Exhibit 10.80
ASSET PURCHASE AGREEMENT
BETWEEN
WELLCARE OF NEW YORK, INC.,
the Seller,
AND
GROUP HEALTH INCORPORATED,
the Purchaser.
Dated as of May 20, 1999
TABLE OF CONTENTS
Page
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1. Definitions...................................................................................... 1
1.1 Defined Terms........................................................................... 1
2. Purchase and Sale of Assets...................................................................... 8
2.1 Commercial Contracts.................................................................... 8
2.2 Provider Contracts...................................................................... 8
2.3 Contracts, Leases, Licenses, Permits, etc............................................... 8
2.4 Medical Management Materials............................................................ 8
2.5 Intangible Assets....................................................................... 8
2.6 Computer Systems and Software........................................................... 9
2.7 Inventory and Supplies.................................................................. 9
2.8 Books and Records....................................................................... 9
2.9 Insurance Proceeds...................................................................... 9
2.10 Other Assets............................................................................ 9
3. Excluded Assets.................................................................................. 9
3.1 Corporate Books and Certain Other Records............................................... 10
3.2 Financial Assets........................................................................ 10
3.3 Accounts Receivable..................................................................... 10
3.4 Real Estate............................................................................. 10
3.5 Certain Contractual Rights.............................................................. 10
3.6 Interests in Subsidiaries............................................................... 10
3.7 Insurance Claims........................................................................ 10
3.8 Claims Against Providers................................................................ 10
3.9 Name.................................................................................... 10
3.10 Tax Refunds............................................................................. 10
3.11 Pre-Effective Time Rights, Claims, and Obligations...................................... 10
4. Consideration.................................................................................... 10
4.1 Post-Closing Purchase Price Adjustment.................................................. 11
4.2 Allocation of Consideration............................................................. 12
4.3 Assignment and Assumption Agreement..................................................... 12
5. Assumption and Retention of Liabilities.......................................................... 12
5.1 Obligations Under Certain Agreements.................................................... 12
5.2 Retained Liabilities.................................................................... 13
5.3 Certain Financial Arrangements.......................................................... 15
6. Closing.......................................................................................... 16
7. Non-Assignable Contracts......................................................................... 16
8. Representations and Warranties of the Seller..................................................... 16
8.1 Organization and Qualification.......................................................... 17
8.2 Certificate of Incorporation and By-Laws................................................ 17
8.3 Authority............................................................................... 17
8.4 No Conflict; Required Filings and Consents.............................................. 17
8.5 Permits; Compliance..................................................................... 18
8.6 Real Property; Other Assets............................................................. 18
8.7 Environmental Matters. ................................................................. 18
8.8 Financial Statements.................................................................... 19
8.9 Absence of Certain Changes or Events.................................................... 20
8.10 Absence of Litigation................................................................... 20
8.11 Employee Benefit Plans; Labor Matters................................................... 20
8.12 Taxes................................................................................... 21
8.13 Certain Agreements...................................................................... 22
8.14 Commercial Contracts.................................................................... 25
8.15 Medical Management...................................................................... 25
8.16 Commercial Members...................................................................... 25
8.17 Pending Treatments...................................................................... 26
8.18 Title to Property....................................................................... 26
8.19 Insurance............................................................................... 26
8.20 Compliance With Laws.................................................................... 26
8.21 Completeness of Assets.................................................................. 27
8.22 [Not Used].............................................................................. 27
8.23 No Bankruptcy........................................................................... 27
8.24 Broker's and Other Fees................................................................. 27
8.25 Transactions with Affiliates............................................................ 27
8.26 Payments................................................................................ 27
8.27 Xxxxx Documents......................................................................... 28
8.28 Full Disclosure......................................................................... 28
9. Representations and Warranties of the Purchaser.................................................. 28
9.1 Organization and Qualification.......................................................... 28
9.2 Authority............................................................................... 28
9.3 No Conflict; Required Filings and Consents.............................................. 29
9.4 Absence of Litigation................................................................... 29
10. Transactions and Conduct of Business Pending the Closing......................................... 29
10.1 Ordinary Course of Business............................................................. 30
10.2 Preparation for Transfer and Transition................................................. 31
10.3 Payment of Retained Liabilities; Discharge of Pre-Effective Date
Medical Claim Liabilities............................................................... 31
10.4 Certain Prohibited Activities........................................................... 32
10.5 Casualty................................................................................ 32
10.6 Access.................................................................................. 32
10.7 Cooperation............................................................................. 33
10.8 No Change in Accounting Methods......................................................... 33
10.9 Other Offers............................................................................ 33
10.10 Public Announcements.................................................................... 34
10.11 Schedule Deliveries..................................................................... 34
10.12 WARN Notices............................................................................ 34
11. Conditions Precedent to the Purchaser's Obligations.............................................. 34
11.1 Delivery of Assets...................................................................... 34
11.2 Representations and Warranties True as of Effective Time................................ 34
11.3 Conveyance Documents.................................................................... 35
11.4 Officer's Certificates.................................................................. 35
11.5 Opinion of the Seller's Counsel......................................................... 35
11.6 Secretary's Certificates................................................................ 35
11.7 Notifications and Consents.............................................................. 35
11.8 Provider Contracts...................................................................... 36
11.9 Third Party Consents.................................................................... 36
11.10 Lien Search............................................................................. 37
11.11 Good Standing Certificate............................................................... 37
11.12 Certified Certificate of Incorporation.................................................. 37
11.13 Related Party Non-Competition Agreement................................................. 37
11.14 Contribution of Certain Assets to Seller ............................................... 37
11.15 Leases.................................................................................. 37
11.16 Guaranty................................................................................ 37
11.17 Transition Services Agreement........................................................... 38
11.18 Insurance Endorsements.................................................................. 38
11.19 No Material Adverse Change.............................................................. 38
11.20 Approval of Schedules................................................................... 38
11.21 Establishment of Claims Fund............................................................ 38
11.22 Xxxxx Transaction....................................................................... 38
11.23 WARN Notices............................................................................ 38
12. Conditions Precedent to the Seller's Obligations................................................. 38
12.1 Representations and Warranties True as of Effective Time................................ 39
12.2 Compliance with Agreement............................................................... 39
12.3 Payment and Deliveries.................................................................. 39
12.4 Officer's Certificate................................................................... 39
12.5 Secretary's Certificate................................................................. 39
12.6 No Suit or Other Proceedings............................................................ 39
12.7 Notifications and Consents.............................................................. 39
12.8 Transition Services Agreement........................................................... 40
13. Certain Transactions and Obligations Subsequent to Closing....................................... 40
13.1 Further Assurance of Cooperation........................................................ 40
13.2 Maintenance of Corporate, Patient Care, Accounting and Tax
Records................................................................................. 40
13.3 Certain Employees of the Seller......................................................... 41
13.4 Designation of the Purchaser as Successor Employer...................................... 41
13.5 Mail and Communications................................................................. 42
13.6 Covenant Not to Compete, Etc............................................................ 42
14. Indemnification.................................................................................. 43
14.1 Indemnification by the Seller........................................................... 43
14.2 Indemnification by the Purchaser........................................................ 43
14.3 Limitations on Indemnity................................................................ 44
14.4 Notice to the Indemnitor................................................................ 44
14.5 Rights of Parties to Settle or Defend................................................... 45
14.6 Reimbursement........................................................................... 45
14.7 Losses Net of Insurance, etc............................................................ 46
14.8 Effectiveness........................................................................... 46
15. Brokers and Finders' Fees........................................................................ 46
15.1 The Seller.............................................................................. 46
15.2 The Purchaser........................................................................... 46
16. Additional Agreements............................................................................ 46
16.1 Expenses................................................................................ 46
16.2 Transfer Taxes.......................................................................... 47
16.3 Confidentiality......................................................................... 47
17. Merger; Amendment................................................................................ 47
18. Assignment and Binding Effect.................................................................... 47
19. Waiver........................................................................................... 48
20. Termination...................................................................................... 48
20.1 Mutual Consent.......................................................................... 48
20.2 The Seller's Breach..................................................................... 48
20.3 The Purchaser's Breach.................................................................. 48
20.4 Casualty................................................................................ 48
20.5 By the Purchaser or the Seller.......................................................... 48
21. Notices.......................................................................................... 49
22. Risk of Loss..................................................................................... 50
23. Severability..................................................................................... 50
24. Governing Law.................................................................................... 50
25. Third Party Beneficiary; No Benefit to Others.................................................... 50
26. Section Headings................................................................................. 50
27. Schedules and Exhibits........................................................................... 50
28. Counterparts..................................................................................... 50
29. Time for Performance............................................................................. 50
30. Survival......................................................................................... 50
31. Waiver of Jury Trial............................................................................. 51
32. Service of Process............................................................................... 51
33. Construction..................................................................................... 51
EXHIBITS
Exhibit I-A Form of Xxxx of Sale
Exhibit I-B Form of Assignment and Assumption Agreement
Exhibit II Form of the Seller's Counsel Opinion
Exhibit III Lease Premises
Exhibit IV Material Terms of Transition Services Agreement
SCHEDULES
Schedule 5.1 Assumed Contracts
Schedule 8.4 Approvals
Schedule 8.5 Pending Actions
Schedule 8.6 Leases
Schedule 8.7 Real Property
Schedule 8.8 Financial Schedules
Schedule 8.10 Litigation
Schedule 8.13 Contracts
Schedule 8.14 Commercial Contracts
Schedule 8.15 Medical Management
Schedule 8.16 Commercial Members
Schedule 8.17 Pending Treatment Requests
Schedule 8.19 Insurance
Schedule 8.20 Compliance With Laws
Schedule 11.19 List of Due Diligence Materials Previously Delivered
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), made as of the 20th day of
May, 1999, by and between WellCare of New York, Inc., a New York corporation
(the "Seller"), and Group Health Incorporated, a New York not-for-profit
corporation ("GHI").
W I T N E S S E T H:
WHEREAS, the Seller is a health maintenance organization currently licensed
and operating in the State of New York;
WHEREAS, the Seller is a party to Commercial Contracts (as such term is
defined in Section 1 hereof) pursuant to which the Seller receives capitation
and/or premium payments on a prepaid basis in exchange for arranging for the
provision of comprehensive healthcare services to enrollees of commercial health
benefit plans;
WHEREAS, simultaneously with the consummation of the transactions
contemplated hereby, the Purchaser (as such term is defined in Section 1 hereof)
will acquire a New York State health maintenance organization license, and will
be eligible to accept an assignment of the Commercial Contracts;
WHEREAS, upon the terms and conditions set forth herein: (i) the Seller
desires to assign and convey to Purchaser the Commercial Contracts and certain
related business assets and goodwill (which assets do not constitute
substantially all of the assets of the Seller), and the Purchaser desires to
accept such assignment and conveyance; and (ii) as of the Effective Time (as
such term is defined in Section 1 hereof), the Seller desires to transfer its
Commercial Members (as such term is defined in Section 1 hereof) to Purchaser;
and
WHEREAS, in order to induce the Purchaser to enter into this Agreement, the
Seller wishes to provide the representations, warranties, covenants and
indemnities set forth herein.
NOW, THEREFORE, in consideration of the premises, and of the mutual
promises and covenants herein contained, the sufficiency of which are hereby
acknowledged, and wishing to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Definitions.
1.1 Defined Terms. The following terms shall have the indicated
meanings:
"Acquired Business" shall mean the Seller's business consisting of
collecting premium revenue and arranging for the provision of comprehensive
health care services to Commercial Members pursuant to the Commercial Contracts,
together with all assets of the Seller used or useful in such business (other
than the Excluded Assets).
"Affiliate" when used with respect to any Person shall mean any Person
controlling, controlled by or under common control with such Person.
"Agreement" shall mean this Asset Purchase Agreement and all of its
Exhibits and Schedules.
"Assets" shall mean all those certain assets (other than the Excluded
Assets) of the Seller described in Section 2.
"Assignment and Assumption Agreement" shall mean that certain
assignment and assumption agreement between the Purchaser and the Seller dated
as of the Closing Date, in the form of Exhibit I-B annexed hereto.
"Assumed Liabilities" shall have the meaning ascribed to such term in
Section 5.
"Benefit Plan" means each funded or unfunded, written or oral,
employee benefit plan, contract, agreement, incentive, salary, wage or other
compensation plan or arrangement, including, but not limited to, each pension
and profit sharing plan, savings plan, bonus, deferred compensation, incentive
compensation, stock purchase, supplemental retirement, severance or termination
pay, stock option, hospitalization, medical, life insurance, dental, disability,
salary continuation, vacation, supplemental unemployment benefit, union
contract, employment contract, consulting agreement, retiree health or life
benefit, severance or termination pay and each other employee benefit program,
plan, policy or arrangement, maintained, contributed to, or required to be
contributed to by the Seller for the benefit of employees, former employees,
directors, agents or consultants of the Seller, or for which the Seller may be
responsible or with respect to which the Seller may have any liability, whether
or not subject to ERISA and whether legally binding or not. For purposes of this
definition, any reference to the term the "Seller" shall be deemed to refer also
to any entity which is under common control or affiliated with the Seller within
the meaning of Section 4001 of ERISA, and the rules and regulations promulgated
thereunder and/or Sections 414(b), (c), (m) or (o) of the Code, and the rules
and regulations promulgated thereunder.
"Xxxx of Sale" shall mean the Xxxx of Sale dated as of the Closing
Date executed by the Seller in the form of Exhibit I-A annexed hereto.
"Claims Fund" shall mean a segregated account to be established by the
Seller and overseen by the DOI, the balance of which shall be not less than $10
million (or such amount as may be approved by DOI) as of the Closing, consisting
of, among other funds, the entirety of the proceeds of the Purchase Price to be
paid by the Purchaser at Closing pursuant to Section 4 hereof and not less than
$2.5 million of the proceeds of the Xxxxx Transaction, and disbursements from
which shall be made solely for the purpose of satisfying the Seller's
obligations under the Claims Releases.
"Claims Release" shall have the meaning ascribed thereto in Section
10.3(b).
"Closing" shall mean the closing of the transactions contemplated
hereby.
"Closing Date" shall have the meaning ascribed thereto in Section 6.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial Contract" shall mean any group or individual health
benefits contract (including any endorsements, riders or other supplements
thereto or applications therefor) pursuant to which Seller receives prepaid
premium payments in exchange for arranging for the provision of comprehensive
healthcare services, except for any such contract providing benefits under the
Medicare, Medicaid or Child Health Plus programs. Commercial Contracts shall
include contracts that have lapsed but are within the reinstatement period
specified therein, subject to reinstatement in accordance with the terms of such
contracts.
"Commercial Member" or "Commercial Members" shall mean each and all
individuals enrolled in a health plan of the Seller in respect of whom premium
revenue is payable under a Commercial Contract as of the Effective Time.
"Conveyance Documents" shall mean the Xxxx of Sale, the Assignment and
Assumption Agreement, and such other instruments of assignment and conveyance of
the Assets as Purchaser deems necessary to effect such assignment and
conveyance, each in form and substance satisfactory to the Purchaser and its
counsel.
"DOH" shall mean the New York State Department of Health.
"DOI" shall mean the New York State Department of Insurance.
"Effective Time" shall mean 12:00 midnight on the Closing Date.
"Environmental Laws" shall mean all local, state, federal, foreign,
civil and criminal, common law, statutes, ordinances, codes, orders, decrees,
laws, permits, rules, guidelines, or regulations of any governmental authority
pertaining to or imposing liability or standards of conduct concerning
environmental regulation, Hazardous Materials (as hereinafter defined), health
and safety, contamination or clean-up including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
("CERCLA"), the Resource Conservation and Recovery Act, as amended ("RCRA"), the
Emergency Planning and Community Right-to-Know Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Solid Waste Disposal
Act, as amended, the Federal Water Pollution Control Act, as amended, the Clean
Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe
Drinking Water Act, as amended, the Occupational Safety and Health Act, as
amended, and all the state analogues thereto, including in all cases all
regulations adopted in respect of the foregoing whether presently in force or
coming into being and/or effectiveness hereafter.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" shall mean Kalkines, Arky, Xxxx & Xxxxxxxxx LLP,
special counsel to the Purchaser.
