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EXHIBIT 2.2
FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT (this "First Amendment") is
made and entered into as of the 1st day of February, 2000, among XXXXXX
METHODIST HEALTH PLAN, INC., a Delaware corporation ("Seller"), Seller's sole
shareholder, TEXAS HEALTH RESOURCES, a Texas corporation ("THR"), and PACIFICARE
HEALTH PLAN ADMINISTRATORS, INC., a Indiana corporation ("Buyer").
PREAMBLE
A. On or about November 1, 1999, Seller, THR and Buyer entered into
that certain Purchase Agreement pursuant to which Buyer agreed to purchase all
of the issued and outstanding shares of capital stock of Xxxxxx Methodist Texas
Health Plan, Inc. d.b.a. Xxxxxx Methodist Health Plan and Xxxxxx Methodist
Health Insurance Company, Inc. and Seller agreed to sell such capital stock to
Buyer (the "Purchase Agreement").
B. Seller, THR, and Buyer mutually desire to amend the Purchase
Agreement in accordance with the terms of this First Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as
follows:
1. Amendments to the Purchase Agreement. The Purchase Agreement is
hereby amended as follows:
1.1 Section 1.2 is deleted in its entirety and the following
provisions are substituted therefor:
"SECTION 1.2 PURCHASE PRICE FOR THE STOCK. On the
terms and subject to the conditions set forth in this
Agreement, at the Closing, as consideration for the sale,
transfer and delivery of the Stock, Buyer shall pay Seller a
cash purchase price in the amount of One Hundred Twenty
Million One Hundred Fifty Thousand Dollars ($120,150,000) (the
"Purchase Price"), subject to post-Closing adjustment as set
forth in Section 1.3 below. In addition, the Purchase Price
will be increased by any severance amounts payable as of
January 31, 2000 to employees of the Target Entities in excess
of $5 million. Likewise, the Purchase Price will be reduced by
the amount that $5 million exceeds the total severance amounts
payable as of January 31, 2000 to employees as of the Target
Entities. All payments made pursuant to Section 1.2 and 1.3
hereof shall be paid via wire transfer pursuant to signed
written payment instructions delivered to the party who owes
the applicable funds from the party to whom such funds are
owed."
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1.2 Section 1.4 is amended by adding the following provisions
after the conclusion of the sentence reading: "The Actuary will have
ninety (90) days from the first anniversary of the Closing Date to
conduct and complete its review":
"Buyer, Seller, and THR agree that, in conducting the Actuary
review of the Pre-Closing HMTHP Incurred Claims, the Actuary
shall apply the standards described on Exhibit A to this First
Amendment."
1.3 Section 1.5 is amended by adding the following provisions
after the conclusion of the sentence reading: "The Actuary will have
ninety (90) days from the first anniversary of the Closing Date to
conduct and complete its review":
"Buyer, Seller, and THR agree that, in conducting the Actuary
review of the Pre-Closing HMHIC Incurred Claims, the Actuary
shall apply the standards described on Exhibit A to this First
Amendment."
1.4 Section 2.2 is amended by adding the following sentence at
the conclusion of the provision: "Notwithstanding anything to the
contrary contained in this Agreement or in any other related agreement
to the contrary, February 1, 2000 shall be the "Closing Date" for the
Transactions consummated under the terms of this Agreement."
1.5 Section 2.2(h) is deleted in its entirety and the
following provisions are substituted therefor:
"(h) Lease Agreement. A lease for the property
located at 000 Xxxx Xxxxx, Xxxxxxxxx, Xxxxx by and between
Texas Health Systems ("THS"), as lessor, and PacifiCare Health
Systems, Inc., as lessee, in the form attached hereto as
Exhibit D, shall be executed by THS and PacifiCare Health
Systems, Inc. and delivered by Buyer and Seller (the "Lease
Agreement"), and the full service rental rate for the
five-year initial lease term of the premises demised by the
Lease Agreement shall have been mutually agreed to by
PacifiCare Health Systems, Inc. and THS."
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1.6 Section 3.5(b) is amended by deleting the first sentences
thereof and substituting the following provisions therefor:
"The authorized capital stock of HMHIC consists of 1,400,000
shares of common stock at $1.00 par value per share. Seven
Hundred Thousand shares of common stock, $1.00 par value per
share, of HMHIC are held beneficially and of record by Seller
(hereinabove, identified as the HMHIC Stock). Except as
heretofore provided, HMHIC has no other classes of capital
stock authorized or outstanding."
