
Books and Records |
5.27
|
Β |
Rate Caps and Guarantees |
5.28
|
Β |
IBNR Report |
6.3
|
Β |
Company Stock |
7.5
|
Β |
Buyer Consents |
7.8
|
Β |
SEC Reports |
8.1
|
Β |
Conduct of the Business Prior to Closing |
9.5
|
Β |
Allocation of Purchase Price |
Β |
Β |
Β |
Exhibits |
Β |
Β |
Β |
A
|
Β |
Deposit Agreement |
10.2(ii)
|
Β |
Medical Services Agreement |
10.2(iii)
|
Β |
Employment Agreement |
10.2(iv)
|
Β |
License Agreement |
10.2(v)
|
Β |
Office Space Agreement |
10.2(vii)
|
Β |
Registration Rights Agreement |
10.2(viii)
|
Β |
Escrow Agreement |
v
Β
Β Β Β Β Β
THIS STOCK PURCHASE AGREEMENT (the βAgreementβ), dated as of AugustΒ 9, 2007 (the βSigning
Dateβ), is by and among Xxxx Medical Centers Health Plans, Inc., a Florida corporation (the
βCompanyβ), the stockholders of the Company listed on the signature pages to this Agreement
(collectively the βSellersβ and each individually a βSellerβ),
HealthSpring, Inc., a
Delaware
corporation (βHealthSpringβ), and NewQuest, LLC, a Texas limited liability company and wholly-owned
subsidiary of HealthSpring (βBuyerβ). For purposes of this Agreement, the βPartiesβ shall mean the
Sellers and the Company, on the one hand, and HealthSpring and Buyer, on the other hand (each
individually a βPartyβ).
Β Β Β Β Β WHEREAS, the Company is a health maintenance organization operating pursuant to SectionΒ 641.21
of the Florida Statutes and currently conducts business as a Medicare health maintenance
organization;
Β Β Β Β Β WHEREAS, the Sellers own, beneficially and of record, all of the issued and outstanding
capital stock of the Company (the βCompany Stockβ);
Β Β Β Β Β WHEREAS, the Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer, all
of the Company Stock, on the terms and subject to the conditions set forth herein;
Β Β Β Β Β WHEREAS, as a condition and material inducement to each Partyβs willingness to enter into this
Agreement and consummate the transactions contemplated hereby, the applicable parties shall execute
and deliver the Medical Services Agreement and certain other agreements contemplated hereby at the
Closing; and
Β Β Β Β Β WHEREAS, each of HealthSpring, the Sellers and the Escrow Agent have executed and delivered
that certain Deposit Escrow Agreement, dated as of the Signing Date, in the form attached hereto as
ExhibitΒ A (the βDeposit Agreementβ), and HealthSpring has delivered to the Escrow Agent the
Financing Deposit, in each case on the date hereof.
Β Β Β Β Β NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, representations,
warranties, and agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, and intending to be legally bound hereby,
the Parties agree as follows:
SECTION 1.
DEFINITIONS
Β Β Β Β Β 1.1. Certain Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or
plural, depending upon the reference.
Β Β Β Β Β βAccredited Investorβ has the meaning set forth in RegulationΒ D promulgated under the
Securities Act.
Β Β Β Β Β βAffiliateβ of any particular Person means any other Person controlling, controlled by or
under common control with such Person. For purposes of this definition, βcontrolβ (including the
terms βcontrolling,β βcontrolled byβ and βunder common control withβ) means the possession, direct
or indirect, of the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or otherwise.
Β
Β
Β Β Β Β Β βAffiliated Groupβ means an affiliated group as defined in Section 1504(a) of the Code or any
similar provision of state or local Law.
Β Β Β Β Β βAudited Financial Statementsβ means the GAAP Audited Financial Statements and the Statutory
Audited Financial Statements.
Β Β Β Β Β βClaimβ means any claim for indemnification or to be held harmless by an Indemnitee pursuant
to SectionΒ 11.
Β Β Β Β Β βCMSβ means the Centers for Medicare and Medicaid Services.
Β Β Β Β Β βCodeβ means the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder, and all citations to the Code, or to the treasury regulations promulgated thereunder,
shall include any amendments or any substitute or successor provisions thereto; provided, however,
that any references to the Code in any representation or warranty in this Agreement shall be deemed
to refer to the Code as it existed on the date on which such representation or warranty is made or
deemed to have been made, as applicable.
Β Β Β Β Β βCompany MACβ means any event, change, circumstance, effect or development that, either
individually or in the aggregate, is or has been, during the Pre-Closing Period, materially adverse
to the Companyβs business, operations, assets, liabilities, financial condition, ability to deliver
services, operating results, cash flow or net worth or employee, plan member, provider or supplier
relations; provided, that, to the extent such events, changes, circumstances, effects or
developments are quantifiable, the same has impacted the Company during the Pre-Closing Period,
either individually or in the aggregate, by a dollar amount in excess of Twelve Million Dollars
($12,000,000); provided, further that the foregoing shall be determined excluding any such event,
change, circumstance, effect or development arising out of or relating to: (i)Β the public
announcement or pendency of the transactions contemplated by this Agreement; (ii)Β changes to
capitation rates or premium payments paid by CMS to Medicare Advantage health plans, but not
changes that affect such Party in any materially more adverse manner or degree than health
maintenance organizations generally operating in the geographic area in which such Party operates,
(iii)Β changes to business or economic conditions generally affecting the national, regional or
local business or economic markets as a whole or the market area or industry of such Party, in each
case not affecting such Party in any materially more adverse manner or degree than health
maintenance organizations generally operating in the geographic area in which such Party operates,
(iv)Β any legislative action or change in Law generally affecting health maintenance organizations
and not affecting such Party in a materially more adverse manner or degree from health maintenance
organizations generally operating in the geographic area in which such Party operates, (v)Β changes
to the provisions of GAAP or the accounting practices prescribed or permitted by any state
insurance department applicable to such Party, or (vi)Β any action taken or not taken at the express
direction of the other Party or otherwise taken expressly in accordance with this Agreement.
Β Β Β Β Β βConfidential Informationβ means, with respect to each of the Buyer Parties (constituting,
individually and collectively, one Party for purposes of this definition) and each of the Sellers
and Xxxx Medical Centers (constituting, individually and collectively, one Party for purposes of
this definition) all information of such Party of a confidential or proprietary nature (whether or
not specifically labeled or identified as βconfidentialβ), in any form or medium, that relates to
or is used in connection with the business, operations, products, financial condition or services
of such Party or its respective suppliers, providers, plan members, patients, customers,
Affiliates, independent contractors or other business relations. Confidential Information
includes, but is not limited to, the following: (i)Β internal business and financial information
(including information relating to strategic and staffing plans and practices,
2
Β
business, finances, training, marketing, promotional and sales plans and practices, cost, rate
and pricing structures and accounting and business methods); (ii)Β identities of, individual
requirements of, specific contractual arrangements with, and information about, such Partyβs and
its Affiliatesβ suppliers, providers, plan members, independent contractors or other business
relations and their confidential information; (iii)Β trade secrets, know-how, compilations of data
and analyses, techniques, systems, formulae, research, records, reports, manuals, documentation,
models, data and data bases relating thereto; (iv)Β inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports and all similar or related information
(whether or not patentable); and (v)Β other information that would constitute Proprietary Rights.
Notwithstanding the foregoing, the term βConfidential Informationβ shall not include information
that (x)Β is or becomes generally known or available to the public through no action or omission on
the part of the disclosing Party or any of its respective officers, directors or Affiliates; (y)
becomes known to the disclosing Party (or one of its Affiliates) from and after the Effective Date
without any restriction on disclosure, which has not been disclosed to the disclosing Party in
violation of any agreement of which the disclosing Party has Knowledge; or (z)Β is required to be
disclosed by Law or Order or any rule or regulation of the NYSE, provided, however, that (1)Β such
disclosure shall only be made to those Persons and to the extent required by such Law or Order
based upon the advice of such Partyβs counsel and (2)Β notice of said requirement shall have been
given to the other Party promptly after the disclosing Party becomes aware that the disclosure is
legally required. The disclosing Party shall, if so requested and at the sole cost and expense of
the other Party, cooperate with the other Party to obtain an appropriate protective order with
respect to the Confidential Information. For purposes of this definition, references to the
βdisclosing Partyβ means the Party that has disclosed the other Partyβs Confidential Information.
Β Β Β Β Β βDamagesβ means the dollar amount of any and all liabilities, damages, losses, claims, Taxes,
deficiencies, demands, settlements, costs or expenses (including interest computed at the
Applicable Rate), fines, penalties, reasonable attorneysβ fees and expenses, investigation
expenses, court costs and fees of expert witnesses), in each case, that is sustained, suffered or
incurred by a Party, but excluding any exemplary, punitive or special damages, other than awards of
exemplary, punitive or special damages paid or payable by any Party to a third party under a third
party claim.
Β Β Β Β Β βDisclosure Scheduleβ means the schedules executed and delivered by Company and Sellers to
HealthSpring and Buyer that set forth the exceptions to the representations and warranties
contained in SectionΒ 5 and SectionΒ 6 hereof and certain other information called for by this
Agreement. Unless otherwise specified, each reference in this Agreement to any schedule designated
by a letter or number is a reference to the schedule designated by such letter or number which is
included in the Disclosure Schedule, except that ScheduleΒ 3.2, ScheduleΒ 7.5,
ScheduleΒ 8.1 and the Indemnification Schedule shall not be part of the Disclosure Schedule.
Β Β Β Β Β βDollarsβ or β$β means U.S. dollars.
Β Β Β Β Β βEmployee Benefit Planβ means (a)Β any βemployee benefit planβ (as defined in SectionΒ 3(3) of
ERISA), whether a single employer, a multiple employer or a multiemployer plan, for the benefit of
employees or former employees, contractual employees (or any dependent or beneficiary thereof) or
(b)Β any other plan, policy, program, practice or arrangement providing compensation (other than
salary and wages) or benefits to any employee or former employee (or any dependent or other
beneficiary thereof), including, without limitation, any cafeteria, incentive, bonus, vacation,
paid leave, holiday, severance, health, life, disability, death, deferred compensation, stock
option or purchase or other similar benefit, whether written or unwritten.
Β Β Β Β Β βERISAβ means the Employee Retirement Income Security Act of 1974, as amended.
3
Β
Β Β Β Β Β βERISA Affiliatesβ means each entity that is treated as a single employer with the Company for
purposes of SectionΒ 414 of the Code.
Β Β Β Β Β βEscrow Agentβ means SunTrust Bank, Miami Office.
Β Β Β Β Β βGAAPβ means accounting principles generally accepted in the United States of America.
Β Β Β Β Β βGAAP Audited Financial Statementsβ means the restated audited balance sheets of the Company
as of DecemberΒ 31, 2006 and 2005 and the related restated audited statements of operations,
restated statements of stockholderβs equity and restated statements of cash flows of the Company
for each of the two (2)Β years ended DecemberΒ 31, 2006 and 2005 prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby.
Β Β Β Β Β βGovernmental Authorityβ means any U.S. federal, state or local government, governmental
agency, regulatory body, court, tribunal, or other U.S. federal, state or local governmental
authority of any nature.
Β Β Β Β Β βHealth Care Lawβ means all Laws relating to Medicare health maintenance organizations and
other health care matters, in each case applicable to the Company.
Β Β Β Β Β βHealthSpring Stockβ means the common stock, par value $0.01 per share, of HealthSpring.
Β Β Β Β Β βHMO Statuteβ means PartΒ I and PartΒ III, ChapterΒ 641, of the Florida Statutes and the
applicable published rules and regulations promulgated thereunder, as amended from time to time.
Β Β Β Β Β βHSR Actβ means Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
Β Β Β Β Β βImmediate Family Memberβ means, with respect to the Sellers, such Sellerβs spouse, parents,
children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than domestic employees) who shares such personβs home.
Β Β Β Β Β βIndebtednessβ means all outstanding obligations for borrowed money or in respect of loans,
including all accrued interest, prepayment premiums or penalties related to any of the repayment of
such Indebtedness, but specifically excluding all capital and other leases for equipment and other
personal property.
Β Β Β Β Β βInterim Balance Sheetβ means the restated unaudited balance sheet of the Company as of the
Interim Financial Statement Date.
Β Β Β Β Β βInterim Financial Statement Dateβ means JuneΒ 30, 2007.
Β Β Β Β Β βInterim Financial Statementsβ means the Interim Balance Sheet and the related restated
unaudited statements of operations of the Company for the period then ended.
Β Β Β Β Β βKnowledgeβ means, when any representation or warranty is based upon a Partyβs knowledge, (i)
with respect to Sellers, their actual knowledge, (ii)Β with respect to the Company, the actual
knowledge of any of the Xxxxxxx, Xxx Xxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxx Xxxxxxxxx, Xxxxx Xxxxxx,
Xxxxxx Xxxxx, Xxxxx Xxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxx Xxxxxx Xxxxxxx
and Xxxxx Xxxxxxxxx, and (iii)Β with respect to HealthSpring and Buyer, the actual knowledge of any
of Xxxxxxx X.
4
Β
Xxxxxx, Xxxxxx X. Coil, Xxxxx X. XxXxxxxx, Xxxxx X. Xxxxx, Xx., Xxxx X. Xxxxxxx, X. Xxxxxx
Xxxxxx, J. Xxxxxxxx Xxxx and Xxxxxx X. Xxxxx.
Β Β Β Β Β βLawβ means any U.S. federal, state or local law (including principles of common law),
statute, rule, regulation, constitution, treaty, ordinance or other provisions having the force or
effect of law.
Β Β Β Β Β βXxxx Medical Centersβ means Xxxx Medical Centers, Inc., a Florida corporation.
Β Β Β Β Β βLienβ means any charge, claim, community property interest, equitable interest, lien
(statutory or other), encumbrance, option, pledge, hypothecation, assignment, security interest,
right of first refusal, or similar restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of ownership; provided,
however, that Liens shall not include restrictions generally imposed by applicable Law that does
not affect the Company Stock or the Companyβs assets in a materially more adverse manner or degree
than other Persons.
Β Β Β Β Β βMaterial Adverse Effectβ means, with respect to HealthSpring and Buyer, on the one hand, and
the Company and Sellers, on the other hand, any untruth or error in any representation or warranty
of such Party (without giving effect to any materiality qualifications or any disclosure pursuant
to the first sentence of SectionΒ 8.11) or any breach or failure to fully perform any covenant or
agreement of such Party hereunder (without regard to any disclosure pursuant to the first sentence
of SectionΒ 8.11) that would reasonably be expected to result in Damages to the other Party in
excess of Twelve Million Dollars ($12,000,000); excluding any such untruth, error, breach or
failure arising out of or relating to: (i)Β the public announcement or pendency of the transactions
contemplated by this Agreement; (ii)Β changes to capitation rates or premium payments paid by CMS to
Medicare Advantage health plans, but not changes that affect such Party in any materially more
adverse manner or degree than health maintenance organizations generally operating in the
geographic area in which such Party operates, (iii)Β changes to business or economic conditions
generally affecting the national, regional or local business or economic markets as a whole or the
market area or industry of such Party, in each case not affecting such Party in any materially more
adverse manner or degree than health maintenance organizations generally operating in the
geographic area in which such Party operates, (iv)Β any legislative action or change in Law
generally affecting health maintenance organizations and not affecting such Party in a materially
more adverse manner or degree from health maintenance organizations generally operating in the
geographic area in which such Party operates, (v)Β changes to the provisions of GAAP or the
accounting practices prescribed or permitted by any state insurance department applicable to such
Party, or (vi)Β any action taken or not taken at the express direction of the other Party or
otherwise taken expressly in accordance with this Agreement.
Β Β Β Β Β βMedical Claimsβ means, with respect to any measurement period, the aggregate dollar amount
incurred by the Company with respect to medical services provided to the Companyβs members during
such period.
Β Β Β Β Β βNYSEβ means the New York Stock Exchange.
Β Β Β Β Β βOrderβ means any award, decision, injunction, judgment, order, writ, decree, ruling, subpoena
or verdict entered, issued, made or rendered by any court or other Governmental Authority or by any
arbitrator.
Β Β Β Β Β βOrdinary Course of Businessβ means the ordinary course of business consistent with past
custom and practice.
5
Β
Β Β Β Β Β βPermitsβ means all licenses, permits, franchises, approvals, authorizations, consents or
orders of, or filings with, any Governmental Authority necessary for the conduct of, or relating to
the operation of, the Company.
Β Β Β Β Β βPermitted Liensβ means (i)Β materialmenβs, mechanicsβ, carriersβ, workmenβs, repairmenβs or
other like Liens arising in the Ordinary Course of Business for amounts not yet due or which are
being contested in good faith by appropriate proceedings, (ii)Β Liens for current Taxes or special
assessments not yet due or any Taxes being contested in good faith by appropriate proceedings,
(iii)Β Liens, easements, rights of way, encroachments, restrictions or similar conditions affecting
or burdening the Companyβs assets which individually or in the aggregate do not detract materially
from the use or value of the assets, and (iv)Β purchase money Liens and Liens securing rental
payments under capital or equipment lease arrangements.
Β Β Β Β Β βPersonβ means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated association, corporation, limited liability company, entity or governmental entity
(whether federal, state, county, city or otherwise and including any instrumentality, division,
agency or department thereof).
Β Β Β Β Β βProprietary Rightsβ means all (i)Β patents, patent applications, patent disclosures and
inventions, (ii)Β Internet domain names, trademarks, service marks, trade dress, trade names, logos
and corporate names and registrations and applications for registration thereof together with all
of the goodwill associated therewith, (iii)Β copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof, (iv)Β computer
software, data, databases and documentation thereof, and (v)Β other intellectual property rights.
Β Β Β Β Β βSECβ means the United States Securities and Exchange Commission.
Β Β Β Β Β βSecurities Actβ means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Β Β Β Β Β βSecurities Exchange Actβ means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Β Β Β Β Β βStatutory Audited Financial Statementsβ means the restated audited balance sheets of the
Company as of DecemberΒ 31, 2006 and 2005 and the related restated audited statements of operations,
restated statements of capital and unassigned surplus (deficit)Β and restated statements of cash
flows of the Company for each of the two (2)Β years ended DecemberΒ 31, 2006 and 2005 prepared in
conformity with accounting practices prescribed or permitted by the Florida Office of Insurance
Regulation applied on a consistent basis throughout the periods covered thereby.
Β Β Β Β Β βStatutory Net Worthβ means the excess, if any, of the value of the Companyβs aggregate cash
and cash equivalents as of the Effective Date over the Companyβs total liabilities (including the
Medical Claims Reserve) as of the Effective Date, as reflected on the statutory financial
statements of the Company for the period ended on the day prior to the Effective Date (as adjusted,
if necessary, to exclude the early receipt of the CMS payment for the period immediately following
the Effective Date).
Β Β Β Β Β βTaxβ or βTaxesβ means any federal, state, local or foreign income, gross receipts, franchise,
estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental,
customs, duties, real property, personal property, capital stock, social security, unemployment,
disability, payroll,
6
Β
license, employee or other withholding, or other tax, of any kind whatsoever, including any
interest, penalties or additions to taxes imposed by any Governmental Authorities.
Β Β Β Β Β βTransaction Documentβ means each, and βTransaction Documentsβ means, collectively, any two or
more of any of the Sellers Transaction Documents, the Company Transaction Documents and/or the
HealthSpring Transaction Documents.
Β Β Β Β Β 1.2. Other Definitions. The following terms are defined in the Sections hereof listed
below:
Β |
Β |
Β |
Defined Term |
Β |
Section |
Β |
Β |
Β |
βActionsβ
|
Β |
5.12 |
βActuaryβ
|
Β |
3.3(iii) |
βAdditional Xxxx Centersβ
|
Β |
3.4(i) |
βAgreementβ
|
Β |
Preamble |
βApplicable Rateβ
|
Β |
13.10 |
βArbitratorβ
|
Β |
11.12 |
βBuyerβ
|
Β |
Preamble |
βBuyer Partiesβ
|
Β |
11.1(i) |
βCash Purchase Priceβ
|
Β |
3.1 |
βChange in Control Agreementβ
|
Β |
5.17(xi) |
βClosingβ
|
Β |
4 |
βClosing Dateβ
|
Β |
4 |
βClosing Deadlineβ
|
Β |
12.1(iv) |
βCompanyβ
|
Β |
Preamble |
βCompany Employee Benefit Planβ
|
Β |
5.17(i) |
βCompany Stockβ
|
Β |
Preamble |
βCompany Transaction Documentsβ
|
Β |
5.2 |
βCompanyβs 18 Month Loss Experienceβ
|
Β |
3.3(ii) |
βCompanyβs 180 Day Loss Experienceβ
|
Β |
3.3(i) |
βConfidentiality Agreementβ
|
Β |
8.2 |
βConsiderationβ
|
Β |
9.5(vii) |
βDisclosing Partyβ
|
Β |
9.7 |
βDistributionβ
|
Β |
3.6 |
βEffective Dateβ
|
Β |
4 |
βEmployeesβ
|
Β |
5.16 |
βEmployment Agreementβ
|
Β |
10.2(iii) |
βEnvironmental and Safety Requirementsβ
|
Β |
5.19 |
βEscrow Agreementβ
|
Β |
10.2(viii) |
βEscrow Accountβ
|
Β |
3.2(i) |
βFinancing Depositβ
|
Β |
10.4 |
βDeposit Agreementβ
|
Β |
Preamble |
βDeposit Release Conditionβ
|
Β |
10.4 |
βHealthSpringβ
|
Β |
Preamble |
βHealthSpring SEC Reportsβ
|
Β |
7.8 |
βHealthSpring Transaction Documentsβ
|
Β |
7.2 |
βHIPAAβ
|
Β |
5.7(ii) |
βIndemnification Capβ
|
Β |
11.1(i) |
βIndemnification Thresholdβ
|
Β |
11.1(i) |
βIndemniteeβ
|
Β |
11.2(i) |
7
Β
Β |
Β |
Β |
Defined Term |
Β |
Section |
Β |
Β |
Β |
βIndemnitorβ
|
Β |
11.2(i) |
βXxxxβ
|
Β |
9.10 |
βLicense Agreementβ
|
Β |
10.2(iv) |
βLicensed Proprietary Rightsβ
|
Β |
5.15 |
βMaterial Contractsβ
|
Β |
5.5 |
βMaterial Permitsβ
|
Β |
5.6 |
βMedical Claims Reserveβ
|
Β |
3.3(i) |
βMedical Services Agreementβ
|
Β |
10.2(ii) |
βMember Listβ
|
Β |
5.5 |
βNewQuest Management
|
Β |
10.2(iii) |
βOffice Space Agreementβ
|
Β |
10.2(v) |
βPartiesβ
|
Β |
Preamble |
βPermitted Defense Assumption Refusalβ
|
Β |
11.2(ii) |
βPre-Closing Periodβ
|
Β |
8.1 |
βPreferred Stockβ
|
Β |
7.3 |
βPurchase Priceβ
|
Β |
3.1 |
βReal Property Leaseβ
|
Β |
5.4(ii) |
βReceiving Partyβ
|
Β |
9.7 |
βRegistration Rights Agreementβ
|
Β |
10.2(vii) |
βRestrictive Covenantsβ
|
Β |
9.5(iv) |
βSellersβ
|
Β |
Preamble |
βSeller Partiesβ
|
Β |
11.1(ii) |
βSellers Transaction Documentsβ
|
Β |
6.1 |
βShare Release Conditionβ
|
Β |
3.4(ii) |
βShare Release Deadlineβ
|
Β |
3.4(ii) |
βSharesβ
|
Β |
3.1 |
βSigning Dateβ
|
Β |
Preamble |
βStatutory Amountβ
|
Β |
3.6 |
8
Β
SECTION 2.
PURCHASE AND SALE OF STOCK
Β Β Β Β Β 2.1. Purchase and Sale of Company Stock. Upon the terms and subject to the conditions
contained herein, at the Closing, Sellers shall sell, convey, transfer, assign and deliver to Buyer
all of their right, title and interest in the Company Stock, and Buyer will purchase and acquire
the Company Stock from Sellers.
Β Β Β Β Β 2.2. Transfer of Stock. At the Closing, the Company Stock shall be transferred by
Sellers to Buyer free and clear of any and all Liens.
SECTION 3.
PURCHASE PRICE AND ESCROW MATTERS
Β Β Β Β Β 3.1. Purchase Price. Subject to the adjustments set forth in SectionsΒ 3.3 and 3.4 and
the fulfillment or waiver of the conditions set forth in SectionΒ 10, HealthSpring and Buyer agree
to pay or cause to be paid to Sellers, at Closing, a purchase price for the Company Stock
consisting of (i)Β Three Hundred Fifty-Five Million Dollars ($355,000,000) in cash (the βCash
Purchase Priceβ) and (ii)Β 2,666,667 shares of HealthSpring Stock (the βSharesβ) (collectively, the
βPurchase Priceβ). In the event that, at any time from and after the Signing Date and prior to the
Effective Date, (I)Β the outstanding shares of HealthSpring Stock are changed into a different
number or kind of shares, securities or other consideration by reason of any reorganization,
reclassification, recapitalization, stock split, merger, consolidation, share exchange,
combination, or any similar transaction, and/or (II)Β any dividend payable in stock or other
securities shall be declared thereon with a record date from and after the Signing Date and prior
to the Effective Date, then the Shares shall be equitably adjusted to provide the Sellers the same
economic effect as contemplated by this Agreement prior to such reclassification, reorganization,
recapitalization, stock split, merger, consolidation, share exchange, combination, transaction or
dividend, and any and all securities or other consideration that may be issued, paid or delivered
in respect of, in exchange for, or in substitution for the Shares, shall be deemed to constitute
Shares for all purposes hereunder. For all purposes under this Agreement, the Shares shall be
issued to and owned by the Sellers effective as of the Effective Date.
Β Β Β Β Β 3.2. Payment of Purchase Price. On the day of Closing, HealthSpring and Buyer shall
deliver the Purchase Price as follows:
Β Β Β Β Β (i) HealthSpring shall, effective as of the Effective Date, (A)Β issue the Shares to and
in the record name of the Sellers in accordance with ScheduleΒ 3.2, (B)Β cause
HealthSpringβs transfer agent to appropriately reflect such issuance in HealthSpringβs stock
records such that, from and after the Effective Date, the Sellers will own the Shares
beneficially and of record for all purposes in accordance with ScheduleΒ 3.2, (C)
cause its transfer agent to prepare certificates representing the Shares prepared in
accordance with ScheduleΒ 3.2, and (D)Β deposit the certificates representing the
Shares with the Escrow Agent to fund the escrow account under the Escrow Agreement (the
βEscrow Accountβ);
Β Β Β Β Β (ii) Buyer shall pay all Indebtedness of the Company, if any, as of the Closing Date in
accordance with the applicable payoff letters described in SectionΒ 10.2(ix)(i), unless the
Sellers shall have delivered to Buyer evidence that all such Indebtedness has been paid in
full prior to Closing;
9
Β
Β Β Β Β Β (iii) Buyer shall pay all unpaid amounts owing or to be owed by the Company to the
Companyβs and Sellersβ representatives and advisors in connection with the transactions
contemplated by this Agreement, if any, in accordance with the applicable payoff letters
described in SectionΒ 10.2(ix)(h), unless the Sellers shall have delivered to Buyer evidence
that all such unpaid amounts have been paid in full prior to Closing; and
Β Β Β Β Β (iv) HealthSpring shall cause Buyer to pay to the Sellers by wire transfer of
immediately available funds according to instructions furnished by Sellers not later than
two (2)Β business days prior to Closing an amount equal to the difference between (A)Β the
Cash Purchase Price and (B)Β the amounts paid by Buyer pursuant to subsections (ii)Β and (iii)
above, if any.
Β Β Β Β Β The Shares will be issued to the Sellers on a pro rata basis as described on ScheduleΒ 3.2.
Β Β Β Β Β 3.3. Adjustment to Purchase Price for Medical Claims Reserve.
Β Β Β Β Β (i) On or prior to three business (3)Β days prior to the Closing Date, the Company shall
prepare and deliver to Buyer a schedule setting forth in detail the Companyβs good faith
best estimate of the Companyβs Medical Claims incurred but not reported, and Medical Claims
incurred and reported but pending or otherwise unpaid as of the Effective Date based upon
the Companyβs claims experience and sound accounting and actuarial practices, as applicable,
consistently applied (such estimate is referred to herein as the βMedical Claims Reserveβ).
Within 210Β days following the Effective Date, Buyer shall cause the Company to prepare and
deliver to Sellers a reconciliation of the Medical Claims Reserve to the aggregate dollar
amount (such aggregate dollar amount, the βCompanyβs 180 Day Loss Experienceβ) of: (a)Β all
Medical Claims incurred before the Effective Date that are paid during the 180Β day period
immediately following the Effective Date; (b)Β the reserve estimate for Medical Claims
incurred prior to the Effective Date but not reported as of the end of such 180Β day period;
and (c)Β the reserve estimate for Medical Claims incurred prior to the Effective Date and
reported but pending or otherwise unpaid as of the end of such 180Β day period. In the event
the Companyβs 180 Day Loss Experience is less than the Medical Claims Reserve, Buyer shall
pay the difference to Sellers in cash or by wire transfer of immediately available funds
within five (5)Β business days following final determination of such reconciliation (as
described below). In the event the Companyβs 180 Day Loss Experience exceeds the Medical
Claims Reserve, Sellers shall pay the difference to Buyer in cash or by wire transfer of
immediately available funds within five (5)Β business days following final determination of
such reconciliation (as described below).
Β Β Β Β Β (ii) Within 19Β months following the Effective Date, Buyer shall cause the Company to
prepare a second reconciliation of the Medical Claims Reserve to the aggregate dollar amount
(such aggregate dollar amount, the βCompanyβs 18 Month Loss Experienceβ) of: (a)Β all Medical
Claims incurred before the Effective Date and paid during the 18Β month period immediately
following the Effective Date; and (b)Β the reserve estimate for Medical Claims incurred prior
to the Effective Date and reported but that remain pending or otherwise unpaid as of the end
of such 18Β month period. For the avoidance of doubt, the Companyβs 18 Month Loss Experience
will not include any reserve estimate for Medical Claims incurred prior to the Effective
Date but not reported. In the event, as finally determined, (A)Β the Companyβs 18 Month Loss
Experience, plus the amount of any payment by Buyer to Sellers as described in (i)Β above or
less the amount of any payment by the Sellers to Buyer as described in (i)Β above, as
applicable, is less than (B)Β the Medical Claims Reserve, Buyer shall pay the difference to
Sellers in cash or via wire transfer of immediately available funds within five (5)Β business
days following final determination of such reconciliation. In the event, as finally
determined, (A)Β the Companyβs 18 Month Loss
10
Β
Experience, plus the amount of any payment by Buyer to Sellers as described in (i)
above or less the amount of any payment by the Sellers to Buyer as described in (i)Β above,
as applicable, exceeds (B)Β the Medical Claims Reserve, Sellers shall pay the difference to
Buyer in cash or via wire transfer of immediately available funds within five (5)Β business
days following final determination of such reconciliation.
Β Β Β Β Β (iii) If the Sellers disagree with either or both of the Companyβs reconciliations of
the Medical Claims Reserve, the Sellers and Buyer shall negotiate in good faith in an
attempt to reach an agreement with respect to the applicable reconciliation. If the Parties
cannot reach an agreement within 15Β days following the Buyerβs delivery of any
reconciliation, the Parties shall submit their respective calculations of the reconciliation
to an independent nationally recognized actuary (the βActuaryβ) for conclusive and binding
resolution as promptly as practicable, but in no event later than 15Β days following the
Partiesβ submission. Each Party hereby agrees to cooperate reasonably and in good faith
with the Actuary and the other Parties (including providing any and all books, records and
other documentation reasonably requested thereby) in order to promptly arrive at such
determination. Upon the final determination of the reconciliation, whether by agreement of
the Parties or determination by the Actuary, such determination shall be final, binding and
non-appealable. For all purposes under this Agreement, the following shall apply with
respect to the Actuary: (A)Β the Actuary shall be selected by agreement of the Parties or, if
the Parties cannot agree on an Actuary, then each Party shall appoint a nationally
recognized actuary and the two actuaries shall appoint a third nationally recognized
actuary, who shall be the sole Actuary; and (B)Β if the Actuaryβs determination is in
agreement with the calculations submitted by one of the Parties, then the other Party shall
pay, concurrently with any payments due under the preceding sentence, all costs and expenses
with respect to the Actuaryβs determination, or alternatively, if the Actuaryβs
determination is not in agreement with either Partyβs calculations, then such costs and
expenses shall be promptly paid, on a 50/50 basis, by both Parties.
Β Β Β Β Β (iv) For the purposes of determining the Medical Claims Reserve, the Companyβs 180 Day
Loss Experience and the Companyβs 18 Month Loss Experience and the validity of all Medical
Claims shall be determined in accordance with GAAP and, to the extent consistent with GAAP,
the guidelines and procedures that were prescribed by CMS at the time such services were
provided and the Companyβs past practices (including all Medical Claims being calculated net
of any actual recoveries from reinsurance and stop-loss coverage for catastrophic claims
recoveries, subrogation and coordination of benefits).
Β Β Β Β Β (v) The Parties acknowledge and agree that the payments of the amounts, if any,
required to be paid by the Parties pursuant to the provisions of SectionΒ 3.3(ii) shall be
final and binding and no other payments shall be required to be made by the Parties under
this Agreement with respect to Medical Claims incurred prior to Closing.
Β Β Β Β Β 3.4. Additional Xxxx Centers.
Β Β Β Β Β (i) Prior to the Signing Date, Sellers have been engaged through Xxxx Medical Centers
in planning and efforts to construct two additional medical centers (the 6th and
7th medical centers to be operated by Xxxx Medical Centers) that will provide
services to the Companyβs plan members on an exclusive basis (the βAdditional Xxxx
Centersβ). Each such Additional Xxxx Center shall (i)Β contain at least 20,000 square feet
of gross space for clinical operations (including space for hallways, bathrooms, closets,
waiting areas and reception areas), (ii)Β be of a finish and quality, and provide medical
facilities and services, consistent with the medical center operated
11
Β
by Xxxx Medical Centers located in West Hialeah, Florida and/or
the medical center operated by Xxxx Medical Centers at 00000 XX 00xx Xxxxxx,
Xxxxx, Xxxxxxx, in each case, as of the date of this Agreement, and (iii)Β be located within
an Approved PLAN Operating Area (as defined in the Medical Services Agreement), but in no
event within two (2)Β miles of another medical clinic operated by Xxxx Medical Centers
(without the prior written consent of Buyer). The Parties acknowledge and agree that (A)Β a
medical center opened by Xxxx Medical Centers that replaces a then existing medical center
operated by Xxxx Medical Centers shall not constitute an Additional Xxxx Center for purposes
of fulfillment of the Share Release Condition (as defined below) and (B)Β following the
fulfillment of the Share Release Condition, the replacement or closure of medical centers
operated by Xxxx Medical Centers may be effected as permitted in the Medical Services
Agreement.
Β Β Β Β Β (ii) Subject to the terms of the Escrow Agreement, the Shares shall be released from
the Escrow Account and delivered to Sellers at such date as the two Additional Xxxx Centers
have been constructed (as evidenced by the issuance of a temporary certificate of occupancy)
as described above, received all material Permits necessary for operation, and commenced
operating and treating the Companyβs plan members (the βShare Release Conditionβ).
Notwithstanding the foregoing, in the event that the Share Release Condition has not been
satisfied on or prior to NovemberΒ 2, 2009 (the βShare Release Deadlineβ), the Shares shall
be forfeited and the Escrow Agent shall deliver the Shares to HealthSpring in accordance
with the terms of the Escrow Agreement; provided, however, that (i)Β the Share Release
Deadline shall be extended (for a period of not more than 180Β days) to the extent of the
continuation of any and all effects of the following force majeure events: acts of God,
floods, fires, explosions, storms, strikes, lockouts, riots, insurrections, war or acts of
terrorism and similar events beyond the reasonable control of Xxxx Medical Centers, in each
case, that prevent or delay the fulfillment of the Share Release Condition; and (ii)Β in the
event that, on or prior to NovemberΒ 1, 2009, Xxxx Medical Centers has opened one Additional
Xxxx Center and is engaged in commercially reasonable efforts to construct and open the
second Additional Xxxx Center, the Share Release Deadline shall be extended until November
1, 2010; provided, further, that in the event the Share Release Deadline is extended to
NovemberΒ 1, 2010 as described above and the Share Release Condition is satisfied after
NovemberΒ 2, 2009 and on or prior to NovemberΒ 1, 2010, a number of Shares equal to the
difference between (A)Β the number of Shares held in the Escrow Account on the date of such
release of Shares and (B)Β 50% of the Shares initially placed in the Escrow Account shall be
released from the Escrow Account and delivered to Sellers at such date as the Share Release
Condition is satisfied and the remaining balance of the Escrow Account shall be released and
delivered to Sellers on NovemberΒ 1, 2010. Any forfeiture of Shares as provided above shall
be deemed for all relevant tax purposes to be an adjustment and reduction to the Purchase
Price, except as otherwise required by Law. The Buyer Parties acknowledge and agree that no
failure, in whole or in part, to meet the Share Release Condition shall constitute a breach,
default or other violation of this Agreement by the Sellers. For purposes of this Section
3.4 (including subclause (B)Β above), references to the Shares shall include the Shares and
any and all securities, cash and/or other property delivered to the Escrow Agent (whether in
exchange for the Shares or otherwise), and any and all interest carried thereon, by reason
of any reorganization, reclassification, recapitalization, stock split, merger,
consolidation, share exchange, dividend (whether in cash, securities or otherwise),
combination or any similar transaction with respect to HealthSpring Stock occurring from and
after the Effective Date.
Β Β Β Β Β 3.5. CMS Payments. In the event that on or after the Effective Date CMS makes any
retroactive adjustments, whether positive or negative, to the capitation reimbursement rates
applicable to members of the Companyβs Medicare plans that relate to periods of service prior to
the Effective Date or
12
Β
CMS makes any other payments or adjustments to amounts paid to the Company relating to the
period prior to the Effective Date then Buyer shall give prompt written notice of such payment or
adjustment to Sellers. Buyer shall pay to Sellers (if the payment or adjustment is positive) or
Sellers shall pay to Buyers (if the adjustment is negative) the aggregate dollar amount of any such
payment or adjustment within ten (10)Β business days of the payment or adjustment by wire transfer
of immediately available funds. In the event of any disputes between the Parties relating to any
such payment or adjustment, the Parties shall negotiate in good faith in an attempt to reach an
agreement with respect to such dispute. If the Parties cannot reach an agreement within 15Β days
after a Party provides written notice to the other Party of such dispute, the Parties shall submit
the dispute to the Actuary for conclusive and binding resolution as promptly as practicable, but in
no event later than 15Β days following the Partiesβ submission. Each Party hereby agrees to
cooperate reasonably and in good faith with the Actuary and the other Parties (including providing
any and all books, records and other documentation reasonably requested thereby) in order to
promptly arrive at a final determination with respect to such payment or adjustment. Upon the
final determination with respect to such payment or adjustment, whether by agreement of the Parties
or determination by the Actuary, such determination shall be final, binding and non-appealable.
Any such payment or adjustment shall be treated as an adjustment, upwards or downwards, as
applicable, to the Purchase Price, except as otherwise required by Law.