"Escrow Agreement" shall mean an escrow agreement among the Seller,
the Purchaser and the Escrow Agent, pursuant to which the Escrow Agent shall
hold and release the monies described in Section 4 hereof for the purposes
specified therein, and containing other customary terms and conditions.
"Excluded Assets" shall have the meaning ascribed thereto in Section
3.
"Financial Schedules" shall have the meaning ascribed to such term in
Section 8.8(c) hereof.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"GHMO" shall mean a New York corporation that is a direct or indirect
wholly-owned subsidiary of GHI to which a New York State health maintenance
organization license will be issued in connection with the consummation of the
transactions contemplated hereby.
"Governmental Entities" shall mean any governmental or regulatory
authority, entity, department, commission, board, agency or instrumentality,
whether domestic or foreign.
"Guaranty" shall mean a guaranty agreement pursuant to which WMG
unconditionally guarantees the full and timely payment and performance of all of
the obligations and liabilities of each of the Related Parties under the
Transaction Documents.
"Hazardous Material" or "Hazardous Materials" shall mean any hazardous
or toxic material, substance, or product or any pollutant or contaminant,
whether or not defined as such under Environmental Law, and shall include
without limitation, asbestos containing material; petroleum product, derivative,
compound or mixture; polychlorinated biphenyls; radioactive material;
lead-containing products; and any other substance which is prohibited by
applicable law, which may require removal, remediation, and/or encapsulation by
applicable law, or which may require a permit or special handling in its use,
collection, storage, treatment or disposal.
"Indemnified Party" shall mean any Person having a claim for
indemnification from an Indemnitor under Section 14.
"Indemnitor" shall mean any Person against whom an Indemnified Party
may make an indemnification claim under Section 14.
"IRS" shall mean the Internal Revenue Service.
"Laws" shall mean any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree.
"Leases" shall mean lease agreements between the Purchaser and the
landlord for each of the premises described in Exhibit III attached hereto,
providing for the lease of each of such premises for a term of 12 months
following the Closing, at a fair market rate of rent.
"Material Adverse Effect" shall mean an effect that is material and
adverse to the business, financial condition or operations of the Purchaser or
the Seller, as applicable, after the Effective Time.
"1997 Financial Statements" shall mean the audited financial
statements of the Seller for the period ending December 31, 1997, in the form
delivered to the Purchaser prior to the date hereof.
"1998 Financial Statements" shall mean the unaudited financial
statements of the Seller for the period ending December 31, 1998, in the form
delivered to the Purchaser prior to the date hereof.
"1999 Interim Financial Statements" shall mean the unaudited financial
statements of the Seller as of and for the two-month period ending February 28,
1999.
"Xxxxx" shall mean Xxxxx X. Xxxxx, M.D.
"Xxxxx Documents" shall have the meaning given thereto in Section
8.27.
"Xxxxx Transaction" shall mean the transactions pursuant to which
Xxxxx and/or one or more of his Affiliates shall, among other things, make a $5
million equity investment in WMG and provide management services to Seller and
WellCare of Connecticut, Inc., all as contemplated by that certain letter
agreement, dated April 21, 1999, between Xxxxx and WMG, as the same may be more
fully specified in the Xxxxx Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permits" shall mean franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders.
"Person" shall mean a natural person or a corporation, partnership,
limited liability company, trust, association or other entity, as the context
requires or admits.
"Primergy IPAs" shall mean Orange-Xxxxxxxx Health Care Alliance IPA,
Inc., Columbia-Xxxxxx Health Care Alliance IPA, Inc., Ulster Health Care
Alliance IPA, Inc. and Dutchess Health Care Alliance IPA, Inc.
"Provider Contracts" shall mean agreements between the Seller and
Providers pursuant to which Providers agree to render health care services to
Commercial Members.
"Provider Contract Assignment" shall mean, with respect to a Provider
Contract, an assignment to the Purchaser, in form and substance satisfactory to
the Purchaser, duly executed by the Provider that is a party thereto and stated
to be effective as of the Effective Time, of the portion of such Provider
Contract that is applicable to the delivery of services to the Commercial
Members.
"Providers" shall mean those individuals or entities rendering or
arranging for health care services to Commercial Members pursuant to a Provider
Contract, including but not limited to, inpatient facilities, primary and
specialty care physicians, ambulatory care clinics, clinical laboratory
facilities, providers of ancillary services, independent practice associations
and pharmacy benefits managers.
"Purchaser" shall mean GHI until such time as GHI assigns its rights
and interests hereunder to GHMO pursuant to Section 18, after which time
"Purchaser" shall be deemed to refer exclusively to GHMO.
"Real Property" shall have the meaning ascribed to such term in
Section 8.6.
"Regulations" shall mean the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Related Parties" shall mean, with respect to the Seller, WMG,
WellCare Development, Inc., WellCare of Connecticut, Inc., WellCare
Administration, Inc. and WellCare Medical Management, Inc.
"Related Party Non-Competition Agreement" shall mean an agreement to
be executed at the Closing by each of the Seller's Related Parties pursuant to
which such Related Parties agree to be bound by and observe the covenants
contained in Section 13.6 hereof.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA, other than a reportable event as to which provision
for 30-day notice to the PBGC would be waived under applicable regulations had
the regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"Retained Liabilities" shall have the meaning ascribed to such term in
Section 5.2.
"Schedules" shall mean the schedules that are attached to this
Agreement.
"Seller" shall mean WellCare of New York, Inc., a New York corporation
licensed as a health maintenance organization.
"Taxes" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer, transfer
gains, registration, value added, alternative or add-on minimum, privilege, ad
valorem, estimated, or other tax of any kind whatsoever, including any interest,
penalties or additions to tax attributable to any of the foregoing, whether
disputed or not.
"Taxpayer" shall mean the Seller and any predecessor of the Seller.
"Tax Return" shall mean all federal, state, local and foreign tax and
information returns, declarations, elections, statements, estimates and reports
or schedules attached to any returns (or any combination or amendment of the
foregoing) required to be supplied by a Person to any Governmental Entity in
connection with Taxes and shall include a claim for refund of Taxes.
"Transaction Documents" shall mean this Agreement, the Related Party
Non- Competition Agreement, the Lease, the Guaranty, the Transition Services
Agreement, and the Conveyance Documents.
"Transition Services Agreement" shall mean an agreement, to be
executed by the Seller and the Purchaser at the Closing, pursuant to which the
Purchaser agrees to provide to the Seller, following the Closing, certain
services or access to certain of the Assets in accordance with the material
terms of such arrangement set forth on Exhibit IV attached hereto.
"WellCare Providers" shall mean those individuals or entities
rendering or arranging for health care services to enrollees of any of
WellCare's commercial, Medicaid, Medicare or Child Health Plus health benefit
plans.
"WellCare Service Area" means each of the counties within New York
State in which the Seller is currently authorized to operate as a health
maintenance organization, namely: Warren, Washington, Saratoga, Rennsalaer,
Albany, Schenectady, Fulton, Montgomery, Schoharie, Otsego, Xxxxxx, Delaware,
Xxxxxx, Columbia, Ulster, Dutchess, Sullivan, Orange, Xxxxxx, Westchester,
Bronx, Queens, New York, Kings and Rockland.
"WMG" shall mean WellCare Management Group, Inc., the parent
corporation of Seller.
2. Purchase and Sale of Assets. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date and effective as of the
Effective Time: (i) the Seller shall transfer, sell, convey, assign and deliver
to the Purchaser, and the Purchaser shall purchase from the Seller, all of the
Assets, other than the Excluded Assets. To evidence such transfer, sale,
conveyance and assignment, at the Closing, the Seller shall execute and deliver
to the Purchaser, the Conveyance Documents, all in such form as shall be
reasonably acceptable to the Purchaser and its counsel. The "Assets" shall mean
and include all of the assets of the Seller that are used or useful in
connection with the Acquired Business (whether or not the same may be used or
useful in connection with any of the Seller's other lines of business) and that
are not specifically described as Excluded Assets in Section 3 and shall in any
event include:
2.1 Commercial Contracts. All of the Seller's right, title and
interest in and to the Commercial Contracts accruing after the Effective Time.
2.2 Provider Contracts. All of the Seller's right, title and interest
in and to the Provider Contracts accruing after the Effective Time, to the
extent the same relate to the delivery of services to the Commercial Members.
2.3 Contracts, Leases, Licenses, Permits, etc. All of the Seller's
right, title and interest in and to all contracts or agreements (whether written
or oral), leases, non-governmental licenses and permits and other documents and
agreements related to the Acquired Business that do not expressly constitute a
part of the Excluded Assets, other than those (x) described in Sections 2.1 or
2.2 above or (y) which the Purchaser has, by notice given to the Seller at least
five business days prior to the Closing Date, declined to accept as part of the
Assets.
2.4 Medical Management Materials. All of the Seller's written
policies, procedures and manuals used or useful in the Acquired Business,
including, but not limited to, medical management materials, materials related
to utilization review and quality assurance activities and provider manuals; it
being understood and agreed that the Seller and the Purchaser shall each have
full right to use and exploit such materials in connection with their respective
product lines from and after the Closing.
2.5 Intangible Assets. All of the Seller's rights in and to the
Acquired Business, including the going concern value of the Acquired Business
and the goodwill associated therewith, all of the Seller's accounts receivable
and rights to receive payment in respect of services rendered after the
Effective Time, and all other intangible assets of the Seller that do not
expressly constitute a part of the Excluded Assets.
2.6 Computer Systems and Software. All of the Seller's right, title
and interest in and to and rights of access to all clinical, diagnostic and data
analysis, storage and retrieval computer systems used or useful in the Acquired
Business, and all billing, bookkeeping and accounting computer systems used or
useful in the Acquired Business, including in each case all associated software
and operating systems.
2.7 Inventory and Supplies. All of the Seller's inventory and other
supplies (both on hand and on order) used or useful in the Acquired Business, as
it exists on the Closing Date, including, but not limited to, inventories of
provider directories, provider and member manuals, member identification cards,
marketing materials and other collateral materials, together with all rights of
the Seller against suppliers of the same.
2.8 Books and Records. All documents, records, operating and protocol
manuals and files, including, without limitation, lists of all the names,
addresses, identification numbers and medical and claims history (to the maximum
extent permissible under applicable law) of Commercial Members, minutes of
medical management committee meetings, credentialing files, and service logs.
2.9 Insurance Proceeds. All insurance proceeds of the Seller received
after the Effective Time arising in connection with damage to the Assets, any
Retained Liability that is asserted against the Purchaser or in respect of any
liability of the Seller that constitutes an Assumed Liability.
2.10 Other Assets. All other intangible and tangible assets of the
Seller associated with or used in the operation of the Acquired Business and
that do not expressly constitute a part of the Excluded Assets, including,
without limitation: all computer software and electronic data, in whatever form
contained; technical data, codes and information necessary for Purchaser to
access data, books and records of Seller conveyed hereunder; all mailing lists;
all sales records; all materials, records, files and other data relating to
advertising; all research, statistical, production, marketing and promotional
materials, records, files and other data; all administration and business
development materials, records, files and other data; all regulatory compliance
files, correspondence, materials and other data; all business post office boxes
and business telephone listings; all research and development results and other
know-how; all warranties, guaranties, contract rights and miscellaneous rights;
and all other materials, records, files and data of the Seller, in each case
excluding the Excluded Assets.
3. Excluded Assets. Notwithstanding any other provision of this Agreement,
the Seller shall not sell, assign or transfer to the Purchaser and the Purchaser
shall not purchase from the Seller the following assets of the Seller
(collectively, the "Excluded Assets"):
3.1 Corporate Books and Certain Other Records. The corporate minute
books of the Seller and any records that by law the Seller is required to retain
in its possession.
3.2 Financial Assets. Subject to Section 5.3, cash, cash equivalents
and negotiable securities held by the Seller.
3.3 Accounts Receivable. The Seller's notes and accounts receivable
arising from the operation of the Acquired Business prior to the Effective Time,
whether billed or unbilled, recorded or unrecorded, or assigned for collection.
3.4 Real Estate. Seller's interests, if any, in real property or any
leases thereof, other than the real property which is the subject of the Leases.
3.5 Certain Contractual Rights. Seller's rights and interests in and
to all contracts, agreements, leases, licenses and other documents and
instruments the obligations and liabilities in respect of which the Purchaser
does not assume pursuant to Section 5 hereof.
3.6 Interests in Subsidiaries. Any interest held by the Seller in any
of its subsidiaries.
3.7 Insurance Claims. Seller's claims against insurers or carriers in
respect of stop loss, coordination of benefits or other similar claims to the
extent the same arise for periods prior to the Effective Time but excluding
claims in respect of Retained Liabilities that are asserted against the
Purchaser.
3.8 Claims Against Providers. Seller's claims against Providers under
the Provider Contracts that arise in respect of periods ending on or prior to
the Effective Time.
3.9 Name. Seller's corporate name.
3.10 Tax Refunds. Any tax refund of the Seller of any type or
description.
3.11 Pre-Effective Time Rights, Claims, and Obligations. All rights,
claims and obligations of the Seller relating to the Assets or the Acquired
Business that have accrued prior to the Effective Time and are not expressly
included in the Assets.
4. Consideration. As consideration for the Assets to be transferred to the
Purchaser hereunder, the Purchaser shall pay to the Seller a purchase price of
five million dollars ($5,000,000), subject to adjustment as provided herein (as
the same may be adjusted, the "Purchase Price"), and shall at Closing assume the
Assumed Liabilities described in Section 5. The Seller and the Purchaser agree
that the Purchase Price shall be disbursed as follows: (i) at the Closing, the
sum of four million dollars ($4,000,000) shall be remitted by the Purchaser
directly to the Claims Fund, by bank check, certified check or wire transfer, as
the Purchaser may elect, in accordance with payment instructions for each of
such methods to be furnished to the Purchaser prior to the Closing; and (ii) the
sum of one million dollars ($1,000,000) (the "Escrow Deposit") shall be remitted
by the Purchaser directly to the Escrow Agent, to be held and released by the
Escrow Agent in accordance with the terms of the Escrow Agreement.
4.1 Post-Closing Purchase Price Adjustment.
(a) In the event that the number of Acquired Members is less than
25,000, the Purchase Price shall be decreased by the product of (x) $100 and (y)
the amount by which 25,000 exceeds the number of Acquired Members. The term
"Acquired Members" shall mean, for purposes of subsection (b) below, those
Commercial Members in respect of whom the premium payable for the month in which
the Closing occurs is received in full by the Purchaser by no later than the
last day of such month (the "First Measurement Date"), and for purposes of
subsection (c) below, those Commercial Members in respect of whom the premium
payable for the month in which the Closing occurs is received in full by the
Purchaser by no later than the last day of the second calendar month following
the month in which the Closing occurs (the "Second Measurement Date").