1.7 Section 5.20 is deleted in its entirety and the following
provisions are substituted therefor:
"SECTION 5.20 STADIUM BOXES. Pursuant to a license
agreement between HMTHP and Texas Rangers Baseball Partners,
dated on or about December 16, 1998, and renewed for a
three-year term on or about January 15, 1999, HMTHP licenses
from the Texas Rangers Baseball Partners a suite known as
Xxxxxx Xxxxxx 8A (the "Suite License"). Prior to Closing,
HMTHP shall sublicense to THR a one-half (1/2) interest in the
tickets available under the Suite License to the fullest
extent permitted under the Suite License."
1.8 Article 7 is amended by adding the following two new
sections:
"SECTION 7.16 REIMBURSEMENT FOR STAY-PUT BONUS
AMOUNTS. Seller and THR jointly and severally agree to
reimburse and pay Buyer and/or the Target Entities for
one-third of the amounts which are payable to the Target
Entities' employees under stay put bonus agreements entered
into with such employees after the Closing. Such reimbursement
shall be due and payable within thirty (30) days after Seller
and THR have received reasonable evidence reflecting the
amount of the stay put bonuses paid to such employees, whether
they are then employed by the Target Entities or by Buyer.
Reimbursements for stay put bonus amounts will be submitted by
Buyer to Seller and THR on a quarterly basis.
SECTION 7.17 REIMBURSEMENT FOR CERTAIN CONSULTANTS.
Seller and THR jointly and severally agree to reimburse and
pay Buyer for the cost and expenses paid to operations and
medical management consultants engaged by Buyer to oversee the
Target Entities' business prior to Closing. Such
reimbursement(s) shall be due and payable within thirty (30)
days after receipt of a written invoice reflecting the
applicable amounts paid or reimbursed to such consultants by
Buyer and/or Buyer's Affiliates."
1.9 Section 8.1(b) is deleted in its entirety and the
following provisions substituted therefor:
"(b) Unknown Claims Covered by Insurance. Seller and
THR jointly and severally agree to be solely financially
responsible for, and
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jointly and severally shall defend, indemnify and hold
harmless any member of Buyer's Group from and against, any
Loss which arises out of or in connection with (i) any Claim
not Known to Seller which occurs, accrues or arises prior to
the Closing Date or which results from facts or circumstances
relating to the period occurring prior to the Closing Date,
(ii) any errors, actions or omissions of the Target Entities
or their employees, personnel, agents or Representatives which
first occurred prior to the Closing Date or (iii) any other
Claim arising from the existence, ownership, management,
operation or conduct of the business of either of the Target
Entities prior to the Closing Date (collectively, "Unknown
Claims"), irrespective of when the Unknown Claim is first
asserted, so long as the Unknown Claim described in the
foregoing clause (i), (ii) or (iii) (A) is covered under any
of the Relevant Insurance Policies, (B) is covered under any
other policy of insurance maintained by Seller or its
Affiliates as of the Closing Date, or (C) by virtue of the
nature, type, or scope of such Unknown Claim, would have been
covered under the Relevant Insurance Policies if coverage for
the Target Entities under the Relevant Insurance policies was
extended for a period of three years after the Closing Date."
1.10 Section 8.1(b) is deleted in its entirety and the
following provisions substituted therefor:
"SECTION 8.6 SURVIVAL OF COVENANTS AND AGREEMENTS;
MAXIMUM INDEMNIFICATION LIABILITY. The covenants and
agreements contained in this Agreement, including the Parties'
respective obligations under this Section VIII, shall survive
the Closing indefinitely or as otherwise may be specified by
their own terms. However, Seller's and THR's joint and several
liability shall not exceed, in any single instance or in the
aggregate, the total amount of $75,000,000 (the "Maximum
Indemnification Liability") for: (i) Losses actually paid or
reimbursed to Buyer' Group pursuant to the provisions of
Section 8.1; (ii) Losses actually paid or reimbursed to
Buyer's Group within the Limited Indemnification Maximum
pursuant to the provisions of Section 8.2; and/or (iii) Losses
or Claims actually paid or reimbursed to Buyer's Group prior
to Closing pursuant to Subsection 6.2(l); provided, however,
that in determining the Limited Indemnification Maximum and
the Maximum Indemnification Liability for which Seller and THR
are responsible hereunder, (A) only amounts paid by Seller or
THR as deductibles or amounts in excess of the insurance
policy limits for Claims covered by insurance may be counted
toward and included within the Limited Indemnification Maximum
or the Maximum Indemnification Liability, as the case may be,
and (B) any insurance proceeds payable, or which would have
been payable in the case of Unknown Claims described in clause
(iii) (C) of Section 8.1(b) above, to any member of
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Buyer's Group with respect to Losses or Claims which are the
subject of indemnification pursuant to Section 8.1 or 8.2
shall not be counted toward or included within the Limited
Indemnification Maximum or the Maximum Indemnification
Liability, as the case may be."