Β Β Β Β Β 3.6. Pre-Closing Distribution. HealthSpring and Buyer acknowledge that, prior to the
Closing, the Board of Directors of the Company intends to declare and pay a cash dividend to the
Sellers (the βDistributionβ). HealthSpring, Buyer, the Company and Sellers hereby consent to the
payment of the Distribution prior to Closing, provided that (i)Β the payment and the amount of the
Distribution are approved by the Florida Office of Insurance Regulation, (ii)Β after giving effect
to the Distribution and the payment of any Indebtedness or other expenses of the Company prior to
the Closing, the representations and warranties of the Sellers and the Company contained in Section
5.7(i) of this Agreement remain true and correct, and (iii)Β the Company and Sellers give
HealthSpring and Buyer at least five (5)Β business days written notice of the payment date and the
amount of the Distribution. Within nine (9)Β months following the Effective Date, Buyer shall cause
the Company to prepare and deliver to Sellers a reconciliation, after giving effect to the
Distribution, of (i)Β the Companyβs Statutory Net Worth as of the Effective Date to (ii)Β the product
of (a) .02 and (b)Β the product of (1)Β the Companyβs aggregate premiums received from CMS for the
three month period immediately prior to the Effective Date (excluding any payments received in
respect of adjustments relating to periods other than such three month period) and (2)Β four (the
number derived from the calculation contained in this subsection (ii)Β is referred to herein as the
βStatutory Amountβ). In the event the Companyβs Statutory Net Worth as of the Effective Date
exceeds the Statutory Amount, Buyer shall pay the difference to Sellers in cash or by wire transfer
of immediately available funds on or before the first anniversary of the Effective Date. In the
event of any dispute between the Parties relating to the determination of the Companyβs Statutory
Net Worth or the Statutory Amount as of the Effective Date, the Parties shall negotiate in good
faith in an attempt to reach an agreement with respect to such dispute. If the Parties cannot
reach an agreement within 15Β days after a Party provides written notice to the other Party of such
dispute, the Parties shall submit the dispute to the Actuary for conclusive and binding resolution
as promptly as practicable, but in no event later than 15Β days following the Partiesβ submission.
Each Party hereby agrees to cooperate reasonably and in good faith with the Actuary and the other
Parties (including providing any and all books, records and other documentation reasonably
requested thereby) in order to promptly arrive at a final determination with respect to such
amounts. Upon the final determination with respect to such amounts, whether by agreement of the
Parties or determination by the Actuary, such determination shall be final, binding and
non-appealable. The Parties acknowledge and agree that the payment by the Buyer of the excess, if
any, of the Companyβs Statutory Net Worth as of the Effective Date over the Statutory Amount shall
be final and binding and no other payments shall be required to be made by the Parties under this
Agreement with respect to the reconciliation of the Statutory Net Worth to the Statutory Amount.
13
Β
SECTION 4.
CLOSING
Β Β Β Β Β Subject to SectionΒ 10.4, the closing of the transactions contemplated herein (the βClosingβ)
shall be consummated within the first five (5)Β business days of the first month following the month
in which all conditions to Closing described in SectionΒ 10 below (other than conditions that will
be satisfied at the Closing) are satisfied (or waived, to the extent permitted by this Agreement),
on such specific date (the βClosing Dateβ), and at such time and place, as may be mutually agreed
upon by the Parties. Unless otherwise mutually agreed upon by the Parties, the Closing will be
effective as of the first day of the month in which the Closing occurs (the βEffective Dateβ).
Each of the Parties agree that, for federal, state and local income tax purposes, the consummation
of the purchase, sale and transfer of the Company Stock will be deemed to have occurred at 11:59
p.m. on the day immediately prior to the Effective Date.
SECTION 5.
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
Β Β Β Β Β Except as set forth in the Disclosure Schedule, Sellers and the Company hereby jointly and
severally represent and warrant to Buyer with respect to the Company as follows:
Β Β Β Β Β 5.1. Organization and Qualification. The Company is a corporation duly organized,
validly existing and in active status under the Laws of the State of Florida, with full corporate
power and authority to conduct its business as it is presently being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all of its obligations under
the Material Contracts. The Company is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of its properties and
assets owned, leased or operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed and/or in good standing
would not reasonably be expected to materially adversely impact the Company. The Company has
delivered to Buyer a true and complete copy of its articles of incorporation and bylaws as
currently in effect, and the Company is not in default under or in violation of any provision
thereof.
Β Β Β Β Β 5.2. Authorization. The Company has all requisite corporate power and authority, and
has taken all corporate action necessary, to execute and deliver this Agreement, the Medical
Services Agreement and the other documents to be executed and delivered by the Company pursuant to
SectionΒ 10.2 of this Agreement (if and when delivered) (collectively, the βCompany Transaction
Documentsβ), to consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. This Agreement and the other Company Transaction Documents
(if and when delivered) have been duly executed and delivered by the Company and are the legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with
their terms, subject to general principles of equity and except as enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws of general application relating to creditorsβ rights generally. The Company is not a party to
or bound by any written or oral agreement or understanding with respect to a transaction involving
the sale of the stock or assets of the Company other than this Agreement and the Confidentiality
Agreement, and the Company and its representatives have terminated all discussions with third
parties (other than with HealthSpring and its Affiliates) regarding such a transaction.
Β Β Β Β Β 5.3. Capitalization. The entire authorized capital stock of the Company consists of
two hundred fifty (250)Β shares of common stock, par value $0.01 per share, of which two hundred
fifty (250)
14
Β
shares are issued and outstanding and owned by Sellers. The Company Stock has been duly
authorized and validly issued and is fully paid and nonassessable, free and clear of any preemptive
rights or other Liens and is held of record by the Sellers in good and valid title. The Company
Stock was not issued in violation of any federal or state securities Laws or other Laws or in
violation of any Order. Except as set forth on ScheduleΒ 5.3, there are no preemptive or
conversion rights or options, warrants or other rights, agreements, contracts, arrangements or
commitments of any character relating to the issued or unissued capital stock of the Company or
obligating the Company to issue, sell, transfer, purchase or redeem any shares of capital stock of,
or other equity interests in, the Company.
Β Β Β Β Β 5.4. Real Property.
Β Β Β Β Β (i) The Company does not own, and has never owned, any real property.
Β Β Β Β Β (ii) ScheduleΒ 5.4 lists the only lease in effect pursuant to which the Company
leases any real property (the βReal Property Leaseβ) and a summary description of the
material terms of the Real Property Lease. No event of default has occurred (whether with
or without notice, lapse of time or both or the happening or occurrence of any other event)
under the Real Property Lease on the part of the Company or the other party thereto. No
event has occurred that (whether with or without notice, lapse of time or both or the
happening or occurrence of any other event) would constitute a default under the Real
Property Lease by the other party thereto. There is no challenge to the Companyβs quiet
enjoyment of all the leased real property covered by the Real Property Lease, and the
Company has performed, in all material respects, all the obligations with respect to the
Real Property Lease required to be performed by it.
Β Β Β Β Β (iii) The Company does not use any real property in the operation of its business that
is not leased by the Company pursuant to the Real Property Lease.
Β Β Β Β Β 5.5. Contracts and Commitments. ScheduleΒ 5.5 lists the following contracts,
whether written or oral, to which the Company is a party (the βMaterial Contractsβ):
Β Β Β Β Β (i) contracts with any governmental payor (including Medicare);
Β Β Β Β Β (ii) any provider agreement, including agreements with clinics, hospital providers,
specialty or ancillary providers, independent physician associations or other medical
groups, and, to the extent significant, individual providers (in each case that involved
more than $75,000 in payments in 2006 or that is anticipated to involve more than $75,000 in
payments in the current or any succeeding fiscal year of the Company);
Β Β Β Β Β (iii) any individual or employer group subscription agreement, membership contract or
agreement for network or physician rental providing for the participation by the Company in
a network;
Β Β Β Β Β (iv) any pharmacy benefit management agreement;
Β Β Β Β Β (v) any broker or other marketing agreement;
Β Β Β Β Β (vi) any guarantee agreement or other agreement by which the Company is or may become
liable for the indebtedness or other obligations of another Person, including the Sellers,
any Affiliate of the Company or Sellers or any other third party;
15
Β
Β Β Β Β Β (vii) any employment contracts and agreements (including noncompetition agreements and
confidentiality agreements) applicable to any Employees of the Company;
Β Β Β Β Β (viii) any contract, agreement or commitment that provides for the incurrence by the
Company of Indebtedness or the placing of a Lien (other than a Permitted Lien) on any of the
Companyβs assets;
Β Β Β Β Β (ix) any partnership or joint venture agreement;
Β Β Β Β Β (x) any assignment, license or other agreement with respect to any form of intangible
property, including with respect to any software used in or related to the Companyβs
business (other than license agreements with respect to βoff-the-shelfβ software), which is
reasonably likely to involve the payment of more than $75,000 during the Companyβs current
or any succeeding fiscal year;
Β Β Β Β Β (xi) any agreement under which the Company has limited or restricted its right to
compete or contract with any Person in any respect or use or disclose any information in its
possession (other than the Confidentiality Agreement and confidentiality agreements entered
into the Ordinary Course of Business);
Β Β Β Β Β (xii) any contract between the Company and Sellers or any Affiliates of the Company or
Sellers not otherwise disclosed in this section; or
Β Β Β Β Β (xiii) any other contract, agreement, commitment, understanding or instrument involving
or reasonably likely to involve payment or receipt of more than $75,000 in the aggregate in
the current or any succeeding fiscal year of the Company and that is not terminable without
penalty by the Company on ninety (90)Β daysβ or less notice, or upon which the operations of
the Company are substantially dependent.
Β Β Β Β Β All of the written Material Contracts are valid obligations of the Company and, to the
Companyβs and Sellersβ Knowledge, of the other parties thereto, and (except for any termination of
a Material Contract after the Signing Date in accordance with its terms) are in full force and
effect, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws of general application relating to
creditorsβ rights generally and except as enforceability may be limited by general equitable
principles, including those affecting the availability of specific performance and other equitable
remedies. No event has occurred which (whether with or without notice, lapse of time or both)
would constitute a material default under any Material Contract on the part of the Company.
Neither the Company nor any of the Sellers has received written notice from any of the other
parties to the Material Contracts of any intention to terminate its Material Contract, except any
termination in the Ordinary Course of Business. Neither the Company nor any of the Sellers has
Knowledge of the occurrence of any event which (whether with or without notice, lapse of time or
both) would constitute a material default under any Material Contract by any other party thereto.
The Company, and to the Companyβs and Sellersβ Knowledge, each other party thereto, has in all
material respects performed all of its obligations pursuant to the Material Contracts in accordance
with the terms of the Material Contracts, and neither the Company nor any other party thereto has
waived any incidence of material non-performance of the Material Contracts in accordance with their
terms. Neither the Company nor Sellers have Knowledge of any anticipated breach or failure to
fully perform by any party to any Material Contract. The Company has provided or made available to
Buyer a true and correct copy of each written Material Contract and ScheduleΒ 5.5 sets forth
a summary description of any oral Material Contract.
16
Β
Β Β Β Β Β In addition to the Material Contracts set forth on ScheduleΒ 5.5, Schedule
5.5-A constitutes the complete list of providers from the Companyβs records as of AugustΒ 7,
2007, and ScheduleΒ 5.5-B constitutes the most recent report of CMS regarding the members of
the Companyβs health plans as of JulyΒ 1, 2007 (the βMember Listβ). To the Knowledge of the Company
and the Sellers, the Member List is true and correct in all material respects as of the date
thereof.
Β Β Β Β Β 5.6. Permits. The Company has, and is in compliance in all material respects with,
all material Permits required to conduct the Companyβs business as now being conducted (the
βMaterial Permitsβ). All Material Permits of the Company are valid and in full force and effect
and are listed on ScheduleΒ 5.6. There is not now pending nor, to the Knowledge of the
Company or Sellers, threatened, any action by or before any Governmental Authority to revoke,
cancel, rescind, modify or refuse to renew in the ordinary course any Material Permit.
Β Β Β Β Β 5.7. Compliance Matters.
Β Β Β Β Β (i) The Company currently meets, and since the commencement of operations by the
Company has met all applicable standards and conditions for operation and licensure under
all Health Care Laws, including without limitation 42 CFR PartΒ 422 and the applicable rules
and regulations of CMS, any applicable rules and regulations of the Florida Office of
Insurance Regulation, any applicable rules and regulations of the Florida Agency for Health
Care Administration, and any applicable rules and regulations constituting Health Care Laws
of other Governmental Authorities, except, in each case, to the extent as would not
reasonably be expected to result in a material adverse impact on the Company. The Company
is not subject to any variances or waivers with respect to such Health Care Laws. The
Company has a valid contract with CMS and holds a valid Health Care Provider Certificate
issued by the Florida Agency for Health Care Administration and a valid Certificate of
Authority issued by the Florida Office of Insurance Regulation, each of which is in full
force and effect. Neither CMS, the Florida Agency for Health Care Administration nor the
Florida Office of Insurance Regulation has restricted or otherwise modified the terms of or
the Companyβs rights and obligations under such contract and certificates in a manner
materially adverse to the Company. Neither Sellers nor the Company have received any notice
of violation of any Health Care Laws by the Company, and neither Sellers nor the Company
have Knowledge that any such notice will be received prior to the Closing. The Company is
in full compliance with all deposit, reserve, capital, net worth and other financial
requirements applicable to the Company, including, without limitation, all regulations,
directives and orders with respect to such requirements issued by the Florida Office of
Insurance Regulation and the Agency for Health Care Administration. Neither the Company nor
the Sellers has any Knowledge of any impending increase in the funds required to meet any
such requirements.
Β Β Β Β Β (ii) The Company and each health plan maintained by the Company is receiving and
transmitting, directly or through third parties, those standard transactions as defined in
the Health Insurance Portability and Accountability Act of 1996 (βHIPAAβ) regulations
regarding electronic transactions and code sets (45 CFR Parts 160 and 162). Each such plan
has, since the commencement of operations by the Company, been distributing notices of
privacy practices in the appropriate form, obtaining acknowledgments of receipt to the
extent required under HIPAA, training its workforce, administering a complaint system, and
offering covered persons the records access, disclosure accounting and other rights, each,
in all material respects, as required by the privacy rule (45 CFR Parts 160 and 164). To
the Knowledge of Sellers and the Company, the Company has complied in all material respects
with applicable rules and regulations relating to the use and disclosure of protected health
information, notices of privacy practices and the
17
Β
privacy rules, and the maintenance and transmission of electronic protected health
information (including the requirements of 45 CFR PartΒ 164, Subpart C).
Β Β Β Β Β (iii) None of the Company or any of its officers or directors nor the Sellers or their
Affiliates have engaged in any activities that are prohibited under U.S. federal or state
βfraud and abuseβ statutes or regulations (including but not limited to 42 USC §§ 1320a-7,
1320 x-0x, 0000x-0x, 0000xx, 00 XXX. §§ 3729-33, 18 USC §§ 1892, 1341, 1343, 1961-63, 286,
1001, 664, 666, 1510, 1516, 1347, 669, 1035, 1518, 3730) including but not limited to any of
the following: (i)Β making or causing to be made a false statement, false claim, or
representation of material fact in any application for any benefit or payment, (ii)Β making
or causing to be made any false statement, false claim, or representation of a material fact
for use in determining rights to any benefit or payment; (iii)Β failing to disclose knowledge
by a claimant of the occurrence of any event affecting the initial or continued right to any
benefit or payment on its behalf or on the behalf of another, with intent to fraudulently
secure such benefit or payment; (iv)Β knowingly, willfully and unlawfully soliciting or
receiving any remuneration (including kickback, bribe, or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay such remuneration (a)Β in return
for referring an individual to a person for the furnishing or arranging for the furnishing
of any item or service for which payment may be made in whole or in part by any state or
federal health care benefit program, or (b)Β in return for purchasing, leasing or ordering or
arranging for or recommending the purchasing, leasing or ordering of any good, facility,
service or item for which payment may be made in whole or in part by a state or federal
health care benefit program.
Β Β Β Β Β (iv) The Company maintains a compliance program that meets in all material respects the
regulatory requirements of 42 CFR Β§422.501(b)(3)(vi) and applicable compliance program
guidance issued by the Department of Health and Human Services Office of Inspector General.
Β Β Β Β Β 5.8. Governmental Audits and Investigations. There are no audits, investigations or
other enforcement actions pending or, to the Knowledge of the Company or Sellers, threatened
against the Company with respect to any contract involving Medicare or any other federally or state
funded health care benefit program, and neither Sellers nor the Company has Knowledge that any such
enforcement actions will arise out of the Companyβs operations prior to the Closing. None of the
Sellers, the Company or any officer or director of the Company has received notice of an, or is
currently under, investigation for any violation of the various provisions of Health Care Laws, nor
have the Sellers, the Company, or any officer or director been required to pay any civil monetary
penalty regarding false, fraudulent or impermissible claims under, or payments to induce a
reduction or limitation of health care services to beneficiaries of, any state or federal health
care benefit program. With respect to Medicare or any other federally or state funded health care
benefit program, none of the Sellers, the Company, or any officer or director of the Company has
ever been excluded from participation in any such program, nor convicted of (A)Β any offense related
to the delivery of an item or service under such program, (B)Β any offense related to such program;
(C)Β a criminal offense relating to neglect or abuse of patients in connection with the delivery of
a health care item or service; (D)Β fraud, theft, embezzlement or other financial misconduct in
connection with the delivery of a health care item or service; (E)Β obstructing an investigation of
any crime referred to in (A)Β or (C)Β above; and/or (F)Β unlawful manufacturing, distributing,
prescribing, or dispensing of a controlled substance.
Β Β Β Β Β 5.9. No Conflict or Violation; Third Party and Governmental Consents. Except under
the HSR Act and as set forth on ScheduleΒ 5.9 and ScheduleΒ 7.5, neither the
consummation by the Company and Sellers of the transactions contemplated hereby and by the other
Transaction Documents (in each case, to the extent a party thereto), nor compliance by the Company and Sellers with
any of the provisions
18
Β
hereof or in any Transaction Document (in each case, to the extent a party
thereto), will (i)Β violate or conflict with any provision of the articles of incorporation or
bylaws of the Company; (ii)Β violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both, would constitute a
default) under, or terminate, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien (other than Permitted
Liens) upon any assets of the Company or any of the Company Stock under, any of the terms,
conditions or provisions of any Material Contract, Real Property Lease, or Material Permit; or
(iii)Β violate any Law or Order applicable to the Company or Sellers or their properties or assets.
Except under the HSR Act, as set forth on ScheduleΒ 5.9 and ScheduleΒ 7.5, and any
applicable Tax returns or other Tax related filings contemplated by SectionΒ 9.4, the execution,
delivery and performance of this Agreement and the other Transaction Documents by the Company and
Sellers (in each case, to the extent a party thereto) does not, and the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents by the Company and
Sellers (in each case, to the extent a party thereto) will not, require the Company or Sellers to
obtain any consent, approval, authorization or permit of, or filing with or notification to, any
Governmental Authority or other third party.
Β Β Β Β Β 5.10. Financial Statements.
Β Β Β Β Β (i) The Audited Financial Statements and the Interim Financial Statements are attached
hereto as ScheduleΒ 5.10. The Audited Financial Statements, the Interim Financial
Statements and any interim financial statements delivered pursuant to SectionΒ 8.6, (a)Β have
been or will be prepared based upon the books and records of the Company, (b)Β have been or
will be prepared in accordance with GAAP (with respect to the GAAP Audited Financial
Statements and any interim financial statements delivered pursuant to SectionΒ 8.6) or
accounting practices prescribed or permitted by the Florida Office of Insurance Regulation
(with respect to the Statutory Audited Financial Statements and the Interim Financial
Statements), and, to the extent consistent with GAAP (with respect to the GAAP Audited
Financial Statements and any interim financial statements delivered pursuant to SectionΒ 8.6)
or accounting practices prescribed or permitted by the Florida Office of Insurance
Regulation (with respect to the Statutory Audited Financial Statements and the Interim
Financial Statements), have been or will be prepared consistent with the Companyβs past
accounting practices, and (c)Β fairly present, or will fairly present, in all material
respects the financial position of the Company as of the respective dates thereof and the
results of operations and cash flows of the Company for the periods covered thereby;
provided, however, that (1)Β the Interim Financial Statements and any interim financial
statements delivered pursuant to SectionΒ 8.6 are or will be subject to normal year-end
adjustments and the absence of footnote disclosure and other presentation items, (2)Β neither
the Interim Financial Statements nor the interim financial statements delivered pursuant to
SectionΒ 8.6 present or will present the results of cash flows of the Company, and (3)Β the
supplemental schedules of selected statutory basis financial data accompanying the Statutory
Audited Financial Statements have been presented to comply with the National Association of
Insurance Commissioners Annual Statement Instructions and are not a required part of the
Statutory Audited Financial Statements and the information presented therein is fairly
stated in all material respects in relation to the statutory basis financial statements
taken as a whole.
Β Β Β Β Β (ii) The Interim Balance Sheet includes all adjustments, which consist only of normal
recurring accruals, necessary to fairly present, in all material respects, the financial
position of the Company as of the date of the Interim Balance Sheet. Provision has been
made on the Interim Balance Sheet for Medical Claims incurred but not reported, and reported
but pending or otherwise unpaid, and for incentives, withholds, risk sharing liabilities
and other related accruals, in each case, if any, as of the date of the Interim Balance
Sheet.
19
Β
Β Β Β Β Β 5.11. Absence of Certain Changes. Except as set forth on ScheduleΒ 5.11, or as
expressly required or permitted by this Agreement, since DecemberΒ 31, 2006, there has not been:
Β Β Β Β Β (i) any material damage, destruction or casualty loss (whether or not covered by
insurance) affecting the Company;
Β Β Β Β Β (ii) the incurrence of any Indebtedness or any cancellation of any material debts owed
to or claims held by the Company;
Β Β Β Β Β (iii) receipt by the Company of notice of the termination (except any termination of a
Material Contract in accordance with its terms) of or occurrence of a default under any
Material Contract, Material Permit or Real Property Lease;
Β Β Β Β Β (iv) any labor union organizing activity, any actual or threatened employee strikes,
work stoppages, slowdowns or lockouts;
Β Β Β Β Β (v) any amendment of the Companyβs articles of incorporation or bylaws;
Β Β Β Β Β (vi) any issuance, sale, pledge, disposition, encumbrance, purchase or redemption, or
authorization of the issuance, sale, pledge, disposition, encumbrance, purchase or
redemption of, any shares of capital stock of the Company or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of capital stock or
any other ownership interest in the Company;
Β Β Β Β Β (vii) any material modification to any Material Contract or Real Property Lease entered
into by the Company other than in the Ordinary Course of Business or any modification or
termination of any contract that but for such modification or termination would constitute a
Material Contract;
Β Β Β Β Β (viii) any sale, assignment, transfer, conveyance, lease, mortgage, pledge or other
disposition of or Lien on any of the assets of the Company, or any interests therein, except
for Permitted Liens and sales, assignments, transfers, conveyances, leases, mortgages,
pledges, dispositions or Liens in the Ordinary Course of Business involving less than
$75,000;
Β Β Β Β Β (ix) any cancellation of any of the insurance policies of the Company;
Β Β Β Β Β (x) any declaration, set aside or payment of any dividend or any other distribution
with respect to the capital stock of the Company, other than a cash dividend approved by the
Florida Office of Insurance Regulation;
Β Β Β Β Β (xi) the making of any loans or advances to any Person by the Company, except for
expense reimbursements and advances to agents, Affiliates, directors, officers or employees
in the Ordinary Course of Business;
Β Β Β Β Β (xii) (a)Β any increase in the compensation payable or to become payable to the officers
of the Company or Employees, (b)Β any severance or termination pay granted to, or any
employment or severance agreement entered into with any current or former officer of the Company or Employee, or (c)Β the establishment, adoption, amendment or termination of
any Employee Benefit Plan or any other collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, Employee Benefit Plan or any other collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement, deferred
compensation,
20
Β
employment, termination, severance or other plan, trust fund, policy or
arrangement for the benefit of any current or former directors or officers of the Company or
Employees, except, in each case, in the Ordinary Course of Business or as required by Law or
existing contracts;
Β Β Β Β Β (xiii) any institution by or against the Company of, settlement of or any agreement to
settle any Action before any Governmental Authority;
Β Β Β Β Β (xiv) the entry by the Company or the Sellers into any agreement or arrangement that
materially restricts the Company from engaging in the operation of its business, as such
business is operated on the date hereof;
Β Β Β Β Β (xv) any postponement, cancellation or waiver by the Company of any claims or rights
with a value to the Company in excess of $75,000; or
Β Β Β Β Β (xvi) the entry by the Company into any agreement, commitment or other obligation (oral
or in writing) incurred by or on behalf of the Company to do any of the foregoing.
Β Β Β Β Β 5.12. Litigation. Except as disclosed in ScheduleΒ 5.12, there is no
outstanding (and, except as set forth on ScheduleΒ 5.12, during the three years preceding
the date hereof, there has not been any) action or Order, claim, suit, litigation, proceeding,
labor dispute, arbitration action, governmental audit or investigation (collectively, βActionsβ) to
which the Company is a party or subject or to which any of its properties or assets is subject and,
to the Companyβs and Sellersβ Knowledge, there are no such Actions threatened.
Β Β Β Β Β 5.13. Undisclosed Liabilities. The Company does not have any liabilities, obligations
or commitments of any nature (whether absolute, accrued, contingent or otherwise and whether
matured or unmatured or known or unknown) except (i)Β liabilities that are reflected and reserved
against on the Interim Balance Sheet that have not been paid or discharged since the date thereof;
(ii)Β accounts payable, deferred revenue, accrued Taxes, accrued expenses, bonuses and payroll
expenses and other costs or expenses incurred in the Ordinary Course of Business since the date of
the Interim Balance Sheet; (iii)Β liabilities listed in ScheduleΒ 5.13; (iv)Β liabilities
arising in connection with the preparation, negotiation, consummation and/or performance of this
Agreement and the other Company Transaction Documents (which shall be repaid in full prior to
Closing); and (v)Β other current liabilities incurred in the Ordinary Course of Business since the
date of the Interim Balance Sheet (none of which is a material liability for breach of contract,
breach of warranty, tort, infringement, violation of Law, claim or lawsuit).
Β Β Β Β Β 5.14. Compliance with Law. The Company has not violated in any material respect any
applicable Law or Order and the Company is in compliance, in all material respects, with all
applicable Laws and Orders. Neither the Company nor Sellers have received any notice to the effect
that the Company is not in compliance in all material respects with any applicable Laws or Orders.
Neither the Company nor, to its Knowledge, anyone acting on the Companyβs behalf, has directly or
indirectly (i)Β in violation of any Law, made any contribution, gift, bribe, kickback payment or
other similar payment of cash or other consideration to any person to obtain favorable treatment in
securing business, to pay for favorable treatment for business secured, or to obtain special
concessions, or (ii)Β engaged in any illegal or fraudulent marketing activities.
Β Β Β Β Β 5.15. Proprietary Rights. ScheduleΒ 5.15 lists all of the Proprietary Rights
(other than packaged βoff the shelfβ software) that constitute patents, Internet domain names,
trademarks, trade names, copyrights and applications therefor owned by or registered in the name of the Company
or in which the Company has any rights as licensee, and which are presently used in the operation
of the
21
Β
Company. Except as set forth in ScheduleΒ 5.15, the Company owns, or is licensed or
otherwise has sufficient rights to use the Proprietary Rights listed on ScheduleΒ 5.15. The
Companyβs Proprietary Rights contain only those items and rights that are: (i)Β owned solely and
exclusively by the Company; or (ii)Β rightfully used by the Company pursuant to a valid and
enforceable license or other agreement (the βLicensed Proprietary Rightsβ). The Company has all
rights in its Proprietary Rights necessary for the conduct of its business as now being conducted.
Except as set forth on ScheduleΒ 5.15, the Company does not owe any material royalties or
other material payments to any third party in respect of the Companyβs Proprietary Rights. The
conduct of the Companyβs business (including, without limitation, the use of the Companyβs
Proprietary Rights) as now being conducted does not infringe, misappropriate, misuse, conflict with
or otherwise violate any Proprietary Rights of any Person in any material respect. Neither the
Company nor Sellers have received any notice that the Company has interfered with, infringed upon,
misappropriated, or violated any Proprietary Rights of third parties and no third party has
asserted any competing Proprietary Rights against the Companyβs Proprietary Rights, except as
disclosed in ScheduleΒ 5.15. To the Companyβs and Sellerβs Knowledge, no third party has
interfered with, infringed upon, misappropriated or violated, in any material respect, any of the
Companyβs Proprietary Rights.
Β Β Β Β Β 5.16. Employees. ScheduleΒ 5.16 sets forth the name of each employee of the
Company or its Affiliates that provides services to the Company on an exclusive basis rather than
providing services to both the Company and to the Companyβs Affiliates (collectively, the
βEmployeesβ), in each case, as of the Signing Date. ScheduleΒ 5.16 also sets forth the
annual rate of compensation paid (including bonus compensation) as of the Signing Date by the
Company or its Affiliates to each Employee (including Employees on temporary or permanent
disability leave). ScheduleΒ 5.16 also sets forth the name and annual rate of compensation
(including bonus compensation) as of the Signing Date of employees of an Affiliate of the Company
that provide services to both Xxxx Medical Centers and the Company. Except as set forth on
ScheduleΒ 5.16, there are no employment agreements or severance or termination agreements to
which the Company is a party or otherwise bound. Except as set forth on ScheduleΒ 5.16, no
Employee of the Company is on temporary or permanent disability leave as of the Signing Date.
Neither the Sellers, the Company, nor, to the Companyβs Knowledge, any of the Employees are subject
to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements
with any Person other than the Company that restrict or are in conflict with the present or
proposed business activities of the Company.
Β Β Β Β Β 5.17. Employee Benefit Plans.
Β Β Β Β Β (i) Except for the Employee Benefit Plans identified on ScheduleΒ 5.17(i) (the
βCompany Employee Benefit Plansβ), the Company does not directly or indirectly maintain or
contribute to, or have any liability under, any Employee Benefit Plans.
Β Β Β Β Β (ii) Each Company Employee Benefit Plan (and each related trust, custodial account or
insurance contract) and the administrator and fiduciaries of each Company Employee Benefit
Plan have complied in all material respects with all applicable Laws and other governmental
requirements, including ERISA and the Code (including reporting and disclosure obligations),
and any contribution due under each such Company Employee Benefit Plan has been or will be
made by the date such contribution is or was required to be made under the terms of the
Company Employee Benefit Plan and applicable Law. The Company does not have any unfunded
liabilities under any Company Employee Benefit Plan except for those properly reserved for
in the Interim Balance Sheet and as set forth on ScheduleΒ 5.17(ii).
Β Β Β Β Β (iii) Each Company Employee Benefit Plan, if intended to be βqualifiedβ within the
meaning of Section 401(a) of the Code, has received a favorable letter of determination from
the
22
Β
Internal Revenue Service indicating that it is so qualified and the related trusts are
exempt from tax under Section 501(a) of the Code and nothing has occurred that has or could
reasonably be expected to affect adversely such determination.
Β Β Β Β Β (iv) Neither Company nor Sellers nor any of their respective ERISA Affiliates nor to
the Knowledge of the Company or Sellers, any other βdisqualified personβ or βparty in
interestβ (as such terms are defined in SectionΒ 4975 of the Code and SectionΒ 3(14) of ERISA,
respectively) with respect to a Company Employee Benefit Plan has breached the fiduciary
rules of ERISA or engaged in a prohibited transaction that could subject the Company to any
tax or penalty imposed under SectionΒ 4975 of the Code or SectionΒ 502(i), (j)Β or (l)Β of
ERISA.
Β Β Β Β Β (v) Except as may be required under the Consolidated Omnibus Reconciliation Act of 1985
(βCOBRAβ) or similar state laws, none of the Company Employee Benefit Plans obligates the
Company to provide any employee or former employee of the Company, or their spouses, family
members or beneficiaries, any post-employment or post-retirement health or life insurance,
accident or other βwelfare-typeβ benefits.
Β Β Β Β Β (vi) Each Company Employee Benefit Plan that is subject to the requirements of COBRA,
the Family Medical Leave Act of 1993 (βFMLAβ) and HIPAA has been maintained in all material
respects in compliance with COBRA, FMLA and HIPAA, including all notice requirements, and
no tax payable or penalty on account of SectionΒ 4980B or any other section of the Code has
been or is expected to be incurred by Company.
Β Β Β Β Β (vii) ScheduleΒ 5.17(vii) lists all former employees of the Company or any of
its ERISA Affiliates and their beneficiaries who currently have elected or are currently
eligible to elect COBRA continuation coverage under any Company Employee Benefit Plan
offering health insurance or medical benefits.
Β Β Β Β Β (viii) No benefit payable or that may or could under certain circumstance become
payable by Company pursuant to any Company Employee Benefit Plan shall constitute an
βexcess parachute payment,β within the meaning of SectionΒ 280G of the Code, that is or may
be subject to the imposition of an excise tax under SectionΒ 4999 of the Code or that would
not be deductible by reason of SectionΒ 280G of the Code (excluding any agreement with Buyer
or entered into with the Company after the Closing).
Β Β Β Β Β (ix) Each Company Employee Benefit Plan that allows loans to plan participants, if any,
has been operated in all material respects in accordance with its terms, the planβs written
loan policy and all applicable laws. In addition, all outstanding loans from such Company
Employee Benefit Plans, if any, are current as of the Closing Date, and there are no such
loans currently in default.
Β Β Β Β Β (x) Except as set forth on ScheduleΒ 5.17(x), neither the execution and delivery
of this Agreement and related documents, nor the consummation or performance of any of the
transactions contemplated herein or therein, will (either alone or together with any other
event): (a)Β result in any payment (including, without limitation, severance, parachute or
otherwise) becoming due from the Company to any director or any employee of the Company
under any Company Employee Benefit Plan or any employment or change in control agreement
between the Company or Sellers and any employee of the Company (a βChange in Control
Agreementβ), (b)Β significantly increase any benefit otherwise payable by the Company to any employee of the
Company under any Company Employee Benefit Plan or Change in Control Agreement, or
23
Β
(c)Β result in any acceleration of the time of payment, vesting or funding, of any material
benefits payable by the Company to any employee of the Company under any Company Employee
Benefit Plan or Change in Control Agreement.
Β Β Β Β Β (xii) Except as set forth on ScheduleΒ 5.17(xi) or pursuant to SectionΒ 8.8, the
Company does not have any express or implied commitment, whether legally enforceable or
not, to modify, change or terminate any Company Employee Benefit Plan, other than with
respect to a modification, change or termination required by this Agreement, ERISA, the
Code or applicable law.
Β Β Β Β Β (xiii) No Action with respect to any Company Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Companyβs or Sellersβ Knowledge, threatened.
Β Β Β Β Β (xiv) Except as set forth on ScheduleΒ 5.17(xiv), neither the Company, Sellers
or any of their ERISA Affiliates (a)Β have ever contributed to, or been under any obligation
to contribute to, any multiemployer plan (as defined in SectionΒ 3(37) of ERISA) and (b)Β are
not liable, directly or indirectly, with respect to any such multiemployer plan for a
complete or partial withdrawal (within the meaning of Title IV of ERISA) or due to the
termination or reorganization of any such multiemployer plan.
Β Β Β Β Β (xv) Except as set forth on ScheduleΒ 5.17(xv), neither the Company, Sellers or
any of their ERISA Affiliates have ever maintained or contributed, or had an obligation to
contribute, to a βdefined benefit planβ (as defined in Section 414(j) of the Code) subject
to Title IV of ERISA.
Β Β Β Β Β 5.18. Labor Relations. There are no collective bargaining agreements relating to the
relationship of the Company with any employee thereof. The Company has never recognized any labor
organization, nor has any such organization been certified, as the exclusive bargaining agent of
any employees of the Company. There has been no demand on behalf of any labor organization to
represent any employees of the Company and neither the Company nor Sellers has any Knowledge of any
present efforts of any labor organization for authorization to represent any employees of the
Company. There are no strikes, work stoppages or labor disputes pending or, to the Companyβs or
Sellersβ Knowledge, threatened, against the Company. There is no pending or, to the Companyβs, or
Sellersβ Knowledge, threatened discrimination or unfair labor practice Action against or involving
the Company.
Β Β Β Β Β 5.19. Environmental, Health, and Safety. The Company has complied and is in
compliance, in each case in all material respects, with all applicable Environmental and Safety
Requirements as defined below (including without limitation all applicable Permits and licenses
required thereunder). None of the Company or the Sellers have received any notice of any violation
by the Company of, or any liability of the Company (contingent or otherwise) or corrective or
remedial obligation required to be performed by the Company under, any Environmental and Safety
Requirements. The Company has not generated, treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released, or permitted persons to be exposed to,
any hazardous substance, waste, pollutant, contaminant, noise, odor or radiation in a manner that
has given or may reasonably be likely to give rise to liabilities under Environmental and Safety
Requirements. βEnvironmental and Safety Requirementsβ means all U.S. federal, state and local
statutes, regulations, ordinances and other provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual obligations and all common
law in each case concerning hazardous substances, public health and safety, and pollution or
protection of the environment.
Β Β Β Β Β 5.20. Tax Matters.
24
Β
Β Β Β Β Β (i) The Company has timely filed with the appropriate taxing authorities all returns
(including without limitation information returns and other material information) in respect
of Taxes of the Company required to be filed through the date hereof (or timely filed
extensions to file such returns) and will timely file any such returns (or extensions)
required to be filed on or prior to the Closing Date. The returns and other information
filed are complete and accurate in all material respects.
Β Β Β Β Β (ii) All Taxes payable by the Company (whether or not shown on any Tax return), if any,
in respect of periods beginning before the Effective Date to the extent attributable to the
period prior to the Effective Date have been timely paid, or an adequate reserve has been
established therefor, as set forth on the Interim Balance Sheet; no material deficiencies
for any Taxes have been proposed, asserted or assessed in writing against or with respect to
any Taxes due by the Company; and, to the Companyβs and Sellersβ Knowledge, the Company has
no liability for Taxes in excess of the amounts so paid or reserves so established.
Β Β Β Β Β (iii) Except as set forth on ScheduleΒ 5.20, there are no pending or, to the
Companyβs or Sellersβ Knowledge, threatened, audits, investigations, claims or other Actions
for or relating to any liability of the Company in respect of Taxes, and there are no
matters under discussion between the Company and any Governmental Authority with respect
thereto. The Company has not entered into any agreement with any Governmental Authority for
the extension or tolling of any statute of limitations in respect of Taxes. There are no
Tax Liens on any of the assets of the Company, except Permitted Liens.
Β Β Β Β Β (iv) All Taxes required to be withheld, collected or deposited by or with respect to
the Company have been timely withheld, collected or deposited as the case may be, and to the
extent required, have been paid to the relevant taxing authority.
Β Β Β Β Β (v) The Company is not a party to any Tax sharing or allocation agreement.
Β Β Β Β Β (vi) The Company (a)Β has never been a member of an Affiliated Group filing a
consolidated Tax return, and (b)Β has no liability for Taxes of any person arising from the
application of Treasury RegulationΒ SectionΒ 1.1502-6 or any analogous provision of state,
local or foreign law, or as a transferee or successor, by contract or otherwise.
Β Β Β Β Β (vii) The Company will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any period (or portion thereof) ending after the
Effective Date as a result of any (a) βClosing Agreementβ as described in SectionΒ 7121 of
the Code (or any corresponding or similar provision of state, local or foreign law) executed
on or prior to the Effective Date; (b)Β installment sale or open transaction disposition made
on or before the Effective Date; or (c)Β prepaid amount received on or before the Effective
Date.