(b) Within five days after the First Measurement Date, the
Purchaser shall deliver to the Seller a statement as to the Purchaser's
determination of the number of Acquired Members as of the First Measurement Date
(the "First Adjustment Statement"), together with reasonable supporting
documentation therefor. The First Adjustment Statement shall become final and
binding on the 10th day following the First Measurement Date, unless the Seller
shall furnish to the Purchaser on or prior to such date written notice of the
Seller's desire to dispute the First Adjustment Statement. In such event, the
following right of audit shall apply (the "Audit Right"): the Seller shall have
the right to cause a firm of certified public accountants, mutually acceptable
to the Purchaser and the Seller, to conduct an audit of the books and records of
the Purchaser, but only as such books and records relate to the determination of
the number of Acquired Members; such audit shall be done during the normal
business hours of the Purchaser and shall be conducted in a reasonable manner
consistent with general auditing practices; the results of such audit shall be
final and binding on the parties, absent manifest error; and the cost of such
audit shall be borne by the Seller, provided, however, that if it shall be
determined that the actual number of Acquired Members exceeds the number of
Acquired Members set forth in the First Adjustment Statement by 10% or more, the
Purchaser shall pay the cost of such audit. If, following the finalization of
the First Adjustment Statement, the number of Acquired Members as of the First
Measurement Date shall result in a downward adjustment to the Purchase Price,
the amount thereof (the "Downward Adjustment") shall be paid to the Purchaser as
follows: (i) the Downward Adjustment shall be released to the Purchaser by the
Escrow Agent from the Escrow Deposit; and (ii) to the extent that the Downward
Adjustment shall be greater than the Escrow Deposit, the excess shall be paid to
the Purchaser by the Seller within 15 days following the finalization of the
First Adjustment Statement. If and to the extent that all or any portion of the
Escrow Deposit is not needed to be applied towards payment of a Downward
Adjustment, the amount thereof shall be released to the Seller by the Escrow
Agent within two business days following the finalization of the First
Adjustment Statement.
(c) Within 15 days after the Second Measurement Date, the
Purchaser shall deliver to the Seller a statement as to the Purchaser's
determination of the number of Acquired Members as of the Second Measurement
Date (the "Second Adjustment Statement"), together with reasonable supporting
documentation therefor. The Second Adjustment Statement shall become final and
binding on the 30th day following the Second Measurement Date, unless the Seller
shall furnish to the Purchaser on or prior to such date written notice of the
Seller's desire to dispute the Second Adjustment Statement. In such event, the
Audit Right shall apply. If, following the finalization of the Second Adjustment
Statement, the number of Acquired Members as of the Second Measurement Date
shall exceed the number of Acquired Members as of the First Measurement Date
(such excess, the "Recount Number"), the Purchaser shall pay to the Seller
within two business days following the finalization of the Second Adjustment
Statement an amount equal to the product of (x) $100 and (y) the Recount Number.
4.2 Allocation of Consideration. The consideration payable by the
Purchaser to the Seller pursuant to Section 4 hereof shall be reasonably
allocated by the Purchaser to the Assets according to the respective fair market
value of each, as determined by the Purchaser on a preliminary basis prior to
Closing (which preliminary allocation shall be subject to change by the
Purchaser at any time on two days' prior notice until Closing Date) and
otherwise in accordance with the residual method described in Regulations
promulgated under Section 338(b)(5) of the Code (the "residual method"). Upon
the Purchaser's determination of the fair market value of each category of the
Assets and the allocation of consideration among such Assets in accordance with
the residual method, the Purchaser shall give notice to the Seller of such
determination. The Purchaser and the Seller each agree to report the
transactions contemplated hereby for federal income tax purposes in a manner
consistent with such allocation for federal, state and local tax purposes and to
comply with all notice, filing and reporting obligations described in Code
Section 1060.
4.3 Assignment and Assumption Agreement. As further consideration for
the conveyance of the Assets, the Purchaser shall deliver to the Seller at the
Closing the Assignment and Assumption Agreement to evidence the assumption of
the obligations and liabilities to be assumed by the Purchaser pursuant to
Section 5 below.
5. Assumption and Retention of Liabilities. Subject to the Closing and
effective as of the Effective Time, the Purchaser shall assume and discharge
only the obligations and liabilities of the Seller expressly described in
Section 5.1 (such obligations and liabilities are collectively referred to
hereinafter as the "Assumed Liabilities").
5.1 Obligations Under Certain Agreements. The Purchaser shall assume
the obligations of the Seller accruing after the Effective Time under (x) each
Commercial Contract, (y) each Provider Contract, and (z) under each other
contract listed or described on Schedule 5.1; in each case to the extent that
(i) the Seller has provided to the Purchaser a true, correct and complete copy
of such contract (if such contract is in writing) or a description of the
obligations of the Seller under such agreement that is true, correct and
complete (if such agreement is not in writing), and the obligations under each
agreement to which the Seller is a party and that is not by the terms of any
such contract required to be described therein and (ii) the liabilities in
respect of such agreements were reserved for or reflected on the 1998 Financial
Statements and the 1999 Interim Financial Statements (unless the applicable
accounting standard did not require such liabilities to be reserved for or
otherwise reflected); provided that, except as set forth in Section 7, the
Purchaser shall not be deemed to have assumed the obligations of the Seller
accruing after the Effective Time under any agreement, contract, or instrument
that is not validly assigned to the Purchaser (including because the consent of
any third party is required as a condition precedent to such assignment and has
not been obtained as of the Effective Time) unless and until such assignment is
validly consummated pursuant to Section 7.
5.2 Retained Liabilities. Except as expressly provided in Section 5.1,
the Purchaser shall not assume, and the Seller shall retain, discharge and pay,
and hold the Purchaser harmless from and against, as contemplated by Section 14
hereof, any and all liabilities of the Seller, whether fixed or contingent,
accrued or unaccrued, liquidated or unliquidated, disclosed or undisclosed, of
any kind or nature whatsoever. The liabilities to be retained by the Seller as
contemplated by this Section 5.2 are hereinafter referred to as the "Retained
Liabilities." The Retained Liabilities shall include, without limitation, the
following:
(a) liabilities and obligations of the Seller accruing prior to
the Effective Time under each Commercial Contract and each other
contract listed on Schedule 5.1;
(b) indebtedness and other obligations or guarantees of the
Seller, including, without limitation, the accounts payable and other
current liabilities of the Seller excepting solely the contractual
obligations of the Seller accruing after the Effective Time and
included in the Assumed Liabilities;
(c) federal, state, or local tax liabilities or obligations of
the Seller for Taxes, including, without limitation, Taxes arising in
connection with the consummation of the transactions contemplated
hereby;
(d) liabilities for any and all claims by or on the behalf of the
Seller's shareholders, officers, directors, employees or contractors,
including, without limitation, liability arising under any Benefit
Plan including, but not limited to, any pension, profit sharing,
deferred compensation, severance or termination pay or any employee
health and welfare benefit plans, liability for any EEOC claim, OSHA
claim, employment discrimination claim (whether based on sex, age,
race, or otherwise), wage and hour claim, unemployment compensation
claim, worker's compensation claim and the like, and liability for all
employee wages and benefits, and taxes or other liability related
thereto;
(e) any liability or obligation of the Seller or the Seller's
shareholders, members, directors, officers, employees, agents, or
independent contractors, with respect to Hazardous Materials or
Environmental Laws, whether known or unknown at the Effective Time;
(f) liabilities or obligations arising out of any breach by the
Seller at any time prior to the Effective Time of any contract or
commitment, whether or not assumed by the Purchaser;
(g) any liability arising out of or in connection with claims for
acts or omissions of the Seller or the Seller's shareholders, members,
directors, officers, employees, agents, or independent contractors,
which allegedly occurred prior to the Effective Time, including,
without limitation, all malpractice, professional liability and
general liability claims, and claims of and liabilities to the
Commercial Members against the Seller, whether or not same are
pending, threatened, known or unknown;
(h) liabilities or obligations in respect of contracts or
agreements of the Seller which are not described on Schedule 5.1 and
expressly assumed in writing by the Purchaser;
(i) subject to Section 5.3, any and all debts, liabilities and
obligations of the Seller to Providers (or to health care providers
not under contract to Seller) for services rendered to Commercial
Members prior to the Effective Time or in respect of periods ending on
or prior to the Effective Time;
(j) liabilities or obligations arising out of any penalties,
fines, assessments or claims, imposed by any Governmental Entity
relating to any failure or alleged failure of the Seller to comply
with any applicable Laws; and
(k) any debt, obligation, expense, or liability of the Seller
(including Taxes of the Seller and the shareholders) arising out of or
incurred in respect of any transaction of the Seller occurring after
the Effective Time including any violation by the Seller of any law,
regulation, or ordinance at any time.
5.3 Certain Financial Arrangements.
(a) The parties acknowledge and agree that the Seller shall be
entitled to all revenue attributable to the Acquired Business for periods ending
on or prior to the Effective Time and that the Purchaser shall be entitled to
all revenue attributable to the Acquired Business for periods from and after the
Effective Time. Accordingly, (i) to the extent that following the Closing the
Purchaser receives any revenue to which the Seller is entitled hereunder, it
shall promptly remit the same to the Seller and (ii) to the extent that the
Seller shall have received prior to the Closing or receives following the
Closing any revenue to which the Purchaser is entitled hereunder, it shall remit
the same to the Purchaser at the Closing or promptly upon receipt thereof, as
applicable.
(b) In the event any Commercial Member is in the course of an
inpatient hospital stay at the Effective Time, the Seller shall pay and be
responsible for the total cost of such inpatient stay multiplied by a fraction,
the numerator of which is the number of inpatient days prior to the Effective
Time and the denominator of which is the total number of days of the inpatient
stay. The Purchaser shall pay and be responsible for the total cost of such
inpatient stay multiplied by a fraction, the numerator of which is the number of
inpatient days subsequent to the Effective Time and the denominator of which is
the total number of days of the inpatient stay.
(c) In the event any Commercial Member is in the course of
prenatal care at the Effective Time, the parties shall allocate the global cost
for the pre-natal treatment, post-natal treatment and delivery associated with
the pregnancy among the following treatment phases: first trimester, second
trimester, third trimester, delivery and post-natal care. The portion of the
total cost allocated to each of these treatment phases shall conform to
customary industry standards. The Seller shall pay and be responsible for the
cost of those treatment phases occurring prior to the Effective Time and the
Purchaser shall pay and be responsible for the cost of those treatment phases
occurring subsequent to the Effective Time. To the extent the Effective Time
falls within a treatment phase with respect to any pregnancy, the Seller shall
pay and be responsible for the percentage of the cost of such treatment phase
equal to the percentage of calendar days of such treatment phase prior to the
Effective Time, and the Purchaser shall pay and be responsible for the
percentage of the cost of such treatment phase equal to the percentage of
calendar days of such treatment phase subsequent to the Effective Time.
(d) In the event any Commercial Member is in the course of
treatment at the Effective Time not subject to either Section 5.3(b) or 5.3(c),
and the Seller has agreed to pay the Provider providing such treatment an
indivisible fee that covers the entire course of treatment, the Seller shall pay
and be responsible for the portion of the treatment provided prior to the
Effective Time and the Purchaser shall pay and be responsible for the portion of
the treatment provided subsequent to the Effective Time. The parties shall work
cooperatively to develop, prior to the Closing, a system for apportioning the
costs associated with such courses of treatment in accordance with this Section
5.3(d).
(e) The Purchaser and the Seller acknowledge and agree that
except for the Assumed Liabilities and those items to be prorated at Closing
pursuant to this Section, the Seller will retain and pay in a timely manner all
bills, obligations, indebtedness, and other liabilities due, accrued, incurred,
or arising in connection with the ownership of the Assets or the operation
and/or maintenance of the Assets for all periods ending on and prior to the
Closing Date. After the Closing Date (i) invoices that are received by the
Purchaser that are the responsibility of the Seller hereunder will be
accumulated and delivered to the Seller on a weekly basis for payment, and (ii)
invoices that are received by the Seller that are the responsibility of the
Purchaser hereunder will be accumulated and delivered to the Purchaser on a
weekly basis for payment.
(f) The parties agree that all payments for utility services,
contract services, accrued rent, accrued vacation pay and sick leave, ad valorem
and personal property taxes relating to the Assets shall be prorated between the
Seller and the Purchaser as of the Effective Time.
(g) The Seller and the Purchaser shall cooperate with one another
in good faith and with all deliberate speed in determining and making payment of
any post-closing adjustments or reconciliations that may be necessary in order
to fully and properly effectuate the provisions of this Section 5.3.
6. Closing. Subject to the satisfaction or waiver of the conditions set
forth in Sections 11 and 12 of this Agreement, the Closing shall take place at
10:00 a.m. at the offices of the Purchaser, on June 1, 1999 or such other date
as may be mutually agreed upon by the parties (the "Closing Date"). All of the
transactions contemplated hereby shall be effective as of the Effective Time.
7. Non-Assignable Contracts. Notwithstanding anything to the contrary in
this Agreement, this Agreement shall not constitute an agreement to assign any
contract the assignment of which is not permitted under applicable law or
pursuant to its terms or is not permitted without the consent of any other party
to the contract if such assignment would constitute a breach of, or cause a loss
of contractual benefits under, any of the contracts. The Seller shall use its
best efforts to obtain any and all such consents required by the terms of such
contracts prior to the Closing Date and, if any such consents have not been so
obtained, the Seller shall cause the benefits of any such contract that is
included in the Assets to be afforded to the Purchaser for any period prior to
the obtaining of such consent. Nothing in this Section 7 shall diminish or
affect any representation or warranty of the Seller in Section 8 hereof.
8. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Purchaser as of the date of this Agreement (or,
in the case of any representation or warranty expressly made as of another date,
as of such other date) as follows:
8.1 Organization and Qualification. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Seller has all requisite corporate power and authority and all
necessary licenses and permits to carry on its business as it has been and is
currently being conducted, to own, lease and operate the Acquired Business and
Assets and to enter into and perform this Agreement and consummate the
transactions contemplated hereby. The Seller is duly qualified to do business
and is in good standing as a corporation under the laws of all jurisdictions
wherein the conduct of its business or the ownership, leasing or operation of
its properties and assets requires such qualification, and where the failure of
the Seller to obtain such qualification would have a Material Adverse Effect.
8.2 Certificate of Incorporation and By-Laws. The Seller has
heretofore furnished to the Purchaser complete and correct copies of the
Certificate of Incorporation and the By-Laws, in each case as amended or
restated, of the Seller. The Seller is not in violation of any of the provisions
of its Certificate of Incorporation or By-Laws.
8.3 Authority. The Seller has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by the Seller. The execution and delivery of this Agreement by the
Seller and the consummation by the Seller of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Seller are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Seller and, assuming the due
authorization, execution and delivery thereof by the Purchaser, constitutes the
legal, valid and binding obligation of the Seller, enforceable in accordance
with its respective terms, except as such enforceability may be qualified by
equitable principles and pursuant to laws enacted for the protection of
creditors.
8.4 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Seller
does not, and the performance of this Agreement by the Seller will not (i)
conflict with or violate the Certificate of Incorporation or By-Laws, in each
case as amended or restated, of the Seller, (ii) assuming that all necessary
consents of Governmental Entities described in Section 11.7(b) will have been
obtained as of the Closing, conflict with or violate any Laws in effect as of
the date of this Agreement and applicable to the Seller or by which its
properties are bound, or (iii) assuming that all necessary consents of third
parties described in Sections 11.8 or 11.9, as applicable, will have been
obtained as of the Closing, result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Seller pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Seller is a party or by
which the Seller or any of its properties is bound.
(b) Assuming that all necessary consents of Governmental Entities
described in Section 11.7(b) will have been obtained as of the Closing, the
execution and delivery of this Agreement by the Seller does not, and the
performance of this Agreement by the Seller will not require the Seller to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Entities based on laws, rules,
regulations and other requirements of Governmental Entities in effect as of the
date of this Agreement, except for any required filings or approvals set forth
on Schedule 8.4.
8.5 Permits; Compliance. As of the date of this Agreement, the Seller
is in possession of all Permits necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted and there
is no action, proceeding or investigation pending or, to the best knowledge of
the Seller, threatened that could result in suspension or cancellation of any of
the Permits except as specified in Schedule 8.5. As of the date of this
Agreement, except as specified in Schedule 8.5 the Seller is not in conflict
with, or in default or violation of (i) any Law applicable to the Seller or by
which any of its respective properties is bound or subject to or (ii) any of the
Permits. During the period commencing on January 1, 1996 and ending on the date
hereof, the Seller has not received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of
material Laws, including, without limitation, any notices issued by DOH, DOI,
the New York State Attorney General, the United States Department of Health and
Human Services (or its Office of the Inspector General) or quasi-governmental
agencies, other than those notices listed on Schedule 8.5, true, correct and
complete copies of which have heretofore been furnished to the Purchaser.