2. Capitalized Terms. Any capitalized terms used in this First
Amendment which are not defined herein shall have the meanings ascribed to those
terms in the Purchase Agreement.
3. Effect of this First Amendment. Except as amended by this First
Amendment, the Purchase Agreement shall not be further amended, modified, or
revised and the Purchase Agreement, as hereby amended, shall continue in full
force and effect and shall be enforced in accordance with its terms and
conditions. The Purchase Agreement may only be further amended, modified,
revised, or supplemented by a dated written instrument executed by Buyer,
Seller, and THR.
4. Severability. If any term or other provision of this First
Amendment is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this First Amendment
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated by this First Amendment is not
affected in a manner adverse to a Party to this First Amendment. Upon a
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties to this First Amendment shall negotiate in good
faith to modify this First Amendment to effect the original intent of the
parties to this First Amendment as closely as possible in an acceptable manner
to the end that transactions contemplated by this First Amendment are fulfilled
to the extent possible.
5. Entire Agreement; Schedules and Exhibits. This First Amendment and
the exhibits attached hereto constitute the entire agreement of the Parties and
supersede all other prior agreements and undertakings, both written and oral,
between or among the Parties with respect to the subject matter of this First
Amendment.
6. Governing Law and Venue. This First Amendment shall be governed as
to all matters by, and construed and interpreted in accordance with, the laws of
the State of Texas, excluding any rule of law that would cause the application
of the laws of any jurisdiction other than Texas. The exclusive situs for any
resolution of disputes arising under this First Amendment or in any manner
related to this First Amendment shall be in the appropriate federal, state or
local court in and for Dallas County.
7. Counterparts. This First Amendment and all agreements executed and
delivered pursuant to this First Amendment may be executed in one or more
counterparts, and by the different Parties to this First Amendment in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which shall constitute one and the same agreement.
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8. Attorneys. In the event of any dispute with respect to the subject
matter of this First Amendment (including an arbitration or mediation), the
substantially prevailing party shall be entitled to recover its reasonable
attorneys' fees and court, arbitration or mediation costs incurred in resolving
or settling the dispute, in addition to any and all other damages or relief
which a court, arbitrator or mediator may deem proper.
IN WITNESS WHEREOF, Seller, THR and Buyer have executed this First
Amendment as of the date first set forth above.
SELLER:
XXXXXX METH0DIST HEALTH PLAN, INC.,
a Delaware corporation
By:
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Name:
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Title:
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THR:
TEXAS HEALTH RESOURCES,
a Texas nonprofit corporation
By:
------------------------------------
Name:
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Title:
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BUYER:
PACIFICARE HEALTH PLAN ADMINISTRATORS,
INC., an Indiana corporation
By:
------------------------------------
Name:
------------------------------
Title:
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EXHIBIT A
STANDARDS FOR PRE-CLOSING INCURRED CLAIMS
For the purposes of this transaction a pre-closing incurred claim which is the
financial responsibility of Seller, and not the financial responsibility of
Buyer or a Target Entity, shall include the following:
1. Any claim for which service was rendered prior to the Closing Date.
2. All claims for services rendered in a care facility for an insured person who
was admitted to a care facility prior to the Closing Date (the "Closing Date
Admission") and all claims payable to that same facility for a readmission
occurring within three (3) days of the Closing Date Admission provided in the
latter case that: (a) such claims are consistent with terms of the care facility
provider contract and (b) the readmission is for the same condition or diagnosis
as that present in the Closing Date Admission.
3. All claims for an insured person for which a medical professional employed by
a Target Entity has made a written agreement outside of the normal course of
business (excluding routine pre-certification and verification processes in the
normal course of business) to provide services at a future date if such written
agreement was made prior to the Closing Date.
4. For any claim for which a Target Entity receives or is eligible for
reinsurance payment, Seller shall benefit from applicable reinsurance recoveries
received after the Closing Date pertaining to claims that are the responsibility
of Seller as defined herein. In this regard, Buyer shall continue to file
reinsurance claims, and provide the detailed support showing what reinsurance
claims were filed and detailed records of reinsurance amounts received.
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