Β Β Β Β Β 5.21. Insurance, Banks, Powers of Attorney. ScheduleΒ 5.21 contains a complete
and accurate list of:
Β Β Β Β Β (i) All insurance policies of the Company (including insurance on the lives of any
employees of the Company) and performance, surety and similar bonds presently in force and
effect with respect to the Company, the operations and the assets of the Company. All of
such policies and bonds are validly outstanding and in full force and effect and, to the
Knowledge of the Company and Sellers, provide coverage in reasonable and customary amounts for all
normal risks incident to the Companyβs business (subject to reasonable deductibles).
Neither the
25
Β
Company nor Sellers has been advised that any insurer or surety intends or
proposes to cancel any such policy or bond prior to the present expiration or termination
date thereof or to materially increase the applicable premium rate, rate classification or
charge therefor prior to or following such expiration or termination date or is not willing
to renew or extend any such policy or bond following its normal expiration or termination
date. The Company does not have any self-insurance or co-insurance programs.
Β Β Β Β Β (ii) The names of each bank in which the Company maintains an account or safe deposit
box and of each security broker with which the Company maintains an account (including, in
each case, the name and account number or other designation thereof), the names of all
Persons authorized to draw thereon or to give instructions with respect or having access
thereto, and the amounts contained therein as of a date within thirty (30)Β days of the
Signing Date.
Β Β Β Β Β (iii) The names of all Persons, if any, holding powers of attorney from the Company and
a brief description thereof.
Β Β Β Β Β 5.22. Subsidiaries; Affiliate Transactions. The Company does not have any
subsidiaries and has no ownership interest or equity investment in any corporation, partnership,
limited liability company, joint venture or other business entity or venture. Schedule
5.22 lists all current contracts or agreements between the Company, on the one hand, and any of
the Sellers and/or any Affiliate of the Company or Sellers, on the other hand, other than the
agreements listed in ScheduleΒ 5.5. ScheduleΒ 5.22 sets forth the amount and general
description of each loan, advance, distribution or payment of any kind or character (excluding all
payments made in the Ordinary Course of Business) in excess of $25,000 made by the Company since
DecemberΒ 31, 2006 to any of the Sellers, any Affiliate of the Company or Sellers and any of their
respective directors and officers.
Β Β Β Β Β 5.23. Title to and Condition of Assets. The Company is the owner of the assets
reflected on the Interim Balance Sheet and all other assets that it purports to own and, except as
set forth on ScheduleΒ 5.23, has good title to all such assets, free and clear of all Liens,
other than Permitted Liens. All tangible assets owned or leased by the Company are in good
operating condition, normal wear and tear excepted, fit for their current uses and sufficient for
the continued operation of the Companyβs business after the Closing in substantially the same
manner as conducted prior to the Closing.
Β Β Β Β Β 5.24. Change in Control Payments. The Company does not have any plans, programs,
agreements or arrangements to which it is a party, or to which it is subject, pursuant to which
payments (or acceleration of benefits) by the Company may be required upon, or may become payable
directly or indirectly as a result of, a change of control of the Company as contemplated by this
Agreement.
Β Β Β Β Β 5.25. Brokers. No Person will be entitled to any brokerage commissions, finderβs fees
or similar compensation based upon any agreement or understanding made by any such Person with the
Company or Sellers in connection with the transactions contemplated by this Agreement. In any
event, Buyer shall have no liability for any brokerage commission, finderβs fees or similar
compensation arising out of or due to any action of the Company or Sellers in connection with the
transactions contemplated by this Agreement.
Β Β Β Β Β 5.26. Books and Records. The books of account, minute books and stock record books of
the Company, all of which have been made available to HealthSpring, are complete and correct in all material respects and have been maintained in all material respects in accordance with
applicable Law and sound business practices.
26
Β
Β Β Β Β Β 5.27. Rate Caps and Guarantees. Except as set forth on ScheduleΒ 5.27, the
Company has not entered into any agreement for a term greater than 12Β months providing for (i)
fixed increases in payments required to be made thereunder by the Company to medical or ancillary
service providers (including on a percentage or dollar amount basis); or (ii)Β payments required to
be made thereunder by the Company to medical or ancillary service providers that are computed on
the basis of a guaranteed minimum aggregate payment amount or guaranteed minimum number of members.
Β Β Β Β Β 5.28. IBNR Report. The historical Medical Claims paid data contained in the Companyβs
lag models as of DecemberΒ 31, 2006 and JuneΒ 30, 2007 as set forth on ScheduleΒ 5.28 reflect
substantially all Medical Claims paid by the Company as of the date(s) referenced therein.
SECTION 6.
REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS
Β Β Β Β Β Except as set forth in the Disclosure Schedule, Sellers hereby jointly and severally represent
and warrant to Buyer with respect to Sellers as follows:
Β Β Β Β Β 6.1. Authorization. Sellers have full power, authority and legal capacity to enter
into this Agreement (in their individual capacities) and the other documents to be executed and
delivered by them pursuant to SectionΒ 10.2 of this Agreement (if and when delivered) (collectively,
the βSellers Transaction Documentsβ) and to perform his or her obligations hereunder and
thereunder.
Β Β Β Β Β 6.2. No Conflict or Violation. Except under the HSR Act and as set forth on
ScheduleΒ 5.9 and ScheduleΒ 7.5, the execution, delivery and performance of this
Agreement and the Sellers Transaction Documents by the Sellers (in their individual capacities)
have been duly authorized by any action required of such Seller, and no other act on the part of
Sellers is necessary to authorize the execution, delivery or performance of this Agreement or the
Sellers Transaction Documents by the Sellers (in their individual capacity) and the consummation of
the transactions contemplated hereby or thereby. This Agreement has been duly executed and
delivered by Sellers and constitutes a valid and binding obligation of Sellers, enforceable against
Sellers in accordance with its terms (subject to general principles of equity and except as
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws of general application relating to creditorsβ
rights generally), and each of the other Sellers Transaction Documents, when executed and delivered
by the applicable Sellers, in accordance with the terms hereof and thereof, shall each constitute a
valid and binding obligation of such Sellers, enforceable in accordance with its respective terms
(subject to general principles of equity and except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of
general application relating to creditorsβ rights generally). Sellers are not a party to or bound
by any written or oral agreement or understanding with respect to a transaction involving the sale
of the stock or assets of the Company other than this Agreement, and Sellers have terminated all
discussions with third parties (other than with HealthSpring and its Affiliates) regarding such a
transaction.
Β Β Β Β Β 6.3. Company Stock. Sellers have good and valid title to the Company Stock, free and
clear of all Liens (except restrictions on transfer under federal and state securities Laws). When
the Company Stock is purchased and sold hereunder, and upon delivery by Sellers to Buyer of
certificates for the Company Stock at the Closing pursuant to this Agreement, Buyer will have, as
of the Closing Date, good and valid title to the Company Stock, free and clear of all Liens (except restrictions on
transfer under federal and state securities Laws). There are no agreements with Sellers with
respect to the voting or transfer of the Company Stock.
27
Β
Β Β Β Β Β 6.4. Litigation. There is no Action pending or, to the Knowledge of Sellers,
threatened against the Sellers or the Company that seeks to delay, limit or enjoin the transactions
contemplated by this Agreement.
Β Β Β Β Β 6.5. Investment. Each of the Sellers (a)Β understands that the Shares have not been
registered under the Securities Act, or under any state securities laws, and are being offered and
sold in reliance upon federal and state exemptions for transactions not involving any public
offering, (b)Β is acquiring the Shares solely for such Sellerβs own account for investment purposes,
and not with a view to the distribution thereof, (c)Β is a sophisticated investor with knowledge and
experience in business and financial matters, (d)Β has received certain information concerning
HealthSpring and has had the opportunity to obtain additional information and ask questions as
desired in order to evaluate the merits and the risks inherent in holding the Shares, (e)Β is able
to bear the economic risk and lack of liquidity inherent in holding the Shares, and (f)Β is an
Accredited Investor.
SECTION 7.
REPRESENTATIONS AND WARRANTIES RELATING TO HEALTHSPRING AND BUYER
Β Β Β Β Β HealthSpring and Buyer hereby jointly and severally represent and warrant to Sellers and the
Company with respect to HealthSpring and Buyer as follows:
Β Β Β Β Β 7.1.
Organization. HealthSpring is a corporation duly organized, validly existing and
in good standing under the laws of the State of
Delaware, with full corporate power and authority
to conduct its business as it is presently being conducted, and to own or use the properties and
assets that it purports to own or use. HealthSpring is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where the character of
its properties and assets owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so qualified, licensed
and/or in good standing would not reasonably be expected to have a material adverse impact on
HealthSpring and its Affiliates, taken as a whole. HealthSpring is not in default under or in
violation of any provision of its certificate of incorporation or bylaws. Buyer is a limited
liability company duly organized, validly existing and in good standing under the laws of the State
of Texas, with full limited liability company power and authority to conduct its business as it is
presently being conducted, and to own or use the properties and assets that it purports to own or
use. Buyer is duly qualified or licensed as a foreign limited liability company to do business,
and is in good standing, in each jurisdiction where the character of its properties and assets
owned, leased or operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed and/or in good standing
would not reasonably be expected to have a material adverse impact on HealthSpring and its
Affiliates, taken as a whole. Buyer is not in default under or in violation of any provision of
its articles of organization or operating agreement.
Β Β Β Β Β 7.2. Authorization. HealthSpring and Buyer have all requisite power and authority,
and have taken all action necessary to execute and deliver this Agreement and the other documents
to be executed and delivered by HealthSpring or Buyer pursuant to SectionΒ 10.2 of this Agreement
(collectively, the βHealthSpring Transaction Documentsβ), to consummate the transactions
contemplated hereby and thereby and to perform their obligations hereunder and thereunder. This
Agreement and the HealthSpring Transaction Documents (if and when delivered) have been or will be
duly executed and delivered by HealthSpring and Buyer and are the legal, valid and binding obligations of
HealthSpring and Buyer, enforceable against HealthSpring and Buyer in accordance with their terms,
subject to general principles of equity and except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of
general application relating to creditorsβ rights generally.
28
Β
Β Β Β Β Β 7.3. Capitalization. All of the authorized membership and other equity interests in
Buyer are owned directly by HealthSpring. The entire authorized capital stock of HealthSpring
consists of 180,000,000 shares of HealthSpring Stock and 5,000,000 shares of preferred stock, $0.01
par value per share (βPreferred Stockβ). At MayΒ 10, 2007, there were 57,340,132 shares of
HealthSpring Stock issued and outstanding and no shares of Preferred Stock issued and outstanding.
All outstanding shares of HealthSpring Stock have been duly authorized and validly issued and are
fully paid and nonassessable and have not been issued in violation of any preemptive or similar
rights.
Β Β Β Β Β 7.4. No Conflict or Violation. None of HealthSpringβs or Buyerβs execution, delivery
or performance of this Agreement or the other HealthSpring Transaction Documents, consummation of
the transactions contemplated hereby or thereby, or compliance with any of the provisions hereof or
thereof, will (i)Β violate or conflict with any provision of the certificate of formation or bylaws
of HealthSpring or the articles of formation or regulations of Buyer; (ii)Β violate, conflict with,
or result in a breach of any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or terminate, or accelerate the
performance required by, or result in a right of termination or acceleration under, or result in
the creation of any Lien upon any of the assets of HealthSpring or Buyer under, any of the terms,
conditions or provisions of any contract, indebtedness, note, bond, indenture, security or pledge
agreement, commitment, license, lease, franchise, permit, agreement or other instrument or
obligation to which HealthSpring or Buyer is a party or by which HealthSpringβs or Buyerβs assets
are bound; or (iii)Β violate any Law or Order applicable to HealthSpring or Buyer or their
properties or assets.
Β Β Β Β Β 7.5. Consents. Except under the HSR Act and as set forth on ScheduleΒ 5.9 and
ScheduleΒ 7.5, the execution, delivery and performance of this Agreement and the
HealthSpring Transaction Documents by HealthSpring and Buyer does not, and the consummation of the
transactions contemplated by this Agreement and the other HealthSpring Transaction Documents by
HealthSpring and Buyer will not, require any consent, approval, authorization or permit of, or
filing with or notification to any Governmental Authority or any other third party.
Β Β Β Β Β 7.6. Litigation. There is no Action pending or, to HealthSpringβs and Buyerβs
Knowledge, threatened against HealthSpring or Buyer that seeks to delay, limit or enjoin the
transactions contemplated by this Agreement. Except as disclosed in the HealthSpring SEC Reports,
there are no Actions pending or, to the Knowledge of HealthSpring and Buyer, threatened against
HealthSpring or its Affiliates that require disclosure by HealthSpring in the HealthSpring SEC
Reports.
Β Β Β Β Β 7.7. Authorization of Shares. The Shares, when issued to Sellers at Closing in
accordance with this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will be approved for listing upon official notice of issuance on the NYSE. Upon
issuance to the Sellers at Closing in accordance with this Agreement, the Sellers will acquire good
and valid title to the Shares as of the Effective Date, free and clear of all Liens, other than
Liens created by Sellers, if any and as expressly provided in SectionΒ 3.4 and SectionΒ 11 of this
Agreement.
Β Β Β Β Β 7.8. SEC Reports. HealthSpring has made available to Sellers all reports and other
documents filed by HealthSpring with, or furnished by HealthSpring to, the SEC pursuant to the
Securities Act or the Securities Exchange Act (the βHealthSpring SEC Reportsβ). HealthSpring
has timely filed all reports and other documents it is required to file pursuant to the Securities
Act or the Securities Exchange Act. The HealthSpring SEC Reports have been prepared and filed in
accordance with the applicable requirements of the Securities Act or the Securities Exchange Act,
as applicable, and did not, as of their respective dates, contain any untrue statement of a
material fact or omit to state a material fact required to be stated or incorporated by reference
therein or necessary to make the
29
Β
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of HealthSpring included in the HealthSpring
SEC Reports (i)Β comply in all material respects with applicable rules and regulations of the SEC
with respect thereto, (ii)Β have been prepared in accordance with GAAP, and (iii)Β fairly present in
all material respects the financial position of HealthSpring as of the respective dates thereof and
the results of operations and cash flows of HealthSpring for the periods covered thereby; provided,
that all interim financial statements included in the HealthSpring SEC Reports are subject to
normal year-end adjustments and the absence of footnote disclosure and other presentation items.
Β Β Β Β Β 7.9. Compliance with Law. Except as disclosed in the HealthSpring SEC Reports,
HealthSpring and its Affiliates have not violated any applicable Law or Order, are in compliance
with applicable Laws and Orders and have not received any notice alleging that HealthSpring or its
Affiliates are not in compliance with applicable Laws or Orders, except, in each case, for any
violation or non-compliance that would not require disclosure by HealthSpring in the HealthSpring
SEC Reports.
Β Β Β Β Β 7.10. Governmental Audits and Investigations. Except as disclosed in the HealthSpring
SEC Reports, there are no audits, investigations or other enforcement actions pending or, to the
Knowledge of HealthSpring or Buyer, threatened against HealthSpring or its Affiliates with respect
to any contract involving Medicare or any other federally or state funded health care benefit
program that require disclosure in the HealthSpring SEC Reports. HealthSpring and its Affiliates
have not received notice of an, and are not currently under, investigation for any violation of the
various provisions of Laws governing Medicare or any federally or state funded health care benefit
program, except in each case, for any violation or non-compliance that would not require disclosure
by HealthSpring in the HealthSpring SEC Reports.
Β Β Β Β Β 7.11. Financing. Buyer will at Closing have sufficient immediately available funds to
pay the Cash Purchase Price to Sellers in accordance with this Agreement.
Β Β Β Β Β 7.12. Brokers. Sellers and their Affiliates shall have no liability for any brokerage
commission, finderβs fees or similar compensation arising out of or due to any action of
HealthSpring, Buyer or any of their Affiliates in connection with the transactions contemplated by
this Agreement.
Β Β Β Β Β 7.13. Investment. Each of HealthSpring and Buyer understand and agree that the
Company Stock has not been registered under the Securities Act or under any state securities laws,
and Buyer acknowledges that it is acquiring the Company Stock for its own account for investment
purposes, and not with a view to the distribution thereof.
SECTION 8.
AGREEMENTS PENDING THE CLOSING
Β Β Β Β Β 8.1. Conduct of the Business Pending the Closing. From the date of this Agreement
until the Closing or the earlier termination of this Agreement (the βPre-Closing Periodβ), except
as consented to in writing by Buyer or as expressly set forth in this Agreement, Sellers and the
Company shall cause the Company to operate in the Ordinary Course of Business (including, without
limitation, with respect to the collection of accounts receivable and payments of accounts payable). Without limiting
the generality of the foregoing, except as set forth on ScheduleΒ 8.1 hereto or as otherwise
specifically contemplated by this Agreement or consented to in writing by Buyer:
Β Β Β Β Β (i) Sellers and the Company shall use commercially reasonable efforts to (a)Β preserve
the business of the Company substantially intact, (b)Β to keep available the services of the
30
Β
Employees, (c)Β to preserve the goodwill of suppliers, providers, plan members and others
having business dealings or relations with the Company, (d)Β maintain its books and records
consistent with past practices and applicable Law in all material respects, (e)Β pay all
liabilities and obligations of the Company in the Ordinary Course of Business, and (f)
maintain reserves and statutory net worth sufficient to be in compliance with all applicable
Laws, including the HMO Statute;
Β Β Β Β Β (ii) the Company shall maintain insurance coverage reasonably appropriate for the
conduct of its business and consistent with past practices;
Β Β Β Β Β (iii) Sellers and the Company shall not, directly or indirectly, engage in any act or
omission that results in a breach of any of the representations, warranties, agreements or
covenants made by Sellers or the Company in this Agreement as of the Signing Date or as
brought down as of the Closing Date; and
Β Β Β Β Β (iv) The Company shall not make a material capital expenditure, distribution or
dividend, enter into or amend any Material Contract, enter into any management,
administrative services or marketing contract with respect to its business, or enter into or
amend a contract with the Sellers or an Affiliate of the Company or Sellers (other than the
cash dividend described in SectionΒ 3.6).
Β Β Β Β Β 8.2. Full Access; Diligence Matters. During the Pre-Closing Period, the Company and
Sellers covenant that they shall permit representatives of the Buyer (including Buyerβs attorneys,
accountants, lenders and other advisors) to have full and complete access during normal business
hours and upon reasonable notice to the Company to the Companyβs books and records, properties,
facilities, plan members, suppliers, providers, employees, representatives, consultants, and
independent accountants in connection with the Buyerβs due diligence review of the Company (it
being understood that, except as set forth in SectionΒ 11.3, such investigation, or any Knowledge of
HealthSpring or Buyer acquired thereby, shall in no way affect or otherwise obviate or diminish any
representations or warranties of the Sellers or the Company or any conditions to the obligations of
HealthSpring and Buyer, in each case as set forth herein, or, except as set forth in SectionΒ 11.3,
otherwise limit the Sellersβ indemnification obligations under SectionΒ 11); provided that Buyer
shall use its reasonable best efforts not to disrupt the Companyβs operations. During the
Pre-Closing Period, Sellers and the Company will permit Buyerβs transition planning team on-site
access at the Companyβs offices during normal business hours and upon reasonable notice to the
Company for purposes of developing an understanding of the decisions of the Companyβs senior
management and coordinating and planning the transition of the Companyβs business consistent with
the terms of applicable Law. The Sellers acknowledge and agree that the Buyerβs diligence review
prior to the Closing Date shall include the performance by the Buyer of βinformation technologyβ
diligence reasonably necessary to adequately assess the capabilities for successful data migration
with the Buyerβs information systems, together with the requisite training, at Buyerβs option, for
the Companyβs employees on the Buyerβs information systems. The Buyer Parties and the Sellers
acknowledge and agree that the terms and conditions of that certain Confidentiality Agreement,
dated as of MarchΒ 27, 2007, as amended, between the Company and HealthSpring (the βConfidentiality
Agreementβ) shall continue in full force and effect in accordance with its terms until (i)Β the earlier of the Closing, at which time the Confidentiality Agreement will terminate, or
(ii)Β the expiration of the Confidentiality Agreement pursuant to its terms.
Β Β Β Β Β 8.3. Notices and Consents. Promptly following the execution of this Agreement, each
of the Parties shall give any required notices to, make any other filings with, and use reasonable
best efforts to obtain as promptly as practicable, any other authorizations, consents, Orders, and
approvals of third
31
Β
parties and Governmental Authorities required to be given, made or obtained by
such Party in connection with the matters contemplated by this Agreement (including, without
limitation, any notifications and applications that it may be required to file with the Florida
Office of Insurance Regulation and any notifications, applications and report forms and related
materials that it may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act), and use all reasonable
efforts to obtain an early termination of any applicable waiting periods, and make any further
filings related to the foregoing filings that may be necessary, proper, or advisable. Buyer and
Sellers shall jointly agree upon the form and substance of any pre-closing notices or announcements
to payors, providers, plan members, Company employees or other third parties.
Β Β Β Β Β 8.4. Further Assurances. Upon the terms and subject to the conditions contained
herein, each Party hereto agrees (i)Β to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement; (ii)Β to execute any further
documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to
carry out any of the transactions contemplated hereunder; and (iii)Β to cooperate with each other in
connection with the foregoing. The Company shall make available to Buyer such information as Buyer
may reasonably request relative to the business, assets and property of the Company as may be
required to make any required filings hereunder, including, without limitation, providing Buyer
with any additional information requested by the Florida Office of Insurance Regulation under the
HMO Statute in connection therewith.
Β Β Β Β Β 8.5. Errors and Omissions Insurance. The Company shall purchase or obtain prior to
Closing tail insurance coverage effective as of the Effective Date for a minimum of two years on
terms and conditions consistent with the Companyβs current insurance coverage and from the
insurance companies providing such coverage to the Company prior to Closing.
Β Β Β Β Β 8.6. Financial Statements. During the Pre-Closing Period, the Company shall provide
Buyer with interim, unaudited, Company-prepared financial statements of the Company for each
calendar month, which shall include an income statement and balance sheet and supporting detail,
within twenty (20)Β days following the end of each calendar month.
Β Β Β Β Β 8.7. Notice of Investigations, Audits, Status of Approvals and Filings, etc. The
Company shall promptly deliver to Buyer any review, audit or investigation report issued by any
Person with respect to the Company that occurs between the date hereof and Closing or any draft
thereof that has been delivered to or otherwise obtained by the Company. Each of the Parties shall
keep the other Parties informed, not less than weekly during the Pre-Closing Period, regarding the
status of any of the notices, filings, authorizations, consents, Orders, and approvals required
pursuant to SectionΒ 8.3 above and promptly deliver to the other Parties any material written
correspondence relating thereto.
Β Β Β Β Β 8.8. Employee Matters. Prior to Closing, the Company shall, if requested by Buyer,
terminate participation effective as of the Effective Date by the Employees in all existing Company
Employee Benefit Plans, including any 401(k) plan and all severance policies, with no further
liability to the Company arising from such termination. Notice of the termination, if so requested
by Buyer, shall be provided to the Employees prior to Closing. No less than five (5)Β days prior to the Closing,
the Company and Sellers will provide HealthSpring and Buyer with an update to ScheduleΒ 5.16
solely to reflect any additions or deletions (as of such delivery date) to the persons listed as
Employees. Effective as of the Effective Date, Xxxx Medical Services, Inc. and its Affiliates
shall release the Employees from their employment.
Β Β Β Β Β 8.9. Tax Matters.
32
Β
Β Β Β Β Β (i) As soon as practicable following the Signing Date, the Company shall file corporate
income Tax returns reflecting its status as a C corporation as follows: (i)Β amended Federal
corporate income tax returns for the years 2004 and 2005, (ii)Β a Federal corporate income
tax return for the year 2006, and (iii)Β Florida corporate income tax returns for the years
2004, 2005 and 2006, and will pay (in any event prior to the Effective Date) all Taxes
(whether or not shown on such amended or other returns) owed by the Company in connection
with such returns. Sellers shall cause the Company to allow Buyer to review and comment on
each such Tax return described in (i)Β to (iii)Β in the preceding sentence prior to filing.
The Company will promptly notify other Governmental Authorities (including the Florida
Office of Insurance Regulation) of the amendments to the Companyβs tax returns and of any
restatements of the Companyβs financial statements in connection therewith, and will provide
Buyer with copies of the documentation filed with the Internal Revenue Service and all other
notices or communications sent by the Company to, or received by the Company from
Governmental Authorities relating the Companyβs status for Federal income tax purposes. The
Parties agree that the foregoing will be reflected in updates to the Disclosure Schedules,
and that such updates will not constitute breaches of the representations, warranties,
covenants and/or agreements contained in this Agreement (including for purposes of Section
10.2 or SectionΒ 11). Notwithstanding anything set forth in this Agreement to the contrary,
the Parties acknowledge and agree that, except for the failure to perform the immediately
preceding covenants in this SectionΒ 8.9(i) or the failure to pay the dollar amount of any
Taxes of the Company for all taxable periods ending before the Effective Date and the
portion through the day prior to the Effective Date for any taxable period that includes
(but does not end on) the Effective Date, no untruth or error in any representation or
warranty or breach or failure to perform any agreement or covenant of Seller or the Company
(including for purposes of SectionΒ 10.2 or SectionΒ 11) shall be deemed to have occurred in
connection with, arising out of or otherwise relating to the Companyβs status as an S
corporation or a C corporation, including as a result of any Tax returns, financial
statements, forms, certifications, applications, statements and other documentation relating
thereto (including all amendments, supplements and restatements thereof (including as
described above)) that has been filed with or provided to Governmental Authorities or other
third parties by the Company or Sellers.
Β Β Β Β Β (ii) Except as expressly described above, during the Pre-Closing Period, without the
prior written consent of Buyer (not to be unreasonably withheld, conditioned or delayed),
except as required by applicable Law (provided that prompt notice is provided to Buyer),
neither Sellers nor the Company shall, with respect to the Company, make or change any
election, change an annual accounting period, adopt or change any accounting method, file
any amended Tax return, enter into any closing agreement, settle any Tax claim or assessment
relating to the Company, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any Tax claim or assessment
relating to the Company, or take any similar action, or omit to take any similar action,
relating to the filing of any required Tax return or the payment of any required Tax, if
such election, adoption, change, amendment, agreement, settlement, surrender, consent or
similar action or omission would have the effect of increasing the present or future Tax liability or decreasing any present or future Tax benefit of
the Company.
Β Β Β Β Β 8.10. Exclusivity. During the Pre-Closing Period, Sellers and the Company will not
and will cause their representatives not to, directly or indirectly, (i)Β solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to the acquisition of
the Company Stock, or any substantial portion of the assets, of the Company (including any
acquisition structured as a merger, consolidation, share exchange, tender offer or otherwise), or
any other reorganization, recapitalization or similar transaction involving the Company or its
assets, or (ii)Β participate in any discussions or negotiations
33
Β
regarding, furnish any information
with respect to, assist or participate in, or facilitate or encourage in any other manner any
effort or attempt by any Person to do or seek any of the foregoing. Sellers and the Company shall
notify Buyer promptly if any Person makes any proposal, offer, inquiry or contact with respect to
any of the foregoing, including a description of the proposed transaction and the identity of the
Person.
Β Β Β Β Β 8.11. Notice of Developments. Each Party shall promptly notify the other Parties in
writing upon (a)Β the occurrence, or failure to occur, of any event, which occurrence or failure to
occur has caused or could be reasonably likely to cause any representation or warranty of such
party contained in this Agreement or any related document to be untrue or inaccurate at any time
during the Pre-Closing Period (including, without limitation, notice by the Company to Buyer of any
routine financial or other examinations of the Florida Office of Insurance Regulation, the Agency
for Health Care Administration, CMS or any other applicable Governmental Authority, in each case,
that is commenced or conducted following the Signing Date and prior to the Closing Date), (b)Β any
breach or failure of any Party hereto or any officer, director, employee or Affiliate or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or any related document, or (c)Β any other event or development
affecting the ability of a Party to consummate the transactions contemplated by this Agreement or
any related documents. During the Pre-Closing Period Sellers shall promptly provide Buyer with
notice of any Company MAC. Notwithstanding the foregoing, except as described in SectionΒ 8.9 and
SectionΒ 11.3, no disclosure shall be deemed to amend or supplement the Disclosure Schedules hereto,
to prevent or cure any misrepresentation, breach of warranty or breach of covenant, to constitute
or give rise to a waiver by the non-breaching party of any condition set forth in this Agreement,
or to otherwise limit the remedies available to the non-breaching Party under this Agreement
(whether prior to or after the Closing).
SECTION 9.
OTHER COVENANTS AND AGREEMENTS
Β Β Β Β Β 9.1. Further Action. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further instruments and documents) as the
other Party reasonably may request.
Β Β Β Β Β 9.2. Expenses. Except as otherwise specified in this Agreement, each Party hereto
shall pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement
and to any action taken by such Party in preparation for carrying this Agreement into effect. All
costs and expenses incurred by the Company in connection with the transactions contemplated by this
Agreement shall be paid prior to or at the Closing. Notwithstanding the foregoing, Buyer and the
Company shall share equally the fees associated with any filings under the HSR Act and the fees and
expenses of the Escrow Agent.
Β Β Β Β Β 9.3. Publicity. Except as may otherwise be required under applicable Law (including,
in the case of HealthSpring, federal securities Laws), or, with respect to HealthSpring,
recommended by counsel, prior to the Closing (i)Β neither Sellers, the Company, HealthSpring nor
Buyer shall make any public announcement with respect to this Agreement or the transactions
contemplated hereby without the express prior consent of the other Party, and (ii)Β each Party shall
hold in confidence and use its reasonable efforts to have all of their officers, directors,
employees, trustees and agents hold in confidence the terms of this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, (i)Β each Party may discuss the terms of this
Agreement and the transactions contemplated hereby without the prior approval of the other Party to
the extent the same are publicly available through the filings with the SEC
34
Β
and the Florida Office
of Insurance Regulation contemplated hereby and (ii)Β HealthSpring may disclose the terms of this
Agreement and the transactions contemplated hereby in reports filed with the Securities and
Exchange Commission and to the extent appropriate under applicable Law. HealthSpring shall provide
Sellers with a reasonable opportunity to review and comment upon any such reports filed with the
SEC or the NYSE.
Β Β Β Β Β 9.4. Tax Matters.
Β Β Β Β Β (i) Tax Returns. Buyer shall cause the Company, which related cost and expense
shall be accrued on the Companyβs financial statements prior to the Effective Time, to
prepare or cause to be prepared and file or cause to be filed all Tax returns of the Company
for all periods ending on or prior to the Effective Date that are filed after the Closing
Date. Buyer shall cause the Company to allow Sellers to review and comment on each such Tax
return described in the preceding sentence prior to filing and shall adopt in such returns
all comments of the Sellers so long as: (i)Β such comments (a)Β do not result in a finding or
admission of any violation by the Company of any Law or Order or the rights of any Person or
(b)Β have any material adverse effect on any claims that may be made against the Company,
(ii)Β the Sellers pay all Taxes that are required to be paid in accordance with such returns,
and (iii)Β the Buyer will have no liability with respect to such returns, and (iv)Β such
comments do not increase the amount of Taxes that will be owed by, or decrease any Tax
benefits of, the Company for any period beginning on or after the Effective Date (as
compared to Taxes owed for such period assuming the returns prepared by Buyer were filed).
The Buyer will use commercially reasonable efforts to cause the Company to incorporate other
comments of the Sellers into such returns.
Β Β Β Β Β (ii) Control of Contest. Sellers shall have the right, at their own expense,
to control any audit, investigation or examination by any taxing authority, initiate any
claim for refund or amended Tax return and contest, resolve and defend against any
assessment, deficiency or other adjustment or proposed adjustment of Taxes for any taxable
period ending prior to the Effective Date for which Sellers are charged with liability for
payment of Tax under this Agreement; provided, that Buyer shall have the right to
participate on the Companyβs behalf, at its sole cost and expense, and (a)Β Buyerβs consent
(not to be unreasonably withheld, conditioned or delayed) shall be required for any
settlement of such matter, except that such consent shall not be required if (1)Β there is no
finding or admission of any violation by the Company of any Law or Order or of the rights of
any Person and no material adverse effect on any other claims that may be made against the
Company, and (2)Β the sole relief provided is monetary damages that are paid in full by the
Sellers and (b)Β the Sellers will have no liability with respect to any settlement of such
matters effected without their consent (not to be unreasonably withheld, conditioned or
delayed). Each Party will allow the other and its counsel and its accountants (at its own
expense) to be represented during any audits of Tax returns to the extent that disputed
items therein relate to the Company. The Buyer Parties shall undertake or authorize actions
of the Company as reasonably requested by Sellers with respect to this SectionΒ 9.4(ii).
Β Β Β Β Β (iii) General. Each of the Buyer Parties and Sellers shall provide the other
with the right to have reasonable access to personnel, and to copy and use, any records or
information that may be relevant in connection with the preparation of any Tax returns, any
audit or other examination by any taxing authority or any litigation relating to liability
for Taxes. Information required in the filing of any Tax return shall be provided to the
other Party not less than thirty (30)Β days before such Tax return is due. Sellers and the
Buyer Parties shall retain all records relating to Taxes for as long as the statute of
limitations with respect thereto shall remain open.
35
Β
Β Β Β Β Β 9.5. Non-Compete; Non-Solicitation.
Β Β Β Β Β (i) Each Seller hereby acknowledges that such Seller is familiar with the Companyβs
trade secrets and with other Confidential Information of the Company. Each Seller
acknowledges and agrees that the Company would be irreparably damaged (including a
significant loss of goodwill by the Company) if such Seller were to breach the provisions of
this SectionΒ 9.5. Each Seller further acknowledges and agrees that the covenants and
agreements set forth in this SectionΒ 9.5 were a material inducement to Buyer to enter into
this Agreement and to perform its obligations hereunder, and that none of Buyer or its
Affiliates would obtain the benefit of the bargain set forth in this Agreement as
specifically negotiated by the parties hereto if such Seller breached the provisions of this
SectionΒ 9.5. Therefore, in further consideration of the amounts to be paid hereunder for
such Sellerβs Company Stock and the goodwill of the Company sold by Sellers, each Seller
covenants and agrees that he or she will not, and will cause his or her Affiliates and
parents, spouse and children (except if the same is also a Seller) not to, directly or
indirectly (including, without limitation, by providing any financing, consulting or other
assistance to any Person (including an Immediate Family Member of Seller) to), own, control,
operate, manage, underwrite, administer and/or have any financial interest (including
indirectly through any Person) in any health maintenance organization, preferred provider
product, other health insurance product or any other similar form of health insurance or
risk-based or pre-paid health benefit plan, including without limitation, through the
operation of a rental network, or direct consumer contracting, for a period of five (5)
years following the Effective Date in any state in which the Company, Buyer or their
Affiliates, as of the time such Sellers or Affiliates or parents, spouses or children
commence engaging in such restricted activities in such state, operate a Medicare Advantage
health plan or other managed care organization.
Β Β Β Β Β (ii) Nothing contained herein shall limit the right of any Seller or his or her
Affiliates or Immediate Family Members to (i)Β maintain any ownership interest of two percent
(2%) or less of the outstanding equity securities of any publicly traded corporation, (ii)
exercise his or her rights under the Medical Services Agreement (including with respect to
the PROVIDER HMO, as defined therein) or (iii)Β take any action at the direction or with the
written consent of, or in connection with the performance of services for, any of the Buyer
Parties and/or their Affiliates.
Β Β Β Β Β (iii) Each Party agrees that such Party shall not (and each Party shall cause such
Partyβs Affiliates not to) (i)Β make any negative or derogatory statement or communication
regarding another Party or any of their respective Affiliates or employees with the intent
to harm such Party or (ii)Β make any disparaging statement or communication regarding another
Party or any of their respective Affiliates or employees. Nothing in this SectionΒ 9.5(v)
will prohibit the making of any truthful statements made by any Person in response to a
lawful subpoena or legal proceeding or to enforce such Personβs rights under this Agreement
and the other related documents, or in connection with any Action by or investigation or audit by a
Governmental Authority.
Β Β Β Β Β (iv) If, at the time of enforcement of the covenants and agreements contained in this
SectionΒ 9.5 (the βRestrictive Covenantsβ), a court shall hold that the duration, scope or
area restrictions stated herein are unreasonable under circumstances then existing, the
Parties agree that the maximum duration, scope or area reasonable under such circumstances
shall be substituted for the stated duration, scope or area and that the court shall be
allowed and directed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by Law. Each Seller has determined and hereby acknowledges
that the Restrictive Covenants are reasonable in terms of duration, scope and area
restrictions and are necessary to protect the
36
Β
goodwill of the Companyβs business and the
substantial investment in the Company made by Buyer hereunder. Each Seller further
acknowledges and agrees that the Restrictive Covenants are being entered into by it in
connection with the sale by such Seller of such Sellerβs Company Stock and the goodwill of
the Companyβs business and not directly or indirectly in connection with any other
relationship with the Company.
Β Β Β Β Β (v) If any Party breaches, or threatens to commit a breach of, any of the Restrictive
Covenants, the non-breaching Party shall have, in addition to, and not in lieu of, any other
rights and remedies available to it, the right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being agreed that any
breach or threatened breach of the Restrictive Covenants would cause irreparable injury to
the non-breaching Party and that money damages would not provide an adequate remedy. In
addition, in the event that any Seller or an Affiliate or Immediate Family Member of any
Seller breaches, or threatens to commit a breach of, any of the Restrictive Covenants, the
Company shall have the right and remedy to require such Seller, Affiliate or Immediate
Family Member to account for and pay over to the Company any profits, monies, accruals,
increments or other benefits derived or received by such Person as the result of any
transactions constituting a breach of the Restrictive Covenants from the date such Seller
was actually aware or was notified that such Seller was in breach of any of the Restrictive
Covenants.
Β Β Β Β Β (vi) In the event of any breach or violation by Sellers of any of the Restrictive
Covenants, the time period of such covenant shall be tolled until such breach or violation
is resolved.
Β Β Β Β Β (vii) For Federal, state and local Tax purposes, the Parties will allocate the portion
of the Purchase Price (the βConsiderationβ) identified on ScheduleΒ 9.5 to the
Restrictive Covenants of the Sellers set forth in this SectionΒ 9.5. The Parties will report
the purchase of the Company Stock and the Restrictive Covenants of the Sellers in accordance
with ScheduleΒ 9.5 on all Federal, state and local Tax returns and reports, and will
not take any position that is inconsistent with this ScheduleΒ 9.5 during any Tax
examination, appeal or related judicial proceeding without the prior written consent of the
other Party. The Sellers agree and acknowledge that a breach or threatened breach of the
Restrictive Covenants would cause irreparable damage to Buyer and HealthSpring that is
materially greater than the Consideration and accordingly, the Sellers hereby agree that the
Consideration is set for Tax purposes only and is not intended to and shall not be deemed to
limit in any way the monetary Damages that may be asserted or collected by the Buyer Parties
upon any breach of the Restrictive Covenants. The Sellers further agree that in any Action
regarding a breach of the Restrictive Covenants by the Buyer Parties, the Sellers will not
in any manner introduce the amount of the Consideration into the litigation or use the
amount of the Consideration to attempt to limit the amount of Damages which the Buyer
Parties may be entitled to recover as a defense to or to limit the Damage which may be awarded to the
Buyer Parties.
Β Β Β Β Β 9.6. Transition. Except as expressly set forth in the Medical Services Agreement, the
Sellers will not take any action that is designed or intended to have the effect of discouraging
any plan member, payor, vendor, provider or other business associate of the Company from
maintaining the same business relationship with the Company after the Closing as it maintained with
the Company prior to Closing.