8.6 Real Property; Other Assets.
(a) Seller owns no real property. Schedule 8.6 contains a true,
correct and complete list and description of all of the Seller's leasehold
interests in any real property (the "Real Property").
(b) The Real Property and the use thereof, as currently used by
the Seller, does not violate any applicable zoning, subdivision, land use and
building laws, codes and requirements except noncompliances that do not (i)
interfere with the continued use of the Real Property in the conduct of the
normal operation of the Acquired Business or (ii) materially and adversely
affect the operations and/or business of the Seller taken as a whole.
8.7 Environmental Matters. The Seller represents and warrants that, to
the best of its knowledge, (i) no Hazardous Material has been used,
manufactured, handled, stored, treated or processed on or in, or generated from,
at any Real Property except in strict compliance with Environmental Law, (ii)
except in strict compliance with Environmental Laws, no Hazardous Material has
been spilled, released, discharged, disposed, transported, placed or otherwise
caused to be found in, on, onto, over, under or from any portion of the Real
Property, (iii) no Hazardous Material has been used in the construction,
alteration, repair or replacement of all or any portion of the Real Property or
the Assets, and (iv) neither the Real Property nor the Assets are in violation
of any Environmental Law. To the best of the Seller's knowledge, all such
arrangements, if any, comply with current applicable laws, rules and regulations
and all such third parties are duly licensed and bonded as required by
applicable laws rules and regulations.
8.8 Financial Statements.
(a) The Seller has delivered to the Purchaser true, correct and
complete copies of the (i) 1997 Financial Statements together with the report
thereon of the Seller's independent certified public accountants, (ii) the 1998
Financial Statements and (iii) the 1999 Interim Financial Statements. Each of
such financial statements (including, in each case, any related notes thereto)
(i) has been prepared from the books and records of the Seller in accordance
with GAAP, and (ii) fairly presents the financial position of the Seller as of
the respective dates thereof and the results of operations and cash flows for
the periods indicated (subject in the case of the 1999 Interim Financial
Statements to normal and recurring year-end adjustments).
(b) Except as may be set forth on Schedule 8.8(b) hereto, the
Seller knows of no liabilities, nor of any basis for any liabilities, relating
to the Acquired Business, either accrued, absolute, contingent or otherwise,
except: (i) those reflected on the 1999 Interim Financial Statements in
accordance with GAAP, and not paid or discharged prior to the Closing Date, (ii)
those incurred, consistently with past business practice, in or as a result of
the ordinary course of the Acquired Business since the date of the 1999 Interim
Financial Statements, and disclosed or not required to be disclosed pursuant
hereto, and (iii) those disclosed in this Agreement or on the Schedules hereto,
or for which an exception to inclusion on such Schedules is provided in this
Agreement. For purposes of this Section 8.8(b) only, the term "liabilities"
shall include, without limitation, any direct or indirect indebtedness, claim,
loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, liquidated or unliquidated, secured or unsecured.
(c) Attached hereto as Schedule 8.8(c) are copies of the
following financial schedules prepared by the Seller with respect to the
Acquired Business (the "Financial Schedules") for each month since January 1,
1999: (a) the premium revenue of the Acquired Business actually received on a
cash basis, by the Seller by region; (b) the medical costs of the Acquired
Business actually incurred by the Seller on an accrual basis during such month
by region; and (c) a comparison for each such month of the actual experience of
the Seller by region in respect of incurred but not reported claims for medical
expenses as compared to the reserves established for such month by the Seller
(without giving effect to any subsequent adjustment to such reserves). The
Financial Schedules have been prepared in accordance with sound accounting
practices and the claims liabilities reflected thereon have been prepared in
accordance with the Actuarial Standards of Practice.
The books and records included as part of the Assets contain complete and
accurate original entries that are consistent with and reflective of the
information contained in the Financial Schedules in all material respects. The
reserves for claims incurred but not reported and the reserves for claims
reported but not paid with respect to the Acquired Business that are reflected
in the Financial Schedules make sufficient provision for such liabilities except
as specifically noted in the Financial Schedules.
(d) Schedule 8.8(d) sets forth, for the year ending December 31,
1998 and for the time period up to the date hereof, a schedule reflecting claims
for medical expenses in excess of $50,000 in the aggregate for any single
Commercial Member for either such period (together with a statement as to
whether any reinsurance claim has been made with respect to such expenses).
8.9 Absence of Certain Changes or Events. Except for the execution of
this Agreement and except for the Xxxxx Transaction, during the period
commencing January 1, 1999, and ending on the date hereof, the Seller has
conducted its business only in the ordinary course and in a manner consistent
with past practice and there has not been: (i) any material damage, destruction
or loss (not covered by insurance) with respect to any material assets of the
Seller that are used or useful in the Acquired Business; or (ii) any change by
the Seller of its accounting methods, principles or practices that is relevant
to the Acquired Business.
8.10 Absence of Litigation. As of the date of this Agreement, except
as set forth on Schedule 8.10 hereto, (i) there is no claim, action, suit,
litigation, proceeding, arbitration or, to the best knowledge of the Seller,
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the best knowledge of the Seller,
threatened in writing against the Seller or any properties or rights of the
Seller, and (ii) neither the Seller nor the Real Property is subject to any
continuing order of, consent decree, settlement agreement or other similar
written agreement with, or, to the best knowledge of the Seller, continuing
investigation by, any Governmental Entity or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator, including,
without limitation, cease-and-desist or other orders. To the best of the
Seller's knowledge, there are no actions, suits, claims, investigations or
proceedings pending or threatened against any Provider relating to the provision
of health care services by such Provider which have been brought or threatened
by or on behalf of a Commercial Member which, if adversely determined, would
disqualify such Provider from participation in the Seller's provider network
under the Seller's current credentialing criteria.
8.11 Employee Benefit Plans; Labor Matters.
(a) With respect to each Benefit Plan maintained or contributed
to by the Seller, or with respect to which the Seller could incur liability
under Section 4069, 4212(c) or 4204 of ERISA, the Seller has made available to
the Purchaser a true and correct copy of (i) the most recent annual report (Form
5500) filed with the IRS, (ii) such Benefit Plan, (iii) each trust agreement
relating to such Benefit Plan, (iv) the most recent summary plan description for
each Benefit Plan for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Benefit Plan subject to Title
IV of ERISA and (vi) the most recent determination letter, if any, issued by the
IRS with respect to any Benefit Plan qualified under Section 401(a) of the Code.
(b) With respect to each Benefit Plan, no event has occurred and,
to the best knowledge of the Seller, there exists no condition or set of
circumstances, in connection with which the Seller could be subject to any
liability under the terms of such Benefit Plan, ERISA, the Code or any other
applicable Law.
(c) The Seller has made available to the Purchaser all collective
bargaining or other labor union contracts to which the Seller is a party
applicable to persons employed by the Seller and no collective bargaining
agreement is being negotiated by the Seller. As of the date of this Agreement,
there is no pending or threatened labor dispute, strike or work stoppage against
the Seller which may interfere with the business activities of the Seller. As of
the date of this Agreement, to the best knowledge of the Seller, neither the
Seller nor any of its representatives or employees have committed any unfair
labor practices in connection with the operation of the business of the Seller,
and there is no pending or threatened charge or complaint against the Seller by
the National Labor Relations Board or any comparable state agency.
(d) The Seller has made available to the Purchaser (i) copies of
all employment agreements with employees of the Seller; (ii) copies of all
agreements of the Seller with consultants who are individuals obligating the
Seller to make annual cash payments in an amount exceeding $100,000; (iii) a
schedule listing all employees of the Seller who have executed a non-competition
agreement with the Seller; (iv) copies of all severance agreements, programs and
policies of the Seller with or relating to its employees; and (iv) copies of all
plans, programs, agreements and other arrangements of the Seller with or
relating to its employees which contain change-in-control provisions.
(e) Except as provided in the employment agreements referred to
in clause (i) of Section 8.11(d), or as otherwise required by Law, (x) no
Benefit Plan provides retiree medical or retiree life insurance benefits to any
person and (y) the Seller is not contractually obligated (whether or not in
writing) to provide any person with life insurance or medical benefits upon
retirement or termination of employment.
8.12 Taxes.
(a) The Taxpayer has duly and timely filed, within any extensions
for filings secured by the Taxpayer, all Tax Returns required to be filed by it
prior to the date hereof. All such Tax Returns were correct and complete in all
material respects. The Taxpayer has paid in full all Taxes (whether or not shown
on a Tax Return) required to be paid by the Taxpayer. The Taxpayer has made
adequate provision in the 1999 Interim Financial Statements, in conformity with
GAAP, for the payment of all accrued Taxes not yet payable as of the date of
such 1999 Interim Financial Statements. All Taxes which the Taxpayer has been
required to collect or withhold have been duly collected or withheld and, to the
extent required when due, have been or will be duly and timely paid to the
proper taxing authority.
(b) To the extent that the Tax Returns of the Taxpayer have been
examined by the applicable Governmental Entities for prior periods, all such
examinations have been completed and all material issues raised therein have
been resolved. Except for an audit of the Seller scheduled by the IRS for June,
1999, there are no audits, inquiries, investigations or examinations relating to
the Taxpayer's Tax Returns pending or of which the Seller has received notice
(either in writing or verbally, formally or informally), and there are no claims
which have been asserted relating to the Taxpayer's Tax Returns filed for any
year which if determined adversely would result in the assertion by any
governmental entity of any material Tax deficiency against the Taxpayer if the
same would have a Material Adverse Effect. Except as set forth on Schedule 8.6,
there have been no waivers or extensions of statutes of limitations by the
Taxpayer sought or obtained by the Taxpayer. No claim has ever been made by a
Governmental Entity in a jurisdiction where the Taxpayer does not file a Tax
Return that Taxpayer is or may be subject to taxation by that jurisdiction.
Except as set forth on Schedule 8.6 hereto, there are no mortgages, pledges,
liens, encumbrances, charges or other security interests on any of the Assets
that arose in connection with any failure (or alleged failure) to pay any Taxes.
There are no liens with respect to Taxes upon any of the Assets. To the best of
the Seller's knowledge, no facts exist that would constitute grounds for the
imposition of any lien with respect to Taxes upon any of the Assets, or that
would otherwise obligate the Purchaser to pay any Taxes related to the Assets or
the operation of the Acquired Business prior to the Closing.
(c) No property of the Taxpayer is property which the Purchaser
is or will be required to treat as owned by another person either pursuant to
the provisions of former Section 168(f) (safe harbor leasing provisions) of the
Code or pursuant to the relevant caselaw. The Taxpayer is not a party to any
tax-sharing agreement or similar arrangement with any other party. The Taxpayer
has not been a United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). The Taxpayer has not made a disclosure on a Tax Return
pursuant to Code Section 6662(d)(2)(B)(ii) and the Regulations thereunder. The
Taxpayer has not made, nor is it obligated to make, any payments, and the
Taxpayer has not been a party to any agreement that under certain circumstances
would obligate it to make any payments, that will not be deductible under Code
Section 280G.
(d) The Taxpayer has no liability for the Taxes of any other
party (A) as a transferee or successor, (B) by contract, or (C) otherwise.
8.13 Certain Agreements.
(a) Schedule 8.13(a) hereto contains a true, correct and complete
list of all material leases, licenses, permits and other documents and
agreements (whether written or oral) pursuant to which the Seller has (i)
obtained the right to use or occupy any real or personal property, or (ii)
granted to any other party (including any Affiliates of the Seller) the right to
use any property, with such list also setting forth, with respect to each item
on such list not in writing, the date thereof and the names of all parties
thereto, and true, correct and complete copies of all such written leases,
licenses, permits and other documents and agreements, together with all
amendments thereto, and a true, accurate and complete summary of the terms of
each such oral agreement listed on Schedule 8.13(a) have been provided by the
Seller to the Purchaser.
(b) Schedule 8.13(b) hereto contains a true, correct and complete
list of all purchase, sales, administrative services and management contracts of
the Seller relating to the Acquired Business that involve more than $10,000 in
any instance and true, correct and complete copies of all written contracts and
true, correct and complete written summaries of all oral agreements listed on
Schedule 8.13(b) have been provided by the Seller to the Purchaser.
(c) Schedule 8.13(c) hereto contains a true, correct and complete
list of all material contracts, commitments, arrangements or agreements of the
Seller with any Provider pursuant to which Commercial Members have received
health care services during the six-month period ending on the date hereof, and
true, correct and complete copies of all agreements listed on Schedule 8.13(c)
have been provided by the Seller to the Purchaser. All such Provider Contracts
are in writing, were entered into by the Seller in the ordinary course of its
business and constitute valid and binding agreements of the Seller, and to the
best knowledge of the Seller, of the other parties thereto. Except for Provider
Contracts entered into prior to January 1, 1997, the forms of all Provider
Contracts and any risk sharing provisions contained therein have been submitted
for approval by DOH to the extent required by DOH rules and regulations, and the
Seller has no reason to believe that any of such forms or provisions will not
ultimately be approved by DOH materially in form and substance as previously
submitted. To the best knowledge of the Seller, no Provider has expressed an
intent in writing or otherwise, whether or not legally binding, to disenroll as
a provider of health care services to Seller, terminate its Provider Contract or
otherwise cease to do business with the Seller except as specified on Schedule
8.13(c). Assuming the receipt of all consents and other instruments contemplated
by Sections 11.8 and 11.9, the Seller's assignment to the Purchaser of each
Provider Contract designated by the Purchaser pursuant to Section 2.2 does not
breach, and will not result in the breach of, result in or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the cancellation or unilateral modification or
amendment of, or accelerate the performance required by, the Provider Contracts
or any other agreement or authority to which the Seller is subject.
(d) Schedule 8.13(d) hereto contains a true, correct and complete
list of all agreements, commitments and other arrangements which are, or shall
as of the Closing Date be, in effect between or relate to the Seller and any and
all employees whose duties relate in any material respect to the Acquired
Business, and true, correct and complete copies of all agreements, commitments
and other arrangements listed on Schedule 8.13(d) have been provided by the
Seller to the Purchaser.
(e) Schedule 8.13(e) hereto contains a true, correct and complete
list of all contracts, commitments, arrangements or agreements which could,
following the Closing, restrain the Purchaser or any Affiliate of the Purchaser
from engaging or competing in the health care business in the State of New York,
and true, correct and complete copies of all agreements, commitments,
arrangements and arrangements listed on Schedule 8.13(e) have been provided by
the Seller to the Purchaser. Except for those Provider Contracts listed on
Schedule 8.13(e), if any, the Seller is not a party to any Provider Contract
which limits the right of the Seller to engage in, or to compete with any
individual or entity, or which contains exclusivity provisions restricting the
geographical area in which, or manner in which, the Acquired Business or any
other business of the Purchaser may be conducted.
(f) Schedule 8.13(f) hereto contains a true, correct and complete
list of all material contracts, commitments, arrangements or agreements of the
Seller relating to the Acquired Business that are not specifically listed and
described on another Schedule hereto and that were not made in the ordinary
course of the Acquired Business, and true, correct and complete copies of all
agreements, commitments, arrangements and arrangements listed on Schedule
8.13(f) have been provided by the Seller to the Purchaser.
(g) Schedule 8.13(g) hereto contains a true, correct and complete
list of each other commitment, agreement and arrangement (whether written or
oral) of Seller relating to the Acquired Business that is not specifically
listed and described on another Schedule hereto and that provides for a payment
by any party to any such agreement in excess of an aggregate of $25,000 or is
otherwise material to the operation of the Acquired Business, and true, correct
and complete copies of all written commitments, agreements and arrangements and
true, correct and complete summaries of all oral commitments, agreements and
arrangements listed on Schedule 8.13(g) have been provided by the Seller to the
Purchaser.