Β Β Β Β Β 9.7. Disclosure of Confidential Information. During the Pre-Closing Period, the
Company and each Seller agrees to use its commercially reasonable efforts to protect, maintain and
safeguard the confidentiality of the Confidential Information of the Company. From and after the
Closing, each Party (the βReceiving Partyβ) agrees to use its commercially reasonable efforts to
protect, maintain and
37
Β
safeguard the confidentiality of the Confidential Information of the other
Party (the βDisclosing Partyβ) using at least the same level of care (but no less than reasonable
care) that such Receiving Party uses to protect, maintain and safeguard the confidentiality of its
own Confidential Information. At the request of the Disclosing Party at any time or from time to
time, the Receiving Party shall, as promptly as practicable, deliver to Disclosing Party all
Confidential Information of the Disclosing Party then in the Receiving Partyβs possession or under
the Receiving Partyβs control; provided, however, that, (i)Β in lieu thereof, the Receiving Party
may destroy all of the Receiving Partyβs copies and information stored by electronic means of such
Confidential Information and certify to the Disclosing Party in writing that such destruction has
been accomplished, and (ii)Β the Receiving Party shall be allowed access to the Confidential
Information of the Disclosing Party as provided in this Agreement (including in SectionΒ 9.8).
Β Β Β Β Β 9.8. Access to Information Following Closing. Prior to the Closing, the Sellers may,
at their expense, make copies of any and all records of the Company which the Sellers are required
to maintain by Law. The Parties acknowledge that, subsequent to the Closing, Sellers may need
access to information, documents, or computer data in the control or possession of the Company or
the Buyer, and Sellers may need to review and/or copy documents or other information relating to
the Company for purposes of concluding or evidencing the transactions contemplated herein and for
audits, investigations, compliance with requirements, rules and requests of Governmental
Authorities, and the prosecution or defense of third-party claims. Accordingly, after the Closing
Date, Buyer agrees that it will make available, during normal business hours and in such manner as
will not unreasonably disrupt the operations of the Company, to Sellers and its agents and
independent auditors such documents and information as may be available relating to the Company in
respect of periods prior to the Effective Date and will permit Sellers to make copies thereof at
Sellersβ expense.
Β Β Β Β Β 9.9. Certificates Representing Shares. Each stock certificate representing the
Shares will be imprinted with legends substantially in the following form:
The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the βSecurities Actβ). Such shares have been
acquired for investment purposes and may not be offered for sale, sold, delivered
after sale, transferred, pledged, or hypothecated in the absence of an effective
registration statement filed by the issuer with the Securities and Exchange
Commission covering such shares under the Securities Act or an opinion of counsel
satisfactory to the issuer that such registration is not required.
The shares represented by this certificate are subject to forfeiture and certain
rights of set-off as set forth in that certain Stock Purchase Agreement, dated as
of AugustΒ 9, 2007, among the issuer and certain persons. A copy of such forfeiture provisions
and set-off rights shall be furnished by the issuer to the holder hereof upon
written request and without charge.
Subject to the provisions of the Registration Rights Agreement, every Person desiring to transfer
the Shares other than pursuant to an effective registration statement filed by the Company pursuant
to the Securities Act, first must furnish HealthSpring (or HealthSpring must otherwise be provided
by its counsel) with (a)Β a written opinion reasonably satisfactory to HealthSpring in form and
substance from counsel reasonably satisfactory to HealthSpring by reason of experience to the
effect that the holder may transfer the Shares as desired without registration under the Securities
Act and (b)Β a written undertaking executed by the desired transferee reasonably satisfactory to
HealthSpring in form and substance agreeing to be bound by the restrictions on transfer contained
herein and in the Escrow Agreement.
38
Β
Β Β Β Β Β 9.10. Directorship. Subject to the completion by Xxxx (as defined below) of
HealthSpringβs standard director and officer questionnaire (a copy of which has been provided to
Xxxx prior to the Signing Date) and other assurances by Xxxx that existing violations of Law
identified by HealthSpring, if any, have been corrected or remediated, in each case to the
reasonable satisfaction of HealthSpringβs Board of Directors, effective immediately following the
Closing, the Board of Directors of HealthSpring shall be enlarged and Xxxxxxxx Xxxx, Xx. (βXxxxβ)
shall be appointed to serve as a ClassΒ II director of HealthSpring. Until the earlier of (i)Β such
time as Xxxx and his Affiliates no longer beneficially own greater than fifty percent (50%) of the
Shares, (ii)Β the death of Xxxx, or (iii)Β SeptemberΒ 30, 2010, HealthSpring shall use its reasonable
best efforts to cause Xxxx to be nominated and recommended to HealthSpringβs stockholders for
election as a ClassΒ III director at each annual meeting of HealthSpringβs stockholders at which
ClassΒ III directors stand for reelection, or at each annual meeting of HealthSpringβs stockholders
in the event HealthSpring ceases to have a classified Board of Directors. In the event Xxxx ceases
to serve as a director of HealthSpring as a result of the death, resignation or removal of Xxxx
from the Board of Directors of HealthSpring or because the stockholders of HealthSpring fail to
elect Xxxx as a director, the provisions of this SectionΒ 9.10 shall be of no further force or
effect. At all times that Xxxx serves as a member of the Board of Directors of HealthSpring, Xxxx
shall be covered by HealthSpringβs director and officer indemnification arrangements and directors
and officersβ insurance policies to the same extent as the other non-employee directors.
Β Β Β Β Β 9.11. Employee Matters. On or prior to Closing, Buyer or one of its Affiliates shall
offer to employ each of the Employees listed on the updated ScheduleΒ 5.16 delivered to
Buyer by Sellers and the Company pursuant to SectionΒ 8.8. Such employment shall be (i)Β effective
as of the Effective Date, (ii)Β at a level of salary or hourly compensation (as applicable) that is
no less than the level of such compensation being paid to such Employees by an Affiliate of the
Company immediately prior to Closing, (iii)Β with bonus compensation that is reasonably comparable
to the bonus compensation being provided to such Employees by an Affiliate of the Company
immediately prior to Closing, and (iv)Β with benefits that are reasonably comparable, in the
aggregate, to the benefits being provided to such Employees by an Affiliate of the Company
immediately prior to Closing. Nothing in this SectionΒ 9.11 shall affect the right of Buyer and its
Affiliates to terminate the employment of or alter the employment terms of an Employee following
the Closing. Following the Closing, the Employees shall be eligible, as of the Effective Date, to
participate in the applicable Employee Benefit Plans in which similarly situated employees of Buyer
and its Affiliates participate, to the same extent as similarly situated employees of Buyer and its
Affiliates; provided, however, that the foregoing shall in no event obligate the Company to
continue the employment of such persons for any period following the Closing Date. With respect to
each Buyer Employee Benefit Plan that is an βemployee benefit plan,β as defined in ERISA, for
purposes of determining eligibility to participate, vesting, and entitlement to benefits (but not
for purposes of benefit accrual), service with the Company shall be treated as service with Buyer
to the extent permitted by Law; provided, however, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits.
SECTION 10.
CONDITIONS TO CLOSING
Β Β Β Β Β 10.1. Conditions to Obligations of Each Party. The obligations of each Party to
consummate the transactions contemplated herein are subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions:
Β Β Β Β Β (i) No Injunctions or Restraints; Illegality. No Law or Order shall have been
enacted, entered, promulgated, enforced or issued by any Governmental Authority or shall
39
Β
otherwise be in effect which prohibits, restrains, enjoins or restricts the consummation of
the transactions provided for hereby.
Β Β Β Β Β (ii) Approvals and Consents. All applicable waiting periods under the HSR Act
shall have expired or been terminated, and the Parties shall have received all
authorizations, Permits, consents, bonds, certificates, registrations, accreditations,
Orders and approvals of Governmental Authorities and other third parties listed on
ScheduleΒ 5.9 and ScheduleΒ 7.5.
Β Β Β Β Β 10.2. Additional Conditions to Obligations of HealthSpring and Buyer. The obligations
of HealthSpring and Buyer to consummate the transactions contemplated herein are also subject to
the satisfaction, on or prior to the Closing, of each of the following conditions:
Β Β Β Β Β (i) Representations, Warranties and Covenants. All representations and
warranties of Sellers and/or the Company contained in this Agreement shall be true and
correct at and as of the date of this Agreement and at and as of the Closing Date (without
giving effect to any materiality qualifications contained therein or any disclosure pursuant
to the first sentence of SectionΒ 8.11) and the Company and Sellers shall have performed,
complied with and satisfied all agreements and covenants required hereby to be performed by
them prior to or on the Closing Date (without giving effect to any disclosure pursuant to
the first sentence of SectionΒ 8.11) or, in the event that the representations and warranties
of Sellers and/or the Company are not true and correct as described above or the Company and
the Sellers have not performed, complied with and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date as described above,
the aggregate of all such breaches shall not constitute a Material Adverse Effect. The
Sellers and a duly authorized officer of the Company shall have delivered to Buyer a
certificate dated the Closing Date to such effect.
Β Β Β Β Β (ii) Medical Services Agreement. Xxxx Medical Centers and the Company shall
have executed and delivered the Medical Services Agreement, including any and all exhibits
thereto, in substantially the form attached hereto as ExhibitΒ 10.2(ii) to be
effective as of the Effective Date (the βMedical Services Agreementβ);
Β Β Β Β Β (iii) Employment Agreement. Xxxxxx X. Xxxxx shall have executed and delivered
to NewQuest Management of Florida, LLC, a Florida limited liability company and wholly-owned
subsidiary of HealthSpring (βNewQuest Managementβ), an Employment Agreement in substantially
the form attached hereto as ExhibitΒ 10.2(iii) to be effective as of the Effective
Date (the βEmployment Agreementβ);
Β Β Β Β Β (iv) License Agreement. Xxxx Medical Centers and the Company shall have
executed and delivered the Trademark License Agreement in substantially the form attached
hereto as ExhibitΒ 10.2(iv) to be effective as of the Effective Date (the βLicense
Agreementβ);
Β Β Β Β Β (v) Office Space Agreement. Xxxx Medical Centers and the Company shall have
executed and delivered the Office Space Agreement in substantially the form attached hereto
as ExhibitΒ 10.2(v) to be effective as of the Effective Date (the βOffice Space
Agreementβ);
Β Β Β Β Β (vi) No Claim Regarding Stock Ownership or Sale Proceeds. There must not be
pending or threatened in writing by any Person any claim asserting that such Person is the
holder or the beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any Company Stock of, or any other voting, equity, or ownership interest in,
the Company.
40
Β
Β Β Β Β Β (vii) Registration Rights Agreement. Each of the Sellers and HealthSpring
shall have executed and delivered the Registration Rights Agreement in substantially the
form attached hereto as ExhibitΒ 10.2(vii) to be effective as of the Effective Date
(the βRegistration Rights Agreementβ).
Β Β Β Β Β (viii) Escrow Agreement. Each of the Sellers and the Escrow Agent shall have
executed and delivered the Escrow Agreement in substantially the form of Exhibit
10.2(viii) to be effective as of the Effective Date (the βEscrow Agreementβ);
Β Β Β Β Β (ix) Closing Documents and Deliveries. Sellers shall have delivered (or
provided) to Buyer (or, if applicable, the Escrow Agent) the following:
Β Β Β Β Β (a) certificates representing the Company Stock, properly endorsed in blank for
transfer, together with any stock transfer powers or other instruments,
appropriately executed, as may be necessary to transfer the Company Stock to Buyer
or an Affiliate of Buyer as designated by Buyer;
Β Β Β Β Β (b) a copy of the Companyβs articles of incorporation certified by the
Secretary of State of Florida;
Β Β Β Β Β (c) a copy of the Companyβs corporate bylaws certified by its secretary;
Β Β Β Β Β (d) a certificate of good standing of the Company from the State of Florida
dated as of a recent date;
Β Β Β Β Β (e) a certified copy of the resolutions and other requisite corporate actions
of the Company, authorizing the execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by the Company pursuant
to this Agreement, and the consummation of the transactions contemplated hereby and
thereby;
Β Β Β Β Β (f) a certificate, in form and substance reasonably satisfactory to Buyer, of
each of Sellers and a duly authorized officer of the Company in accordance with
SectionΒ 10.2(i);
Β Β Β Β Β (g) separate letters of resignation signed by each director and officer of the
Company as designated by the Buyer, to be effective as of the Effective Date;
Β Β Β Β Β (h) evidence (in form and substance reasonably satisfactory to Buyer) that all
amounts required to be paid by the Company to the Companyβs and Sellersβ legal
counsel, investment bankers, brokers and other agents and representatives, in each
case, with respect to the transactions contemplated by this Agreement, have been
paid in full and that the Company does not have any liability to any of the
foregoing Persons with respect thereto or, to the extent any such amounts are being
paid by Sellers at Closing, delivered to Buyer payoff letters with respect to all
such unpaid amounts (on terms and conditions reasonably satisfactory to Buyer);
Β Β Β Β Β (i) evidence (in form and substance reasonably satisfactory to Buyer) that the
Companyβs outstanding Indebtedness, if any, has been paid in full and Sellers shall
have obtained releases of all Liens relating to the assets and properties of the
Company, if any, other than Permitted Liens or, to the extent such Indebtedness is
being repaid by
41
Β
Sellers at Closing, delivered to Buyer payoff letters with respect
to all such Indebtedness outstanding as of the Closing (in each case on terms and
conditions reasonably satisfactory to Buyer);
Β Β Β Β Β (j) each Seller shall have delivered to Buyer a non-foreign affidavit dated as
of the Effective Date and in form and substance required under the U.S. Treasury
regulations issued pursuant to SectionΒ 1445 of the Code so that Buyer is exempt from
withholding any portion of the Purchase Price hereunder;
Β Β Β Β Β (k) evidence (in form and substance reasonably satisfactory to Buyer) that the
Company has obtained and fully paid for the errors and omissions insurance described
in SectionΒ 8.5;
Β Β Β Β Β (l) each Seller shall have executed and delivered to the Escrow Agent stock
powers with respect to the Shares as required by the Escrow Agreement;
Β Β Β Β Β (m) the Company shall have delivered to Buyer the consent of the Companyβs
independent public accountants, in form and substance reasonably acceptable to
Buyer, to the inclusion of the GAAP Audited Financial Statements, and such
accountantβs written report thereon, in the Current Report on Form 8-K to be filed
by HealthSpring with respect to the transactions contemplated by this Agreement and
to the incorporation by reference of the GAAP Audited Financial Statements into all
effective registration statements of HealthSpring;
Β Β Β Β Β (n) all corporate books and records and other property of the Company in their
possession, if any; and
Β Β Β Β Β (x) There shall not have occurred a Company MAC.
Β Β Β Β Β (a) All proceedings to be taken by Sellers or the Company in connection with
the consummation of the transactions contemplated hereby and all documents required
to be delivered by Sellers or the Company to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the Buyer. Any
condition specified above may be waived if such waiver is set forth in a writing
duly executed by the Buyer.
Β Β Β Β Β 10.3. Additional Conditions to Obligations of Sellers. The obligations of Sellers to
consummate the transactions contemplated herein are also subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions:
Β Β Β Β Β (i) Representations, Warranties and Covenants. All representations and
warranties of HealthSpring and/or Buyer contained in this Agreement shall be true and
correct at and as of the date of this Agreement and at and as of the Closing Date (without
giving effect to any materiality qualifications contained therein or any disclosure pursuant
to the first sentence of SectionΒ 8.11) and HealthSpring and Buyer shall have performed,
complied with and satisfied all agreements and covenants required hereby to be performed by
them prior to or on the Closing Date (without giving effect to any disclosure pursuant to
the first sentence of SectionΒ 8.11) or, in the event that the representations and warranties
of HealthSpring and Buyers are not true and correct as described above or HealthSpring and
Buyer have not performed, complied with and satisfied all agreements and covenants required
hereby to be performed by them prior to or on the
42
Β
Closing Date as described above, the
aggregate of all such breaches shall not constitute a Material Adverse Effect. A duly
authorized officer of HealthSpring and Buyer shall have delivered to Sellers a certificate
dated the Closing Date to such effect.
Β Β Β Β Β (ii) Closing Documents and Deliveries. HealthSpring and Buyer shall have
delivered to Sellers (or, if applicable, the Escrow Agent) the following:
Β Β Β Β Β (a) wire transfers of immediately available funds of the Cash Purchase Price in
accordance with SectionΒ 3.2;
Β Β Β Β Β (b) HealthSpring shall have delivered the certificates representing the Shares
to the Escrow Agent as required by SectionΒ 3.2 and the Escrow Agreement;
Β Β Β Β Β (c) a copy of the resolutions and other requisite actions of HealthSpring and
Buyer authorizing the execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered pursuant to this Agreement,
and the consummation by HealthSpring and Buyer of the transactions contemplated
hereby and thereby, which copies have been certified by HealthSpringβs and Buyerβs
secretary;
Β Β Β Β Β (d) a certificate of a duly authorized officer of HealthSpring and Buyer in
accordance with SectionΒ 10.3(i);
Β Β Β Β Β (e) a copy of HealthSpringβs Amended and Restated Certificate of Incorporation
certified by the
Delaware Secretary of State;
Β Β Β Β Β (f) a copy of Buyerβs Articles of Formation certified by the Texas Secretary of
State;
Β Β Β Β Β (g) a copy of HealthSpringβs bylaws certified by its Secretary;
Β Β Β Β Β (h) a copy of Buyerβs Amended and Restated Regulations as certified by its
Secretary;
Β Β Β Β Β (i) a certificate of good standing of HealthSpring issued by the Secretary of
State of the State of
Delaware;
Β Β Β Β Β (j) certificates of good standing for Buyer issued by the Secretary of State of
the State of Texas and the Office of the Comptroller of the State of Texas; and
Β Β Β Β Β (k) NewQuest Management shall have delivered to Xxxxxx X. Xxxxx the Employment
Agreement;
Β Β Β Β Β (l) HealthSpring shall have executed and delivered to Sellers the Registration
Rights Agreement;
Β Β Β Β Β (m) the Company shall have executed and delivered the License Agreement and the
Medical Services Agreement;
Β Β Β Β Β (n) evidence of the appointment of Xxxx to the Board of Directors of
HealthSpring effective immediately following the Closing Date; and
43
Β
Β Β Β Β Β (o) HealthSpring, Buyer and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
Β Β Β Β Β All proceedings to be taken by HealthSpring and Buyer in connection with the
consummation of the transactions contemplated hereby and all documents required to be
delivered by HealthSpring and Buyer to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Sellers. Any condition specified above
may be waived if such waiver is set forth in a writing duly executed by the Sellers.
Β Β Β Β Β 10.4. Extension of Closing; Deposit Release Condition. In the event that all of the
conditions to Closing described in SectionsΒ 10.1, 10.2 and 10.3 (other than conditions that will be
satisfied at the Closing) are satisfied and the Closing cannot occur solely as a result of Buyerβs
failure to have sufficient funds to pay the Cash Purchase Price on the scheduled Closing Date (the
βDeposit Release Conditionβ), the Escrow Agent shall deliver to the Sellers on a pro rata basis
within three (3)Β business days Twelve Million Dollars ($12,000,000) in cash (the βFinancing
Depositβ), as further described in the Deposit Agreement; provided that the Escrow Agent shall
thereupon distribute to HealthSpring any interest or other earnings with respect to the Financing
Deposit. Notwithstanding anything set forth in this Agreement to the contrary, the Escrow Agent
shall deliver the Financing Deposit, together with any interest or other earnings with respect
thereto, to HealthSpring within three (3)Β business days in the event the Agreement is terminated
for any reason prior to the satisfaction of the Deposit Release Condition. Upon the release of the
Financing Deposit upon the satisfaction of the Deposit Release Condition, Buyer may, at its sole
option, delay the Closing by up to 30Β days to permit Buyer additional time to obtain the financing
required for Buyer to consummate the transactions contemplated by this Agreement. In the event
Buyer determines to delay the Closing as described in this SectionΒ 10.4, Buyer shall deliver
written notice to Sellers and the Company of its exercise of its option to delay the date of the
Closing. In the event that the Parties consummate the transactions contemplated by this Agreement,
the Financing Deposit shall be credited towards, and shall reduce dollar for dollar, the Cash
Purchase Price to be paid by Buyer at Closing. In the event that the Buyer pays the Financing
Deposit and the Parties do not consummate the transactions contemplated by this Agreement other
than as a result of an intentional breach of this Agreement by Sellers or the Company, Sellers
shall retain the Financing Deposit as liquidated damages, this Agreement shall terminate and all
further rights and obligations of the Parties under this Agreement will terminate except with
respect to SectionΒ 9.2 and SectionΒ 13. The Parties acknowledge and agree that it would be
impracticable or extremely difficult for any Party to determine the actual damages resulting from
any such breach or failure to perform by Buyer and HealthSpring hereunder and, therefore, the
Parties have agreed upon the foregoing remedy as liquidated damages which shall not be deemed to be
in the nature of a penalty. In the event Buyer elects to delay the Closing as described herein,
the Closing shall be consummated within the first five (5)Β business days of the first month
following the expiration of the 30-day delay period.
SECTION 11.
INDEMNIFICATION
Β Β Β Β Β 11.1. Indemnification by the Parties.
Β Β Β Β Β (i) Indemnification by Sellers. Subject to the other provisions of this
SectionΒ 11, Sellers, shall jointly and severally indemnify and hold HealthSpring and Buyer
and their Affiliates (including the Company after the Closing), officers, directors,
members, successors and assigns (collectively, the βBuyer Partiesβ) harmless from and
against:
44
Β
Β Β Β Β Β (a) except as set forth in (d)Β below, any and all Damages that Buyer Parties
shall suffer or incur connected with, arising out of or otherwise relating to any
untruth or error in any representation or warranty, or any breach, default or
failure to fully perform any covenant or agreement of Sellers or the Company,
hereunder (without regard to any materiality qualifications and without regard to
any disclosures pursuant to the first sentence of SectionΒ 8.11;
Β Β Β Β Β (b) any Taxes of the Company for all Taxable periods ending before the
Effective Date and the portion through the day prior to the Effective Date for any
Taxable period that includes (but does not end on) the Effective Date;
Β Β Β Β Β (c) any Indebtedness of the Company incurred prior to the Closing Date and any
other unpaid costs or expenses of the Company incurred in connection with the
transactions contemplated by this Agreement; and
Β Β Β Β Β (d) any and all Damages that Buyer Parties shall suffer or incur connected
with, arising out of or otherwise relating to any untruth or error in the
representations or warranties of Sellers or the Company contained in SectionsΒ 5.2 or
5.3 (without regard to any materiality qualifications and without regard to any
disclosures pursuant to the first sentence of SectionΒ 8.11).
Β Β Β Β Β Notwithstanding the foregoing, except with respect to matters specified in subsections
(b), (c), or (d)Β above or as any of the Claims relate to post-Closing covenants and
agreements of the Sellers contained herein, the Sellers shall not be liable for any
indemnification obligations hereunder unless and until the aggregate amounts of Buyer
Partiesβ Damages hereunder exceed Two Million Dollars ($2,000,000) (the βIndemnification
Thresholdβ). Once the Indemnification Threshold is exceeded, the Buyer Parties shall, in
all events, be entitled to recover for Buyer Partiesβ Damages only the excess of the Buyer
Partiesβ Damages over the Indemnification Threhhold. Except with respect to matters
specified in subsections (b), (c), or (d)Β above or as any of the Claims relate to
post-Closing covenants and agreements of the Sellers contained herein, in no event shall
the aggregate liability of Sellers for any indemnification obligations pursuant to this
SectionΒ 11 exceed Fifty Million Dollars ($50,000,000) (the βIndemnification Capβ). For
avoidance of doubt, the aggregate indemnification payments to be made by the Sellers shall
in no event exceed with respect to any Claim the difference of (i)Β Fifty Million Dollars
($50,000,000) minus (ii)Β the aggregate amount of all indemnification payments previously
made by or on behalf of Sellers (or any of them) in respect of any and all Claims.
Notwithstanding any provision to the contrary (including the Indemnification Threshold and
the Indemnification Cap), nothing in this Agreement shall limit or restrict the Buyer
Partiesβ rights to maintain or recover any amounts in connection with any Claim based upon
fraudulent misrepresentation with respect to any of the representations and warranties of
Sellers or the Company contained in this Agreement.
Β Β Β Β Β (ii) Indemnification by HealthSpring and Buyer. Subject to the other
provisions of this SectionΒ 11, HealthSpring and Buyer jointly and severally shall indemnify
and hold harmless Sellers and their Affiliates, successors and assigns (collectively, the
βSeller Partiesβ) from and against any and all Damages which Seller Parties shall suffer or
incur connected with, arising out of or otherwise relating to any untruth or error in any
representation or warranty made by HealthSpring or Buyer (without regard to any materiality
qualifications and without regard to any disclosures pursuant to the first sentence of
SectionΒ 8.11) or any breach, default or failure to fully perform any covenant or agreement
of HealthSpring or Buyer, hereunder (without regard to any
45
Β
materiality qualifications and without regard to any disclosures pursuant to the first
sentence of SectionΒ 8.11). Notwithstanding any provision to the contrary, nothing in this
Agreement shall limit or restrict the Seller Partiesβ rights to maintain or recover any
amounts in connection with any Claim based upon fraudulent misrepresentation with respect to
any of the representations and warranties of HealthSpring or Buyer contained in this
Agreement.
Β Β Β Β Β 11.2. Procedure for Indemnification Claims β Third Party Claims.
Β Β Β Β Β (i) Promptly after receipt by a Party entitled to indemnification under SectionΒ 11.1
(the βIndemniteeβ) of notice of the commencement of any Action against it, such Indemnitee
will, if a Claim is to be made against a Party obligated to indemnify under such Section
(the βIndemnitorβ), give notice to the Indemnitor of the commencement of such Action, but
the failure to notify the Indemnitor will not relieve the Indemnitor of any liability that
it may have to any Indemnitee, except to the extent that the Indemnitor demonstrates that
the defense of such Action is materially prejudiced by the Indemniteeβs failure to give such
notice. Each such notice shall specify in reasonable detail the basis for Indemniteeβs
Claim.
Β Β Β Β Β (ii) If any Action is brought against an Indemnitee and it gives notice to the
Indemnitor of the commencement of such Action, the Indemnitor will be entitled to
participate in such Action and, to the extent that it wishes (unless (a)Β the Indemnitor is
also a party to such Action and the Indemnitee reasonably determines in good faith that
joint representation of both parties by the same counsel would be materially adverse to the
Indemnitee, or (b)Β the Indemnitor fails to provide, if requested by the Indemnitee,
reasonable evidence to the Indemnitee of its financial capacity to defend such Action and
provide indemnification with respect to such Action (any refusal of such assumption by the
Indemnitee on the basis of either (a)Β or (b)Β is referred to herein as a βPermitted Defense
Assumption Refusalβ)) to assume the defense of such Action with counsel reasonably
satisfactory to the Indemnitee and, after notice from the Indemnitor to the Indemnitee of
its election to assume the defense of such Action, the Indemnitor will not, as long as it
diligently conducts such defense, be liable to the Indemnitee under this SectionΒ 11 for any
fees or expenses of any other counsel or any other expenses with respect to the defense of
such Action, in each case incurred by or on behalf of the Indemnitee, including any such
fees or expenses incurred prior to the Indemnitorβs delivery of notice of assumption of the
defense to the Indemnitee; provided, however, that the Indemnitee may, prior to the date on
which it receives such notice of assumption of the defense, (I)Β retain counsel, whose
reasonable fees and expenses shall (subject to the remainder of this SectionΒ 11.2(ii)) be at
the expense of the Indemnitor, (II)Β file any motion, answer or other pleading and (III)Β take
such other action that it reasonably shall deem necessary to protect its interests or those
of the Indemnitor until the date on which the Indemnitee receives such notice from the
Indemnitor. If the Indemnitor assumes the defense of an Action, (A)Β it will be conclusively
established for purposes of this Agreement that the claims made in that Action are within
the scope of and subject to indemnification, and (B)Β the Indemnitor, so long as it
diligently conducts such defense, shall have full and exclusive control of the conduct of
such defense and the compromise and/or settlement of such Action; provided, however, that no
compromise or settlement of such Action may be effected by the Indemnitor without the
Indemniteeβs consent (such consent not to be unreasonably withheld, conditioned or delayed)
unless (1)Β there is no finding or admission of any violation by the Indemnitee of any Law or
Order or any violation by the Indemnitee of the rights of any Person and no material adverse
effect on any other claims that may be made against the Indemnitee, and (2)Β the sole relief
provided is monetary damages that are paid in full by the Indemnitor (subject to the
remainder of this SectionΒ 11.2(ii)). If the Indemnitor assumes the defense of an Action, or
if the Indemnitor elects to assume such defense but Indemnitee effects a Permitted Defense Assumption
46
Β
Refusal, then the Indemnitor will have no liability with respect to any
compromise or settlement of such Action effected without its consent (such consent not to be
unreasonably withheld, conditioned or delayed). If notice is given to an Indemnitor of the
commencement of any Action and the Indemnitor does not, within ten business days after the
Indemniteeβs notice is given, give notice to the Indemnitee of its election to assume the
defense of such Action, the Indemnitor will be bound by any determination made in such
Action or any compromise or settlement effected by the Indemnitee (subject to the
Indemnification Threshold and Indemnification Cap, if applicable). The Parties agree that,
notwithstanding the assumption of the defense of any such Action by Sellers, as the
Indemnitor, all fees or expenses of its counsel or any other reasonable expenses with
respect to the defense of such Action, in each case, incurred by or on behalf of the Sellers
in connection with the defense of such Action, shall (x)Β be reimbursed to Sellers by
HealthSpring promptly upon invoice, as and when the same are incurred, unless and until the
Indemnification Threshold has been exceeded, and (y)Β be deemed to constitute indemnifiable
Damages for purposes of calculation of the Indemnification Threshold and indemnification
payments made by or on behalf of Sellers for purposes of calculation of the Indemnification
Cap.
Β Β Β Β Β (iii) Notwithstanding the foregoing, if an Indemnitee reasonably determines in good
faith that there is a reasonable probability that an Action would materially and adversely
affect it and its Affiliates (taken as a whole), the Indemnitee may, by notice to the
Indemnitor, assume joint control (together with the Indemnitor) of the conduct, compromise
or settlement of the defense of such Action; provided, however, that (a)Β the Indemnitor will
have no liability with respect to any compromise or settlement of such Action effected
without its consent (which may not be unreasonably withheld, conditioned or delayed), (b)
the Indemnitor shall not be required to change its legal representation with respect to such
defense, and (c)Β all fees or expenses of the Indemniteeβs counsel or any other expenses with
respect to the Indemniteeβs participation in the defense of such Action shall be borne
exclusively by the Indemnitee.
Β Β Β Β Β 11.3. Effect of Waiver of Closing Condition. Except as expressly described in the
following sentences of this SectionΒ 11.3, the waiver, in accordance with SectionΒ 10 above, of any
condition based on the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or agreement, will not affect the right to indemnification based on
such representation, warranty, covenant or agreement. In the event that a Party determines that it
has unintentionally breached the representations and warranties contained in this Agreement or
failed to perform the covenants and agreements contained in this Agreement and such breaches or
failures to perform give the other Party the right to terminate this Agreement as described in
SectionΒ 12.1(ii) or SectionΒ 12.1(iii), as applicable, the breaching Party shall give the
non-breaching Party written notice of such breaches or failures to perform specifying the
provisions of this Agreement that have been breached, providing reasonable detail regarding the
facts, events or circumstances giving rise to such breaches or failures to perform, and stating
that the non-breaching Party has the right to terminate this Agreement pursuant to SectionΒ 12.1(ii)
or SectionΒ 12.1(iii), as applicable. In the event that the non-breaching Party receives the
written notice described above and elects to waive such termination right and consummates the
Closing, the non-breaching Party shall have no right to indemnification under SectionΒ 11.1(i)(a),
11.1(i)(d) or SectionΒ 11.1(ii), as applicable, with respect to the breaches and failures to perform
that arise out of and are reasonably apparent from the facts, events or circumstances identified in
such written notice delivered by the breaching Party.
Β Β Β Β Β 11.4. Additional Limitations on Indemnification. The Parties liability for
indemnification under this SectionΒ 11 shall be further limited and be subject to the following:
47
Β
Β Β Β Β Β (i) In determining the amount of the Buyer Partiesβ Damages for purposes of this
SectionΒ 11, such Damages shall not include any amounts finally determined by the Parties
pursuant to the procedures set forth in SectionΒ 3.3, SectionΒ 3.5 or SectionΒ 3.6 that is paid
by Sellers to the Buyer Parties.
Β Β Β Β Β (ii) In determining an Indemniteeβs Damages hereunder, to the extent that any Claim is
covered by insurance, the Indemnitee shall be entitled to indemnification with respect to
the amount of any Claim that is in excess of the cash proceeds actually received by such
Indemnitee (after deducting reasonable costs and expenses incurred in connection with the
recovery of such insurance proceeds, including premium increases) pursuant to such
insurance.
Β Β Β Β Β (iii) Each Claim shall be reduced by any indemnity, contribution or other similar
payment received by any Indemnitee from any third party with respect to such Claim and, if
any Indemnitee recovers from third parties all or any part of any indemnification payments
previously paid to it by the Indemnitor (and even if such recovery occurs after the
expiration of the time limit for the survival of such Claim set forth in SectionΒ 11.5 or
11.6, as applicable), the applicable Indemnitee shall, within ten (10)Β business days, pay
over to the Indemnitor the amount so recovered.
Β Β Β Β Β (iv) Each Claim shall be reduced by an amount equal to any cash reduction of the Taxes
paid by an Indemnitee attributable to such Claim.
Β Β Β Β Β (v) No Party shall have any obligation to indemnify any other Parties for any Claim to
the extent such Claim results from a breach of a representation or warranty that would not
have occurred but for the passing of, or any change in, after the Closing, any Law or Order,
even if such change in Law or Order has a retroactive effect.
Β Β Β Β Β (vi) Notwithstanding anything contained herein to the contrary, the Sellers shall be
severally, and not jointly, liable for any violation of the provisions of SectionΒ 9.5, such
that no Seller shall be liable (whether under this SectionΒ 11 or otherwise) for any breach
of such SectionΒ 9.5 by any other Seller.
Β Β Β Β Β 11.5. Manner of Payment. Any indemnification payment pursuant to this SectionΒ 11
shall be made within ten (10)Β business days after the submission of the Claim to the Indemnitor by
the Indemnitee or, with respect to third party claims or any Claim that is disputed by the
Indemnitor, the final determination thereof. The Sellers shall, except as set forth in the next
sentence, have the option, in their sole discretion, to pay and satisfy any Claim (other than a
Claim related to Taxes) made by the Buyer Parties that is either undisputed or finally resolved in
favor of the Buyer Parties either (i)Β by payment in cash by Sellers directly to HealthSpring, (ii)
by the tender to HealthSpring of Shares held in the Escrow Account, or (iii)Β any combination of the
methods identified in the preceding clauses (i)Β and (ii), in each case, so long as the aggregate
amount delivered to HealthSpring (including the value of any tendered Shares) pursuant to any of
the preceding methods equals the amount of such Claim as finally determined and all Sellers must
make the same elections with respect to the satisfaction of a Claim. All Claims for
indemnification by Buyer pursuant to SectionΒ 11.(i)(b) or otherwise related to Taxes shall be paid
by the Sellers in cash. If Sellers elect the release of Shares from the Escrow Account as one of
the methods for satisfying any such Claim, Sellers shall give written notice of such election to
the Buyer Parties and the Escrow Agent and direct the Escrow Agent to release Shares from the
Escrow Account. Any Shares so released from the Escrow Account will be released by all Sellers pro
rata based upon their relative ownership of the Shares held in the Escrow Account. For purposes of
any satisfaction of a Claim, in whole or in part, with the tender of Shares pursuant to clauses
(ii)Β or (iii)Β above, (A)Β the value of each
48
Β
Share constituting a publicly traded security shall be deemed to be equal to the average
closing price of such security as reported by the NYSE (or on such other primary exchange or market
in which such security is traded at such time) for the twenty (20)Β trading days immediately
preceding the date Sellers deliver written notice to the Buyer Parties and the Escrow Agent of
their election to so tender Shares held in the Escrow Account, and (B)Β the value of each Share not
constituting cash or a publicly traded security shall be the fair market value of such Share as
determined by the HealthSpring board of directors in good faith. In the event that Sellers elect
to satisfy any Claim, in whole or in part, by tendering Shares held in the Escrow Account and,
subsequently, the Share Release Condition is not satisfied and the Shares are forfeited as
described in SectionΒ 3.4, Sellers shall, within five (5)Β business days of the failure of the Share
Release Condition, deliver to Buyer in cash or via wire transfer of immediately available funds, an
amount equal to the dollar value of the portion of any Claim satisfied by the Sellers by tendering
Shares as described above. For purposes of this SectionΒ 11.5, references to the Shares shall
include the Shares and any and all securities, cash and/or other property delivered to the Escrow
Agent (whether in exchange for the Shares or otherwise), and any and all interest carried thereon,
by reason of any reorganization, reclassification, recapitalization, stock split, merger,
consolidation, share exchange, dividend (whether in cash, securities or otherwise), combination or
any similar transaction with respect to HealthSpring Stock occurring from and after the Effective
Date.
Β Β Β Β Β 11.6. Survival of Obligations.
Β Β Β Β Β (i) The Buyer Partiesβ right to assert a Claim for indemnity pursuant to Section
11.1(i)(a) arising out of any untruth or error in any representation or warranty of Sellers
or the Company hereunder or out of any breach of a covenant or agreement of the Sellers or
the Company to be performed prior to the Closing shall survive the Closing for eighteen
months following the Effective Date, except that the Buyer Partiesβ right to assert a Claim
for any untruth or error in any of the representations and warranties (a)Β contained in
SectionsΒ 5.7, 5.8 or 5.19 shall survive for three years following the Effective Date and (b)
contained in SectionsΒ 5.2, 5.3 or 5.20 shall survive until the expiration of the applicable
statutes of limitation, if any.
Β Β Β Β Β (ii) The Buyer Partiesβ right to assert a Claim for indemnity pursuant to Section
11.1(i)(b), (c)Β or (d)Β or to assert a Claim pursuant to SectionΒ 11.1(i)(a) arising out of
the breach of a post-Closing covenant or agreement of the Sellers shall survive until the
expiration of the applicable statutes of limitation, if any.
Β Β Β Β Β (iii) The Seller Partiesβ right to assert a Claim for indemnity pursuant to Section
11.1(ii) arising out of any untruth or error in any representation or warranty of
HealthSpring or Buyer hereunder or out of any breach of a covenant or agreement of
HealthSpring or Buyer to be performed prior to the Closing shall survive for eighteen months
following the Effective Date, except that the Seller Partiesβ right to assert a Claim for
any untruth or error in any of the representations and warranties contained in SectionsΒ 7.2
or 7.7 shall survive until the expiration of the applicable statutes of limitation, if any.
The Seller Partiesβ right to assert a Claim for indemnity pursuant to SectionΒ 11.1(ii)
arising out of any breach of a post-Closing covenant or agreement of HealthSpring or Buyer
shall survive until the expiration of the applicable statutes of limitation, if any.
Β Β Β Β Β 11.7. Survival of Claims. No Claim (including any third party Claim) shall be brought
under this SectionΒ 11, and no Party shall have any liability under this SectionΒ 11 with respect
thereto, unless the Indemnitee, at any time prior to the applicable survival date, if any, gives
the Indemnitor written notice of the existence of any such Claim (including any third party Claim).
Upon the giving of written notice of a Claim prior to the applicable survival date, the
Indemnitorβs obligations with respect thereto shall survive
49
Β
the time at which it would otherwise terminate pursuant to this SectionΒ 11 (regardless of when
the Damages in respect thereof may actually be incurred) until such Claim is finally resolved and
the Indemnitee shall have the right to commence legal proceedings subsequent to the survival date
for the enforcement of their rights under this SectionΒ 11.
Β Β Β Β Β 11.8. Representations and Warranties. For all purposes under this Agreement,
including for purposes of indemnity under this SectionΒ 11, the representations and warranties of
the Parties set forth in this Agreement shall be deemed to be made herein on and as of the Signing
Date (unless any such representation or warranty provides that it speaks as of a different date)
and on and as of the Closing Date (unless any such representation or warranty provides that it
speaks as of the Signing Date or any other date, which shall be true and correct as of such date on
the Closing Date).
Β Β Β Β Β 11.9. Certain Waivers; etc. Without limiting any remedies against Sellers hereunder,
the representations, warranties, covenants and agreements of the Company set forth herein with
respect to a Claim hereunder by a Seller shall terminate effective upon the Closing and shall be of
no further force or effect. Each Seller hereby agrees that, from and after the Closing, such
Seller shall not make any claim for indemnification or otherwise against HealthSpring, Buyer, the
Company or any of their respective Affiliates by reason of the fact that such Seller was, at any
time prior to the Closing Date, an equityholder, director or officer of the Company or was, at any
time prior to the Closing Date, serving at the request of the Company as a partner, trustee,
manager, member, officer, director or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses or otherwise and
whether such claim is pursuant to any statute, charter document, bylaw, agreement or otherwise)
with respect to any Action brought by the Buyer Parties against Sellers pursuant to this Agreement
or applicable law or otherwise, and each Seller hereby acknowledges and agrees that such Seller
shall not have any claim or right to contribution or indemnity from the Company with respect to any
amounts paid by it pursuant to this Agreement or otherwise. Following the Closing Date, the
Company will continue to indemnify and hold harmless each Seller, to the same extent historically
provided in the Articles of Incorporation or Bylaws of the Company, for any Action brought against
such Seller by reason of the fact that such Seller was an officer or director of the Company prior
to Closing or was serving at the request of the Company as a partner, trustee, manager, member,
officer or director of another Person unless such Action is (i)Β a derivative action brought by the
shareholders or former shareholders of the Company or (ii)Β an Action that is subject to
indemnification pursuant to this SectionΒ 11. In no event shall the Company or any of its
Affiliates have any liability whatsoever to any of the Sellers for any breaches of the
representations, warranties, agreements or covenants of the Company hereunder, and in any event
none of the Sellers may seek contribution from the Company in respect of any payments required to
be made by any of the Sellers pursuant to this Agreement.
Β Β Β Β Β 11.10. Exclusive Remedy. Except in cases of fraudulent misrepresentation, or as
otherwise expressly set forth in this Agreement, Buyer, Sellers and the Company acknowledge and
agree that from and after the Closing Date the indemnification provisions of this SectionΒ 11 shall
be the exclusive remedy of HealthSpring, Buyer, Sellers and the Company with respect to any and all
instances of non-performance, defaults, breaches, and/or other violations of any representations,
warranties, covenants or agreements contained in this Agreement or in any certificate delivered
pursuant hereto. Notwithstanding anything in this Agreement to the contrary, neither Party shall,
after the Closing, have a right to rescind this Agreement or any of the transactions contemplated
hereby.
Β Β Β Β Β 11.11. Adjustment to Purchase Price. Amounts paid by Sellers for indemnification
Claims pursuant to this SectionΒ 11 shall be deemed for all relevant tax purposes to be an
adjustment and reduction to the Purchase Price, except as otherwise required by Law.
50
Β
Β Β Β Β Β 11.12. Resolution of Disputes Regarding Indemnification. If any of the Indemnitors
with respect to any Claim disputes all or any portion of such Claim, Buyer and Sellers will in good
faith attempt to resolve such dispute. If on or before the thirtieth (30th) day after the date the
Indemnitee gives the Indemnitor notice of the Claim as to which a dispute exists, the
aforementioned Parties have not resolved such dispute, then either Buyer or Sellers, as the case
may be, may apply to the American Arbitration Association for resolution of such Claim, in which
case the resolution of such Claim and the disposition of the amount specified therein shall be
determined by an arbitration proceeding in accordance with the commercial arbitration rules of the
American Arbitration Association by one (1)Β arbitrator selected by agreement of the Parties or, if
the Parties cannot agree on an arbitrator, then each Party shall appoint an arbitrator and the two
arbitrators shall appoint a third arbitrator who shall be the sole Arbitrator (the βArbitratorβ).
Each such arbitration shall be held in Miami-Dade County, Florida. Each Party shall cooperate with
the Arbitrator and provide the Arbitrator such information, documents and records as he or she may
request. All decisions of the Arbitrator shall be final, binding on the Parties and
non-appealable. The Arbitrator shall issue a written order stating the resolution of the Claim
(including the amount, if any, to be paid to the Indemnitee or Indemnitor, as the case may be)
which order may be enforced in any court of the United States having jurisdiction. With respect to
each dispute submitted to the Arbitrator, if the Arbitratorβs determination is in agreement with
the position submitted by one of the Parties, then the other Party shall promptly pay all costs and
expenses with respect to the Arbitratorβs determination (together with reasonable legal fees and
expenses of the prevailing Party). Alternatively, if the Arbitratorβs determination is not in
agreement with either Partyβs position, then such costs and expenses shall be borne equally by
Buyer and Sellers (and each side shall then bear its own legal fees and expenses), unless the
Arbitrator determines that, in the interest of equity, the costs and expenses of such arbitration
(including reasonable legal fees and expenses of counsel) must be apportioned differently.
SECTION 12.
TERMINATION
Β Β Β Β Β 12.1. Right to Terminate. This Agreement may be terminated at any time prior to the
Closing either as provided in SectionΒ 10.4 or as follows:
Β Β Β Β Β (i) by mutual written agreement of Sellers and Buyer;
Β Β Β Β Β (ii) by Buyer, if there has been a failure of the condition set forth in Section
10.2(i) that has not been waived in writing by Buyer or, in the case of any failure of such
condition as a result of a breach of representation, warranty or covenant which is curable,
has not been cured to Buyerβs reasonable satisfaction within thirty (30)Β days after written
notification thereof by Buyer to Sellers or the Company;
Β Β Β Β Β (iii) by Seller, if there has been a failure of the condition set forth in Section
10.3(i) that has not been waived in writing by Sellers or, in the case of any failure of
such condition as a result of a breach of representation, warranty or covenant which is
curable, has not been cured to Sellersβ reasonable satisfaction within thirty (30)Β days
after written notification thereof by Sellers to Buyer;
Β Β Β Β Β (iv) by Buyer, if any condition to Buyerβs obligation to proceed with the Closing set
forth in SectionsΒ 10.1 and 10.2 has not been fully satisfied (or waived, to the extent
permitted by this Agreement) by the one year anniversary of the Signing Date (the βClosing
Deadlineβ) or becomes impossible to satisfy prior to the Closing Deadline (and has not been
waived), unless
the failure of such condition results primarily from the breach of a representation,
warranty or covenant of Buyer or HealthSpring; or
51
Β
Β Β Β Β Β (v) by Sellers, if any condition to Sellersβ obligation to proceed with the Closing set
forth in SectionsΒ 10.1 and 10.3 has not been fully satisfied (or waived, to the extent
permitted by this Agreement) by the Closing Deadline or becomes impossible to satisfy prior
to the Closing Deadline (and has not been waived), unless the failure of such condition
results primarily from the breach of a representation, warranty or covenant of Sellers.
Β Β Β Β Β Notwithstanding the foregoing, Buyer may extend the Closing Deadline by up to thirty
(30)Β days upon written notice to Seller in the event the failure to close on or before the
Closing Deadline is solely as a result of any delays associated with obtaining the requisite
regulatory approvals by the Florida Office of Insurance Regulation or CMS (except if such
delays are attributable to any breach of Buyerβs obligations under this Agreement).
Β Β Β Β Β 12.2. Effect of Termination. The Parties acknowledge and agree that, notwithstanding
any other provision in this Agreement to the contrary or otherwise, prior to the Closing, each
Partyβs sole and exclusive remedy with respect to any untruth or error in any representation or
warranty, or any breach, default or failure to fully perform any covenant or agreement, set forth
in this Agreement or any other Transaction Document or directly or indirectly in connection with
the transactions contemplated hereunder shall be, except as provided in SectionΒ 10.4, termination
under SectionΒ 12.1 and payment of the amounts set forth in this SectionΒ 12.2. In the event this
Agreement is terminated pursuant to SectionΒ 12.1(i), all further obligations of the parties under
this Agreement will terminate except with respect to SectionΒ 9.2, SectionΒ 12.2 and SectionΒ 13. If
this Agreement is terminated by Buyer pursuant to SectionΒ 12.1(ii) or SectionΒ 12.1(iv) or by
Sellers pursuant to SectionΒ 12.1(iii) or SectionΒ 12.1(v), in each case, as a result of any
unintentional breach of the representations, warranties, covenants or agreements set forth in this
Agreement or an unintentional failure to perform of the other Party, then the breaching Party shall
pay to the other Party, as liquidated damages and as such other Partyβs sole and exclusive remedy,
a termination fee equal to Two Million Dollars ($2,000,000.00), by wire transfer of immediately
available funds to an account specified to such breaching Party by the other Party, within ten (10)
business days of the effective date of such termination. The Parties acknowledge and agree that it
would be impracticable or extremely difficult for any Party to determine the actual damages
resulting from any such unintentional breach or failure to perform hereunder and, therefore, the
Parties have agreed upon the foregoing remedy as liquidated damages which shall not be deemed to be
in the nature of a penalty. If this Agreement is terminated by Buyer pursuant to SectionΒ 12.1(ii)
or SectionΒ 12.1(iv) or by Sellers pursuant to SectionΒ 12.1(iii) or SectionΒ 12.1(v), in each case,
as a result of any wilfull or intentional breach of the representations, warranties, covenants or
agreements set forth in this Agreement or any wilfull or intentional failure to perform of the
other Party, then the non-breaching Party(ies) shall be entitled to recover from the breaching
Party(ies), jointly and severally, any and all Damages that the non-breaching Party(ies) shall
suffer or incur connected with, arising out of or otherwise relating to such breach or failure to
perform, including, but not limited to, all out-of-pocket fees and expenses incurred before or
after the date of this Agreement by such non-breaching Party(ies) related to the transactions
contemplated hereby, including reasonable fees and expenses of legal counsel, accountants and other
consultants and advisors retained by such non-breaching Party(ies) in connection with the
transactions contemplated hereby.
SECTION 13.
MISCELLANEOUS
Β Β Β Β Β 13.1. Notices. Any notice, consent, demand or other communication required or
permitted hereunder must be in writing to be effective and shall be deemed delivered and received
(i)Β upon delivery if personally delivered, including by a nationally recognized overnight delivery
service such as FedEx, or (ii)Β if delivered by mail or facsimile transmission (with confirmation
via mail), when received, each
52
Β
addressed or sent by facsimile transmission as follows (or to such
other address as any Party shall specify by written notice so given):
If to Buyer:
HealthSpring, Inc.
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxxx X, XxxxxΒ 000
Xxxxxxxx, XX 00000
Attention: X. Xxxxxx Xxxxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Senior Vice President, Corporate General Counsel and Secretary
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Fax (000)Β 000-0000
with a copy (which shall not constitute notice) to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, XxxxxΒ 0000
Xxxxxxxxx, XX 00000
Attention: J. Xxxxx Xxxxxxx, Jr.
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Fax (000)Β 000-0000
If to Sellers or the Company (if prior to Closing):
Xxxx Medical Centers Health Plans, Inc.
00000 XX 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxx, Xx.
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Fax (000)Β 000-0000
with a copy (which shall not constitute notice) to:
Bilzin Xxxxxxx Xxxxx Price & Xxxxxxx LLP
000 X. Xxxxxxxx Xxxxxxxxx, XxxxxΒ 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Fax (000)Β 000-0000
If to Sellers after the Closing:
Xxxx Medical Centers, Inc.
00000 XX 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxx, Xx.
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Fax (000)Β 000-0000
53
Β
with a copy (which shall not constitute notice) to:
Bilzin Xxxxxxx Xxxxx Price & Xxxxxxx LLP
000 X. Xxxxxxxx Xxxxxxxxx, XxxxxΒ 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Fax (000)Β 000-0000
Β Β Β Β Β 13.2. Binding Effect; Benefits. This Agreement shall be binding upon and shall inure
to the benefit of the Parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement,
except where expressly provided, is intended to confer on any Person other than the Parties hereto
or their respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Β Β Β Β Β 13.3. Entire Agreement. This Agreement, together with the Disclosure Schedules,
exhibits, attachments and other documents contemplated hereby and the Confidentiality Agreement,
constitute the final written expression of all of the agreements among the Parties, and is a
complete and exclusive statement of those terms and supersedes all understandings and negotiations
concerning the matters specified herein. The Parties specifically represent, each to the other,
that there are no additional or supplemental agreements among them related in any way to the
matters herein contained unless specifically included or referred to herein. Each Party hereby
acknowledges and agrees that, except for the representations and warranties of the other Parties
expressly set forth in this Agreement, none of such other Parties has made any representation or
warranty, express or implied, and all such other representations and warranties are hereby
expressly disclaimed. No addition to or modification of any provision of this Agreement shall be
binding upon any Party unless made in writing and signed by all Parties.
Β Β Β Β Β 13.4.
Governing Law. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THIS AGREEMENT,
AND ALL QUESTIONS RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT (INCLUDING,
WITHOUT LIMITATION, PROVISIONS CONCERNING LIMITATIONS OF ACTION), SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (EXCLUSIVE OF THE CONFLICT OF LAW
PROVISIONS THEREOF) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Β Β Β Β Β 13.5. Jurisdiction; Jury Trial Waiver. Except as set forth in SectionΒ 11.12 with
respect to disputes regarding indemnification pursuant to SectionΒ 11 (other than any disputes with
respect to breaches of SectionΒ 9.5, which shall in all events be adjudicated in any federal court
located within Miami-Dade County in the State of Florida), and except for any matters required or
permitted hereunder to be submitted to the Actuary, each of the Parties irrevocably consents to the
exclusive jurisdiction of any federal court located within Miami-Dade County in the State of
Florida in connection with any
matter based upon or arising out of this Agreement or the matters contemplated herein, agrees
that process may be served upon them in any manner authorized by the laws of the State of Florida
for such Persons and waives and covenants not to assert or plead any objection that they might
otherwise have to such jurisdiction and such process. The Parties hereby irrevocably waive any and
all right to trial by jury in any legal proceeding arising out of or related to this Agreement or
the transactions contemplated hereby, whether now existing or hereafter arising, and whether
sounding in contract, tort or otherwise; provided, however, that no such waiver shall apply to any
lawsuit or proceeding brought by any Buyer Party against Sellers in which such Buyer Party alleges
fraudulent conduct by Sellers or their Affiliates, in which case, such lawsuit or proceeding shall
be adjudicated with any and all applicable jury trial rights. The Parties
54
Β
agree that any of them
may file a copy of this paragraph with any court of competent jurisdiction as written evidence of
the knowing, voluntary and bargained-for agreement among the Parties irrevocably to waive trial by
jury (except as hereinabove provided) and that any action or proceeding whatsoever between them
relating to this Agreement or the transactions contemplated hereby shall instead be tried in a
court of competent jurisdiction by a judge sitting without a jury (except as hereinabove provided).
Β Β Β Β Β 13.6. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which shall constitute one and the same
instrument. This Agreement shall become effective when one or more counterparts hereof have been
executed by each of the Parties hereto and delivered to the other Parties hereto, it being
understood that all Parties need not sign the same counterpart. Delivery by facsimile or e-mail
transmission in PDF format to counsel for the other Party of a counterpart executed by a Party
shall be deemed to meet the requirements of the previous sentence and to constitute good and
effective delivery for all purposes.
Β Β Β Β Β 13.7. Waivers. Any Party hereto may, by written notice to the other Party hereto, (i)
extend the time for the performance of any of the agreements or other covenants of the other Party
under this Agreement, or (ii)Β waive compliance with any of the representations, warranties,
agreements, conditions, covenants or actions of the other Party contained in this Agreement.
Except as provided in the preceding sentence or as provided in SectionΒ 11.3, no action taken
pursuant to this Agreement, including without limitation any investigation by or on behalf of any
Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this Agreement. The waiver
by any Party hereto of a breach of any provisions hereunder shall not operate or be construed as a
waiver of any prior or subsequent breach of the same or any other provision hereunder.
Β Β Β Β Β 13.8. Survival. Except as otherwise expressly provided in this Agreement, the
covenants, agreements, representations and warranties in this Agreement shall not merge on, and
shall survive, the Closing in accordance with the express terms of this Agreement, notwithstanding
the Closing or any investigation made by or on behalf of any party, and shall continue in full
force and effect. Notwithstanding the foregoing, and without limiting any remedies against Sellers
hereunder, the representations, warranties, covenants and agreements of the Company set forth
herein shall terminate effective upon the Closing and shall be of no further force or effect.
Β Β Β Β Β 13.9. Schedules and Exhibits. All schedules, including the Disclosure Schedule, and
exhibits attached hereto are by this reference incorporated herein and made a part hereof for all
purposes as if fully set forth herein. Nothing in any schedule attached hereto shall be adequate
to disclose an exception to a representation or warranty made in this Agreement unless such
schedule identifies the Section of this Agreement where such representation or warranty is set
forth; provided, however, that, unless otherwise specified in such schedule, any schedule
designated by a letter or number shall be deemed to identify the Section in this Agreement
designated by such letter or number, and any disclosures set forth in such
schedule shall be deemed for all purposes to be disclosures and exceptions with respect to the
representations and warranties set forth in such Section. No exceptions to any representations or
warranties disclosed on one schedule shall constitute an exception to any other representations or
warranties made in this Agreement unless the exception is disclosed as provided herein on each such
other applicable schedule or cross-referenced in such other applicable section or schedule.
Β Β Β Β Β 13.10. Interest. Amounts not paid when due hereunder shall bear interest from the
date originally due (notwithstanding the date of any applicable court order or other resolution)
until paid at an annualized interest rate equal to the Prime Rate as of the end of each calendar
quarter, as in effect from time to time and as listed in The Wall Street Journal, compounded
quarterly (the βApplicable Rateβ).
55
Β
Β Β Β Β Β 13.11. Severability. If for any reason whatsoever, any one or more of the provisions
of this Agreement shall be held or deemed to be illegal, inoperative, unenforceable or invalid as
applied to any particular case or in all cases, such circumstances shall not have the effect of
rendering such provision illegal, inoperative, unenforceable or invalid in any other case or of
rendering any of the other provisions of this Agreement illegal, inoperative, unenforceable or
invalid. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not
to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction,
be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.
Β Β Β Β Β 13.12. Assignability. Neither this Agreement nor any of the Partiesβ rights or
obligations hereunder shall be assignable or delegable by any Party hereto (whether directly or
indirectly, by operation of law, change of control or otherwise) without the prior written consent
of the other Parties hereto, except that HealthSpring and Buyer shall be entitled to (i)Β freely
assign its rights and obligations hereunder in connection with the acquisition of all or
substantially all of the stock or assets of HealthSpring (including by merger, share exchange,
reorganization or other similar transaction) and (ii)Β collaterally assign its rights hereunder to
any financial institution providing financing in connection with the transactions contemplated by
this Agreement, provided, in each case, that no such assignment or delegation will relieve
HealthSpring or Buyer from any of its obligations hereunder.
Β Β Β Β Β 13.13. Participation in Drafting. Each Party acknowledges that it has been
represented by counsel in connection with the negotiation and drafting of this Agreement and the
other agreements and documents to be executed by the Parties in connection herewith. Accordingly,
in the event an ambiguity or question of intent or interpretation arises, this Agreement and the
other agreements and documents to be executed by the Parties in connection herewith shall be
construed as if drafted jointly by Buyer and HealthSpring, on the one hand, and Sellers and the
Company, on the other hand, and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement and
the other agreements and documents to be executed by the Parties in connection herewith.
Β Β Β Β Β 13.14. Interpretation. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. In this Agreement, unless a clear contrary intention appears:
Β Β Β Β Β (i) references in this Agreement to Sections, Exhibits, Schedules or Preamble refer to
the sections, exhibits, schedules or main preamble and recitals, respectively, of this
Agreement;
Β Β Β Β Β (ii) the words βinclude,β βincludesβ and βincludingβ when used herein shall be deemed
in each case (unless already stated) to be followed by the words βwithout limitationβ;
Β Β Β Β Β (iii) when a reference is made in this Agreement to a certain number of days, such
reference shall be deemed to refer to βcalendarβ days unless the reference expressly
indicates that the reference is being made with respect to business days;
Β Β Β Β Β (iv) the phrases βthe date of this Agreement,β βthe date hereof,β and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the Signing Date;
Β Β Β Β Β (v) the masculine, feminine or neuter gender and the singular or plural number shall be
deemed to include the others whenever the context so requires;
56
Β
Β Β Β Β Β (vi) words such as βherein,β βhereinafter,β βhereof,β βherebyβ and βhereunderβ and the
words of like import refer to this Agreement as a whole and not to any particular Section or
other provision hereof;
Β Β Β Β Β (vii) references to documents, instruments or agreements shall be deemed to refer as
well to all addenda, exhibits, schedules or amendments thereto;
Β Β Β Β Β (viii) with respect to the determination of any period of time, βfromβ means βfrom and
includingβ and βtoβ means βto but excludingβ; and
Β Β Β Β Β (ix) reference to any Person includes such Personβs permitted successors and assigns,
and reference to a Person in a particular capacity excludes such Person in any other
capacity or individually.
[Remainder of page intentionally left blank]
57
Β
Β Β Β Β Β Β Β Β Β Β IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered as of
the Signing Date.
Β |
Β |
Β |
Β |
Β |
Β |
XXXX MEDICAL CENTERS HEALTH PLANS, INC.
Β |
Β |
Β |
By:Β |
/s/
Xxxxxxxx Xxxx, Xx.Β |
Β |
Β |
Β |
Name:Β Β |
Xxxxxxxx Xxxx, Xx.Β |
Β |
Β |
Β |
Title:Β Β |
Chief Executive OfficerΒ |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
SELLERS
Β |
Β |
Β |
/s/
Xxxxxxxx Xxxx, Xx. |
Β |
Β |
Name:Β Β |
Xxxxxxxx Xxxx, Xx,Β |
Β |
Β |
Β |
Β |
Β |
/s/
Xxxxxx XxxxΒ |
Β |
Β |
Name:Β Β |
Xxxxxx XxxxΒ |
Β |
Β |
Β |
Β |
Β |
/s/ Xxxxxxxx Xxxx, III |
Β |
Β |
Name:Β Β |
Xxxxxxxx Xxxx, IIIΒ |
Β |
Β |
Β |
Β |
Β |
/s/ Xxxxxxx Xxxx |
Β |
Β |
Name:Β Β |
Xxxxxxx XxxxΒ |
Β |
Β |
Β |
Β |
Β |
/s/ Xxxxxx Xxxxx |
Β |
Β |
Name:Β Β |
Xxxxxx XxxxxΒ |
Β |
Β |
Β |
Β |
Β |
/s/ Xxxxxx X. Xxxxx |
Β |
Β |
Name:Β Β |
Xxxxxx X. XxxxxΒ |
Β |
Β |
Β |
Β |
Β |
/s/ Xxxxxx Xxxxxxx |
Β |
Β |
Name:Β Β |
Xxxxxx XxxxxxxΒ |
Β |
Β |
Β |
Β |
Β |
/s/ Xxxxxx Xxxxx |
Β |
Β |
Name:Β Β |
Xxxxxx XxxxxΒ |
Β |
Β
Β
Β |
Β |
Β |
Β |
Β |
Β |
NEWQUEST, LLC
Β |
Β |
Β |
By:Β Β |
/s/Β X.
Xxxxxx Xxxxxx |
Β |
Β |
Β |
Name:Β Β |
X.
Xxxxxx Xxxxxx |
Β |
Β |
Β |
Title:Β Β |
Vice
President |
Β |
Β |
Β |
HEALTHSPRING, INC.
Β |
Β |
Β |
By:Β Β |
/s/Β X.
Xxxxxx Xxxxxx |
Β |
Β |
Β |
Name:Β Β |
X.
Xxxxxx Xxxxxx |
Β |
Β |
Β |
Title:Β Β |
Senior
Vice President, Corporate General Counsel, and Secretary |
Β |
Β
Β
ExhibitΒ 10.2(ii)
MEDICAL SERVICES AGREEMENT
Β Β Β Β Β This MEDICAL SERVICES AGREEMENT (this βAgreementβ) is hereby made and entered into effective
as of Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β , 2007 (the βEffective Dateβ), by and between Xxxx Medical Centers Health Plans,
Inc., a Florida corporation (βPLANβ), and Xxxx Medical Centers, Inc., a Florida corporation
(βPROVIDERβ).
RECITALS
Β Β Β Β Β WHEREAS, PLAN is a duly licensed health maintenance organization (βHMOβ);
Β Β Β Β Β WHEREAS, PLAN offers an option to its Medicare Advantage members to receive services from a
Clinic Model Provider (as defined in SectionΒ 1.1 below);
Β Β Β Β Β WHEREAS, PROVIDER operates clinics, known as βmedical centers,β and provides certain medical
services to PLANβs Medicare Advantage members as a Clinic Model Provider;
Β Β Β Β Β WHEREAS, as of immediately prior to the Effective Date, PROVIDER is providing Services
(defined below) as a Clinic Model Provider to PLANβs Medicare Advantage members pursuant to that
certain Agreement by and between PROVIDER and PLAN, dated SeptemberΒ 15, 2004 (the βCurrent
Agreementβ);
Β Β Β Β Β
WHEREAS, immediately prior to the execution of this Agreement,
HealthSpring, Inc., a
Delaware
corporation (β
HealthSpringβ
), and NewQuest, LLC, a Texas limited liability company and wholly owned
subsidiary of HealthSpring β
NewQuestβ) acquired PLAN from certain affiliates of PROVIDER pursuant
to the terms of that certain
Stock Purchase Agreement, dated AugustΒ 9, 2007, by and among
HealthSpring, NewQuest, PLAN and such affiliates of PROVIDER (the β
Stock Purchase Agreementβ);
Β Β Β Β Β
WHEREAS, the execution and delivery of this Agreement by PROVIDER was a material inducement
and condition to the consummation of the purchase of PLAN by HealthSpring and NewQuest pursuant to
the
Stock Purchase Agreement;
Β Β Β Β Β WHEREAS, PLAN and PROVIDER desire that, subject to the terms and conditions of this Agreement,
PROVIDER provide or arrange for the provision of certain primary care medical services, specified
specialty care services, pharmacy services and specified ancillary services (each and any of such
services, βServicesβ), as a Clinic Model Provider through PROVIDERβS medical centers and/or through
Affiliated Providers (as defined in SectionΒ 11.5) to PLANβs Medicare Advantage members who (i)
reside in Approved PLAN Operating Areas (as defined in SectionΒ 1 below) and (ii)Β select or are
assigned to a Clinic Model Provider for delivery of Services;
Β Β Β Β Β WHEREAS, concurrently with the execution of this Agreement, PROVIDER, as licensor, and PLAN,
as licensee, have entered into a certain Trademark License Agreement (the βLicense Agreementβ) and
such parties have also entered into the Office Space Agreement; and
Β
Β
Β Β Β Β Β WHEREAS, PLAN and PROVIDER desire to hereby provide for their mutual rights and obligations
with respect to the arrangement contemplated by the preceding recitals.
AGREEMENT
Β Β Β Β Β NOW, THEREFORE, for and in consideration of the mutual covenants and promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Application of this Agreement & Approved PLAN Operating Areas.
Β Β Β Β Β 1.1 Application of this Agreement. PROVIDER and PLAN agree that the Current Agreement
is hereby terminated and extinguished for all purposes and is hereby superseded by this Agreement.
This Agreement applies to the relationship between PROVIDER and PLAN with respect to the provision
of Services by PROVIDER, including, without limitation, through the PROVIDER-operated medical
centers that now or hereafter service the Approved PLAN Operating Areas (the βPROVIDER Medical
Centersβ) and/or through Affiliated Providers (as defined in SectionΒ 11.5), to (i)Β PLANβs Medicare
Advantage members who (A)Β reside in Approved PLAN Operating Areas and (B)Β select or are assigned to
PLANβs Clinic Model Provider for delivery of Services (βPROVIDER Medicare Membersβ), and (ii)
PROVIDER HMO Members (as defined in SectionΒ 7.1(d)). For the purposes of this Agreement, βClinic
Model Providerβ means a medical services provider (1)Β that employs, or contracts on an exclusive
basis with, two or more primary care physicians; and (2)Β that provide services to persons who are
eligible for Medicare; and (3)Β at a clinic or other common facility; and (4)Β either (a)Β provides
services on an exclusive basis to the members of a single HMO or similar managed care organization,
or (b)Β if providing services not exclusively to the members of a single HMO or similar managed care
organization, the services provided are not normally and customarily provided by primary care
physician practices.
Β Β Β Β Β 1.2 Approved PLAN Operating Areas. As used in this Agreement, the term βPLAN
Operating Areaβ means a geographic area (x)Β that is located in the Restricted Area (as defined in
SectionΒ 7.1(a)) and (y)Β that is served by a single zip code. As used in this Agreement, the term
βApproved PLAN Operating Areasβ means the PLAN Operating Areas listed on ExhibitΒ 4, as amended from
time to time in order to incorporate any expansions, if any, to the Approved PLAN Operating Areas
in accordance with SectionΒ 7.1(b) below. Notwithstanding anything set forth in this Agreement to
the contrary, the parties acknowledge and agree that (1)Β PROVIDER shall in no event have any
obligation to provide or deliver Services, or to cause the provision or delivery of Services, to
any Medicare Advantage members who do not reside in an Approved PLAN Operating Area, (2)Β Medicare
Advantage members who do not reside in an Approved PLAN Operating Area shall in no event constitute
PROVIDER Medicare Members, (3)Β in the event that any of PLANβs Medicare Advantage members selects
or is assigned to one of PROVIDERβs primary care physicians that cannot accommodate such member
because it would cause such physician to exceed his or her availability, as determined in good
faith by PROVIDER in accordance with its historical practices and guidelines communicated by
PROVIDER to PLAN from time to time, PLAN, with the assistance and recommendation of PROVIDER, shall
assign or cause such member to select another of PROVIDERβs primary care
2
Β
physicians at the same PROVIDER Medical Center, and (4)Β in the event that any of PLANβs
Medicare Advantage members selects or is assigned to one of PROVIDERβs primary care physicians that
practices at a PROVIDER Medical Center that has exceeded its designated capacity (as set forth on
ExhibitΒ 5), then PLAN shall not permit such member to assign or select such PROVIDER Medical Center
without the prior written consent of PROVIDER and shall, if directed by PROVIDER (i)Β assign or
cause such member to select one of PROVIDERβs primary care physicians practicing at a PROVIDER
Medical Center that has not exceeded or reached its designated capacity or at an Affiliated
Provider (if and to the extent directed by PROVIDER), or (ii)Β if and only to the extent that PLAN
is unable to effectuate the alternative described in the preceding clause (i), assign or cause such
member to select one of PLANβs non-Clinic Model Provider products. In no event will the failure of
a PROVIDER Medical Center or Affiliated Provider to have capacity to admit one of PLANβs Medicare
Advantage members give rise to a right on the part of PLAN to contract with, or direct or permit
any of its PLANβs Medicare Advantage members to select, a Clinic Model Provider operating in the
Restricted Area other than PROVIDER. The parties acknowledge and agree that in no event will
PROVIDER have any obligation to expand or modify the designated capacity of any of its PROVIDER
Medical Centers or Affiliated Providers. For the avoidance of doubt, references in this Agreement
to βMedicare Advantageβ shall be deemed to include any and all successor Medicare plans to Medicare
Advantage.
2. Contract Year. References throughout this Agreement to a βContract Yearβ shall be
deemed to refer to a specific calendar year (i.e., January 1 β DecemberΒ 31) during the Term (as
defined in SectionΒ 10.1 hereof), except that the period commencing on the Effective Date and ending
on DecemberΒ 31, 2007 shall be deemed to constitute the first Contract Year (i.e., Contract Year
2007).
3. Provision of Services.
Β Β Β Β Β 3.1 PROVIDER Covered Services. During the Term, PROVIDER shall provide to the
PROVIDER Medicare Members the Services set forth, together with their respective CPT codes and/or
definitions (as applicable) and their respective Core Non-Pharmacy Payments (as defined in Section
4.1(a) below), on ExhibitΒ 1, as the same may be amended from time to time in accordance with
SectionΒ 4.5(c) (the βPROVIDER Core Servicesβ); provided, however, that, notwithstanding anything in
this Agreement to the contrary, if any PROVIDER Medicare Member selects or is assigned as their
primary care physician a physician who primarily practices in an Affiliated Provider, or in a
PROVIDER Medical Center that does not provide transportation to the Approved PLAN Operating Area
where such PROVIDER Medicare Member resides, then PROVIDER shall have the right, in its sole
discretion, to withhold the transportation benefit that is part of the PROVIDER Core Services with
respect to such PROVIDER Medicare Member unless and until either (i)Β such PROVIDER Medicare Member
selects or is assigned as their primary care physician a physician who practices at the PROVIDER
Medical Center(s), if any, that provides transportation to the Approved PLAN Operating Area where
such PROVIDER Medicare Member resides, as designated by PROVIDER and communicated to PLAN in
writing from time to time, or (ii)Β the physician selected by or assigned to such PROVIDER Medicare
Member as their primary care physician relocates his or her practice to a PROVIDER Medical Center,
if any, that provides transportation to the Approved PLAN Operating Area where such PROVIDER
Medicare Member resides.
3
Β
Except as specifically set forth in SectionΒ 4.5(c) or as expressly agreed to in a writing
executed by each of PLAN and PROVIDER, the PROVIDER Core Services shall in no event be expanded,
curtailed or otherwise modified at any time during the Term. In addition to the PROVIDER Core
Services, PROVIDER shall provide to the PROVIDER Medicare Members the Services set forth, together
with their respective CPT codes and/or definitions (as applicable) and their respective Additional
Services Capitation Payments (as defined in SectionΒ 4.2 below), on ExhibitΒ 2, as the same may be
amended from time to time in accordance with SectionΒ 3.2 below (the βPROVIDER Additional
Servicesβ). The PROVIDER Core Services and PROVIDER Additional Services are referred to together
as the βPROVIDER Covered Services.β
Β Β Β Β Β 3.2 Revisions to PROVIDER Additional Services. During the Contract Years 2007 and
2008, PROVIDER shall provide to the PROVIDER Medicare Members the PROVIDER Additional Services set
forth in ExhibitΒ 2. For each Contract Year subsequent to Contract Year 2008, PLAN and PROVIDER
shall determine what additional Services, if any, PROVIDER shall provide as PROVIDER Additional
Services, as well as the Additional Services Capitation Payments to be paid by PLAN to PROVIDER
with respect to any and all PROVIDER Additional Services, and whether any changes are appropriate
to the CPT codes and/or the definitions (as applicable) of the PROVIDER Additional Services set
forth on the then current version of ExhibitΒ 2, all subject to SectionΒ 4 below. The parties shall
make such determination in accordance with the following procedures:
Β Β Β Β Β (a) PROVIDER shall, with respect to each Contract Year beginning with the Contract Year
2008, not later than March 1 of such Contract Year, provide to PLAN a list of Services that
it proposes to provide as the PROVIDER Additional Services during the following Contract
Year. In response, PLAN shall, not later than AprilΒ 15 of such Contract Year, provide
PROVIDER with a revised ExhibitΒ 2 reflecting those of such proposed Services that PLAN
desires PROVIDER provide as the PROVIDER Additional Services during the following Contract
Year, such revised Exhibit to include the CPT codes and/or proposed definitions (as
applicable) with respect to any proposed additions to the PROVIDER Additional Services, any
revisions to the CPT codes and/or definitions (as applicable) of the PROVIDER Additional
Services then being provided, and the Additional Services Capitation Payments to be paid by
PLAN to PROVIDER with respect to all PROVIDER Additional Services (together, the βRevisions
to Additional Servicesβ).
Β Β Β Β Β (b) PROVIDER and PLAN shall negotiate in good faith and attempt to reach agreement on
such Revisions to Additional Services by May 1 of such Contract Year. The Revisions to
Additional Services so agreed, if any (as evidenced by an amended ExhibitΒ 2 executed by
PROVIDER and PLAN), shall (i)Β constitute, with respect to such following Contract Year, the
PROVIDER Additional Services, the CPT codes and/or definitions (as applicable) with respect
to such PROVIDER Additional Services and the Additional Services Capitation Payments to be
paid by PLAN to PROVIDER with respect to all PROVIDER Additional Services, and (ii)Β be
attached hereto and deemed for all purposes to have, with respect to such following Contract
Year, amended, restated and superseded ExhibitΒ 2 in its entirety.
4
Β
Β Β Β Β Β (c) Notwithstanding the foregoing, PROVIDER shall (including upon the failure of PLAN
and PROVIDER to reach agreement on the Revisions to the Additional Services within the time
periods provided in the preceding sub-section (b)), have the option (the βAdditional
Services Optionβ), but not the obligation, during each of the Contract Years, of either: (i)
not providing or arranging for the provision of any PROVIDER Additional Services during the
following Contract Year, or (ii)Β providing or arranging for the provision during the
following Contract Year of any one or more Services (as selected by PROVIDER in its sole
discretion) as PROVIDER Additional Services by selecting such Services from among: (A)Β the
Revisions to Additional Services proposed by PLAN for the following Contract Year, and/or
(B)Β the PROVIDER Additional Services being provided in the then current Contract Year, on
the same terms as set forth on the ExhibitΒ 2 then in effect, except (i)Β subject to any
adjustments pursuant to SectionΒ 4.5 below, (ii)Β if CMS no longer requires Medicare Advantage
plans to provide to Medicare Advantage plan members a Service that is a PROVIDER Additional
Service, such Service shall be eliminated as a PROVIDER Additional Service unless otherwise
mutually agreed by PROVIDER and PLAN (other than hearing aids and after hours answering
service, which are currently listed on ExhibitΒ 2 and shall remain PROVIDER Additional
Services compensated at the Additional Services Capitation Payments set forth therein) and
(iii)Β if CMS revises, adds or eliminates CPT codes or definitions with respect to any of the
PROVIDER Additional Services set forth on ExhibitΒ 2, the parties shall modify ExhibitΒ 2
accordingly. The parties shall proceed to negotiate in good faith in an attempt to agree on
any revisions to ExhibitΒ 2, including the amount of any adjustments to the Additional
Services Capitation Payments to reflect any changes to PROVIDER Additional Service or such
revisions, additions or elimination of CPT codes or definitions, as applicable. If the
parties cannot agree on such revisions to ExhibitΒ 2 within fifteen (15)Β days following
commencement of the negotiations with respect thereto, then the revisions to ExhibitΒ 2,
including the calculation of the adjustment, shall be submitted to an independent nationally
recognized actuary (the βActuaryβ) for final resolution in accordance with the provisions of
SectionΒ 4.5(a). Upon the exercise by PROVIDER of such Additional Services Option, a revised
version of ExhibitΒ 2 shall be prepared by PROVIDER and PLAN reflecting PROVIDERβs selection
under the Additional Services Option and shall be executed by PLAN and PROVIDER and attached
hereto and deemed for all purposes with respect to such following Contract Year, to (X)Β have
amended, restated and superseded the then current ExhibitΒ 2 in its entirety, and (Y)Β reflect
the PROVIDER Additional Services (if any), the CPT codes and/or definitions (as applicable)
with respect to such PROVIDER Additional Services and the Additional Services Capitation
Payments to be paid by PLAN to PROVIDER with respect to such PROVIDER Additional Services
(if any).