(h) Except as shall be specifically described on the Schedules
hereto, all material contracts, commitments, arrangements and agreements
described on such Schedules are valid and effective in accordance with their
respective terms, and there is not, under any of such contracts, commitments,
arrangements or agreements, or any obligation, covenant or condition contained
therein, any existing material default by the Seller or, to the best knowledge
of the Seller, by any other party, or event which, with notice, lapse of time,
or both, would constitute a material default or any event of default if the same
would have a Material Adverse Effect.
(i) Except as specified otherwise on Schedule 8.13(c), the Seller
has no knowledge of the intention of any third party that has transacted
business with the Seller, to alter, cancel, amend or adjust their relationship
(contractual or otherwise) with the Seller or, in connection with or after
consummation of the transactions contemplated hereunder, to discontinue or not
enter into similar relationships with the Purchaser if the same would have a
Material Adverse Effect.
(j) The Seller is not a party (whether as an original party or as
an assignee or successor) to any agreement, commitment or arrangement which
would, following the Closing, restrict the Purchaser from operating the Acquired
Business in any respect.
8.14 Commercial Contracts. Attached hereto as Schedule 8.14 is a true,
correct and complete list of all Commercial Contracts, and true, correct and
complete copies of all Commercial Contracts have been provided by the Seller to
the Purchaser. Each Commercial Contract is legal, valid, binding, enforceable in
accordance with its terms (except as enforcement thereof may be limited by any
bankruptcy, insolvency, reorganization, moratorium or similar statute, rule,
regulation or other law affecting the enforcement of creditors' rights and
remedies generally) and in full force and effect. Assuming the satisfaction of
the conditions described in Sections 11.7(b) and 11.9, each Commercial Contract
will continue to be legal, valid, binding, enforceable, and in full force and
effect following the Closing. Except as set forth in Schedule 8.14, no party is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification
or suspension under any Commercial Contract and no party has repudiated any
provision of any Commercial Contract. Assuming the satisfaction of the
conditions described in Sections 11.7(b) and 11.9, the transactions contemplated
hereby will not constitute a breach or default on the part of the Seller under
any Commercial Contract. Seller is and has at all times been in compliance with
the applicable requirements of law and regulations governing the manner in which
services provided under any Commercial Contract may be marketed to enrollees to
the extent that any violation thereof would have a Material Adverse Effect.
Seller has no knowledge of any intention on the part of DOH or DOI to refuse to
permit the renewal of any Commercial Contract upon the expiration of the term
thereof.
8.15 Medical Management. Attached hereto as Schedule 8.15 is a copy of
the medical management and quality assurance policies and procedures that Seller
uses or has used since January 1, 1997 with respect to the Acquired Business.
Seller has delivered to Purchaser a true, correct and complete copy of the
minutes maintained by Seller's medical management and quality assurance
committees since January 1, 1998. Except as set forth in Schedule 8.15, Seller's
medical management and quality assurance policies comply in all material
respects with all applicable laws, rules, regulations and Commercial Contract
requirements.
8.16 Commercial Members.
(a) Schedule 8.16(a) lists, for each month since January 1, 1998,
the aggregate number of Commercial Members and the numbers of Commercial Members
added to or deleted from the Seller's list of enrolled Commercial Members during
each such month.
(b) Schedule 8.16(b) contains the most recent available list of
names, addresses and identification numbers for all Commercial Members and a
summary fairly describing, by type and medium in which kept, all books and
records maintained for the Commercial Members, including medical and claim
histories, in all mediums used by the Seller, electronic or otherwise. The books
and records described in Schedule 8.16(b) comprise all of the books and records
required by law to be maintained by the Seller with respect to the Commercial
Members and such books and records comply with all applicable legal requirements
and the terms of the Commercial Contracts.
(c) Schedule 8.16(c) describes each grievance and appeal received
by the Seller from any Commercial Member since January 1, 1998, and generally
describes the nature and status or disposition of such grievance or appeal.
8.17 Pending Treatments. Schedule 8.17 contains (i) a list of all
requests for prior authorization of treatment to be provided to Commercial
Members pending with the Seller as of the date hereof, including the date,
detailed nature and status of each such request, and (ii) a list of all
previously authorized organ transplants that are yet to be provided to
Commercial Members and all other previously authorized treatments that are yet
to be provided to Commercial Members the claims expense for which is likely to
exceed $5,000, including the date of authorization and a detailed case
description. The Seller has engaged in no acts or omissions having the effect of
delaying the authorization or scheduling of health care services provided to
Commercial Members in a manner inconsistent with customary industry practices or
Article 49 of the Public Health Law.
8.18 Title to Property. Except as set forth in Schedule 8.18, the
Seller has, and at the Closing will assign or convey as applicable to the
Purchaser, good and marketable title to all of the Assets free and clear of all
liens, security interests, pledges, guaranties, charges, claims, restrictions,
options, commitments and other encumbrances of any nature whatsoever. None of
the Assets being sold by the Seller to the Purchaser pursuant to this Agreement
are subject to any claim or dispute, or to any agreement or arrangement for
their use by any Person.
8.19 Insurance. Schedule 8.19 hereto contains a true, correct and
complete list of all policies of liability, title, error and omissions, fidelity
bonds and other forms of insurance and reinsurance held by Seller in connection
with or that relate in any way to the Acquired Business, together with a brief
description of each, including the name of the insurer, the risks insured
against, the limits of coverage, the deductible amount (if any), the premium
rate and the date through which coverage will continue by virtue of premiums
already paid. Except as set forth in Schedule 8.19, all such policies are in
full force and effect and all premiums thereon have been paid in a timely manner
through the date hereof. Seller shall continue to carry all such insurance in
full force and effect through the Effective Time, and to the extent any such
coverage is on a "claims made" basis, shall prior to the Closing purchase the
maximum available extended reporting period coverage (i.e., "tail").
8.20 Compliance With Laws. Except as set forth in Schedule 8.20,
Seller is in compliance with all laws, rules, regulations, ordinances, reporting
and licensing requirements and orders applicable to the Seller, and no condition
exists which with or without notice or passage of time or both would constitute
non-compliance therewith. Except as specified on Schedule 8.20, Seller has not
received notification from any Governmental Entity asserting that Seller is not
in compliance with any of the statutes, regulations or ordinances which such
Governmental Entity enforces, or threatening to revoke, suspend or modify any
Permit. Except as set forth in Schedule 8.20, Seller has filed all reports,
registrations and statements, together with any amendments required to be made
thereto, that are required to be filed with DOH, DOI and each other Governmental
Entity having jurisdiction over the Acquired Business. Schedule 8.20 lists all
examinations of Seller conducted by any Governmental Entity since January 1,
1996 and identifies by date any correspondence between such Governmental Entity
and Seller regarding sanctions, conclusions made and/or corrective action
required or suggested based on such examination.
8.21 Completeness of Assets. The Assets which are to be conveyed and
assigned pursuant to the Conveyance Documents constitute all of the assets and
properties utilized by the Seller in the operation of the Acquired Business
since December 31, 1998, except for (i) assets that were disposed of since such
date and replaced with adequate replacements or that were disposed of in the
ordinary course of business and were not material to the conduct of the Acquired
Business, (ii) assets acquired since such date and included in the Assets, and
(iii) the Excluded Assets. The Assets include all rights and property (other
than working capital) utilized by the Seller and reasonably necessary to carry
on the Acquired Business as it has been carried on by the Seller prior to the
date hereof.
8.22 [Not Used].
8.23 No Bankruptcy. Seller is not the subject of bankruptcy or any
similar proceedings.
8.24 Broker's and Other Fees. Other than pursuant to its engagement of
Bear Xxxxxxx & Co. Inc, the Seller has not employed any broker or finder or
incurred any liability for any broker's or finder's fees or commissions in
connection with any of the transactions contemplated by this Agreement.
8.25 Transactions with Affiliates. The Seller does not own, directly
or indirectly, nor does it have an interest which exceeds 10% of the outstanding
equity, either of record or beneficially, in any business or business concern,
corporate or otherwise, which is a party to any agreement, business arrangement
or course of dealing with Seller.
8.26 Payments. Neither Seller nor any Affiliate of Seller, nor any of
its or their officers, directors, agents or employees or any other person on
behalf of Seller, has made directly or indirectly any illegal or improper
payment to or on behalf of, or provided any illegal or improper benefit or
inducement for, any physician, supplier, customer or patient. Neither Seller nor
any Affiliate of Seller, nor any officer, director, employee or agent of any of
the foregoing has, directly or indirectly, paid or delivered a fee, commission
or other sum of money or item or property, however characterized, to any finder,
agent, government official or other party, in the United States or any other
country, which was or is illegal under any Law. Seller has not participated in
any boycotts or other similar practices affecting any of its actual or potential
customers and has at all times done business in an open and ethical manner.
Neither Seller nor any Affiliate of Seller nor any officer, director, employee
or agent of any of the foregoing has made any payment to any customer or
supplier of Seller or any officer, director, partner, employee or agent of any
customer, patient or supplier of Seller, for the unlawful sharing of fees or to
any such customer, patient or supplier or any such officer, director, partner,
employee or agent for the unlawful rebating of charges, or engaged in any other
unlawful payment or given any other unlawful consideration to any such customer,
enrollee, patient or supplier or any such officer, director, partner, employee
or agent.
8.27 Xxxxx Documents. The Seller has delivered to the Purchaser a
true, correct and complete copy of each of the material agreements and other
documents executed or to be executed in connection with the Xxxxx Transaction
(the "Xxxxx Documents").
8.28 Full Disclosure. No representation, warranty or statement made by
Seller in this Agreement, or in any statement, certificate, exhibit, schedule,
or other document furnished to the Purchaser pursuant hereto, or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
9. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Seller that:
9.1 Organization and Qualification. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. The Purchaser has all requisite corporate power and authority
and all necessary licenses and permits to carry on its business as it has been
and is currently being conducted, to own, lease and operate the business and
assets used in connection therewith, and, subject to the Purchaser obtaining any
necessary Permits, to enter into and perform this Agreement and consummate the
transactions contemplated hereby. The Purchaser is duly qualified to do business
and is in good standing as a corporation under the laws of all jurisdictions
wherein the conduct of its business or the ownership, leasing or operation of
its properties and assets requires such qualification and where the failure of
the Purchaser to obtain such qualification would have a Material Adverse Effect.
9.2 Authority. The Purchaser has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by the Purchaser. The execution and delivery of this Agreement by
the Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no other corporate proceedings on the part of the Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Purchaser and,
assuming the due authorization, execution and delivery thereof by the Seller,
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its respective terms except as such
enforceability may be qualified by equitable principles and pursuant to laws
enacted for the protection of creditors.
9.3 No Conflict; Required Filings and Consents.
(a) Assuming the satisfaction of the condition described in
Section 11.7(b), the execution and delivery of this Agreement by the Purchaser
does not, and the performance of this Agreement by the Purchaser will not: (i)
conflict with or violate the Certificate of Incorporation or By-Laws, in each
case as amended or restated, of the Purchaser; (ii) conflict with or violate any
Laws in effect as of the date of this Agreement applicable to the Purchaser or
any of its subsidiaries or by which any of its or their respective properties
are bound or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
required payment under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Purchaser or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, or other instrument or obligation
to which the Purchaser or any of its subsidiaries is a party or by which the
Purchaser or any of its subsidiaries or any of its or their respective
properties is bound or subject to.
(b) The execution and delivery of this Agreement by the Purchaser
does not, and the performance of this Agreement by the Purchaser will not, as of
the date hereof, require the Purchaser to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to, any
Governmental Entities, based on laws, rules, and regulations and such other
requirements of Governmental Entities in effect as of the date hereof, except
for any Permits required for the continued operation of the Acquired Business
following the Closing.
9.4 Absence of Litigation. As of the date hereof, (a) there is no
claim, action, suit, litigation, proceeding, arbitration or, to the best
knowledge of the Purchaser, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to the
best knowledge of the Purchaser, threatened in writing against the Purchaser or
any of its subsidiaries or any properties or rights of the Purchaser or any of
its subsidiaries and (b) neither the Purchaser nor any of its subsidiaries is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the best knowledge of the
Purchaser, continuing investigation by, any Governmental Entity, or any
judgment, order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other orders if
the same would have a Material Adverse Effect.
10. Transactions and Conduct of Business Pending the Closing. The
Seller covenants and agrees that pending the Closing:
10.1 Ordinary Course of Business. The Seller shall carry on its
business in the ordinary course and substantially in the same manner as
heretofore carried on by it. In connection therewith, the Seller shall:
(a) Preserve the Assets and the Acquired Business intact;
(b) Use its best efforts to preserve the goodwill of its
relationships with Commercial Members, Providers, DOH, DOI, suppliers,
contractors, employees and others having business relations with it
related to the Acquired Business;
(c) Comply with all regulations and laws applicable to it;
(d) Keep in full force and effect insurance coverage with
reputable insurers, which in respect of amounts, types and risks
insured is that which its management reasonably believes to be
adequate, which insurance coverages shall not be less than described
on Schedule 8.17;
(e) Make no material change in the customary terms and conditions
upon which it does business with respect to the Acquired Business;
(f) Take no action or permit any omission having the effect of
delaying the authorization or scheduling of health care services
provided to Commercial Members in a manner inconsistent with customary
industry practices;
(g) Duly and timely file, or obtain appropriate extensions of the
time for filing, all material reports, and all Tax Returns and other
documents required to be filed with Governmental Entities.
(h) Unless it is contesting the same in good faith and has
established reasonable reserves therefor, pay when required to be paid
all Taxes indicated by such Tax Returns or otherwise lawfully levied
or assessed upon it, or any of its properties or assets, or which it
is otherwise legally obligated to pay and withhold or collect and pay
to the proper governmental authorities or hold in separate bank
accounts for such payment all Taxes and other assessments which it
believes in good faith to be required by law to be so withheld or
collected;
(i) Take no action which would adversely affect the ability of
any party to obtain the Permits or consents of private parties
required for the transactions contemplated hereby or which would
adversely affect the Seller's ability to perform its covenants and
agreements contained herein; and
(j) Maintain, in accordance with past practice, its Provider
Contracts; credential and re-credential such Providers in accordance
with the standards of the National Committee on Quality Assurance;
take such steps as may be necessary on Seller's part to maintain the
adequacy of the provider network for the Acquired Business and the
pricing levels currently contemplated by the Provider Contracts; and
take such other steps as are necessary in order to render the
representations and warranties of Seller with respect to the Provider
Contracts true and correct as of the Effective Time as if made at such
time.
10.2 Preparation for Transfer and Transition. To ensure an effective
transition and transfer of Commercial Members to the Purchaser, the parties
agree as follows:
(a) At all times prior to the Effective Time, Seller shall
cooperate and work with Purchaser in transition planning and
implementing such transfer;
(b) At all times prior to the Effective Time, Seller shall
orient, educate and otherwise train Purchaser regarding (i) Seller's
operating policies and procedures, (ii) the health plan benefits and
services offered by Seller to Commercial Members including, without
limitation, member services, member outreach and education, and
preventative medicine programs, and (iii) the Provider Contracts;
(c) During the time period prior to the Effective Time, Seller
shall use best efforts to obtain the consents of any third parties
necessary for the execution of the Leases; and
(d) During the time period prior to the Effective Time, Seller
shall use best efforts to cause the execution by Providers of the
instruments described in Section 11.8.
10.3 Payment of Retained Liabilities; Discharge of Pre-Effective Date
Medical Claim Liabilities.
(a) Seller shall pay, perform and discharge in due course, all of
its obligations with respect to any of the Retained Liabilities. In connection
with the discharge of such claims, to the extent any of the claims payment
information for such claims is received by the Purchaser after the Effective
Time, the Purchaser shall promptly forward such information to the Seller.
(b) By no later than two days prior to the Closing Date, the
Seller shall furnish to the Purchaser a copy, certified as true, correct and
complete by the President or a Vice-President of the Seller, of each binding
agreement (a "Claims Release") then obtained pursuant to which a WellCare
Provider shall have waived or released claims for payment in respect of
healthcare services rendered to enrollees of the Seller's health care plans
(whether commercial, Medicaid, Medicare or Child Health Plus) for any period
ending on or prior to the Closing, in consideration of the agreement by the
Seller to pay such WellCare Provider a negotiated sum out of the Claims Fund.
10.4 Certain Prohibited Activities. On and after the date hereof and
prior to the Closing, Seller shall not take any of the following actions, or
agree to take any such actions, except with the prior written consent of
Purchaser:
(a) Merge or consolidate with any other corporation or other
entity or permit any other entity to merge into it; acquire any stock;
undergo any reorganization or recapitalization; or acquire any assets
of any other person, corporation or business organization;
(b) Authorize or make any material change in the operation of the
Acquired Business; lease, sell or dispose of any part of the Assets;
or otherwise enter into any contract, transaction or commitment
related to the Acquired Business, other than in the ordinary course of
business, consistent with past practice; or
(c) Take or omit to take any action, or permit the occurrence of
any change or event, that would render any of its representations and
warranties contained herein untrue in any respect at and as of the
Effective Time with the same effect as though such representations and
warranties had been made at and as of the Effective Time.
10.5 Casualty. If, prior to the Closing, any of the Assets are damaged
by fire, vandalism, acts of God, or other casualty or cause in an aggregate
amount equal to or greater than $50,000, as determined by an independent
insurance adjustor, the Purchaser shall have the right to terminate this
Agreement by written notice delivered to the Seller within three (3) days after
the Purchaser is given notice by the Seller of such damage or casualty. In the
event the Purchaser does not elect to terminate this Agreement in the manner
aforesaid or if, prior to the Closing, any of the Assets are damaged by fire,
vandalism, acts of God, or other casualty or cause in an aggregate amount less
than $50,000, the Purchaser shall proceed with the Closing and shall have the
right to receive the insurance proceeds, if any, that are attributable to such
damage or casualty and that would otherwise be payable to the Seller and that
are received after the Closing, and the Purchaser shall apply such proceeds to
the repair of such damage or casualty. The Purchaser and the Seller agree to
cooperate in any loss adjustment negotiations, legal actions and agreements with
the insurance company relating to any such damage.
10.6 Access. The Seller shall afford the Purchaser's officers,
employees, accountants, counsel and other representatives prompt, free and full
access, upon reasonable notice, to its properties and its books, records,
contracts, commitments and other documents (in each instance, subject to patient
confidentiality laws, rules and regulations), including, without limitation,
records to which such Seller has access relating to the historical revenues of
the Acquired Business and all working papers of the Seller's accountants
relating thereto, and the right to consult to a reasonable extent with the
officers, employees, accountants, counsel and other representatives of the
Seller for the purpose of making such investigation of the Acquired Business as
the Purchaser shall desire to make. In connection with this investigation, the
Seller shall permit the Purchaser to make copies of all such documents, records
and information to which the Purchaser shall be entitled to have access
hereunder, including working papers, as the Purchaser may from time to time
request.
10.7 Cooperation. The Seller and the Purchaser shall cooperate with
each other in promptly taking any and all actions appropriate to the
consummation of the transactions contemplated by this Agreement. The Seller and
the Purchaser shall take all actions reasonably necessary and shall use their
respective reasonable commercial efforts to consummate the transactions
contemplated hereby on the Closing Date on and subject to the terms and
conditions of this Agreement. The Seller shall use its best efforts to (i) cause
its management and employees to cooperate fully with the Purchaser in order to
promote and effect an orderly transition of the ownership of the Assets, (ii)
maintain the vendor, patient, Provider, managed care company, agency and other
relationships of the Seller insofar as they relate to the Acquired Business and
(iii) otherwise provide for the conduct of the Acquired Business after the
Effective Time in substantially the manner as the same is being conducted as of
the date hereof.
10.8 No Change in Accounting Methods. The Seller shall not change the
historical accounting methods utilized in arriving at the 1999 Interim Financial
Statements without prior notice to the Purchaser.
10.9 Other Offers. On and after the date hereof and prior to Closing,
and except as expressly permitted by the following provisions of this Section,
neither the Seller nor WMG shall, and neither the Seller nor WMG shall authorize
or permit any of their respective officers, directors employees, affiliates,
financial advisors, attorneys, accountants or other advisors or representatives
to solicit, initiate, encourage, endorse, or enter into any agreement with
respect to, or take any other action to knowingly facilitate, any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal (as defined below). Notwithstanding the
foregoing, nothing contained herein shall prevent the Board of Directors of the
Seller from (i) furnishing information to, entering into discussions or
negotiations with, or consummating any transaction (including any transaction
contemplated by the Xxxxx Documents) that does not conflict with the
transactions contemplated hereby, (ii) furnishing information or entering into
discussions or negotiations with or consummating any Acquisition Proposal with
any person or entity if and only to the extent (A) the Board of Directors of the
Seller or WMG shall have determined in good faith that such action is required
in the exercise of its fiduciary duties, based upon the advice of counsel, or
(B) directed to so act by New York HMO regulatory authorities, (iii) WMG
complying with Rules 14d-9 and 14e-2 promulgated under the Securities Exchange
Act of 1934, or (iv) WMG making any disclosures to WMG's shareholders if the
Board of Directors of WMG shall have determined, after consultation with outside
counsel, that failure to make such disclosures would be inconsistent with
applicable law. As used herein, "Acquisition Proposal" shall mean any offer to
acquire assets of the Seller relating to its commercial HMO products offered in
the State of New York or any other transaction or arrangement that would
constitute, directly or indirectly, a disposition of such assets (including but
not limited to, a sale or insurance of stock, a merger or other business
combination or a co-insurance or reinsurance arrangement).
10.10 Public Announcements. Immediately after execution of this
Agreement, the parties shall, subject to any required regulatory approvals,
prepare and issue a joint press release describing the sale of the Acquired
Business to the Purchaser. At Closing, the parties again shall prepare and issue
a joint press release describing the consummation of the transactions
contemplated hereby, the benefits to the respective parties, and the benefits to
the Commercial Members. The parties shall thereafter actively disseminate such
information to parties in interest in furtherance of the transitioning to the
Purchaser of the Commercial Members.
10.11 Schedule Deliveries. On or before two days prior to the Closing
Date, the Seller shall deliver to the Purchaser all Schedules contemplated to be
attached hereto and which are not so attached at the time of execution.
10.12 WARN Notices. No less than five days prior to the Closing Date,
the Purchaser shall issue notices of termination to all of its employees, except
those employees being retained by Seller pursuant to Section 13.3(a), in
accordance with the Worker Adjustment Retraining and Notification (WARN) Act, if
and to the extent required under such act and the regulations promulgated
thereunder.
11. Conditions Precedent to the Purchaser's Obligations. All obligations of
the Purchaser under this Agreement are subject to the fulfillment or
satisfaction, prior to or at the Closing, of each of the following conditions
precedent (any of which may be waived in writing in whole or in part by the
Purchaser, in its sole discretion).
11.1 Delivery of Assets. At the Closing, the Assets shall be conveyed
and delivered to the Purchaser free and clear of any and all liens, security
interests, pledges, guaranties, charges, claims, restrictions, options,
commitments and other encumbrances of any nature whatsoever. Without limiting
the generality of the foregoing, good and valid title to the Seller's "Cactus"
credentialing system and to the Seller's "MAZ 90" system shall be so conveyed
and delivered to the Purchaser.
11.2 Representations and Warranties True as of Effective Time. The
representations and warranties of the Seller contained in this Agreement and in
any list, certificate, document or written statement furnished by the Seller to
the Purchaser pursuant hereto shall be true in all material respects at and as
of the date hereof and shall be true in all material respects at and as of the
Effective Time with the same effect as though such representations and
warranties were made at and as of the Effective Time.
11.3 Conveyance Documents. The Seller shall have executed and
delivered to the Purchaser the Conveyance Documents, as provided by Section 2
hereof.
11.4 Officer's Certificates. The Purchaser shall have received from
the Seller a certificate (dated the Closing Date and in form and substance
reasonably satisfactory to the Purchaser), signed by the President or a
Vice-President of the Seller, certifying that the conditions specified in
Sections 11.1 and 11.2 have been fulfilled.
11.5 Opinion of the Seller's Counsel. The Purchaser shall have
received the written opinion dated the Closing Date of Xxxxxxx, Xxxxxx & Green,
P.C., counsel to the Seller, substantially in the form annexed hereto as Exhibit
II.
11.6 Secretary's Certificates. The Purchaser shall have received from
the Seller a certificate of the Secretary of the Seller (dated the Closing Date
and in form and substance reasonably satisfactory to the Purchaser), certifying
and setting forth (i) the names, signatures and positions of the officers of the
Seller authorized to execute the Conveyance Documents, and (ii) a copy of the
resolutions adopted by the Board of Directors and the shareholders of the Seller
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
11.7 Notifications and Consents.
(a) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by or before any Governmental Entity, which materially
prohibits or restricts the consummation of any of the material transactions
contemplated hereby.
(b) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of other waiting periods imposed by,
any Governmental Entity necessary for the consummation of any of the
transactions contemplated hereby shall have been filed, have occurred or have
been obtained, as the case may be, including, without limitation: (i) such
Permits as must be issued by DOH and DOI to: (w) authorize the Purchaser to
operate a health maintenance organization in accordance with Article 44 of the
New York Public Health Law; (x) effectuate the assignment by Seller of its
rights under the Commercial Contracts to the Purchaser and to the continuation
by the Purchaser of the Acquired Business without any "open enrollment" period
during which any existing Commercial Member of Seller may elect to terminate
his, her or its Commercial Contract; (y) effectuate the transfer and enrollment,
as of the Effective Time, of the Commercial Members into the Purchaser (which
members as of the Effective Time shall be deemed by DOH and DOI to be members of
the Purchaser); and (z) confirm that as of the Effective Time, the Purchaser
will be deemed by DOH and DOI to have satisfied the statutory reserve and net
worth requirements, and that neither DOH nor DOI will assert successor liability
against the Purchaser in respect of liabilities of Seller, or with respect to
any regulatory issues; and (ii) such other authorizations of DOH and DOI as
shall be necessary for Seller to consummate the transactions contemplated
hereby.
(c) No action, suit, claim or proceeding by or before any
Governmental Entity shall have been commenced and be pending which (i) seeks to
restrain, prevent or materially delay or restructure the transactions
contemplated hereby, (ii) seeks to obtain any material damages in respect of a
claim in connection with the Acquired Business or the transactions contemplated
hereby, (iii) seeks to prohibit or impose any material limitation (including but
not limited to, any time limitation) on the ownership or operation by the
Purchaser of all or any portion of the Acquired Business or to compel the
Purchaser to dispose of or hold separate all or any portion of the Acquired
Business, (iv) seeks to make any of the Real Property the subject of material
remediation activities or investigations pursuant to any Environmental Laws; or
(v) otherwise questions the validity or legality of any such transactions and,
in the case of any of the foregoing, the same is, in the reasonable judgment of
the Purchaser, reasonably likely to be adversely determined and such adverse
determination could have a Material Adverse Effect.
11.8 Provider Contracts.
(a) Each of the Primergy IPAs shall have executed and delivered
to the Purchaser an agreement containing the terms and conditions set forth in
that certain proposal, dated of even date herewith, submitted by Primergy, Inc.
to GHI, and otherwise reasonably satisfactory in form and substance to the
Purchaser.
(b) The Seller shall have delivered or caused to be delivered to
the Purchaser, not less than two business days prior to the Closing, Provider
Contract Assignments with respect to the Seller's Provider Contracts with each
of the following entities and any Affiliates or successors thereof: (i) CHVC
IPA, Inc. (vision services); (ii) MBC of New York, Inc. (mental health
services); (iii) Laboratory Corporation of America Holdings (laboratory
services); (iv) Pharmacare Management Services, Inc. (pharmacy services); (v)
New York Medical Imaging, P.L.L.C. (imaging services); (vi) Homedco, Inc. (home
care services, infusion services and durable medical equipment); and (vii)
Access Care IPA, Inc. (chiropractice services).
(c) The Seller shall have delivered or caused to be delivered to
the Purchaser, not less than two business days prior to the Closing, Provider
Contract Assignments with respect to Provider Contracts constituting not less
than (i) 80% of the Provider Contracts with physicians in each of the counties
comprising the WellCare Service Area and (ii) 80% of the Provider Contracts with
hospitals in each of the counties comprising the WellCare Service Area. The
Purchaser acknowledges and agrees that the physicians who participate in the
network of the Primergy IPAs and who are located within a given county
comprising party of the WellCare Service Area may be counted towards the
requirement set forth in clause (i) of the preceding sentence.
11.9 Third Party Consents. The Purchaser shall have received all
necessary consents of the counterparties to the Commercial Contracts and all
other third parties to the succession by the Purchaser to the position of the
Seller under each material agreement, contract or instrument included in the
Assets (other than the Provider Contracts referenced in Section 11.8 above), in
each case without any change in the terms thereof that is materially adverse to
the Acquired Business or the Purchaser, and containing if requested by the
Purchaser estoppels from the respective counterparties thereto, and all legal
matters with respect to such consents and assignments shall be reasonably
satisfactory to the Purchaser and its counsel.
11.10 Lien Search. The Purchaser shall have obtained UCC, state and
federal tax lien and judgment searches with respect to the Seller, the Real
Property and the Assets as of a date no more than 15 days prior to the Closing
Date, together with termination statements with respect to all liens or other
encumbrances relating to the Assets reflected thereon that do not constitute
Permitted Encumbrances, except such as may have occurred as a result of the
express agreement of the Purchaser and the Seller or as a result of the
transactions contemplated hereby.
11.11 Good Standing Certificate. The Seller shall have delivered to
the Purchaser a good standing certificate for the Seller as of a date no more
than 15 days prior to the Closing Date, issued by the Secretary of State of the
State of New York and each jurisdiction where the conduct of the Seller's
business activities necessitates qualification.
11.12 Certified Certificate of Incorporation. The Seller shall have
delivered to the Purchaser a copy of the Certificate of Incorporation of the
Seller, and all amendments thereto, certified by the Secretary of State of the
State of New York as of a date no more than 15 days prior to the Closing Date.
11.13 Related Party Non-Competition Agreement. Each of the Related
Parties shall have executed and delivered to the Purchaser the Related Party
Non- Competition Agreement, in form and substance reasonably satisfactory to the
Purchaser.
11.14 Contribution of Certain Assets to Seller . WMG shall have
contributed to the Seller, so that the Seller may convey to the Purchaser as
contemplated by Section 11.1, all right, title and interest and in and rights of
access to the following assets, to the extent held by WMG: all clinical,
diagnostic and data analysis, storage and retrieval computer systems used or
useful in the Acquired Business, and all billing, bookkeeping and accounting
computer systems used or useful in the Acquired Business, including in each case
all associated software and operating systems.
11.15 Leases. The Leases shall been have executed and delivered to the
Purchaser, in form and substance reasonably satisfactory to the Purchaser, and
all consents of any third parties required therefor shall have been obtained.
11.16 Guaranty. WMG shall have executed and delivered to the Purchaser
the Guaranty, in form and substance reasonably satisfactory to the Purchaser.
11.17 Transition Services Agreement. The Seller shall have executed
and delivered to the Purchaser the Transition Services Agreement, in form and
substance reasonably satisfactory to the Purchaser.