Β Β Β Β Β 3.3 CMS Bid. Not less than ninety (90)Β days prior to PLANβs making its annual CMS bid
(the βBidβ) with the Center for Medicare and Medicaid Services (βCMSβ), the parties will meet and
discuss the merits of filing an alternative benefit schedule for PROVIDER Medicare Members as part
of such Bid filing. PROVIDER shall have the right, with respect to each such Bid, in its sole
discretion, to direct PLAN to include as benefits or alternative benefits in such Bid (A)
transportation and/or (B)Β no co-payment for PartΒ D Pharmaceuticals (as hereinafter defined), and
PLAN hereby agrees to comply with each such direction; provided, that (i)Β if the most recently
calculated MLR (as calculated pursuant to the Final Settlement (as
5
Β
defined in ExhibitΒ 3)) reflects an MLR Deficit (defined in ExhibitΒ 3) greater than 5%, then,
only with respect to the Bid submitted during such Contract Year, PLAN shall not be obligated to
include no co-payment for PartΒ D Pharmaceuticals as part of the Bid, and (ii)Β all other terms of
PLANβs Bid, including rates, shall be in the sole discretion of PLAN; and provided further, that
such proposed alternative benefit schedule (X)Β would fully comply with all applicable federal and
state laws and regulations and (Y)Β is substantially complete on or before thirty (30)Β days prior to
the filing deadline for the Bid. Except as mandated by CMS, no PROVIDER Core Services currently
being provided by PROVIDER to the PROVIDER Medicare Members shall be withdrawn from or otherwise
materially diminished in any benefit schedule filed as part of PLANβs annual Bid filing with CMS
without PROVIDERβs prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. As used in this Agreement, the term βPartΒ D Pharmaceuticalsβ means
pharmaceuticals subject to the Medicare PartΒ D prescription drug benefit under the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, as amended from time to time.
4. Compensation.
Β Β Β Β Β 4.1 PROVIDER Core Services.
Β Β Β Β Β (a) PROVIDER Core Services Other than PartΒ D Pharmaceuticals. From and after
the Effective Date, PLAN shall make and deliver to PROVIDER, with respect to each calendar
month during the Term (or portion thereof if the Term shall end earlier than on the last day
of a calendar month), a payment (each, a βCore Non-Pharmacy Paymentβ) with respect to each
PROVIDER Core Service (other than PartΒ D Pharmaceuticals) equal to the product obtained by
multiplying (i)Β the amount delineated for such PROVIDER Core Service in ExhibitΒ 1
under the heading βCore Services Paymentβ times (ii)Β the Adjusted Members (as
hereinafter defined) for such month. The term βAdjusted Membersβ means, with respect to
each month during the Term, the number of PROVIDER Medicare Members reflected on the Plan
Payment Report delivered to PLAN by CMS for such month (currently reflected on line item 1
thereof under the A payment line item), as adjusted to reflect prior period deaths of
beneficiaries, retroactive accretion and retroactive deletions. Together with each Core
Non-Pharmacy Payment, PLAN shall deliver to PROVIDER copies of the monthly Plan Payment
Report (and any successor reports thereto) delivered to PLAN by CMS reflecting the amounts
of the CMS capitation reimbursement rates and the number of PROVIDER Medicare Members used
in computing the Core Non-Pharmacy Payment for such month. The Core Non-Pharmacy Payment
with respect to each month during the Term (or portion thereof if the Term shall end earlier
than on the last day of a calendar month) shall be paid and delivered by PLAN to PROVIDER no
later than the fifteenth (15th) day of such month (or the next business day if
the same shall not fall on a business day), by wire transfer of immediately available funds
in accordance with wire instructions provided by PROVIDER to PLAN from time to time.
Β Β Β Β Β (b) Pharmacy. From and after the Effective Date, PLAN shall make and deliver
to PROVIDER a payment (each, a βCore Pharmacy Paymentβ; the Core Non-Pharmacy Payments and
the Core Pharmacy Payments are also referred to, individually and collectively, as βCore
Services Paymentsβ) equal to one hundred and five percent
6
Β
(105%) of the actual cost (including the effect of any rebates, adjustments, or similar
payments received or to be received by PROVIDER) incurred by PROVIDER with respect to PartΒ D
Pharmaceuticals (other than Injectable Drugs) that are delivered to the PROVIDER Medicare
Members during such month. The Core Pharmacy Payments shall be paid and delivered to
PROVIDER, either directly by PLAN or through pharmacy benefits managers, at such time(s) as
the parties shall agree but in no event less frequently than every two weeks. With each
request for a Core Pharmacy Payment, PROVIDER shall provide PLAN with a schedule of PartΒ D
Pharmaceuticals dispensed that are covered by such Core Pharmacy Payment. If so requested
by PLAN, PROVIDER will provide PLAN with such records and information relating to the PartΒ D
Pharmaceuticals dispensed by PROVIDER and PROVIDERβs costs with respect to such PartΒ D
Pharmaceuticals as PLAN shall reasonably request to permit PLAN to verify the accuracy of
the Core Pharmacy Payment. If the parties disagree with respect to the amount of any Core
Pharmacy Payment, then either party may submit the disputed amount to the Actuary for final
resolution in accordance with the provisions of SectionΒ 4.5(a).
Β Β Β Β Β 4.2 PROVIDER Additional Services. From and after the Effective Date, PLAN shall make
and deliver to PROVIDER, with respect to each calendar month during the Term (or portion thereof if
the Term shall end earlier than on the last day of a calendar month), a payment (each, an
βAdditional Services Capitation Paymentβ) with respect to each PROVIDER Additional Service equal to
the product obtained by multiplying (i)Β the amount delineated for such PROVIDER Additional
Service in ExhibitΒ 2 under the heading βAdditional Services Capitation Paymentβ times (ii)
the number of Adjusted Members for such month. Together with each Additional Services Capitation
Payment, PLAN shall deliver to PROVIDER copies of the monthly Plan Payment Report (and any
successor reports thereto) delivered to PLAN by CMS reflecting the number of PROVIDER Medicare
Members used in computing the Additional Services Capitation Payment for such month. The
Additional Services Capitation Payment with respect to each month during the Term (or portion
thereof if the Term shall end earlier than on the last day of a calendar month) shall be paid and
delivered by PLAN to PROVIDER no later than the fifteenth (15th) day of such month (or
the next business day if the same shall not fall on a business day), by wire transfer of
immediately available funds in accordance with wire instructions provided by PROVIDER to PLAN from
time to time. The Core Services Payments and the Additional Services Capitation Payments are
collectively referred to throughout this Agreement as the βCovered Services Paymentsβ).
Β Β Β Β Β 4.3 Additional Reports. In addition to the monthly Plan Payment Reports required to
be delivered by PLAN to PROVIDER together with the Covered Services Payments as hereinabove
provided, PLAN shall deliver to PROVIDER copies of the Monthly Membership Reports. PLAN shall
deliver to PROVIDER such other reports relating to CMS capitation rates, the PROVIDER Covered
Services and/or the PROVIDER Medicare Members as may be reasonably requested in writing by PROVIDER
from time to time, in each case, once such written request has been made, within five (5)Β business
days of the date such report is received by PLAN.
Β Β Β Β Β 4.4 Co-payments. In addition to the Covered Services Payments, PROVIDER shall be
entitled to collect from PROVIDER Medicare Members, and retain for its own account, any
7
Β
co-payments payable by such PROVIDER Medicare Members with respect to the Services rendered by
PROVIDER under this Agreement; provided such co-payments are approved as part of the terms of
PLANβs Bid.
Β Β Β Β Β 4.5 Adjustments to Covered Services Payments. Except as specifically set forth in
SectionΒ 3.2 and this SectionΒ 4.5, none of the Covered Services Payments shall be adjusted or
otherwise modified at any time during the Term.
Β Β Β Β Β (a) Annual Adjustments. The parties acknowledge and agree that the Core
Non-Pharmacy Payments and Additional Services Capitation Payments reflected in Exhibits 1
and 2 as of the Effective Date constitute 2007 rates and that such Covered Services Payments
shall apply only until the CMS capitation reimbursement rates applicable to the PROVIDER
Medicare Members for 2008 are known. Accordingly, beginning with Contract Year 2008, the
Core Non-Pharmacy Payments and any Additional Services Capitation Payments that were not
subject to any Revisions to Additional Services shall be adjusted annually as follows:
Β Β Β Β Β (i) Effective January 1 of each Contract Year, the Core Non-Pharmacy Payments
and any Additional Services Capitation Payments that were not subject to any
Revisions to Additional Services shall be increased or decreased by the aggregate
percentage increase or decrease, respectively, in the CMS capitation reimbursement
rates applicable to the PROVIDER Medicare Members for such Contract Year as compared
to the preceding Contract Year (i.e., CMS capitation reimbursement rates applicable
to January compared to the CMS capitation reimbursement rates applicable to the
immediately preceding December for all PROVIDER Medicare Members enrolled in
December that are still enrolled with PLAN in January). Promptly after the CMS
capitation reimbursement rates applicable to each Contract Year are known, the
parties shall in good faith attempt to arrive at an agreement with respect to the
amount of such adjustment.
Β Β Β Β Β (ii) If the parties cannot agree on the amount of such adjustment within
fifteen (15)Β days following commencement of such negotiations, then the calculation
of the adjustment shall be submitted to an Actuary for analysis and calculation,
together with each partyβs respective calculations of the adjustment that each
believes should be made. The determination of the Actuary shall be final, binding
and non-appealable. For all purposes under this Agreement, the following shall
apply with respect to the Actuary: (i)Β the Actuary shall be selected by agreement of
the parties or, if the parties cannot agree on an Actuary, then each party shall
appoint an actuary and the two actuaries shall appoint a third actuary which shall
be the sole Actuary; and (ii)Β if the Actuaryβs determination is in agreement with
the calculations submitted by one of the parties, then the other party shall
promptly pay all costs and expenses with respect to the Actuaryβs determination, or
alternatively, if the Actuaryβs determination is not in agreement with either
partyβs calculations, then such costs and expenses shall be promptly paid, on a
50/50 basis, by both parties.
8
Β
Β Β Β Β Β (iii) Upon determination of the annual adjustment to the Core Non-Pharmacy
Payments and Additional Services Capitation Payments, whether by agreement of the
parties or determination by the Actuary, revised versions of Exhibits 1 and 2 shall
be prepared by PROVIDER and PLAN reflecting the Core Non-Pharmacy Payments and
Additional Services Capitation Payments as revised pursuant to such determination.
Such revised Exhibits shall be executed by PROVIDER and PLAN and be attached hereto
and deemed for all purposes with respect to such Contract Year, to (a)Β have amended,
restated and superseded the then current Exhibits 1 and 2 in their entirety, and (b)
reflect the Core Non-Pharmacy Payments and Additional Services Capitation Payments
to be paid by PLAN to PROVIDER.
Β Β Β Β Β (iv) As part of the determination of the annual adjustment, whether by the
parties or the Actuary, all Core Non-Pharmacy Payments and Additional Services
Capitation Payments that have been paid to PROVIDER during such Contract Year after
the effective date of such adjustment shall be recalculated to reflect such
adjustment. PLAN or PROVIDER shall, within three (3)Β business days following such
determination, pay and deliver to the other party, by wire transfer of immediately
available funds, the aggregate amount of any underpayment or overpayment,
respectively, with respect to such prior Core Non-Pharmacy Payments and Additional
Services Capitation Payments following such recalculation.
Β Β Β Β Β (b) Intra-year Adjustments. If at any time during the Term, CMS effectuates an
adjustment to the capitation reimbursement rates applicable to PROVIDER Medicare Members
(other than the annual adjustments addressed in the immediately preceding sub-section (a)),
whether upwards or downwards, and whether effective immediately, retroactively or
prospectively for such Contract Year, then the Core Non-Pharmacy Payments and the Additional
Services Capitation Payments shall be adjusted as follows:
Β Β Β Β Β (i) Effective as of the effective date of such adjustment, the Core
Non-Pharmacy Payments and Additional Services Capitation Payments shall be increased
or decreased by the aggregate percentage increase or decrease, respectively, in the
CMS capitation reimbursement rates applicable to the PROVIDER Medicare Members
(i.e., the CMS capitation reimbursement rates applicable to the calendar month, or
portion thereof, commencing on the effective date of such adjustment compared to the
CMS capitation reimbursement rates applicable to the calendar month or portion
thereof immediately preceding such effective date, in each case, for all PROVIDER
Medicare Members enrolled in such preceding month or portion thereof that are still
enrolled in the month or portion thereof commencing on such effective date).
Promptly after any such intra-year adjustment in CMS capitation reimbursement rates
is known, the parties shall attempt to arrive at an agreement with respect to the
amount of such adjustment.
9
Β
Β Β Β Β Β (ii) If the parties cannot agree on the amount of such adjustment within
fifteen (15)Β days following the applicable partyβs request therefor, then the
calculation of the adjustment shall be submitted to the Actuary for analysis
and calculation, together with each partyβs respective calculations of the
adjustment that each believes should be made. The determination of the Actuary
shall be final, binding and non-appealable.
Β Β Β Β Β (iii) Upon determination of any such intra-year adjustment to the Core
Non-Pharmacy Payments and Additional Services Capitation Payments, whether by
agreement of the parties or determination by the Actuary, revised versions of
Exhibits 1 and 2 shall be prepared by PROVIDER and PLAN reflecting the Core
Non-Pharmacy Payments and Additional Services Capitation Payments as revised
pursuant to such determination. Such revised Exhibits shall be executed by PROVIDER
and PLAN and be attached hereto and deemed for all purposes with respect to such
Contract Year, to (a)Β have amended, restated and superseded the then current
Exhibits 1 and 2 in their entirety, and (b)Β reflect the Core Non-Pharmacy Payments
and Additional Services Capitation Payments to be paid by PLAN to PROVIDER.
Β Β Β Β Β (iv) With respect to any such intra-year adjustments having immediate or
retroactive effective dates, all Core Non-Pharmacy Payments and Additional Services
Capitation Payments that have been paid to PROVIDER during such Contract Year after
the effective date of such adjustment shall be recalculated as part of the
determination of such intra-year adjustment, whether by the parties or the Actuary,
to reflect such adjustment. PLAN or PROVIDER shall, within three (3)Β business days
following such determination, pay and deliver to the other party, by wire transfer
of immediately available funds, the aggregate amount of any underpayment or
overpayment, respectively, with respect to such prior Core Non-Pharmacy Payments and
Additional Services Capitation Payments following such recalculation.
Β Β Β Β Β (c) Revisions to Core Services. In the event that CMS or any other
governmental agency of competent jurisdiction at any time (i)Β requires that a Service that
is not then currently being provided as part of the PROVIDER Core Services be provided as
part of the PROVIDER Core Services, (ii)Β requires that PROVIDER discontinue providing a
Service that is then currently being provided as part of the PROVIDER Core Services (other
than the PCP Management Fee), or (iii)Β changes the CPT code for any PROVIDER Core Service or
changes the definition or breadth of, or otherwise modifies, services for any PROVIDER Core
Service (other than the PCP Management Fee), then PROVIDER and PLAN shall, promptly
following such modifications being known, jointly prepare a revised ExhibitΒ 1 reflecting all
of such modifications, such revised Exhibit to include any applicable revisions to the CPT
codes and/or definitions (as applicable) of the PROVIDER Core Services then being provided,
and the Core Services Payments to be paid by PLAN to PROVIDER with respect to all PROVIDER
Core Services (together, the βRevisions to Core Servicesβ). PROVIDER and PLAN shall
negotiate in good faith and attempt to reach agreement on the Revisions to Core Services.
If the parties cannot agree on such adjustment within fifteen (15)Β days following
commencement of negotiations with respect to the preparation of such revised ExhibitΒ 1, then
the Revisions to Core Services shall be submitted to the Actuary for analysis and
10
Β
calculation, together with each partyβs respective proposals therefor. The
determination of the Actuary shall be final, binding and non-appealable. The Revisions to
Core Services as agreed to by the parties or determined by the Actuary shall, as part of the
negotiation or Actuaryβs determination, be memorialized in a revised ExhibitΒ 1, which shall
be executed by PROVIDER and PLAN, if agreement by the parties is reached, or by the Actuary,
if determined thereby. Such revised ExhibitΒ 1 shall (A)Β constitute, with respect to the
remainder of the Term (subject to any additional modifications as provided in this Section
4.5(c)), the PROVIDER Core Services, the CPT codes and/or definitions (as applicable) with
respect to such PROVIDER Core Services and the Core Services Payments to be paid by PLAN to
PROVIDER with respect to all PROVIDER Core Services, and (B)Β be attached hereto and deemed
for all purposes to have amended, restated and superseded ExhibitΒ 1 in its entirety.
Β Β Β Β Β (d) Change in Economic Circumstances. In the event CMS or any other
governmental agency of competent jurisdiction changes the methodology that it uses to
reimburse PLAN under the Medicare Advantage program or Medicare benefits or other factors
with respect to the Medicare Advantage program (including, without limitation, CMS mandated
changes in PLANβs benefits) are changed such that the economic risks and benefits of either
party are changed in a materially adverse manner (other than any modifications subject to
SectionΒ 4.5(c) above or increases in CMS capitation rates covered by SectionsΒ 4.5(a) or
(b)), either PLAN or PROVIDER (i.e., whichever party suffers the materially adverse change
as compared to the circumstances in place prior to such change) may request, by written
notice to the other party, an adjustment to PROVIDERβs compensation. The parties shall
first attempt to arrive at an agreement with respect to such adjustment. If the parties
cannot agree on such adjustment within fifteen (15)Β days following the applicable partyβs
request therefor, then the adjustment shall be submitted to the Actuary for analysis and
calculation, together with each partyβs respective calculations of the adjustment, if any,
that each believes should be made to PROVIDERβs compensation. The Actuary shall calculate
the economic impact using relevant cost and utilization data, and shall determine the
actuarially sound adjustment to take into account the change(s), if any. The determination
of the Actuary shall be final, binding and non-appealable.
Β Β Β Β Β 4.6 Injectable Drugs Replacement/Reimbursement. The parties acknowledge that PLAN
bears the sole and exclusive, subject to inclusion for purposes of calculating βDeficitβ and
βSurplusβ for purposes of ExhibitΒ 3, financial responsibility for providing Injectable Drugs (as
hereinafter defined) to PROVIDER Medicare Members and that the Core Pharmacy Payment does not
include any costs, fees or charges associated with providing Injectable Drugs. Accordingly, with
respect to each calendar quarter during the Term, PROVIDER shall, at least fifteen (15)Β days prior
to the first day of such calendar quarter (or fifteen (15)Β days prior to the Effective Date, with
respect to any calendar quarter that includes but does not commence on, the Effective Date),
deliver to PLAN a schedule of its charges (to be determined by and in the sole discretion of
PROVIDER) with respect to the Injectable Drugs that it proposes to dispense during such calendar
quarter (the βInjectable Drugs Chargesβ). PLAN shall, within ten (10)Β days following its receipt of
such schedule, provide written notice to PROVIDER of its election, with respect to such quarter, to
either: (i)Β at no cost to PROVIDER, timely replace PROVIDERβs inventory of each item of Injectable
Drugs that is dispensed by PROVIDER to PROVIDER
11
Β
Medicare Members during such quarter, or (ii)Β pay to PROVIDER the Injectable Drugs Charge for
each item of Injectable Drugs that is dispensed by PROVIDER to PROVIDER Medicare Members during
such quarter. PROVIDER shall provide PLAN, within thirty (30)Β days following the end of each
month, a schedule of Injectable Drugs dispensed during such month and the Injectable Drugs Charges
with respect thereto, if applicable. Within thirty (30)Β days following the end of each calendar
quarter, PROVIDER shall provide PLAN a schedule of Injectable Drugs dispensed during such calendar
quarter and the Injectable Drugs Charges with respect thereto. PLAN shall effectuate the
replacement of PROVIDERβs inventory of Injectable Drugs or the payment to PROVIDER for the
applicable Injectable Drugs Charges, in each case, consistent with its election with respect to
such prior quarter as hereinabove provided, within thirty (30)Β days of receipt of PROVIDERβs
quarterly schedule. As used in this Agreement, the term βInjectable Drugsβ means the prescription
drug medications that are excluded from PartΒ D Pharmaceuticals portion of the PROVIDER Core
Services, which medications are identified on ExhibitΒ 1-A under the heading βInjectable Drugs.β If
so requested by PLAN, PROVIDER will provide PLAN with such records and information relating to the
dispensation of the Injectable Drugs dispensed by PROVIDER as PLAN shall reasonably request to
permit PLAN to verify the accuracy of the Injectable Drugs Charges (but not information regarding
PROVIDERβs costs with respect to such Injectable Drugs).
Β Β Β Β Β 4.7 MLR Sharing Arrangement. PLAN and PROVIDER shall be subject to the medical loss
ratio (MLR)Β sharing arrangement set forth in ExhibitΒ 3 with respect to the provision of Services to
PROVIDER Medicare Members and PROVIDER HMO Members and shall make all payments required by such
arrangement.
5. Advertising and Promotional Activities.
Β Β Β Β Β (a) Advertising Activities. Throughout the Term, PROVIDER (directly or through
a third party) shall be responsible for the management of all advertising and other
promotional activities (specifically excluding all Sales, Enrollment and Regulatory
Compliance Activities (as hereinafter defined)) with respect to (i)Β PROVIDER as a provider
of the Services to the PROVIDER Medicare Members in Approved PLAN Operating Areas and (ii)
PLANβs Clinic Model Provider Medicare plan product offering in the Approved PLAN Operating
Areas (the βAdvertising Activitiesβ); provided, however, that if CMS or any other
governmental authority restricts PROVIDER from engaging in the management of any such
Advertising Activities, PROVIDER shall have the right to assign and delegate its rights and
obligations under this SectionΒ 5 to one or more third parties so long as PROVIDER provides
prior written notice thereof to PLAN and PROVIDER remains liable to PLAN hereunder with
respect to any failures by any such third parties to comply with PROVIDERβs obligations
under this SectionΒ 5. PLAN hereby acknowledges and agrees that, throughout the Term, all
telemarketing, sales and/or enrollment activities with respect to PLANβs Clinic Model
Provider Medicare plan product offering in the Approved PLAN Operating Areas (and the
payment of all commissions and/or brokerβs fees with respect thereto), as well as all
regulatory oversight with respect thereto (collectively, βSales, Enrollment and Regulatory
Compliance Activitiesβ) shall be the sole and exclusive responsibility of PLAN and shall be
conducted (A)Β in accordance in all material respects with applicable CMS, legal, regulatory,
administrative and other requirements and (B)Β exclusively under the
12
Β
βLicensed Marksβ (as defined in the License Agreement). The Advertising Activities
will include, without limitation, the development and implementation of advertising creative
materials, placement of media, direct mail printing and postage, sales collateral materials
and other promotions. PLAN shall have the right to review and approve all such Advertising
Activities, such approval not to be unreasonably withheld, conditioned or delayed, solely
for purposes of determining compliance with applicable state and federal laws and
regulations (including, but not limited to, the requirements of CMS). PROVIDER shall
conduct the Advertising Activities pursuant to and in accordance with the directions of PLAN
with respect to such state and federal compliance, except that Advertising Activities not
requiring CMS approval shall not necessitate such approval or be subject to such directions.
PROVIDER shall conduct all such Advertising Activities not requiring PLANβs approval in
accordance, in all material respects, with applicable legal, regulatory, administrative and
other legal requirements. The Advertising Activities with respect to PLAN will identify
PLAN as a subsidiary or division of
HealthSpring, Inc., as determined by PLAN. PROVIDER
shall provide PLAN, not less frequently than quarterly, a reasonably detailed summary of all
Advertising Activities and Advertising Expenses (as defined below), together with
retrospective performance reviews or evaluations with respect to the calendar quarter or
portion thereof to which such summary relates (each, a β
Quarterly Advertising Reportβ).
Β Β Β Β Β (b) Reimbursable Advertising Amount. With respect to each Contract Year, PLAN
shall, within ten (10)Β business days following delivery of each Quarterly Advertising
Report, reimburse PROVIDER for any and all costs and expenses incurred with respect to
Advertising Activities by or on behalf of PROVIDER (or its permitted designees and assigns
(as provided in sub-section (a)Β above)) during the quarter to which such Quarterly
Advertising Report relates (collectively βAdvertising Expensesβ); provided, however, that
(i)Β the aggregate of all such reimbursements with respect to any Contract Year shall in no
event exceed the Reimbursable Advertising Amount (as hereinafter defined) for such Contract
Year, and (ii) βAdvertising Expensesβ shall in no event include any general or
administrative expenses of PROVIDER or of any such designees or assigns (including salaries
and similar overhead expenses associated with employees and contractors). The term
βReimbursable Advertising Amountβ means, (A)Β with respect to Contract Year 2007, the
difference of (I) $3,850,000 and (II)Β all Advertising Expenses incurred by PROVIDER and PLAN
between JanuaryΒ 1, 2007 and the business day immediately preceding the Effective Date, (B)
with respect to Contract Year 2008, $3,850,000 plus or minus an amount equal
to $3,850,000 multiplied by the percentage increase or decrease, respectively, in the per
member Core Non-Pharmacy Payment and Additional Services Capitation Payment for such
Contract Year as compared to the preceding Contract Year (as calculated pursuant to Section
4.5), and (C)Β with respect to each subsequent Contract Year, an amount equal to the
Reimbursable Advertising Amount for the immediately preceding Contract Year plus or
minus an amount equal to the Reimbursable Advertising Amount for such immediately
preceding Contract Year multiplied by the percentage increase or decrease, respectively, in
the per member Core Non-Pharmacy Payment and Additional Services Capitation Payment for such
Contract Year as compared to the prior Contract Year (as calculated pursuant to Section
4.5); provided, however, that the Reimbursable Advertising Amount with respect to any
Contract Year shall in no event exceed the Advertising Cap for such Contract
13
Β
Year. The term βAdvertising Capβ means, (x)Β with respect to each of Contract Years
2007 through and including 2012, $5,000,000, (y)Β with respect to each of Contract Years 2013
through and including 2017, $6,000,000, and (z)Β with respect to each of Contract Years 2018
through and including 2022 (if applicable), $7,000,000. PROVIDER shall, not later than
November 1 of each Contract Year, provide PLAN with an opportunity to review its plan for
Advertising Activities for the following Contract Year; provided, however, that except as
expressly set forth in subsection (a)Β above, PLAN shall not have any right to approve,
disapprove or modify all or any portion of such plan.
6.
PROVIDER Expansion. As of the Effective Date, PROVIDER operates five PROVIDER Medical
Centers, all of which are located in Miami-Dade County, Florida. PROVIDER may, at any time, open
additional medical centers of such size and at such locations in any Approved PLAN Operating Areas,
as amended from time to time, as determined by PROVIDER in its sole discretion (including, without
limitation, the βAdditional Xxxx Centersβ contemplated to be opened pursuant to the
Stock Purchase
Agreement (regardless of whether or not such βAdditional Xxxx Centersβ are opened within the time
periods provided therein)) (collectively, the β
Additional Centersβ). Provided that an Additional
Center shall be of a finish and quality substantially consistent with the PROVIDER Medical Centers
then in operation, then such Additional Center shall constitute for all purposes hereunder a
PROVIDER Medical Center and shall participate as such under the terms and conditions of this
Agreement. The parties acknowledge and agree that, subject to the last sentence of this SectionΒ 6,
PROVIDER shall have the right, in its sole discretion, to replace (i)Β any PROVIDER Medical Center
(including any Additional Center) with a different PROVIDER Medical Center (including any
Additional Center) so long as such replacement center is of a similar size, finish and quality and
provides substantially the same services as the PROVIDER Medical Center being replaced or (ii)Β any
Affiliated Provider with a different Affiliated Provider. Each such replacement center shall
constitute for all purposes hereunder a PROVIDER Medical Center and each such replacement
Affiliated Provider shall constitute for all purposes hereunder an Affiliated Provider, and shall
participate as such under the terms and conditions of this Agreement. PROVIDER shall not, at any
time during the Term, without the prior written consent of PLAN, terminate the operation of any
PROVIDER Medical Center without replacing such PROVIDER Medical Center as hereinabove provided
concurrently with such termination, except that, notwithstanding the foregoing, PROVIDER shall in
all events have the right, in its sole discretion and without obtaining PLANβs written consent, to
(a)Β terminate the operation of the PROVIDER Medical Center located in 0000 Xxxxx Xxx, Xxxxx, XX,
00000 so long as such termination does not occur prior to the completion of both of the βAdditional
Xxxx Centersβ contemplated to be opened pursuant to the Stock Purchase Agreement (regardless of
whether or not such βAdditional Xxxx Centersβ are opened within the time periods provided therein)
and/or (b)Β terminate the operation of any number of PROVIDER Medical Centers so long as no such
termination results in either (x)Β after the completion of such βAdditional Xxxx Centers,β PROVIDER
operating less than six PROVIDER Medical Centers (regardless of whether or not such βAdditional
Xxxx Centersβ are opened within the time periods provided therein), or (y)Β before the completion or
in the event of non-completion of such βAdditional Xxxx Centers,β PROVIDER operating less than five
(5)Β PROVIDER Medical Centers.
14
Β
7. Exclusivity; PROVIDER HMO.
Β Β Β Β Β 7.1 Exclusivity.
Β Β Β Β Β (a) PLAN Exclusivity. Subject to the provisions of SectionΒ 7.5, and
notwithstanding anything in this Agreement to the contrary (other than the provisions of
SectionΒ 7.5), PLAN hereby acknowledges and agrees that (i)Β PROVIDER shall be PLANβs and its
Affiliatesβ sole and exclusive Clinic Model Provider in Miami-Dade County, Florida, Monroe
County, Florida, Palm Beach County, Florida and Broward County, Florida (collectively, the
βRestricted Areaβ) at all times throughout the Term, such that (without limiting the
generality of the foregoing), neither PLAN nor any of its Affiliates shall, at any time
during the Term, directly or indirectly, offer or provide, or contract with respect to the
offer or provision of, any Clinic Model Provider option other than PROVIDER to any Medicare
Advantage members who reside in the Restricted Area and (ii)Β PLAN shall not offer PROVIDER
to any Medicare Advantage members who reside outside of the Approved PLAN Operating Areas.
PLAN shall, at all times throughout the Term, offer as options to all Medicare Advantage
members residing in Approved PLAN Operating Areas a Clinic Model Provider option. As used
in this Agreement, the terms (I) βAffiliate(s)β means, with respect to any person or entity,
any person or entity directly or indirectly controlling, controlled by or under common
control with such person or entity; and (II) βControl,β βControllingβ or βControlled byβ
(whether or not any such term is capitalized) means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of an entity,
whether through the ownership of voting securities, by agreement, or otherwise.
Β Β Β Β Β (b) Expansion of Approved PLAN Operating Areas.
Β Β Β Β Β (i) Drag Along Right. If at any time prior to the final Contract Year
of the Term, PROVIDER has determined to expand its delivery of the PROVIDER Covered
Services to a PLAN Operating Area that is not then an Approved PLAN Operating Area
then PROVIDER shall have the right (the βDrag Along Rightβ), exercisable at any time
prior to the commencement of the Final Two Contract Years by providing written
Notice to PLAN, to request that PLAN use its commercially reasonable efforts to
expand to such PLAN Operating Area as hereinafter provided. Upon PLANβs receipt
from PROVIDER of Notice of PROVIDERβs exercise of its Drag Along Right (which Notice
shall specify the applicable PLAN Operating Area(s) into which PROVIDER wishes to
expand), PLAN shall use its commercially reasonable efforts to take and/or cause to
be taken, at its sole cost and expense, the steps (including the preparation,
submission, filing and delivery of appropriate notices, applications, forms and
other documents and instruments) that are reasonably necessary or appropriate to
become authorized to offer and provide its Clinic Model Provider products and
Services to Medicare Advantage members residing in such PLAN Operating Area(s).
PROVIDER will provide PLAN with all other information relating to PROVIDER that PLAN
may reasonably request to permit PLAN to submit its request to expand into such PLAN
Operating Area. Upon PLANβs receipt of authorization to operate in a new PLAN
Operating Area, such PLAN Operating
Area(s) shall constitute Approved PLAN Operating Area(s) for all purposes
hereunder and ExhibitΒ 4 shall be revised as provided below.
15
Β
Β Β Β Β Β (ii) Revisions to ExhibitΒ 4. If PROVIDER timely exercises its Drag
Along Right, or if the parties mutually agree to expand the Approved PLAN Operating
Areas, then in each case the parties shall prepare and execute a revised ExhibitΒ 4
reflecting all such new PLAN Operating Areas as additions to the Approved PLAN
Operating Areas, whereupon such revised ExhibitΒ 4 shall be deemed to have amended,
restated and superseded the then current version of ExhibitΒ 4 and shall be deemed to
set forth each and all Approved PLAN Operating Areas.
Β Β Β Β Β (c) Non-Competition; PROVIDER HMO. Subject to the provisions of SectionΒ 7.5,
neither PLAN nor any of its Affiliates shall, during the Term, directly or indirectly, own,
control, operate, manage, underwrite, administer and/or have any financial interest in any
Clinic Model Provider operating within the Restricted Area (other than an ownership interest
of less than 2% of the outstanding equity interests of any entity whose common stock is
traded on a national securities exchange or market quotation system). Except for the
ownership, control, operation and management of the PROVIDER HMO (as hereinafter defined),
which shall be governed by the provisions of this SectionΒ 7.1 and SectionΒ 10.3 below,
neither PROVIDER nor any of its Affiliates shall, during the Term, directly or indirectly,
own, control, operate, manage, underwrite, administer and/or have any financial interest in
any health maintenance organization, preferred provider product, other health insurance
product or any other similar form of health insurance or risk-based or pre-paid health
benefit plan, including without limitation, through the operation of a rental network or
direct consumer contracting, in the Restricted Area (other than HealthSpring and any of its
Affiliates or an ownership interest of less than 2% of the outstanding equity interests of
any entity whose common stock is traded on a national securities exchange or market
quotation system). Notwithstanding the foregoing, Provider and its Affiliates shall have
the right, directly or indirectly, to (a)Β at any time after the expiration of the five (5)
year period immediately following the Effective Date, form and/or own a health maintenance
organization licensed in the State of Florida (the βPROVIDER HMOβ) and to apply to CMS for a
Medicare contract with respect to such PROVIDER HMO for any geographic area outside of the
Restricted Area and to operate such PROVIDER HMO anywhere outside the Restricted Area
(including in competition with PLAN and its Affiliates), (b)Β apply to CMS for a Medicare
contract with respect to such PROVIDER HMO for all or any portion of the Restricted Area and
(c)Β directly or indirectly market, solicit and enroll (upon becoming eligible), and provide
the products and services offered by such PROVIDER HMO to, any and all actual or prospective
Medicare participants (including any and all Medicare Advantage members of PLAN or its
Affiliates) residing in the Restricted Area (including any and all PROVIDER Medicare
Members), and such actions described in clauses (a), (b)Β and (c)Β above shall not be deemed a
violation of this Agreement; provided, however, that such actions described in clauses (b)
and (c)Β above may only be undertaken (i)Β at any time from and after the earlier to occur of
(A)Β an HMO Event as provided in SectionΒ 10.3 hereof or (B)Β the date that is the earlier of
(I)Β eighteen months prior to the expiration of the Initial Term if PLAN has duly given
written notice to PROVIDER of its intention not to renew the
16
Β
Agreement as provided in SectionΒ 10.1 (the period commencing on the first day of such
eighteen month period and ending on the last day of the Renewal Term, the βFinal Thirty
Monthsβ), (II)Β the first day of the penultimate Contract Year during any Renewal Term (the
period commencing on such day and ending on the last day of the Renewal Term, the βFinal Two
Contract Yearsβ), or (III)Β the first day of the then current ante-penultimate cycle of open
enrollment for Medicare participants (i.e., currently running from November 1 through
DecemberΒ 31) prior to the expiration of any Renewal Term (the period commencing on such day
and ending on the last day of the Term, the βFinal Three Enrollment Cyclesβ), and (ii)
subject to compliance by PROVIDER with SectionsΒ 7.1(e) and (f).
Β Β Β Β Β (d) PROVIDER Exclusivity; Non-solicitation. Commencing on the Effective Date
and continuing until the expiration or earlier termination of this Agreement, neither
PROVIDER, its Affiliates nor any of the PROVIDER Medical Centers shall provide the Services,
nor shall the Affiliated Providers provide the primary care services identified in ExhibitΒ 1
as part of the PROVIDER Core Services, to any persons residing in the Restricted Area other
than to (i)Β the PROVIDER Medicare Members pursuant to this Agreement and/or (ii)Β any and all
Medicare participants that enroll with the PROVIDER HMO in accordance with this SectionΒ 7.1
(the βPROVIDER HMO Membersβ).
Β Β Β Β Β (e) PROVIDER HMO Members. It is the intention of the parties that, with
respect to any and all periods during the Term, PROVIDER and PLAN shall be in substantially
the same financial position with respect to one another regarding PROVIDER HMO Members as if
such persons were PROVIDER Medicare Members under this Agreement. Accordingly, if the
PROVIDER HMO shall during the Final Two Contract Years, the Final Three Enrollment Cycles or
the Final Thirty Months (each such period, as applicable, the βMake Whole Periodβ), commence
marketing, soliciting, enrolling or providing its product and services offerings to Medicare
participants in the Restricted Area as hereinabove provided, then the PROVIDER HMO shall pay
to PLAN, with respect to each month during the Make Whole Period (or portion thereof if the
Make Whole Period commences or ends other than on the first or last day of a calendar month,
respectively), an amount equal to (i)Β the applicable Administrative Percentage (as
hereinafter defined) multiplied by (ii)Β the sum of the CMS capitation reimbursement rates
for all PROVIDER HMO Members as of the first (1st) day of such calendar month (or
portion thereof) (the βPROVIDER Monthly Paymentβ). The PROVIDER Monthly Payment with
respect to each month (or portion thereof) during the Make Whole Period shall be paid by
PROVIDER HMO to PLAN on the fifteenth (15th) day of such month (or the next
business day if the same shall not fall on a business day) by wire transfer of immediately
available funds, in accordance with wire instructions delivered by PLAN to PROVIDER HMO from
time to time. The PROVIDER Monthly Payments received by PLAN shall be subject to
reconciliation as set forth in SectionΒ 7.1(g) below.
Β Β Β Β Β (f) Administrative Percentage. The βAdministrative Percentageβ shall mean and
be calculated as follows:
17
Β
Β Β Β Β Β (i) With respect to the period commencing on the first day of the Make Whole
Period and ending on DecemberΒ 31 of the penultimate Contract Year
of the Term (the βFirst Measurement Periodβ), the Administrative Percentage
shall equal the difference between 100% minus the MLR (as defined and
calculated in ExhibitΒ 3 hereof) actually achieved by PLAN during the
ante-penultimate Contract Year of the Term (or, if not then known, the Contract Year
immediately prior to such ante-penultimate Contract Year). The parties agree that,
as soon as practicable, the Administrative Percentage used in calculating the
PROVIDER Monthly Payment with respect to the First Measurement Period shall be
calculated using the MLR actually achieved by PLAN during the ante-penultimate
Contract Year of the Term.