11.18 Insurance Endorsements. The Seller shall have delivered to the
Purchaser an endorsement to each insurance policy listed on Schedule 8.18 or
otherwise maintained in connection with the Acquired Business reflecting the
Purchaser as an additional insured or loss payee and confirming that the tail
coverage required by Section 8.18 has been bound.
11.19 No Material Adverse Change. There shall have been no material
adverse change in the financial condition, business, operations, assets or
prospects of the Seller at Closing as compared with the date hereof, except such
as may have occurred as a result of the Xxxxx Transaction, as a result of the
express agreement of the Purchaser and the Seller or as a result of the
transactions contemplated hereby.
11.20 Approval of Schedules. The Schedules delivered by the Seller to
the Purchaser subsequent to the execution and delivery of this Agreement, as
required by Section 10.11 hereof, shall be acceptable to the Purchaser in its
sole but reasonable discretion; provided, however, that the Purchaser shall not
be entitled to object to any information contained in any such Schedule that was
expressly set forth in any of the written due diligence materials heretofore
furnished to the Purchaser, as identified on Schedule 11.19 attached hereto.
11.21 Establishment of Claims Fund. The Seller shall have delivered to
the Purchaser such certifications and/or other documents as the Purchaser may
reasonably request to evidence the establishment and funding of the Claims Fund
as contemplated by the definition of such term in Section 1 hereof.
11.22 Xxxxx Transaction. The Xxxxx Transaction shall have been
consummated on or prior to the Closing Date substantially in accordance with the
terms thereof set forth in the Xxxxx Documents, and the Seller shall have
delivered to the Purchaser such certifications and/or other documents as the
Purchaser may reasonably request to evidence the same.
11.23 WARN Notices. The Seller shall have delivered to the Purchaser
evidence reasonably acceptable to the Purchaser that Seller has issued all WARN
notices required under Section 10.12 (if any).
12. Conditions Precedent to the Seller's Obligations. All obligations of
the Seller under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent (any
of which may be waived in writing in whole or in part by the Seller, in its sole
discretion):
12.1 Representations and Warranties True as of Effective Time. The
Purchaser's representations and warranties contained in this Agreement and in
any list, certificate, document or written statement furnished by the Purchaser
to the Seller pursuant hereto shall be true in all material respects at and as
of the date hereof and shall be true in all material respects at and as of the
Effective Time with the same effect as though such representations and
warranties were made on and as of the Effective Time.
12.2 Compliance with Agreement. The Purchaser shall have performed and
complied in all material respects with all agreements and conditions contained
in this Agreement that are required to be performed or complied with by it prior
to or at the Closing.
12.3 Payment and Deliveries. The Purchaser shall have made the
payments and deliveries contemplated by Section 4 to be made on the Closing Date
and shall have executed and delivered the Assignment and Assumption Agreement.
12.4 Officer's Certificate. The Seller shall have received a
certificate (dated the Closing Date and in form and substance reasonably
satisfactory to the Seller), signed by the President or a Vice-President of the
Purchaser, certifying that the conditions specified in Sections 12.1 and 12.2
hereof have been fulfilled.
12.5 Secretary's Certificate. The Seller shall have been furnished
with a certificate of the Secretary of the Purchaser (dated the Closing Date and
in form and substance reasonably satisfactory to the Seller) certifying and
setting forth (i) the names, signatures and positions of the officers of the
Purchaser executing this Agreement and any documents to be delivered by the
Purchaser at Closing, and (ii) a copy of the resolutions adopted by the board of
directors of the Purchaser authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated hereby.
12.6 No Suit or Other Proceedings. No injunction or restraining order
shall have been granted that would restrain or prohibit the transactions
contemplated hereby.
12.7 Notifications and Consents.
(a) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by or before any Governmental Entity, which materially
prohibits or restricts the consummation of any of the material transactions
contemplated hereby.
(b) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of other waiting periods imposed by,
any Governmental Entity necessary for the consummation of any of the
transactions contemplated hereby shall have been filed, have occurred or have
been obtained, as the case may be, including, without limitation: (i) such
Permits as must be issued by DOH and DOI to: (w) authorize the Purchaser to
operate a health maintenance organization in accordance with Article 44 of the
New York Public Health Law; (x) effectuate the assignment by Seller of its
rights under the Commercial Contracts to the Purchaser and to the continuation
by the Purchaser of the Acquired Business without any "open enrollment" period
during which any existing Commercial Member of Seller may elect to terminate his
or her Commercial Contract; (y) effectuate the transfer and enrollment, as of
the Effective Time, of the Commercial Member into the Purchaser (which members
as of the Effective Time shall be deemed by DOH and DOI to be members of the
Purchaser); and (z) confirm that as of the Effective Time, the Purchaser will be
deemed by DOH and DOI to have satisfied the statutory reserve and net worth
requirements, and that neither DOH nor DOI will assert successor liability
against the Purchaser in respect of liabilities of Seller, or with respect to
any regulatory issues; and (ii) such authorizations of DOH and DOI as shall be
necessary for Seller to consummate the transactions contemplated hereby.
(c) No action, suit, claim or proceeding by or before any
Governmental Entity shall have been commenced and be pending which (i) seeks to
restrain, prevent or materially delay or restructure the transactions
contemplated hereby, (ii) seeks to obtain any material damages in respect of a
claim in connection with the Acquired Business or the transactions contemplated
hereby, (iii) seeks to prohibit or impose any material limitation (including but
not limited to, any time limitation) on the ownership or operation by the
Purchaser of all or any portion of the Acquired Business or to compel the
Purchaser to dispose of or hold separate all or any portion of the Acquired
Business, (iv) seeks to make any of the Real Property the subject of material
remediation activities or investigations pursuant to any Environmental Laws; or
(v) otherwise questions the validity or legality of any such transactions and,
in the case of any of the foregoing, the same is, in the reasonable judgment of
the Purchaser, reasonably likely to be adversely determined and such adverse
determination could have a Material Adverse Effect.
12.8 Transition Services Agreement. The Purchaser shall have executed
and delivered to the Seller the Transition Services Agreement, in form and
substance reasonably satisfactory to the Seller.
13. Certain Transactions and Obligations Subsequent to Closing. The
Purchaser and the Seller represent, warrant and agree that, after the Closing
and during the periods specified below and except as otherwise mutually agreed
in writing by the Purchaser and the Seller:
13.1 Further Assurance of Cooperation. From and after the date hereof
and following the Closing, the Seller and the Purchaser shall execute and
deliver such further documents and instruments and do such other acts and things
as the Purchaser or the Seller, as the case may be, may reasonably request in
order to effectuate the transactions contemplated by this Agreement.
13.2 Maintenance of Corporate, Patient Care, Accounting and Tax
Records. For a period of six (6) years following the Closing, each party hereto
shall maintain and (subject to customary confidentiality agreements and subject
to applicable patient confidentiality laws, rules and regulations) make
available to such other party, for inspection and duplication by it and its
representative for any reasonable purpose, all of such party's corporate,
patient care, provider claims, accounting and tax records, files, documents and
correspondence relating to the Acquired Business and to periods prior to the
Effective Time (including in the case of the Purchaser, the books and records
included in the Assets, which the parties acknowledge it is the Purchaser's
obligation to maintain at its own cost) and shall not dispose of, alter or
destroy any such records, files, documents and correspondence for such period.
Subsequent to such six (6) year period, each party hereto shall advise such
other party prior to any intended destruction or unavailability of any such
corporate, accounting and tax records, files, documents and correspondence and
afford such other party reasonable opportunity to either take possession of such
information or to make copies thereof (subject to applicable patient
confidentiality laws, rules and regulations).
13.3 Certain Employees of the Seller.
(a) The Seller or its Affiliates shall have the right to retain
as their employees (i) all sales and marketing personnel devoted to all portions
of the Seller's business other than the Acquired Business, (ii) five members of
Seller's utilization management staff mutually agreed to by Seller and Purchaser
and (iii) five members of Seller's quality assurance staff mutually agreed to by
Seller and Purchaser.
(b) With respect to all other employees of the Seller not subject
to Section 13.3(a) (the "Commercial Employees"), the Seller agrees, for itself
and on behalf of its Affiliates, that the Purchaser shall have the right, but
not the obligation, to extend offers of employment commencing as of the
Effective Time to any of the Commercial Employees, with such hours, compensation
and benefits as the Purchaser shall determine in its sole discretion.
(c) The Seller agrees, for itself and on behalf of its
Affiliates, that they shall not seek to enforce any non-competition obligations
which be owed by any of the Commercial Employees who are to become employees of
the Purchaser as of the Effective Time.
(d) The Seller shall bear all termination costs, including but
not limited to, severance pay and compensation payable under the Worker
Adjustment Retraining and Notification (WARN) Act, that are triggered by the
Seller's termination of any of its employees, without regard as to whether an
employee is offered employment or employed by the Purchaser. Nothing in this
Agreement shall be construed as imposing any liability for such costs on the
Purchaser.
13.4 Designation of the Purchaser as Successor Employer. The Seller
agrees, if requested by the Purchaser, to consent to the designation of the
Purchaser as successor employer of those employees of the Seller who become
employees of the Purchaser as contemplated by Section 13.3(b), for purposes of
employment insurance, payroll taxes or contribution ratings and payroll credits
under state and federal law and/or worker compensation contribution premium
ratings under applicable state law. The employment of any such employee by the
Purchaser shall not be treated as or deemed to constitute the continuation of
employment of such employee for any other purpose whatsoever.
13.5 Mail and Communications. The Seller shall promptly deliver to the
Purchaser any mail or other communications relating to the Assets, the Real
Property or the Acquired Business that is intended for the Purchaser and that is
received by the Seller following the Effective Time. The Purchaser shall deliver
to the Seller all mail intended for the Seller.
13.6 Covenant Not to Compete, Etc..
(a) As a further inducement for the Purchaser to enter into this
Agreement and consummate the transactions contemplated hereby, the Seller hereby
agrees that, for a period of 12 months after the Closing Date (the
"Non-competition Period"), the Seller shall not, and shall not permit or cause
any of its Related Parties to, directly or indirectly, in any capacity, own,
manage, operate, control or participate in the ownership, management, operation
or control of, consult with, lend its name to, otherwise assist, or continue any
interest whatsoever, in any enterprise, whether private or otherwise, which
operates a commercial health benefit plan anywhere within the WellCare Service
Area.
(b) During the Non-competition Period, the Seller shall not, and
shall not permit or cause any of its Related Parties to, directly or indirectly,
(i) request or cause any Providers, Commercial Members or other suppliers or
customers of the Purchaser with whom the Purchaser has a business relationship
to cancel, terminate or diminish any such business relationship with the
Purchaser, or (ii) solicit, interfere with or entice from the Purchaser any
employee of the Purchaser.
(c) During the Non-competition Period, the Seller shall not, and
shall not permit or cause any of its Related Parties to, make any statement or
other communication (except, and only to the extent, as may be required by
subpoena or other legal process) that impugns or attacks the reputation or
character of the Purchaser or its Affiliates or their respective directors,
officers or employees, or damages the goodwill of any of the foregoing, take any
affirmative action that would interfere in any material respect with any
contractual or customer relationships of the Purchaser, including but not
limited to any action that would result in a diminution of business, or
otherwise take any affirmative action that is detrimental in any material
respect to the best interests of the Purchaser or its Affiliates.
(d) In the event any of the covenants contained in this Section
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for which
it may be enforceable and/or over the maximum geographical area as to which it
may be enforceable and/or to the maximum extent in all other respects as to
which it may be enforceable, all as determined by such court in such action. The
Seller acknowledges that a breach of the covenants contained in this Section
will cause irreparable damage to the Purchaser, the exact amount of which will
be difficult to ascertain, and that the remedies at law for any such breach will
be inadequate. Accordingly, the Seller agrees that if the Seller or any of its
Related Parties breaches or threatens to breach any of the covenants contained
in this Section, in addition to any other remedy that may be available at law or
in equity, the Purchaser shall be entitled to seek specific performance and
injunctive relief, without posting bond or other security.
14. Indemnification.
14.1 Indemnification by the Seller. The Seller hereby indemnifies the
Purchaser and agrees to hold the Purchaser harmless against and in respect of:
(a) all Retained Liabilities;
(b) any and all damages, losses, liabilities, Taxes and
deficiencies and penalties and interest thereon and costs and expenses resulting
from any breach or nonfulfillment of any representation, warranty, covenant or
agreement on the part of the Seller under this Agreement;
(c) all liabilities, obligations, claims, demands, damages,
penalties, causes of action, losses, fines, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses and investigative
costs) imposed upon or incurred by the Purchaser by reason of (i) the real or
claimed presence, disposal, discharge, escape, discharge, emission, release or
threatened release of any Hazardous Material on, in, from, affecting, or onto
any of the Real Property or any of the Assets; (ii) any lawsuit, action, order,
or violation brought or threatened relating to such Hazardous Material or
Environmental Laws; (iii) any violation or claimed violation of any
Environmental Law affecting any of the Real Property or any of the Assets or the
imposition or recording of a lien against any of the Real Property or any of the
Assets relating to Environmental Law; (iv) any misrepresentation of the
representations set forth in Section 8.7 hereunder; and (v) any personal injury
or property damage resulting from Hazardous Materials or the violation of any
Environmental Law with respect to any of the Real Property or any of the Assets,
in each case except to the extent the same arises solely from the actions or
omission of the Purchaser after the Effective Time; and
(d) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, losses, liabilities and reasonable legal and
other expenses incident to any of the foregoing.
14.2 Indemnification by the Purchaser. The Purchaser hereby
indemnifies the Seller and agrees to hold the Seller harmless against and in
respect of:
(a) all Assumed Liabilities;
(b) any and all damages, losses, liabilities, Taxes and
deficiencies and penalties and interest thereon resulting from any breach or
nonfulfillment of any representation, warranty, covenant or agreement on the
part of the Purchaser under this Agreement;
(c) any and all damages, losses, liabilities, claims or
litigation which may hereafter be brought by any third party against the Seller
arising out of the Purchaser's actions or omissions in the operation of the
Acquired Business after the Effective Time; and
(d) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, losses, liabilities and reasonable legal and
other expenses incident to any of the foregoing.
14.3 Limitations on Indemnity.
(a) The indemnification obligations of the parties hereto
pursuant to Sections 14.1(b) or 14.2(b) with respect to any breach of any
representation, warranty, covenant or agreement shall be limited to indemnity
claims made prior to the last date of survival thereof referred to in Section
30. If at the expiration of the appropriate period any claim for indemnification
has been asserted but not fully determined, or any audit or other proceeding
with respect to any Tax or Tax Return has been initiated, such period will be
extended as to such claim, audit or other proceeding until it is finally
determined or concluded.
(b) Notwithstanding anything to the contrary contained in Section
14.1, in no event shall the Seller have any indemnity obligation arising under
Section 14.1(b) in an amount that would cause the aggregate amount of
indemnification provided by the Seller in respect thereof to exceed the sum of
$2,000,000; provided, however, that such limitation shall not apply to any
indemnity obligation arising in respect of third party claims asserted against
the Purchaser.
14.4 Notice to the Indemnitor. Within a reasonable period after the
assertion of any claim by a third party or occurrence of any event which may
give rise to a claim for indemnification from the Indemnitor under this Section
14, the Indemnified Party shall notify the Indemnitor in writing of such claim
in a timely manner, describing the basis for such claim, and, with respect to
claims by third parties, advise the Indemnitor whether the Indemnified Party
intends to contest same; provided, however, that an Indemnified Party's failure
to give timely notice to an Indemnitor shall not constitute a defense (in whole
or in part) to any claim for indemnification by such Indemnified Party unless,
and only to the extent that, such failure results in prejudice to the
Indemnitor.