Β Β Β Β Β (ii) With respect to the period commencing on January 1 of the final Contract
Year and ending on the effective day of the expiration or earlier termination of
this Agreement (the βFinal Measurement Periodβ), the Administrative Percentage shall
equal the difference of 100% minus the MLR actually achieved by PLAN during
the ante-penultimate Contract Year (or, if available, the PROVIDER HMO MLR (as
hereinafter defined) achieved by the PROVIDER HMO during the First Measurement
Period). The parties agree that, as soon as practicable, the Administrative
Percentage used in calculating the PROVIDER Monthly Payment with respect to the
Final Measurement Period shall be calculated using the PROVIDER HMO MLR achieved by
the PROVIDER HMO during the First Measurement Period. As used in this Agreement,
the term βPROVIDER HMO MLRβ means, with respect to any Contract Year or portion
thereof, the percentage obtained by dividing (I)Β the medical expenses actually
incurred only by the PROVIDER HMO (and not PLAN) during such Contract Year or
portion thereof with respect to PROVIDER HMO Members, by (II)Β the sum of the CMS
capitation reimbursement rates for all Medicare Advantage members that constituted
PROVIDER HMO Members during such Contract Year or portion thereof. The PROVIDER HMO
MLR shall be calculated in accordance with the βRun Out Periodβ method described in
SectionΒ 3 of ExhibitΒ 3.
Β Β Β Β Β (g) PROVIDER Monthly Payment Adjustment. The PROVIDER Monthly Payments
received by PLAN shall be reconciled as follows:
Β Β Β Β Β (i) Within thirty (30)Β days following the 30th day of June of the
final Contract Year, PLAN and PROVIDER shall jointly calculate a reconciliation of
the PROVIDER Monthly Payments paid to PLAN by the PROVIDER HMO with respect to the
First Measurement Period by recalculating the Administrative Percentage used in
calculating each and all of such PROVIDER Monthly Payments using the PROVIDER HMO
MLR achieved by the PROVIDER HMO during the First Measurement Period.
Β Β Β Β Β (ii) Within thirty (30)Β days following the 30th day of June of the
calendar year immediately following the final Contract Year, the parties shall
jointly calculate a reconciliation of the PROVIDER Monthly Payments paid to PLAN by
the PROVIDER HMO with respect to the Final Measurement Period by recalculating the
Administrative Percentage used in calculating each and all of
such PROVIDER Monthly Payments using the PROVIDER HMO MLR achieved by the
PROVIDER HMO during the Final Measurement Period.
18
Β
Β Β Β Β Β (iii) If the parties are unable to agree on the results of either of the
reconciliations provided for in the immediately preceding sub-sections, then either
party may, by written notice to the other party, require that such reconciliation be
submitted to the Actuary for final determination. Each party shall submit to the
Actuary its final proposed calculation of such reconciliation. The Actuary shall be
instructed to deliver a determination of such reconciliation within thirty (30)Β days
following such submission, which determination shall be final, binding and
non-appealable.
Β Β Β Β Β (iv) To the extent that the results of a reconciliation described above
(whether by agreement of the parties or determination by the Actuary) reflect that
the payments made to PLAN by the PROVIDER HMO of the PROVIDER Monthly Payments with
respect to the applicable measurement period are in excess of the amounts calculated
pursuant to such reconciliation, then PLAN shall, within five (5)Β business days,
reimburse to the PROVIDER HMO the full amount of such overpayment. To the extent
that the results of a reconciliation described above (whether by agreement of the
parties or determination by the Actuary) reflect that the payments to PLAN by the
PROVIDER HMO of the PROVIDER Monthly Payments with respect to the applicable
measurement period are less than the amounts calculated pursuant to such
reconciliation, then the PROVIDER HMO shall, within five (5)Β business days, pay to
PLAN the full amount of such underpayment.
Β Β Β Β Β (h) Remedies. If either party breaches, or threatens to commit a breach of,
any of the covenants set forth in SectionsΒ 7.1(a), (b), (c)Β or (d) (collectively, the
βRestrictive Covenantsβ), the non-breaching Party shall have, in addition to, and not in
lieu of, any other rights and remedies available to it, including the rights and remedies
set forth in SectionΒ 12, the right and remedy to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to the
non-breaching party and that money damages would not provide an adequate remedy. In
addition, in the event that either party breaches, or threatens to commit a breach of, any
of the Restrictive Covenants, the other party shall have the right and remedy to require
such breaching party and its Affiliate (as applicable) to account for and pay over to the
non-breaching party any profits, monies, accruals, increments or other benefits derived or
received by such breaching party or its Affiliates as the result of any transactions
constituting a breach of the Restrictive Covenants from the date such breaching party was
actually aware or was notified that such breaching party was in breach of any of the
Restrictive Covenants.
19
Β
7.2 Sale of PLAN.
Β Β Β Β Β (a) Subject to the next sentence of this SectionΒ 7.2(a) and SectionΒ 7.2(b) below,
without first obtaining PROVIDERβs written consent, such consent to be given,
withheld, conditioned or delayed in the sole and absolute discretion of PROVIDER,
during the Term neither PLAN nor any Affiliate thereof shall in any way consummate, or enter
into any definitive agreement (i)Β with respect to any direct or indirect sale, lease,
transfer or other disposition of (A) (I)Β 50% or more of the capital stock and/or other
equity interests in PLAN or (II)Β such other percentage of the capital stock and/or other
equity interests in PLAN as shall permit the transferee to directly or indirectly appoint a
majority of the board of directors (or other applicable governing body) of PLAN and/or (B)
all or substantially all of the assets of PLAN, including, in each case, by way of
acquisition of the debt, equity or assets of PLAN, or by merger, share exchange,
reorganization or other business combination, or otherwise, to any person or entity that is
not, at such time, an Affiliate of PLAN or (ii)Β pursuant to which PLAN or its Affiliates
grants a third party the right to appoint a majority of the board of directors (or other
applicable governing body) of PLAN (each, a βSale of PLANβ). Notwithstanding the foregoing,
however, for all purposes of this Agreement, a Sale of PLAN shall in no event be deemed to
include any direct or indirect sale, lease, transfer or other disposition (including by way
of acquisition of the debt, equity or assets of HealthSpring (or its
successors, or any direct or indirect parent entities of HealthSpring), or by
merger, share exchange, reorganization or other business combination, or otherwise) of (a)
50% or more of the voting capital stock of HealthSpring (or its
successors, or any direct or indirect parent entities of HealthSpring) or (b)Β eighty
percent (80%) or more of the assets of HealthSpring (or its
successors, or any direct or indirect parent entities of HealthSpring) (each, βSale of
HealthSpringβ). PLAN shall notify PROVIDER as soon as practicable in writing of any actual
or proposed Sale of PLAN. Failure by PROVIDER to consent to a Sale of PLAN, such consent to
be effectuated by PROVIDERβs delivery of a written consent to PLAN within thirty (30)Β days
following PLANβs delivery to PROVIDER of a written request for such consent, shall be deemed
to constitute PROVIDERβs denial of such consent unless otherwise agreed to in writing by the
parties.
Β Β Β Β Β (b) Right of First Refusal. In the event that, in connection with a Sale of
HealthSpring, CMS, DFS, the Agency, DHHS or any other governmental or other regulatory
authority of competent jurisdiction shall require that a Sale of PLAN be effectuated, such
Sale of PLAN (a βRequired Divestitureβ) shall not require PROVIDERβs consent, so long as
PLAN complies with the following provisions:
Β Β Β Β Β (i) if HealthSpring or its applicable Affiliate (the βTransferorβ) receives a
bona fide offer (the βTransfer Offerβ) to effectuate the Required Divestiture, then
PLAN shall deliver a Notice to PROVIDER setting forth and certifying as to the
material terms of the Transfer Offer (together with copies of all applicable
correspondence and other documents relating thereto) (a βRequired Divestiture
Noticeβ), including the purchase price with respect to such Transfer Offer (the
βRequired Divestiture Purchase Priceβ). The Required Divestiture Notice shall
constitute an irrevocable offer to effectuate a Sale of PLAN to PROVIDER or to any
of its Affiliates designated thereby (any or all of them, collectively, the
βPurchaserβ) pursuant to the terms of this SectionΒ 7.2(b). Within thirty (30)Β days
after the giving of a Required Divestiture Notice, the PROVIDER shall give the PLAN
a Notice (a βResponse Noticeβ) setting forth whether the PROVIDER has elected to
exercise its right of first refusal. The PROVIDERβs failure to timely deliver the
Response Notice shall be deemed to constitute the
PROVIDERβs irrevocable election not to exercise its right of first refusal
solely with respect to such Transfer Offer.
20
Β
Β Β Β Β Β (ii) In the event the PROVIDER shall elect to exercise the right of first
refusal, the Response Notice shall constitute an irrevocable offer to effectuate a
Sale of PLAN and the Purchaser and the Transferor shall as promptly as practicable
effectuate a Sale of PLAN to the Purchaser for the Required Divestiture Purchase
Price and upon other terms substantially similar to those of the Transfer Offer.
The Purchaser and the Transferor will execute and deliver to each other all
agreements, documents and instruments and take all actions reasonably necessary to
effectuate such Sale of PLAN for the Required Divestiture Purchase Price and upon
other terms substantially similar to those of the Transfer Offer.
Β Β Β Β Β (iii) If the PROVIDER does not elect (or is deemed not to have elected) to
exercise the right of first refusal, (a)Β the Transferor shall in no event, directly
or indirectly, contract with respect to, or in any way consummate, a Required
Divestiture to a third party other than to the offeror of the Transfer Offer for a
purchase price equal to the Required Divestiture Purchase Price and upon other terms
substantially similar to those of the Transfer Offer, and (b)Β if the Transferor has
not consummated the Required Divestiture to the offeror of the Transfer Offer for a
purchase price equal to the Required Divestiture Purchase Price and upon other terms
substantially similar to those of the Transfer Offer by the expiration of the one
hundred eighty (180)Β day period immediately following the date that is the earlier
of (A)Β the delivery of a Response Notice electing not to exercise the right of first
refusal or (B)Β the expiration of the period for timely delivery of the Response
Notice, then any subsequent proposed Required Divestiture shall again be subject to
the applicable provisions of this SectionΒ 7.2(b).
Β Β Β Β Β 7.3 Sale of PROVIDER. Without first obtaining PLANβs written consent, such consent to
be given, withheld, conditioned or delayed in the sole and absolute discretion of PLAN, during the
Term neither PROVIDER nor any Affiliate thereof shall in any way consummate, or enter into any
definitive agreement (i)Β with respect to any direct or indirect sale, lease, transfer or other
disposition of (A) (I)Β 50% or more of the capital stock and/or other equity interests in PROVIDER
or (II)Β such other percentage of the capital stock and/or other equity interests in PROVIDER as
shall permit the transferee to directly or indirectly appoint a majority of the board of directors
(or other applicable governing body) of PROVIDER and/or (B)Β all or substantially all of the assets
of PROVIDER, including, in each case, by way of acquisition of the debt, equity or assets of
PROVIDER, or by merger, share exchange, reorganization or other business combination, or otherwise,
to any person or entity that is not (I)Β a direct or indirect owner of the capital stock of PROVIDER
as of the Effective Date, (II)Β any spouse, sibling, lineal descendant (including by adoption) or
ancestor of any of the persons identified in the preceding item (I), (III)Β any trust, family
limited partnership or similar entity created by or for the sole benefit of the persons identified
in the preceding items (I)Β or (II), (IV)Β any Affiliate of PROVIDER or any of the persons or
entities identified in the preceding items (I), (II)Β or (III), or (ii)Β pursuant to which PROVIDER
or its Affiliates grants a third party the right to appoint a majority of the board of directors
(or other applicable governing body) of PROVIDER (each, a
21
Β
βSale of PROVIDERβ). PROVIDER shall notify PLAN as soon as practicable in writing of any
actual or proposed Sale of PROVIDER. Failure by PLAN to consent to a bona fide Sale of PROVIDER,
such consent to be effectuated by PLANβs delivery of a written consent to PROVIDER within thirty
(30)Β days following PROVIDERβs delivery to PLAN of a written request for such consent, shall be
deemed to constitute PLANβs denial of such consent unless otherwise agreed to in writing by the
parties. All references in this Section to PROVIDER or any direct or indirect parent thereof shall
include any and all successors thereto.
Β Β Β Β Β (a) Consent by PLAN. In the event that PLAN shall provide its consent with
respect to any Sale of PROVIDER, then PROVIDER shall cause that, concurrently with the
closing of the Sale of PROVIDER, and as an absolute condition thereto (which condition shall
be reflected to the reasonable satisfaction of PLAN in any and all appropriate agreements
and other documents entered into by PROVIDER with respect to such Sale of PROVIDER), a lump
sum payment be made to PLAN by wire transfer of immediately available funds in the aggregate
amount of ten percent (10%) of the cash value of the purchase price and any and all other
consideration, whether immediately payable, deferred, contingent or otherwise, and whether
payable in cash, equity, in kind, discharge of indebtedness or any other manner, with
respect to such Sale of PROVIDER.
Β Β Β Β Β (b) Non-consent by PLAN. In the event that PLAN does not provide its consent
with respect to any proposed Sale of PROVIDER, PLAN (or an Affiliate of PLAN designated by
PLAN) shall have the right, but not the obligation, upon delivery of written notice of
exercise to PROVIDER within thirty (30)Β days of such refusal, to acquire PROVIDER on
substantially the same terms as such denied proposed Sale of PROVIDER, provided, however,
that the purchase price and any and all other consideration, whether immediately payable,
deferred, contingent or otherwise, and whether payable in cash, equity, in kind, discharge
of indebtedness or any other manner, with respect to such proposed Sale of PROVIDER shall be
discounted with respect to PLANβs acquisition by ten percent (10%).
Β Β Β Β Β 7.4 Remedies. If either party breaches, or threatens to commit a breach of, any of
the covenants set forth in SectionsΒ 7.2 or 7.3, as applicable, the non-breaching Party shall have,
in addition to, and not in lieu of, any other rights and remedies available to it, the right and
remedy to have such covenants specifically enforced by any court of competent jurisdiction, it
being agreed that any breach or threatened breach of such covenants would cause irreparable injury
to the non-breaching party and that money damages would not provide an adequate remedy.
Β Β Β Β Β 7.5 Affiliate of PLAN Exclusion. Notwithstanding anything contained herein to the
contrary, the obligations of Affiliates of the PLAN under the provisions of SectionΒ 7.1, shall not
apply to (i)Β any Affiliate of PLAN that becomes an Affiliate of PLAN as a result of (x)Β any Sale of
PLAN (as defined in SectionΒ 7.2) that is consented to by PROVIDER or (y)Β any Sale of HealthSpring
(as defined in SectionΒ 7.2) or (ii)Β any entity or person that owns, directly or indirectly, any
capital stock and/or other equity interest in HealthSpring, or to any Affiliate of any such entity
or person (other than HealthSpring and its direct and indirect subsidiaries).
22
Β
8. Credentialing and Provision of Services.
Β Β Β Β Β 8.1 PROVIDER Physicians and PROVIDER Non-Physician Providers. PROVIDER shall provide
to PLAN the names of all PROVIDER physicians and PROVIDER non-physician providers proposed to
provide Services under this Agreement from time-to-time. PROVIDER hereby represents and warrants
that each such PROVIDER physician and PROVIDER non-physician provider is an employee of, or is
otherwise engaged by, PROVIDER. PROVIDER shall enter into a written agreement with respect to each
such physician and non-physician provider whom it employs or otherwise engages, which agreement
shall include, without limitation, a provision which shall provide: (i)Β that, in rendering Services
to PROVIDER Medicare Members, each such physician or non-physician provider, as applicable, shall
comply with all the policies and procedures of PLAN (including, without limitation, Utilization
Review and Quality Improvement Programs), as such policies and procedures may be amended by PLAN
from time-to-time; (ii)Β that (a)Β such provider shall not take any action to cause or attempt to
cause any PROVIDER Medicare Member to terminate his/her relationship with PLAN or PROVIDER or to
convert any PROVIDER Medicare Member from PLAN to any other managed care or insurance company other
than PROVIDER HMO in accordance with SectionΒ 7.1. above; and (b)Β PLAN shall be an intended third
party beneficiary of such non-solicitation clause; (iii)Β such terms as may be required by state or
federal law or regulation for agreements with physicians or non-physicians, as applicable, who
render health care goods and services to the public (including, without limitation, individuals
entitled to benefits under Medicare); and (iv)Β notification requirements similar in scope to those
binding upon PROVIDER pursuant to SectionΒ 8.8 of this Agreement. PROVIDER shall provide PLAN with
a copy(ies) of its standard Physician Agreement(s) upon request by PLAN, and shall notify PLAN of
any material changes made thereto.
Β Β Β Β Β 8.2 Credentialing. PROVIDER, the PROVIDER physicians, the PROVIDER Medical Centers,
the Affiliated Providers and PROVIDER non-physician providers shall be required to comply with PLAN
credentialing standards and successfully complete PLANβs credentials application and process, as
applicable. PROVIDER, the PROVIDER physicians, the PROVIDER Medical Centers, the Affiliated
Providers and PROVIDER non-physician providers shall further cooperate with PLAN as necessary to
conduct credentialing according to PLANβs recredentialing process. PROVIDER shall have the right
to utilize PLAN participating physicians and non-physician providers of its choosing to provide any
and all Services; provided, that, PLAN retains the right to terminate the participation under this
Agreement of any PROVIDER physician or PROVIDER non-physician provider if such provider does not
comply with PLANβs credentialing criteria and such noncompliance has not been cured by PROVIDER
within the greater of (i)Β any cure period which may be set forth in any applicable National
Committee on Quality Assurance (βNCQAβ) accreditation standard or state or federal laws and
regulations or which may be granted by the applicable state or federal agency; or (ii)Β the cure
period set forth in SectionΒ 10.2 of this Agreement subsequent to PROVIDERβs receipt of written
notice of noncompliance from PLAN (the βCompliance Noticeβ). PLAN may also terminate participation
under this Agreement of any PROVIDER Medical Center or Affiliated Provider upon sending a
Compliance Notice to PROVIDER in the event PLAN determines in good faith that the continued
participation of such PROVIDER Medical Center or Affiliated Provider would jeopardize the health,
welfare or safety of PROVIDER Medicare Members or PLANβs NCQA accreditation would be jeopardized by
such PROVIDER Medical Centerβs or Affiliated Providerβs continued participation, subject, in the
case of termination relating to NCQA accreditation, to PROVIDERβs opportunity to within the greater
of (i)Β any cure period which
23
Β
may be set forth in any applicable NCQA accreditation standard or state or federal laws and
regulations or which may be granted by the applicable state or federal agency; or (ii)Β the cure
period set forth in SectionΒ 10.2 of this Agreement subsequent to PROVIDERβs receipt of such
Compliance Notice. In the case of such termination due to PLANβs good faith determination that
continued participation of the PROVIDER Medical Center or Affiliated Provider would jeopardize the
health, welfare or safety of PROVIDER Medicare Members, PROVIDER shall, absent an emergency, have
thirty (30)Β days after receipt of the Compliance Notice to cure the deficiency(ies) and an
additional thirty (30)Β days so long as PROVIDER has commenced and is diligently pursuing efforts to
cure such deficiency(ies) within the first thirty (30)Β days. The Compliance Notice shall specify
the deficiencies noted by PLAN with regard to such PROVIDER Medical Center(s) or Affiliated
Provider(s) and/or any PROVIDER physician or non-physician provider. If the Compliance Notice
affects a PROVIDER physician or PROVIDER non-physician provider, such physician or provider shall
also receive from PLAN a copy of the Compliance Notice. Without limiting any remedy available to
it hereunder, PLAN reserves the right to suspend any PROVIDER physician or PROVIDER non-physician
provider for which PROVIDER, the PROVIDER physician or non-physician provider has received a
Compliance Notice until the non-compliance has been cured or the cure period has expired
(βSuspension Periodβ) in the event such non-compliance, in PLANβs good faith judgment, represents a
threat to any PROVIDER Medicare Memberβs health, safety or welfare. Neither a PROVIDER physician
nor a PROVIDER non-physician provider that has been so suspended by PLAN shall provide health care
goods and services to PROVIDER Medicare Members during any Suspension Period through any PROVIDER
Medical Center or Affiliated Provider. PLAN reserves the right to audit PROVIDERβs credentialing
files, upon reasonable prior notice by PLAN, during regular business hours and at PLANβs sole cost
and expense, and PROVIDER shall, to the extent necessary and appropriate, make such files available
to the Florida Department of Financial Services (βDFSβ), the Florida Agency for Health Care
Administration (the βAgencyβ), CMS, United States Department of Health and Human Services (βDHHSβ),
and any other regulatory authority with jurisdiction over PLAN, PROVIDER, the PROVIDER physicians
or non-physician providers.
Β Β Β Β Β 8.3 Member Grievances. PROVIDER, the PROVIDER physicians and PROVIDER non-physician
providers shall comply with the terms of PLANβs Medicare grievance and appeals procedures,
including expedited appeals, whereby PROVIDER Medicare Membersβ complaints relating to PROVIDER
physicians and PROVIDER may be filed and addressed, including the gathering and forwarding of
information on appeal to PLAN, if necessary; provided, however, that any such procedure shall
permit PROVIDER to take reasonable steps necessary to address a grievance or appeal (including,
without limitation, initiating disciplinary actions) with PROVIDER physicians or PROVIDER
non-physician providers prior to PLAN taking corrective action to the extent Florida law and NCQA
standards (if applicable) permit such a delegation of authority by a health maintenance
organization. PROVIDER shall provide written notice to PLAN of all grievances and appeals received
by PROVIDER from PROVIDER Medicare Members within three (3)Β business days of such receipt,
including those grievances and appeals relating to PROVIDER physicians, PROVIDER non-physician
providers or the care rendered thereby.
24
Β
Β Β Β Β Β 8.4 Use of PROVIDER Roster. PROVIDER consents to PLANβs publication of each PROVIDER
physicianβs and PROVIDER non-physician providerβs name, office address,
and area of practice in PLANβs roster of participating providers and in its advertising,
marketing, and promotional materials used to solicit prospective PROVIDER Medicare Members;
provided, however, that PLANβs use of such information and any and all such advertising, marketing
and promotional materials shall be conducted, prepared and used, as applicable, in accordance with
all applicable state and federal laws, rules and regulations. PROVIDER shall notify PLAN within
three (3)Β business days of any change to PROVIDERβs roster of physicians or non-physician
providers, including the office addresses of such physicians and non-physician providers.
Β Β Β Β Β 8.5 Encounter Data. PROVIDER shall provide PLAN, on a monthly basis, with patient
encounter reports setting forth the Services furnished to PROVIDER Medicare Members. All encounter
data shall be coded to the highest level of specificity in accordance with CMS requirements.
PROVIDER shall certify the completeness and truthfulness of such data. PROVIDER shall provide PLAN
with any other information and/or reports pertaining to such Services that PLAN may from
time-to-time reasonably request. PROVIDER shall further maintain all medical records, patient
files, or other documentation as may be reasonably required by PLAN with respect to PROVIDER
Medicare Members. PROVIDER shall provide PLAN and its agents, NCQA, and any state or federal
agency with jurisdiction over PLAN, to the extent permitted by applicable law and to the extent
necessary or appropriate, with access to and copies of all such records promptly upon PLANβs
reasonable request during the Term and for a period of ten years subsequent to its expiration or
termination.
Β Β Β Β Β 8.6 Independent Medical Judgment. Nothing in this Agreement, including, without
limitation, the participation by PROVIDER, the PROVIDER physicians and PROVIDER non-physician
providers in the Utilization Management Review and Quality Improvement Programs and other PLAN
polices and programs is deemed to, or shall be construed to, interfere with or in any way affect
the obligation of any PROVIDER physician and PROVIDER non-physician provider to exercise
independent medical judgment in rendering all health care services to PROVIDER Medicare Members.
PLAN does not direct, nor does it control the rendition of PROVIDER physiciansβ or PROVIDER
non-physiciansβ medical services or their exercise of independent medical judgment.
Β Β Β Β Β 8.7 Participation. PROVIDER shall appoint a medical director as an advisor to PLAN
and a point of contact for PLAN in the event of a dispute between a PROVIDER physician and PLAN
over whether a Service other than a PROVIDER Covered Service should be authorized. In the event of
any such dispute or decision as to whether to authorize the provision of Services to PROVIDER
Medicare Members, PLAN shall consult with the medical director appointed by PROVIDER.
Β Β Β Β Β 8.8 Required Notifications. PROVIDER shall notify PLAN within three (3)Β business days
of Provider obtaining knowledge of any inquiries, investigations, lawsuits, pre-suit notices,
complaints, or disciplinary actions which PROVIDER knows have been initiated or taken by any person
or entity, or any state or federal regulatory agency based upon any action or inaction of (i)
PROVIDER or any of its officers, directors, owners, managers or employees or (ii)Β any health care
providers with which PROVIDER directly or indirectly contracts. PLAN shall promptly notify
PROVIDER of any inquiries, investigations, lawsuits, or disciplinary actions which PLAN knows have
been initiated or taken by any person or entity, or any state or federal
regulatory agency based upon any action or inaction of PLAN or any of its officers, directors,
owners, managers which could reasonably be expected to have an adverse effect upon PROVIDER.
25
Β
Β Β Β Β Β 8.9 Adequacy and Accessibility of Provider Panel. PROVIDER shall ensure that it
employs or otherwise engages a sufficient number of PROVIDER physicians and PROVIDER non-physician
providers to provide the PROVIDER Covered Services to the PROVIDER Medicare Members consistent with
PROVIDERβs practices as of the Effective Date. PROVIDER shall ensure that the PROVIDER physicians
shall comply with the following standards for provider accessibility: emergency cases must be seen
immediately, during normal business hours; urgent cases must be seen within twenty-dour (24)Β hours
of notification; routine symptomatic cases must be seen within five working days of notification;
and routine non-symptomatic cases should be seen within thirty (30)Β days of notification. PROVIDER
shall assure that a PROVIDER physician is on-call at all times for each PROVIDER Medical Center and
each Affiliated Provider during all times when the office is closed.
Β Β Β Β Β 8.10 Notice of Policies and Procedures. PLAN shall provide PROVIDER with copies of
its programs, policies and procedures applicable to PROVIDER (including, without limitation, any
and all amendments, supplements, updates and other modifications thereto). PLAN shall provide
PROVIDER with notice of material changes to its programs, policies and procedures in advance of the
applicability of such changes to PROVIDER.
Β Β Β Β Β 8.11 Remediation Actions.
Β Β Β Β Β (a) In the event that the DFS, CMS or any other applicable regulatory or government
body notifies PLAN of any material breach, non-compliance, default, deficiency or other
event requiring remediation by PLAN with respect to its operation of a health maintenance
organization in any of the Approved PLAN Operating Areas, PLAN shall promptly provide to
PROVIDER copies of any and all notices, correspondences and other documentation from or to
the applicable regulatory or government body concerning the subject matter thereof, as well
as a reasonably detailed action plan to be implemented by PLAN in order to fully remedy such
breach, non-compliance, default, deficiency or event. PLAN agrees to promptly implement
such action plan and to otherwise take any and all reasonable actions and steps necessary,
desirable and/or appropriate to remedy such breach, non-compliance, default, deficiency or
event.
Β Β Β Β Β (b) In the event that the DFS, CMS or any other applicable regulatory or government
body notifies PROVIDER of any material breach, non-compliance, default, deficiency or other
event requiring remediation by PROVIDER with respect to its operation of the PROVIDER
Medical Centers, PROVIDER shall promptly provide to PLAN copies of any and all notices,
correspondences and other documentation from or to the applicable regulatory or government
body concerning the subject matter thereof, as well as a reasonably detailed action plan to
be implemented by PROVIDER in order to fully remedy such breach, non-compliance, default,
deficiency or event. PROVIDER agrees to promptly implement such action plan and to
otherwise take any and all
reasonable actions and steps necessary, desirable and/or appropriate to remedy such breach,
non-compliance, default, deficiency or event.
26
Β
9. Insurance.
Β Β Β Β Β 9.1 Liability Insurance. PROVIDER shall purchase and maintain, during the Term, a
claims made policy of professional liability insurance (βClaims Made Insuranceβ) covering PROVIDER
and each PROVIDER physician and PROVIDER non-physician provider employed or otherwise engaged by
PROVIDER, naming PLAN as an additional insured, in an amount which is commercially reasonable for
providers of medical services of the type provided by PROVIDER, and in any event not less than that
required by Florida law. PROVIDER shall cause its insurer or insurers to issue to PLAN a
certificate reflecting such coverage and shall make commercially reasonable efforts to require such
insurer or insurers to provide prior written notice to PLAN of any modification of such coverage or
the cancellation or proposed cancellation thereof for any cause.
Β Β Β Β Β 9.2 Other Insurance. PROVIDER shall purchase and maintain, during the Term, workersβ
compensation insurance and general liability insurance at such levels as may be reasonably required
to insure against foreseeable incidents and claims which may arise as a result of the Services
performed hereunder. Further, PROVIDER shall provide PLAN with written notice within ten (10)
business days of PROVIDER receiving notice or otherwise becoming aware of any adverse changes or
proposed adverse changes in the amount of coverage, value of the assets set aside for such
coverage, policy terms, claims made under the policy, or cancellation of such coverage. This
provision shall survive the termination or expiration of this Agreement regardless of the cause
giving rise thereto.
10. Term and Termination.
Β Β Β Β Β 10.1 Term. The initial term of this Agreement (the βInitial Termβ) shall commence on
the Effective Date and continue without interruption (unless earlier terminated as provided in
SectionΒ 10.2) until DecemberΒ 31, 2017. Thereafter, (A)Β in the event that PLAN shall have given
PROVIDER written notice of non-renewal at least eighteen months (18)Β prior to the expiration of the
Initial Term, this Agreement shall automatically renew for one additional one (1)Β year term (unless
earlier terminated as provided in SectionΒ 10.2) commencing immediately upon the expiration of the
Initial Term, on the same terms, conditions and provisions as contained herein, together with any
authorized and approved amendments hereto, or (B)Β in the event that PLAN shall not have given
PROVIDER written notice of non-renewal at least eighteen months (18)Β prior to the expiration of the
Initial Term, this Agreement shall automatically renew for one additional five (5)Β year term
(unless earlier terminated as provided in SectionΒ 10.2) commencing immediately upon the expiration
of the Initial Term, on the same terms, conditions and provisions as contained herein, together
with any authorized and approved amendments hereto, (each of the renewal terms described in the
preceding clauses (A)Β or (B), a βRenewal Termβ) (the Initial Term, together with the applicable
Renewal Term, are collectively referred to herein as the βTermβ).
27
Β
Β Β Β Β Β 10.2 Termination. Notwithstanding anything contained herein to the contrary, the
parties acknowledge and agree that (i)Β this Agreement may only be terminated by the mutual
written agreement of the parties or upon a Termination Event (as hereinafter defined) and (ii)
in the event of any breach by either PLAN or PROVIDER of any of their respective obligations under
this Agreement, whether monetary or non-monetary, then, unless such breach constitutes a
Termination Event, the non-breaching party shall not have the right to terminate this Agreement,
but shall be entitled to xxx for damages or injunctive relief. This Agreement may be terminated
unilaterally by PROVIDER as provided in SectionsΒ 10.2(a) or unilaterally by PLAN as provided in
SectionΒ 10.2(b) (each partyβs respective βTermination Eventsβ).
Β Β Β Β Β (a) Termination Events of PROVIDER. The following constitute the only
Termination Events for the benefit of PROVIDER:
Β Β Β Β Β (i) Covered Services Payments. The failure of PLAN to make the Covered
Services Payments as provided in SectionΒ 4.1 or SectionΒ 4.2, in each case, if such
breach remains uncured after ten (10)Β business days following PLANβs receipt of
Notice from PROVIDER of such breach and its intention to terminate with respect
thereto.
Β Β Β Β Β (ii) Loss of PLAN Licensure or Medicare Contract. PLANβs license or
other authorization to operate a health maintenance organization in the Approved
PLAN Operating Areas is revoked, suspended, modified or not renewed and/or PLANβs
Medicare contract with respect to the Approved PLAN Operating Areas is terminated,
not renewed or modified and, in each case, such revocation, suspension,
modification, non-renewal or termination (x)Β results in PLAN being unable to serve
greater than 50% of the Adjusted Members at the time of such revocation, suspension,
modification, non-renewal or termination and (y)Β such breach remains uncured after
sixty (60)Β calendar days following PLANβs receipt of Notice from PROVIDER of such
breach and its intention to terminate with respect thereto, or if such breach cannot
reasonably be cured within such sixty (60)Β calendar day period and PLAN has
commenced and is diligently pursuing efforts to cure such breach, the expiration of
an additional sixty (60)Β calendar day period (i.e., 120Β days total).
Β Β Β Β Β (b) Termination Events of PLAN. The following constitute the only Termination
Events for the benefit of PLAN:
Β Β Β Β Β (i) Voluntary Closure of PROVIDER Medical Centers. Subject to Section
12.3, any breach by PROVIDER of the last sentence of SectionΒ 6 (other than a breach
described in SectionΒ 10.2(b)(ii)), unless such breach is cured within sixty (60)
calendar days following receipt of Notice from PLAN of such breach and its intention
to terminate with respect thereto, or if such breach cannot reasonably be cured
within such sixty (60)Β calendar day period and PROVIDER has commenced and is
diligently pursuing efforts to cure such breach, the expiration of an additional
sixty (60)Β calendar day period (i.e., 120Β days total).
Β Β Β Β Β (ii) Involuntary Closure of PROVIDER Medical Centers. Subject to
SectionΒ 12.3, any breach by PROVIDER of the last sentence of SectionΒ 6 where the
termination of operation of the PROVIDER Medical Center(s) giving rise to
28
Β
such breach is required by applicable legal, regulatory, statutory,
administrative or similar authority (including any revocation or non-renewal of the
applicable license(s) to operate such PROVIDER Medical Center(s)) and (x)Β results in
PROVIDER being unable to deliver the PROVIDER Covered Services to greater than 50%
of the Adjusted Members at the time of such termination and (y)Β such breach remains
uncured after sixty (60)Β calendar days following PROVIDERβs receipt of Notice from
PLAN of such breach and its intention to terminate with respect thereto, or if such
breach cannot reasonably be cured within such sixty (60)Β calendar day period and
PROVIDER has commenced and is diligently pursuing efforts to cure such breach, the
expiration of an additional sixty (60)Β calendar day period (i.e., 120Β days total).
Β Β Β Β Β 10.3 HMO Events. Notwithstanding anything set forth in the Stock Purchase Agreement
to the contrary, in the event PROVIDER terminates this Agreement under SectionΒ 10.2(a) (each, an
βHMO Eventβ), PROVIDER may cause, directly or indirectly, the PROVIDER HMO to, directly or
indirectly, market, solicit and enroll (upon becoming eligible), and provide the product and
services offering of such PROVIDER HMO to, any and all actual or prospective Medicare participants,
including, but not limited to, any and all PLAN Medicare Advantage members (including, without
limitation, PROVIDER Medicare Members), regardless of whether they reside in or outside of the
Restricted Areas. Notwithstanding anything in this Agreement to the contrary, upon the occurrence
of an HMO Event, no such marketing, solicitation, enrollment, provision or other activities by or
on behalf of the PROVIDER HMO shall be subject to the provisions of 7.1(e), (f)Β or (g) (including,
but not limited to, the obligation to pay the PROVIDER Monthly Payments to PLAN with respect to
periods following the HMO Event) or otherwise require any make whole or other compensation of PLAN
by PROVIDER or PROVIDER HMO with respect to periods following the HMO Event.
Β Β Β Β Β 10.4 Additional Effects of Termination. Except as expressly provided herein,
termination pursuant to a Termination Event shall not preclude the non-breaching party from
pursuing any and all remedies available to it hereunder in law or at equity as a consequence of
such breach or any other breach. Unless otherwise required by law, upon termination of this
Agreement, each party shall promptly pay to the other any amounts payable hereunder that accrued
prior to termination of this Agreement. In addition, upon any expiration or earlier termination of
this Agreement, any and all rights and obligations of the parties under this Agreement shall
immediately terminate and be of no further force or effect, except that the rights and obligations
of the parties under the following provisions shall survive any expiration or termination of this
Agreement in accordance with their respective terms: SectionsΒ 4.7 (including ExhibitΒ 3), the second
sentence of SectionΒ 7.1(h), 10.2, 10.3, 10.4, 10.6, 11.9, 11.15, 12, 13.8, 13.9, 13.12, 13.13,
13.14 and 13.15.
Β Β Β Β Β 10.5 Referral to Participating Providers. PROVIDER physicians and PROVIDER
non-physician providers shall use their best efforts to refer PROVIDER Medicare Members only to
PLAN participating hospitals or other PLAN participating providers in accordance with the policies
and procedures of PLAN or, with respect to PROVIDER HMO Members, to PROVIDER HMO participating
hospitals or other PROVIDER HMO participating providers, unless PROVIDER shall have received the
prior written approval of PLAN. PLAN may from time to time amend the list of PLAN participating
hospitals and providers; provided, however,
29
Β
that PLAN shall use its commercially reasonable efforts to maintain participating hospital
agreements with Mercy Hospital, Hialeah Hospital, Xxxxxxx Regional Hospital, and Palmetto Hospital,
or any successors of any such hospital (the βPreferred Hospitalsβ), for so long as PLAN is able to
obtain commercially reasonable terms and rates with the Preferred Hospitals. It is the intention
of PROVIDER that PROVIDER HMO will enter into participating provider agreements with the Preferred
Hospitals for elective services. Even if PLAN is unable to continue to be able to contract with
the Preferred Hospitals on commercially reasonable terms and rates for all PLAN members, PLAN shall
use good faith efforts to enter into participating provider agreements with the Preferred Hospitals
for the purpose of allowing PROVIDER Medicare Members to access them as participating providers.
In the event that a Preferred Hospital nonetheless refuses to enter into a participating provider
agreement with PLAN, or terminates such an agreement with PLAN, as a result of which PROVIDER
Medicare Members are denied access to such Preferred Hospital as a participating provider, then
PROVIDER shall have the right to participate with PLAN in its negotiations with such Preferred
Hospital to attempt to reach a mutually acceptable agreement. Subject to the foregoing, PROVIDER
shall reimburse PLAN for any costs incurred by PLAN for medical services, other than emergency,
urgent care or any other medical services that do not ordinarily require PLAN authorization,
rendered to PROVIDER Medicare Members by a non-participating hospital or provider to whom the
PROVIDER physician or PROVIDER non-physician provider referred by written referral authorization a
PROVIDER Medicare Member without PLANβs prior authorization.
Β Β Β Β Β 10.6 Coordination of Benefits; Subrogation. With respect to the Services provided to
PROVIDER Medicare Members that are subject to this Agreement, notwithstanding the payment
provisions above, PLAN retains any and all rights whatsoever for third party liability subrogation
cases, rights of reimbursement from workersβ compensation and any and all rights in connection with
the coordination of benefits with another health maintenance organization or other third party
payor. PROVIDER HMO retains such rights with respect to PROVIDER HMO Members. PROVIDER shall
inform PLAN, at the time PROVIDER obtains such information (before, during, or after Services are
rendered), of the existence of any of the above referenced conditions as it relates to the Services
that PROVIDER is providing to PROVIDER Medicare Members. In addition, with respect to the PROVIDER
Covered Services provided to PROVIDER Medicare Members hereunder, PROVIDER shall inform PLAN upon
receipt of any payment (other than any patient co-payments) received from any parties other than
PLAN or PROVIDER HMO for Services provided to PROVIDER Medicare Members or to PROVIDER HMO Members,
respectively, refunding all such monies to PLAN and shall not interfere with the attempts by PLAN
to recover monies for which another party may be liable under one of the above outlined conditions;
provided, however, that the immediately preceding clause shall not apply to payments for Services
provided to the PROVIDER HMO Members during the period following the occurrence of an HMO Event.