14.5 Rights of Parties to Settle or Defend. The Indemnitor shall have
the right, at its own expense, to contest and defend against such claim. Should
the Indemnitor so elect to assume the defense of such claim, the Indemnitor
shall not be liable to the Indemnified Party for any legal expenses subsequently
incurred by the Indemnified Party except to the extent that such expenses are
incurred directly in connection with interposing defenses that are not available
to the Indemnitor. The Indemnified Party shall make available to the Indemnitor
and its attorneys and accountants, at all reasonable times during normal
business hours, all books, records, and other documents in its possession
relating to such claim. If the Indemnitor has elected to contest such claim, the
Indemnified Party shall have the right to be represented, at all stages and at
its own expense, by advisory counsel and accountants, their participation to be
subject to the reasonable direction and approval of the Indemnitor. The party
contesting any such claim shall be furnished all reasonable assistance in
connection therewith by the other party. If the Indemnitor chooses to defend or
prosecute any such claim, the Indemnified Party will agree to any settlement,
compromise or discharge of such claim which provides solely for the payment of
money damages and which the Indemnitor may recommend and which by its terms
obligates the Indemnitor to pay the full amount of the liability in connection
with such claim at the time of the settlement, compromise or discharge thereof.
Whether or not the Indemnitor shall have assumed the defense of such a claim,
the Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such claim without the Indemnitor's prior written
consent. If the Indemnitor fails forthwith to defend, settle or pay any such
third party claim within ten days after the Indemnitor has received written
notice from the Indemnified Party, or after receiving such notification from the
Indemnified Party, the Indemnitor fails to defend, settle or pay such claim,
then the Indemnified Party may take any and all reasonable necessary action to
defend or dispose of such claim including, without limitation, the settlement or
full payment thereof upon such terms as it shall deem appropriate, in its sole
discretion, subject to the requirement that such settlement provide only for the
payment of money damages.
14.6 Reimbursement. At the time that the Indemnified Party shall
suffer a loss because of a breach of any warranty, representation or covenant by
the Indemnitor or at the time the amount of any liability on the part of the
Indemnitor under this section is determined (which in the case of payments to
third persons, shall be the earlier of (i) the date of such payments, or (ii)
the date that a court of competent jurisdiction shall enter a final judgment,
order or decree, after exhaustion of appeal rights establishing such liability),
the Indemnitor shall forthwith, upon notice from the Indemnified Party, pay to
the Indemnified Party the amount of the indemnity claim. If such amount is not
paid forthwith, then the Indemnified Party may, at its option, take legal action
against the Indemnitor for reimbursement in the amount of its indemnity claim.
For purposes hereof, the indemnity claim shall include the amounts so paid (or
determined to be owing) by the Indemnified Party together with costs and
reasonable attorneys' fees and interest on the foregoing items at the legal rate
applicable to outstanding judgments in the jurisdictions involved from the date
the obligation is due from the Indemnified Party to the Indemnitor, as
hereinabove provided, until the indemnity claim shall be paid.
14.7 Losses Net of Insurance, etc. The amount of any loss, liability,
claim, damage or expense for which indemnification is provided under this
Section 14 shall be net of any amounts recovered or recoverable by the
Indemnified Party under insurance policies with respect to such loss, liability,
claim, damage or expense. If, following the receipt by any Indemnified Party of
any indemnity payment hereunder, such Indemnified Party shall receive any
insurance recovery or indemnity payment from a third party in respect of the
same underlying loss, liability, damage or expense, the Indemnified Party shall
reimburse the Indemnitor hereunder to the extent of such insurance recovery or
third-party indemnity payment.
14.8 Effectiveness. Nothing herein shall be construed to impose any
obligation on the Purchaser or any Affiliate of the Purchaser to assume or
discharge any responsibility for any liability of the Seller if the Closing does
not occur. The terms and conditions of this Section 14 shall have effect only
from and after the Effective Time.
15. Brokers and Finders' Fees.
15.1 The Seller. The Seller represents and warrants to the Purchaser
that, except pursuant to the engagement of Bear Xxxxxxx & Co. Inc. in connection
with, among other things, the transactions contemplated hereby, all negotiations
relative to this Agreement have been carried on by the Seller directly without
the intervention of any Person who or which may be entitled to a brokerage fee
or other commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby. The Seller hereby
indemnifies and agrees to hold the Purchaser and its Affiliates harmless against
any and all claims, losses, liabilities or expenses which may be asserted
against the Purchaser or any of the Purchaser's Affiliates as a result of the
Seller's or the Seller's Affiliates' dealings, arrangements or agreements with
Bear Xxxxxxx & Co. Inc. or any such other person or entity.
15.2 The Purchaser. The Purchaser represents and warrants to the
Seller that all negotiations relative to this Agreement have been carried on by
it directly without the intervention of any Person who or which may be entitled
to a brokerage fee or other commission in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby. The
Purchaser agrees to indemnify and hold the Seller and its Affiliates harmless
against any and all claims, losses, liabilities or expenses which may be
asserted against the Seller or its Affiliates as a result of the Purchaser's or
any of the Purchaser's Affiliates' dealings, arrangements or agreements with any
such other person or entity.
16. Additional Agreements.
16.1 Expenses. Except as otherwise provided herein, each of the
parties hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby, including any amendments
or revisions hereto. In the event that any party hereunder brings an action or
suit against any other party hereunder by reason of any breach of any of the
covenants, agreements or provisions in this Agreement before or after the
Effective Date, the prevailing party shall be entitled to have and recover of
and from the other party all costs and expenses of the action or suit,
including, without limitation, reasonable attorneys' fees.
16.2 Transfer Taxes. The Purchaser and the Seller shall bear and
discharge in a timely manner any and all federal, state and local transfer and
gains taxes, sales taxes and real property transfer and gains taxes under
applicable statutes, rules or regulations that may be incurred as a result of
the transactions contemplated by this Agreement (collectively, "Transfer
Taxes"), as follows: the Purchaser shall bear the first $20,000 of Transfer
Taxes and the Purchaser and the Seller shall each bear 50% of all Transfer Taxes
in excess of $20,000. The Purchaser and the Seller agree that (i) they shall
each remit a check in payment of its obligation under this Section 16.2 to the
appropriate Governmental Entity on or prior to the applicable payment due date
for such tax payment; (ii) the Purchaser shall prepare and timely file all
necessary reports and returns in connection with the payment of such taxes
(except that the Seller shall remit any to the appropriate authority of the
State of New York any sale tax due) and the Seller shall provide its full
assistance and cooperation with respect thereto, including, but not limited to,
the Seller's furnishing any necessary information or data and executing and
delivering any documents required to be filed; and (iii) the Seller shall
cooperate with the Purchaser in connection with the Purchaser's filing of a bulk
sale notice with the New York State Department of Taxation and Finance. This
Section 16.2 and the respective parties' obligation to pay the indicated taxes
as described herein shall survive the Closing.
16.3 Confidentiality. Subject to Section 10.10, until the Closing Date
the parties hereto shall, and after the Closing Date the Seller shall, to the
extent not otherwise permitted hereby or required by law, hold and cause each of
its Affiliates, employees and agents to hold all information and documents
relating to the Assets, the Real Property or the Acquired Business or obtained
in connection with the transactions contemplated hereby (to the extent such
information and documents are not generally available and readily accessible to
the public at large) confidential.
17. Merger; Amendment. This Agreement and the other Transaction Documents
set forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. Any and all other previous agreements and
understandings between or among the parties regarding the subject matter hereof,
whether written or oral, are hereby released, merged herein and superseded by
this Agreement. This Agreement shall not be amended except by a written
instrument duly executed by each of the parties hereto.
18. Assignment and Binding Effect. This Agreement may not be assigned by
any party hereto without the prior written consent of the other party hereto and
any purported assignment in violation of the terms of this Section 18 shall be
null and void ab initio. Notwithstanding the foregoing, GHI may assign all of
its rights and interests hereunder to GHMO without the consent of any other
party hereto, whereupon GHMO shall be deemed to have assumed all of GHI's
duties, obligations and liabilities hereunder and GHI shall be deemed to have
been fully released therefrom. Such assignment by GHI and assumption by GHMO
shall be conclusively evidenced by the execution and delivery by GHMO of the
Assignment and Assumption Agreement to be entered into between the Seller and
the Purchaser at the Closing. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto.
19. Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
20. Termination. This Agreement may be terminated at any time, but not
later than the Effective Time, as follows:
20.1 Mutual Consent. By the Purchaser and the Seller mutually agreeing
to terminate this Agreement; or
20.2 The Seller's Breach. By the Purchaser if, as of the Effective
Time, the Purchaser is ready, willing and able to proceed to consummate the
transactions contemplated hereby but any of the conditions of the obligations of
the Purchaser pursuant to Section 11 hereof shall not have been satisfied or, in
the sole discretion of the Purchaser, waived by the Purchaser, or if the Seller
shall have breached a material covenant or agreement hereunder and shall not
have cured the same within three business days after notice of such breach is
given to the Seller by the Purchaser; or
20.3 The Purchaser's Breach. By the Seller if, as of the Effective
Time, the Seller is ready, willing and able to proceed to consummate the
transactions contemplated hereby but any of the conditions of the obligations of
the Seller pursuant to Section 12 hereof shall not have been satisfied or, in
the sole discretion of the Seller, waived by the Seller, or if the Purchaser
shall have breached a material covenant or agreement hereunder and shall not
have cured the same within three business days after notice of such breach is
given to the Purchaser by the Seller; or
20.4 Casualty. By the Purchaser in the circumstances contemplated by
Section 10.5; or
20.5 By the Purchaser or the Seller. By either the Purchaser or the
Seller if the Closing Date shall not have occurred on or before June 1, 1999,
except if such delay has occurred by reason of a breach by such party of any of
its material obligations hereunder.
In the event of the termination by either the Purchaser or the Seller
as provided above, written notice of termination shall forthwith be given by the
party electing to terminate to the other party. Any termination pursuant to this
Section 20 shall be without liability on the part of any party to the other
parties hereto, except to the extent that such termination by one party has
resulted from a breach by the other party of any of its material obligations
hereunder. Nothing in this Agreement shall be deemed to require any party to
terminate this Agreement in the event that a condition precedent to its
obligations hereunder is not met, rather than to waive such conditions precedent
and proceed to Closing. Notwithstanding the foregoing, the occurrence of the
Closing shall not be deemed to constitute a waiver by a party of any term or
condition hereof that is for the benefit of such party except to the extent that
such waiver is in writing and subscribed by such party.
21. Notices. Any notice, request, demand, waiver, consent, approval,
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to
such party personally or sent to such party by facsimile (with confirmation of
receipt) or by overnight courier or by registered or certified mail (return
receipt requested), with postage and registration or certification fees thereon
prepaid, addressed to the party at its address set forth below:
To the Seller: WellCare of New York, Inc.
Park Xxxx/Xxxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxx Xxxxxxxx-Xxxxxx
Facsimile No.: 000-000-0000
with copies to: Xxxxxxx, Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
To the Purchaser: Group Health Incorporated
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
with copies to: Kalkines, Arky, Xxxx & Xxxxxxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile No: (000) 000-0000
or to such other address or person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication shall be deemed to have been
given as of the date so delivered.
22. Risk of Loss. Except as provided in Section 10.5 of this Agreement,
legal title, equitable title and risk of loss with respect to the Assets shall
not pass to the Purchaser until the Assets are transferred to the Purchaser as
of the Effective Time.
23. Severability. If any provision of this Agreement, or the application
thereof to any Person or any circumstance, is invalid or unenforceable, (i) a
suitable and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision, and (ii) the remainder of this Agreement and
the application of such provision to other persons, entities or circumstances
shall not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
24. Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York as applied to
contracts made and fully performed in such state.
25. Third Party Beneficiary; No Benefit to Others. The representations,
warranties, covenants and agreements contained in this Agreement are for the
benefit of the Purchaser and the Seller and their respective successors and
permitted assigns. This Agreement shall not be construed as conferring, and is
not intended to confer, any rights on any other persons.
26. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
27. Schedules and Exhibits. All Schedules hereto and the Exhibits referred
to herein are intended to be and hereby are specifically made a part of this
Agreement.
28. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Seller, and the
Purchaser may become parties hereto by executing a counterpart hereof. This
Agreement and any counterpart so executed shall be deemed to be one and the same
instrument. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts. A
facsimile copy of the signature page hereof transmitted by a party hereto shall
be effective to constitute the execution and delivery hereof by such party.
29. Time for Performance. If the final day of any period or any date of
performance under this Agreement falls on a Saturday, Sunday or legal holiday,
then the final day of the period or the date of performance shall be extended to
the next day which is not a Saturday, Sunday or legal holiday.
30. Survival. The provisions of Sections 2, 3, 5, 7, 8, 9, 14, 15, 16, 17,
18, 19, 22 and 24 through 34 hereof (the "Surviving Provisions") shall survive
the Closing hereunder, in accordance with the following: (i) the representations
and warranties contained in Section 8.7, 8.11 and 8.12 shall survive until the
expiration of the applicable statute of limitations (giving effect to any waiver
or extension thereof); (ii) each of other representations and warranties
contained in Sections 8, 9 and 15 shall survive for a period of two years
following the Closing; and (iii) each of the other Surviving Provisions shall
survive indefinitely, unless it is expressly stated therein that such provision
is to survive for a different period.
31. Waiver of Jury Trial. To the extent not prohibited by applicable law
which cannot be waived, the Purchaser and the Seller hereby waive, and covenant
that it or they will not assert (whether as plaintiff, defendant or otherwise),
any right to trial by jury in any forum in respect of any issue, claim, demand,
action, or cause of action arising out of or based upon this agreement or the
subject matter hereof or any Transaction Document, in each case whether now
existing or hereafter arising or whether in contract or tort of otherwise. The
parties acknowledge that they have been informed that the provisions of this
section constitute a material inducement upon which the other party has relied,
are relying and will rely in entering into this Agreement. Any party may file an
original counterpart or a copy of this section with any court as written
evidence of the consent of the other parties to the waiver of their rights to
trial by jury.
32. Service of Process. The Seller and the Purchaser (each a "Submitting
Party") each hereby irrevocably submits to the jurisdiction of the state courts
of the State of New York and to the jurisdiction of the United States District
Court for the Southern District of New York for the purposes of any suit, action
or other proceeding arising out of or based upon this agreement or the subject
matter hereof brought by the Purchaser. The Submitting Party to the extent
permitted by applicable law hereby waives, and agrees not to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding
brought in such courts, any claim that it or he is not subject personally to the
jurisdiction of the above-named courts, that its or his property is exempt or
immune from attachment or execution, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this agreement or the subject matter hereof may
not be enforced in or by such court. The Submitting Party hereby consents to
service of process by mail at its address to which notices are to be given
pursuant to Section 21 hereof. Final judgment against the Submitting Party in
any such action, suit or proceeding shall be conclusive, and may be enforced in
any other jurisdiction (a) by suit, action or proceeding on the judgment, a
certified or true copy of which shall be conclusive evidence of the fact and the
amount of indebtedness or liability of the Submitting Party therein described or
(b) in any other manner provided by or pursuant to the laws of such other
jurisdiction.
33. Construction. The Purchaser and the Seller agree that the terms and
conditions of this Agreement and the other Transaction Documents are the result
of negotiations between the parties and that this Agreement and the other
Transaction Documents shall not be construed in favor of or against any party by
reason of the extent to which any party or its professionals participated in the
preparation of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Asset Purchase Agreement on the date first above
written.
GROUP HEALTH INCORPORATED
By: /s/ Xxxxx Xxxxx
-----------------------------
Name: Xxxxx Xxxxx
-----------------------------
Title: Executive VP/COO
-----------------------------
WELLCARE OF NEW YORK, INC.
By: /s/ Xxxx Xxx Xxxxxxxx-Xxxxxx
-----------------------------
Name: Xxxx Xxx Xxxxxxxx-Xxxxxx
-----------------------------
Title: President/CEO
-----------------------------