Β Β Β Β Β 10.7 Collection of Information. PROVIDER shall collect from PROVIDER Medicare Members
information regarding the existence of any of the conditions referred to in SectionΒ 10.6 above as
it relates to the Services that PROVIDER is providing to PROVIDER Medicare Members, and shall
timely forward such information to PLAN.
30
Β
11. Additional Medicare Advantage Requirements. In addition to certain provisions of this
Agreement set forth above required for Medicare Advantage plans, additional Medicare Advantage
requirements are set forth below:
Β Β Β Β Β 11.1 Compliance with Medicare Advantage Administrative Policies and Procedures. This
SectionΒ 11 shall supersede any term or condition of this Agreement with which it conflicts.
PROVIDER shall cooperate and shall cause PROVIDER physicians and PROVIDER non-physician providers
to cooperate in any external review conducted by applicable federal or state agencies, or
independent quality review and improvement organizations, in connection with the PLAN Medicare
Advantage Plan. PROVIDER shall pay the costs, if any, in connection with any such review.
Β Β Β Β Β 11.2 Access to Services. PROVIDER Medicare Members may directly access (through
self-referral and without a referral from primary care physicians and other physicians) mammography
screening and influenza vaccines. Cost sharing may not be imposed upon influenza and pneumococcal
vaccines. Additionally, PROVIDER Medicare Members may choose direct access to a health care
specialist who is a PROVIDER physician for womenβs routine and preventative health care services as
provided in the PLAN Medicare Advantage Plan.
Β Β Β Β Β 11.3 Timeliness of Initial Assessment. PROVIDER shall comply with PLAN policies and
procedures relating to effective and continuing patient care and quality review, specifically
including, but not limited to, an initial assessment of each PROVIDER Medicare Memberβs health care
needs within 90Β days of the effective date of enrollment (subject to patient cooperation).
Β Β Β Β Β 11.4 Treatment Plan for Certain Medical Conditions. PROVIDER shall comply with PLANβs
policies and procedures with regard to the identification of PROVIDER Medicare Members with complex
or serious medical conditions; assessment of those medical conditions, including the use of medical
procedures to diagnose and monitor such PROVIDER Medicare Members on an on-going basis; and
establishment and implementation of a treatment plan appropriate to those conditions, with an
adequate number of direct access visits to specialists to accommodate the treatment plan.
Β Β Β Β Β 11.5 Subcontracting. PROVIDER shall not subcontract for the performance of Services
under this Agreement without the prior written consent of PLAN, which shall not be unreasonably
withheld, conditioned or delayed. Notwithstanding the foregoing, PROVIDER may subcontract the
performance of the primary care services identified in ExhibitΒ 1 as part of the PROVIDER Core
Services to one or more medical centers, individual physicians or physician groups (each, an
βAffiliated Providerβ). A subcontract with an Affiliated Provider shall be consistent with the
terms and conditions of this Agreement and include an express agreement by the Affiliated Provider
(i)Β to perform the obligations of PROVIDER under this Agreement, (ii)Β that following payment by
PLAN to PROVIDER in accordance with the terms and conditions of this Agreement, PROVIDER is solely
responsible, and PLAN has no responsibility or liability for, any amounts owed to an Affiliated
Provider for Services provided to PROVIDER Medicare Members by such Affiliated Provider; and (iii)
that following payment by PLAN to PROVIDER in accordance with the terms and conditions of this
Agreement, PLAN has no responsibility or liability as a result of nonpayment or other breach by
PROVIDER under
31
Β
its subcontract with the Affiliated Provider. PROVIDER agrees to oversee the Affiliated
Providerβs performance of its obligations under such subcontract and to be accountable to PLAN and
the PROVIDER Medicare Members for the negligent performance or nonperformance of any obligation
under such subcontract related to the provision of Services to PROVIDER Medicare Members. Each
Affiliated Provider must meet PLANβs credentialing requirements as provided in SectionΒ 8 as a
condition precedent to Affiliated Providerβs status as an Affiliated Provider under this Agreement.
PROVIDER shall furnish PLAN with copies of the first page and signature page of such subcontracts
within ten (10)Β days of execution of this Agreement and ten (10)Β days of execution of any
subsequent subcontracts by PROVIDER. Each such subcontractor shall meet PLANβs credentialing
requirements as provided in SectionΒ 8, prior to the subcontract becoming effective.
Β Β Β Β Β 11.6 Compliance With Other Federal Laws. Each party hereby represents and warrants
that it is currently in compliance, and covenants that it remain in compliance, in each case, in
all material respects, at all times during the Term, with any and all laws and regulations
applicable to the subject matter of this Agreement, including, without limitation, all applicable
laws and regulations related to Medicare Advantage and/or otherwise applicable to recipients of
federal funds and applicable laws and regulations relating to the ownership and/or operation of
medical clinics. Without limiting the generality of the foregoing, PROVIDER shall comply with the
following federal laws and regulations: Title VI of the Civil Rights Act of 1964, the Age
Discrimination Act of 1975, the American with Disabilities Act, and the Rehabilitation Act of 1973,
and PLAN shall comply with the terms of its authorizations and permits from DFS and the Agency and
the terms and conditions of PLANβs contract with CMS with respect to the Approved PLAN Operating
Areas. Upon request, PLAN shall provide to PROVIDER a true, correct and complete copy of its
contract with CMS. It is assumed for purposes of this Agreement that PROVIDER and PLAN receive
federal funds.
Β Β Β Β Β 11.7 Member Advice. PLAN agrees that it will not prohibit or otherwise restrict any
PROVIDER physician or PROVIDER non-physician provider acting within such PROVIDER physician or
PROVIDER non-physician providerβs lawful scope of practice, from advising, or advocating on behalf
of a PROVIDER Medicare Member about:
Β Β Β Β Β (a) The PROVIDER Medicare Memberβs health status, medical care, or treatment options,
including the provision of sufficient information to the individual to provide an
opportunity to decide among all relevant treatment options;
Β Β Β Β Β (b) The risk, benefits, and consequences of treatment and no treatment; or
Β Β Β Β Β (c) The opportunity for the individual to refuse treatment and to express preferences
about future treatment decisions.
Β Β Β Β Β 11.8 Hold Harmless. PROVIDER agrees that in no event, including but not limited to
nonpayment by PLAN, the insolvency of PLAN or breach of this Agreement, shall PROVIDER or a
PROVIDER physician or PROVIDER non-physician provider xxxx, charge, collect a deposit from, seek
compensation, remuneration or reimbursement from, or have any recourse against a PROVIDER Medicare
Member or a person other than PLAN acting on behalf of such PROVIDER Medicare Member for Services
provided pursuant to this Agreement. This
32
Β
Agreement does not prohibit PROVIDER from collecting co-payments, as specifically provided in
the PLAN Medicare Advantage Plan, nor does this Agreement prohibit PROVIDER and any PROVIDER
Medicare Member from entering into an agreement for the provision of non-PROVIDER Covered Services
and payment for such services as long as PROVIDER has clearly informed the PROVIDER Medicare Member
in writing in advance of providing non-PROVIDER Covered Services that PLAN will not cover or
continue to cover a specific service or services. Under no circumstance will PLAN be liable for
non-payment to PROVIDER for a non-PROVIDER Covered Service rendered to a PROVIDER Medicare Member.
PROVIDER further agrees that:
Β Β Β Β Β (a) this provision shall survive the termination of this Agreement regardless of the
cause giving rise to termination and shall be construed to be for the benefit of PROVIDER
Medicare Members; and
Β Β Β Β Β (b) this provision supersedes any oral or written contrary agreement now existing or
hereafter entered into between PROVIDER and PROVIDER Medicare Members or persons acting on
their behalf.
Β Β Β Β Β Any modification, addition, or deletion of or to the provision of this SectionΒ 11.8 shall be
effective on a date no earlier than fifteen (15)Β days after the DFS has received written notice of
and has approved such change.
Β Β Β Β Β 11.9 Confidentiality and Accuracy of Medicare Advantage Member Records. For any
medical records or other health and enrollment information maintained by PROVIDER and its
subcontractors with respect to PROVIDER Medicare Members, PROVIDER shall:
Β Β Β Β Β Β Β Β Β Β (a)Β Safeguard the privacy of any information that identifies a particular PROVIDER Medicare
Member. Information from, or copies of, records may be released only to authorized individuals,
and unauthorized individuals must not gain access to or alter such records. Original medical
records must be released only in accordance with federal or state laws, court orders, or subpoenas;
Β Β Β Β Β Β Β Β Β Β (b)Β Maintain all such records and information in an accurate and timely manner;
Β Β Β Β Β Β Β Β Β Β (c)Β Allow timely access by PROVIDER Medicare Members to the records and information that
pertain to them; and
Β Β Β Β Β Β Β Β Β Β (d)Β Abide by all federal and state laws regarding confidentiality and disclosure for mental
health records, medical records, other health information, and Member information.
Β Β Β Β Β 11.10 Access to Records. PROVIDER agrees and shall cause each PROVIDER physician and
PROVIDER non-physician provider to agree that:
Β Β Β Β Β Β Β Β Β Β (a)Β The Secretary of the DHHS, the Comptroller General, or their designees, have the right to
inspect, evaluate, and audit any pertinent contracts, books, documents, papers and records of
PROVIDER and PROVIDER physicians and PROVIDER non-physician
providers involving transactions relating to the Medicare Advantage contract between CMS and
PLAN; and
33
Β
Β Β Β Β Β Β Β Β Β Β (b)Β DHHSβs or the Comptroller Generalβs right to inspect, evaluate, and audit any pertinent
information for any particular contract period will exist through ten years from the final date of
the applicable CMS/PLAN contract period or from the date of completion of any audit, whichever is
later.
Β Β Β Β Β 11.11 Federal Funds. Because PLAN is receiving federal payments under its contract
with CMS, PLAN is subject to certain laws that are applicable to individuals and entities receiving
federal funds. PLAN is under a duty to inform such payees, and PLAN hereby informs PROVIDER, that
payments received from the PLAN Medicare Advantage Plan are, in whole or in part, federal funds.
Β Β Β Β Β 11.12 Non-Discrimination. In carrying out obligations under these Medicare Advantage
provisions, PROVIDER shall not discriminate against any PROVIDER Medicare Member on the basis of
race, color, religion, sex, national origin, age, health status, participation in any government
program (including Medicare), source of payment, membership in a health maintenance organization,
marital status or physical or mental handicap, nor shall PROVIDER knowingly contract with a person
or entity which discriminates against any PROVIDER Medicare Member on any such basis.
Β Β Β Β Β 11.13 Advance Directives. In compliance with the Patient Self-Determination Act, as
amended and to the extent applicable, and other applicable laws, PROVIDER shall document the
existence of an advance directive in a prominent place in all applicable PROVIDER Medicare Memberβs
patient records.
Β Β Β Β Β 11.14 Professional Standards. PROVIDER shall provide PROVIDER Covered Services to
PROVIDER Medicare Members in a manner consistent with professionally recognized standards of health
care.
Β Β Β Β Β 11.15 Continuation of Benefits. Upon termination of this Agreement, PROVIDER and each
PROVIDER physician and PROVIDER non-physician provider shall continue to provide those PROVIDER
Covered Services then being provided under this Agreement by PROVIDER to PROVIDER Medicare Members
until the period ends for which CMS has paid a premium to PLAN for such Member under the Medicare
Advantage contract; and if a PROVIDER Medicare Member is hospitalized on the date PLANβs Medicare
Advantage contract with CMS terminates, or PLAN is insolvent during the period of such
hospitalization, and a PROVIDER physician is caring for such Member during the period of
hospitalization, the PROVIDER physician shall continue to provide such PROVIDER Covered Services as
the physician is required to provide under this Agreement, if any, until the PROVIDER Medicare
Memberβs discharge.
Β Β Β Β Β 11.16 Excluded Persons. PROVIDER agrees that it shall not employ any management staff
or hire any agents who have been convicted of criminal offenses related to their involvement in
Medicaid, Medicare, or any other social service plan under Title XX of the Social Security Act.
34
Β
Β Β Β Β Β 11.17 Development of Programs. PLAN shall provide PROVIDER with an opportunity to
review and comment upon the Utilization Review and Quality Improvement Programs and other medical
policies and procedures implemented by PLAN. PROVIDER shall, and shall cause the PROVIDER
Physicians, PROVIDER non-physician providers and the Affiliated Providers, to comply with such
Utilization Review and Quality Improvement Programs and other medical policies and procedures
implemented by PLAN from time to time.
Β Β Β Β Β 11.18 Accountability to CMS. PLAN maintains full responsibility for adhering to and
otherwise complying with the terms and conditions of its contract with CMS. Such compliance
depends to a great extent on the cooperation, assistance, collaboration and support of PROVIDER,
the PROVIDER physicians, the PROVIDER non-physician providers and the Affiliated Providers.
PROVIDER agrees, and shall its commercially reasonable best efforts to cause such PROVIDER
physicians, PROVIDER non-physician providers and Affiliated Providers to, provide such cooperation,
assistance, collaboration and support.
12. Special Damages; Guaranty. PLAN and PROVIDER have discussed the potential losses,
costs and damages that PLAN could incur, including the harm to the ongoing business of PLAN, and
PROVIDER expressly hereby acknowledges and agrees that it has reasonable notice of the special
damages the PLAN may incur, in each case, in the event of a breach by PROVIDER or any of its
Affiliates of SectionsΒ 7.1(c), 7.1(d), or 7.3 (exclusive of SectionΒ 7.3 (b) (Non-consent by PLAN)),
or a breach by PROVIDER constituting a Termination Event under SectionΒ 10.2(b) (regardless whether
this Agreement is terminated by PLAN) (in each case, a βSpecial Damages Breachβ). Accordingly and
notwithstanding anything in this Agreement to the contrary, in addition to any remedies available
to PLAN in law or at equity, the parties hereto confirm, acknowledge, and agree that PLAN shall be
entitled to seek recovery against PROVIDER for incidental, indirect, special, and consequential
damages and damages for loss of profits, loss of revenue, loss of business or assets and diminution
of value, in each case, to the extent suffered or incurred in connection with, arising out of or
otherwise relating to a Special Damages Breach. A Guaranty Agreement, dated as of the Effective
Date, in the form attached hereto as ExhibitΒ 6, with respect to the obligations of PROVIDER under
this SectionΒ 12, has been executed and delivered by PLAN and the guarantors set forth therein.
13. Miscellaneous Provisions.
Β Β Β Β Β 13.1 Additional Representations and Warranties of the Parties. Each party hereby
represents and warrants to the other party that it has all necessary permissions, permits,
franchises, authorizations and other corporate or other organizational or legal authority and power
to enter into and perform its obligations under this Agreement, and this Agreement constitutes a
legal, valid, and binding obligation enforceable against such party in accordance with its terms,
except as such obligation may be limited by (i)Β the effect of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and/or (ii)Β the rules governing the availability of
specific performance, injunctive relief or other equitable remedies and general principles of
equity, regardless of whether considered in a proceeding in equity or at law. Each party hereby
represents and warrants to the other party that no agreement, contract, easement, instrument,
mortgage, encumbrance, or other document or grant of rights to which such party is currently a
party conflicts with its obligations or the other party heretoβs rights under this
Agreement, and such representing partyβs entry into and performance of this Agreement will not
cause any default under any of the foregoing.
35
Β
Β Β Β Β Β 13.2 Relationship of the Parties. The parties to the Agreement are independent legal
entities. Except as expressly set forth in this Agreement, nothing herein shall be construed or
deemed to create between them any relationship of employer and employee, principal and agent,
partnership, joint venture or any relationship other than that of independent parties. No party
hereto, nor the respective agents or employees of any party, shall be required to assume or bear a
responsibility for the acts or omissions, or any consequences thereof, of any other party, or its
agents or employees under this Agreement.
Β Β Β Β Β 13.3 Force Majeure. The failure of either party hereto to perform its obligations
under this Agreement shall be excused and shall not constitute a breach of this Agreement during
the period that such failures are occasioned by any of the following events of force majeure: acts
of God, floods, fires, storms, strikes, lockouts, disputes with workmen, riots, insurrections, war
or acts of terrorism that prevent or delay the performance of the obligations herein contained and
similar events beyond the reasonable control of such party, but only during such period and to the
extent such prevention or delay is caused by the force majeure event.
Β Β Β Β Β 13.4 Amendment. No amendment, restatement or other modification to this Agreement
shall be effective unless in writing and executed by PLAN and PROVIDER.
Β Β Β Β Β 13.5 Assignment. Except as provided in Sections 5(a) and 11.5, neither party may
sell, assign, delegate, or otherwise transfer, whether directly, indirectly, by operation of law,
by merger or otherwise, this Agreement or its obligations or rights hereunder, without the prior
written consent of the other party. Any such purported sale, assignment, delegation or other
transfer shall be void and of no force or effect.
Β Β Β Β Β 13.6 Waiver of Breach. The waiver by either party of a breach or violation of any
provision of this Agreement shall not be deemed a waiver of any other breach of the same or
different provision.
Β Β Β Β Β 13.7 Severability. In the event any provision of this Agreement is rendered invalid
or unenforceable by any act of Congress or of the Florida Legislature or by any regulation
promulgated by officials of the United States or the applicable Florida state agency, or declared
null and void by any court of competent jurisdiction, the remainder of the provisions of this
Agreement shall remain in full force and effect.
Β Β Β Β Β 13.8 Confidentiality. Any and all non-public information disclosed by any party to
another party to this Agreement in relation to this Agreement, whether communicated orally or in
any physical form, related to a partyβs business shall be deemed the βConfidential Informationβ of
the party disclosing the Confidential Information, regardless of whether such information is
designated as such at the time of disclosure. In accordance with the following provisions, each
party shall, and shall use commercially reasonable efforts to cause each of its contractors and
agents to, hold the other partyβs Confidential Information in trust and confidence and such
information shall be used only for the purposes contemplated herein, and not for any other purpose.
36
Β
Β Β Β Β Β Β Β Β Β Β (a)Β A party shall use the Confidential Information received from the other parties solely in
relation to this Agreement. No other rights are implied or granted under this Agreement.
Β Β Β Β Β Β Β Β Β Β (b)Β Confidential Information supplied by one party to another party shall not be reproduced in
any form except for internal use or with the prior written authorization of the party furnishing
the Confidential Information.
Β Β Β Β Β Β Β Β Β Β (c)Β The parties shall use all reasonable efforts to protect the confidentiality of the
Confidential Information received from each other with the same degree of care used to protect
their own Confidential Information and that of their Affiliates from unauthorized use or disclosure
by its agents and employees. The parties shall not release, publish, reveal or disclose, directly
or indirectly, Confidential Information to any other person or entity without the prior written
consent of the other, except that such Confidential Information may be used by or disclosed to the
partiesβ directors, officers, lawyers, accountants and other professional consultants as may be
reasonably required in relation to this Agreement, provided that all such persons shall be directed
and required to maintain the disclosed Confidential Information in confidence at all times
thereafter. Such disclosure shall not relieve the parties of their obligations under this
Agreement.
Β Β Β Β Β Β Β Β Β Β (d)Β All Confidential Information, unless otherwise specified in writing, shall remain the
exclusive property of the party providing the Confidential Information, shall be used by the party
receiving the Confidential Information only for the purpose permitted under this Agreement, and
shall be returned to the party furnishing the Confidential Information (including all whole or
partial copies thereof) promptly upon termination of this Agreement.
Β Β Β Β Β Β Β Β Β Β (e)Β The term βConfidential Informationβ does not include information which: (i)Β is now or
hereafter in the public domain through no fault of the party receiving the Confidential
Information; or (ii)Β is obligated to be produced by the party which was furnished the Confidential
Information or any of its affiliates under order of a court of competent jurisdiction, unless made
the subject of a confidentiality agreement or order in connection with such proceeding.
Β Β Β Β Β Β Β Β Β Β (f)Β The provisions of this SectionΒ 13.8 are necessary for the protection of the business and
goodwill of the respective parties and are considered by the parties to be reasonable for such
purpose.
Β Β Β Β Β Β Β Β Β Β (g)Β Without limiting other possible remedies of the parties for breaches of their respective
obligations under this Agreement, the parties agree that the breach or threatened breach of this
Agreement (including under SectionΒ 7 or this SectionΒ 13.8) may cause irreparable harm to the
non-breaching party and the non-breaching party may not have an adequate remedy at law, and
therefore the non-breaching party shall be entitled to injunctive or other equitable relief to
enforce the Agreement without obligation to post a bond.
Β Β Β Β Β 13.9 Notice. All notices, demands, requests and other communications required or
permitted hereunder (each, a βNoticeβ) shall be in writing, and shall be (i)Β personally delivered;
(ii)Β sent by a nationally recognized overnight delivery service; (iii)Β facsimile machine, with
37
Β
electronic confirmation of successful transmission; or (iv)Β sent by certified or registered mail,
return receipt requested. All Notices personally delivered shall be deemed effective when actually
delivered as documented in a delivery receipt. All Notices sent by a nationally recognized
overnight delivery service shall be deemed effective and received one (1)Β business day following
delivery by the sender to such delivery service. All Notices sent by certified or registered mail,
return receipt requested, shall be deemed effective and received five (5)Β days after having been
deposited in the United States mail. All Notices sent by facsimile transmission with electronic
confirmation of successful transmission shall be deemed effective and received at the time of
transmission, provided, however, that the party giving such facsimile Notice sends a copy of such
Notice to the other party using any of the other methods permitted hereunder. Any Party may
designate a change of address, or require that Notices be provided to additional persons, upon
written Notice to and receipt by the other Party. All Notices shall be sent to the addressee at
its address set forth following its name below:
Β |
Β |
Β |
If to PLAN:
|
Β |
Xxxx Medical Centers Health Plans, Inc. |
Β
|
Β |
c/o HealthSpring, Inc. |
Β
|
Β |
0000 Xxxxxxxxx Xxxxxxx |
Β
|
Β |
Xxxxxxxx X, XxxxxΒ 000 |
Β
|
Β |
Xxxxxxxx, Xxxxxxxxx 00000 |
Β
|
Β |
Attn: Chief Executive Officer |
Β
|
Β |
Facsimile: (000)Β 000-0000 |
Β |
Β |
Β |
with copies to:
|
Β |
HealthSpring, Inc. |
Β
|
Β |
0000 Xxxxxxxxx Xxxxxxx |
Β
|
Β |
Xxxxxxxx X, XxxxxΒ 000 |
Β
|
Β |
Xxxxxxxx, Xxxxxxxxx 00000 |
Β
|
Β |
Attn: General Counsel |
Β
|
Β |
Facsimile: (000)Β 000-0000 |
Β |
Β |
Β |
Β
|
Β |
Bass, Xxxxx & Xxxx PLC |
Β
|
Β |
000 Xxxxxxxxx Xxxxxx, XxxxxΒ 0000 |
Β
|
Β |
Xxxxxxxxx, Xxxxxxxxx 00000 |
Β
|
Β |
Attn.: J. Xxxxx Xxxxxxx, Jr, |
Β
|
Β |
Facsimile: (000)Β 000-0000 |
Β |
Β |
Β |
If to PROVIDER: |
Β |
Β |
Β |
Β
|
Β |
Xxxx Medical Centers, Inc. |
Β
|
Β |
00000 XX 00xx Xxxxxx |
Β
|
Β |
Xxxxx XX 00000 |
Β
|
Β |
Attn: Xxxxxxxx Xxxx, Xx., Co-Chief Executive Officer |
Β
|
Β |
and Xxxxxx Xxxxxxx, Co-Chief Executive Officer |
Β |
Β |
Β |
with copy to:
|
Β |
Bilzin Xxxxxxx Xxxxx Xxxxx & Xxxxxxx XXX |
Β
|
Β |
0000 Xxxxxxxx Financial Center |
Β
|
Β |
000 Xxxxx Xxxxxxxx Xxxxxxxxx |
Β
|
Β |
Xxxxx, Xxxxxxx 00000 |
Β
|
Β |
Attn: Xxxxxx X. Xxxxxx |
Β
|
Β |
Facsimile: (000)Β 000-0000 |
38
Β
Β Β Β Β Β 13.10 Headings. The headings of the sections contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.
Β Β Β Β Β 13.11 Interpretation. When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated. The words
βinclude,β βincludesβ and βincludingβ when used herein shall be deemed in each case to be followed
by the words βwithout limitation.β When a reference is made in this Agreement to a certain number
of days, such reference shall be deemed to refer to βcalendarβ days unless the reference expressly
indicates that the reference is being made with respect to business days. As used in this
Agreement, the masculine, feminine or neuter gender and the singular or plural number shall be
deemed to include the others whenever the context so requires. References to Sections refer to
sections of this Agreement, unless the context requires otherwise. Words such as βherein,β
βhereinafter,β βhereof,β βherebyβ and βhereunderβ and the words of like import refer to this
Agreement, unless the context requires otherwise. All references in this Agreement to PLAN,
PROVIDER, HealthSpring or any other entity shall include any and all successors thereto. To the
extent that the form and/or substance of any reports or other documents referenced in this
Agreement in connection with the calculation of any terms hereof (including the Covered Services
Payments and the Adjusted Members) are amended, restated or succeeded by any other reports, in each
case, such that such calculations would vary if effectuated following such amendments, restatements
or successions, then the parties shall promptly negotiate in good faith with respect to any
necessary revisions to the provisions to this Agreement so as to maintain the intent of such
provisions as written prior to the effectuation of such amendments, restatements or successions.
Any disputes with respect to such revisions that cannot be resolved within fifteen (15)Β days
following commencement of the negotiations with respect thereto shall be submitted to the Actuary
for final resolution in accordance with the provisions of SectionΒ 4.5(a).
Β Β Β Β Β 13.12 Governing Law; Jurisdiction; Jury Trial Waiver. This Agreement, and any
dispute, controversy or claim arising out of or relating to this Agreement or a breach thereof
shall be governed by, and construed in accordance with the laws of the State of Florida. Each of
the parties hereto irrevocably consents to the exclusive jurisdiction of any federal court located
within Miami-Dade County in the State of Florida in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein (except with respect to any
matters required or permitted hereunder to be submitted to the Actuary), agrees that process may be
served upon them in any manner authorized by the laws of the State of Florida for such persons and
waives and covenants not to assert or plead any objection that they might otherwise have to such
jurisdiction and such process. The parties hereto hereby irrevocably waive any and all right to
trial by jury in any legal proceeding arising out of or related to this Agreement or the
transactions contemplated hereby, whether now existing or hereafter arising, and whether sounding
in contract, tort or otherwise; provided, however, that no such waiver shall apply to any lawsuit
or proceeding brought by PLAN against PROVIDER in which PLAN alleges fraudulent conduct by PROVIDER
and/or its Affilaites, in which case, such lawsuit or proceeding shall be adjudicated with any and
all applicable jury trial rights. The parties hereto agree that any of
39
Β
them may file a copy of this paragraph with any court of competent jurisdiction as written evidence
of the knowing, voluntary and bargained-for agreement among the parties irrevocably to waive trial
by jury (except as hereinabove provided) and that any action or proceeding whatsoever between them
relating to this Agreement or the transactions contemplated hereby shall instead be tried in a
court of competent jurisdiction by a judge sitting without a jury (except as hereinabove provided).
Β Β Β Β Β 13.13 Third-Party Beneficiaries. This Agreement shall not be construed to create any
third-party beneficiaries, except for PLANβs being a third-party beneficiary under SectionΒ 8.1,
PROVIDER Medicare Members being third party beneficiaries of SectionΒ 11.8 (Member Hold Harmless),
and the PROVIDER HMO being a third-party beneficiary of PLANβs obligations hereunder.
Β Β Β Β Β 13.14 Entire Agreement. All Exhibits to this Agreement and all attachments hereto are
incorporated by reference into and made part of this Agreement. This Agreement and any amendments,
exhibits, attachments, and schedules hereto as are now incorporated, or as may be added from
time-to-time pursuant to the terms of this Agreement, constitute the entire understanding and
agreement of the parties hereto and supersede any prior written or oral agreement pertaining to the
subject matter hereof.
Β Β Β Β Β 13.15 Prevailing Party. In the event of a dispute between the parties hereto arising
out of or in connection with this Agreement, the losing party in any action, claim or suit shall
promptly pay to the prevailing party all reasonable attorneysβ and paralegalsβ fees and costs, at
trial and at all appellate levels, incurred by or on behalf of such prevailing party.
Β Β Β Β Β 13.16 Participation in Drafting. Each party acknowledges that it has been represented
by counsel in connection with the negotiation and drafting of this Agreement and the other
agreements and documents to be executed by the parties in connection herewith. Accordingly, in the
event an ambiguity or question of intent or interpretation arises, this Agreement and the other
agreements and documents to be executed by the parties in connection herewith shall be construed as
if drafted jointly by PLAN, on the one hand, and PROVIDER, on the other hand, and no presumption or
burden of proof shall arise favoring or disfavoring either party by virtue of the authorship of any
of the provisions of this Agreement and the other agreements and documents to be executed by the
parties in connection herewith.
Β Β Β Β Β 13.17 Counterparts. This Agreement and each other document executed in connection
with the transactions contemplated hereby, and the consummation thereof, may be executed in one or
more counterparts, all of which shall be considered one and the same document and shall become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other party, it being understood that all parties need not sign the same counterpart. Delivery
by facsimile or e-mail transmission in PDF format to counsel for the other party of a counterpart
executed by a party shall be deemed to meet the requirements of the previous sentence and to
constitute good and effective delivery for all purposes. The individual signing on behalf of the
named party personally warrants and represents that he or she is the duly authorized agent of that
party with the authority to execute this Agreement on behalf of such party.
[SIGNATURES ON FOLLOWING PAGE]
40
Β
Β Β Β Β Β IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
authorized officers or agents, effective as of the Effective Date.
Β |
Β |
Β |
Β |
Β |
Β |
Β |
XXXX MEDICAL CENTERS |
Β |
XXXX MEDICAL CENTERS, INC., |
HEALTH PLANS, INC., |
Β |
a Florida corporation |
a Florida corporation |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
Β |
By:
|
Β |
Β |
Β |
By: |
Β |
Β |
Β
|
Β |
Β
|
Β |
Β |
Β |
Β |
Name : |
Β |
Β |
Β |
Name: Xxxxxxxx Xxxx, Xx. |
Β
|
Β |
Β |
Β |
Β |
Β |
Β |
Title: |
Β |
Β |
Β |
Title: Chief Executive Officer |
Β
|
Β |
Β |
Β |
Β |
Β |
Β |
[Signature Page to Medical Services Agreement.]
Β
Β
EXHIBIT 3
MLR SHARING ARRANGEMENT
1. Definitions.
Β Β Β Β Β 1.1 βDeficitβ means, with respect to each Contract Year, the product obtained by
multiplying (i)Β the sum of the CMS capitation reimbursement rates for all Medicare Advantage
members that constituted PROVIDER Medicare Members and all Medicare Advantage members that
constituted PROVIDER HMO Members during such Contract Year, by (ii)Β the MLR Deficit, if any, for
such Contract Year.
Β Β Β Β Β 1.2 βMLRβ means, with respect to any calendar year or Contract Year, as applicable,
the percentage obtained by dividing (i)Β the aggregate medical expenses (including the cost of Part
D Pharmaceuticals and Injectable Drugs) actually incurred by PLAN and by the PROVIDER HMO during
such calendar year or Contract Year with respect to the PROVIDER Medicare Members and the PROVIDER
HMO Members, respectively, by (ii)Β the sum of the CMS capitation reimbursement rates for all
Medicare Advantage members that constituted PROVIDER Medicare Members and all Medicare Advantage
members that constituted PROVIDER HMO Members during such Contract Year (including, without
limitation, during any portion thereof). With respect to all calculations of the MLR in this
Agreement, (A)Β reinsurance and stop-loss coverage for catastrophic claims costs and premiums and
payments for disease management services shall be treated as an increase in medical expenses, and
(B)Β reinsurance and stop-loss coverage for catastrophic claims recoveries, subrogation and
coordination of benefits recoveries shall be treated as a reduction in medical expenses.
Β Β Β Β Β 1.3 βMLR Benchmarkβ means, (i)Β with respect to Contract Years 2007, 2008 and 2009,
eighty percent (80.0%), (ii)Β with respect to Contract Years 2010 and 2011, eighty and one-half
percent (80.5%), and (iii)Β with respect to all subsequent Contract Years, eighty one percent
(81.0%).
Β Β Β Β Β 1.4 βMLR Deficitβ means, with respect to each Contract Year, the positive difference,
if any, between the actual MLR with respect to such Contract Year minus the MLR Benchmark
for such Contract Year.
Β Β Β Β Β 1.5 βMLR Surplusβ means, with respect to each Contract Year, the positive difference,
if any, between the MLR Benchmark for such Contract Year minus the actual MLR with respect
to such Contract Year.
Β Β Β Β Β 1.6 βSurplusβ means, with respect to each Contract Year, the product obtained by
multiplying (i)Β the sum of the CMS capitation reimbursement rates for all Medicare Advantage
members that constituted PROVIDER Medicare Members and all Medicare Advantage members that
constituted PROVIDER HMO Members during such Contract Year, by (ii)Β the MLR Surplus, if any, for
such Contract Year.
2. Medical Loss Ratio Formula. With respect to each Contract Year, the following shall
apply:
Β
Β
Β Β Β Β Β (a) to the extent that the MLR Surplus is greater than 0% but is 5% or less, then 50%
of the Surplus calculated using the MLR Surplus within such range shall be retained by PLAN
and 50% of such Surplus shall be paid by PLAN to PROVIDER;
Β Β Β Β Β (b) to the extent that the MLR Surplus is greater than 5%, then 100% of the Surplus
calculated using the MLR Surplus above such 5% shall be retained by PLAN (after risk sharing
and payment by PLAN to PROVIDER for the corridor set forth in (a)Β above);
Β Β Β Β Β (c) to the extent that the MLR Deficit is greater than 0% but is 5% or less, then 50%
of the Deficit calculated using the MLR Deficit within such range shall be paid by PROVIDER
to PLAN; and
Β Β Β Β Β (d) to the extent that the MLR Deficit is greater than 5%, then no payment of any
Deficit calculated using the MLR Deficit above such 5% shall be made by PROVIDER to PLAN
(after risk sharing and payment by PROVIDER to PLAN for the corridor set forth in (c)
above).
Β Β Β Β Β Notwithstanding the foregoing, in no event will the aggregate amount of all Surplus payments
by PLAN or Deficit payments by PROVIDER with respect to any one Contract Year exceed 2.5%
multiplied by the sum of the CMS capitation reimbursement rates for all Medicare Advantage members
that constituted PROVIDER Medicare Members and all Medicare Advantage members that constituted
PROVIDER HMO Members during such Contract Year (including, without limitation, during any portion
thereof).
3. Run Out Periods and Payment of Surplus and Deficit.
Β Β Β Β Β (a) Payment of Surplus and Deficit. With respect to each Contract Year or
portion thereof, all Surplus and Deficit payments among the parties shall be made as
follows:
Β Β Β Β Β (i) Immediately following the expiration of the three (3)Β calendar month period
immediately following the applicable measurement period (e.g., each Contract Year,
the First Measurement Period, the Final Measurement Period, or any portion thereof
(if any of the foregoing shall commence or end other than on the first or last day,
respectively, of a calendar month)), the parties shall estimate the amount of any
Surplus or Deficit payable with respect to such measurement period so as to reflect
any (i)Β claims incurred by PLAN with respect to such measurement period that have
not been reported (βIBNRβ) as of the end of such three month period, (ii)Β claims
incurred by PLAN with respect to such measurement period that have been reported but
are pending or otherwise unpaid (βPending Claimsβ) as of the end of such three month
period, and (iii)Β claims incurred by PLAN with respect to such measurement period
that have been paid (βPaid Claimsβ) as of the end of such three month period (such
estimate, the βFirst Estimated Surplus or Deficitβ). PLAN or PROVIDER, as
applicable shall pay 80% of any First Estimated Surplus or Deficit payable with
respect to such Contract Year, by wire transfer of immediately available funds,
within three (3)Β business days following the determination thereof (whether by the parties
or the Actuary);
2
Β
Β Β Β Β Β (ii) Immediately following the expiration of the six (6)Β calendar month period
immediately following the applicable measurement period, the parties shall estimate
the amount of any Surplus or Deficit payable with respect to such measurement period
so as to reflect any IBNR, Pending Claims and Paid Claims as of the end of such six
(6)Β month period (such estimate, the βSecond Estimated Surplus or Deficitβ). The
difference between (A)Β the amount of the Second Estimated Surplus or Deficit payable
with respect to such Contract Year, and (B)Β the amount of the First Estimated
Surplus or Deficit paid pursuant to the immediately preceding item (i)Β shall be paid
by the applicable party, by wire transfer of immediately available funds, within
three (3)Β business days following the determination thereof (whether by the parties
or the Actuary) (the βInterim Settlement Amountβ); and
Β Β Β Β Β (iii) Immediately following the expiration of the eighteen (18)Β calendar month
period immediately following the applicable measurement period, the parties shall
calculate the actual MLR achieved with respect to such measurement period (i.e., so
as to reflect all Pending Claims and Paid Claims as of the end of such eighteen (18)
month period but not IBNR), as well as the amount of any Surplus or Deficit payable
with respect to such measurement period (the βFinal Settlementβ). The difference
between (A)Β the amount of the Surplus or Deficit payable with respect to such
Contract Year, as determined pursuant to the Final Settlement for such Contract Year
(whether by the parties or the Actuary), and (B)Β the amount of the Second Estimated
Surplus or Deficit shall be paid by the applicable party, by wire transfer of
immediately available funds, within three (3)Β business days following the
determination of the Final Settlement.
Β Β Β Β Β (b) Actual MLR Calculation. For avoidance of doubt, for purposes of the
calculation of the MLR and the PROVIDER HMO MLR actually achieved for the applicable
measurement period as required under SectionΒ 3(a)(iii), no IBNR existing as of the end of
the eighteen month period that is the subject of any Final Settlement shall be reflected in
such MLR or PROVIDER HMO MLR.
Β Β Β Β Β (c) Monthly Reports. Within thirty (30)Β days following the end of each calendar
month, PLAN shall provide to PROVIDER its estimate and calculations with respect to whether,
as of the date of such estimate, there exists a Surplus or a Deficit for such Contract Year.
Such monthly reports shall be for informational purposes only and shall not be deemed
probative or supportive in any way of either partyβs calculation of the MLR, PROVIDER HMO
MLR, First or Second Estimated Surplus or Deficit, the Interim Settlement Amount or the
Final Settlement.
4. Disputes; Actuary. With respect to all calculations of MLR, Surplus and Deficit, the
parties shall first attempt to make all such calculations jointly and agree on the results thereof.
If the parties are unable to agree on the results of the calculations of MLR, Surplus or Deficit
(including each of their respective components), then either party may, by written notice to the
other party, require that such calculations be submitted to the Actuary for final determination.
Each party shall submit to the Actuary its final proposed calculation of such Surplus or Deficit.
The Actuary shall be instructed to deliver a determination of such reconciliation within thirty
(30)Β days following such submission, which determination shall be final, binding and
non-appealable.
3