FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT, dated as of February 21,
1997 (this "First Amendment"), is made and entered into by and between
PACIFICARE HEALTH SYSTEMS, INC., a Delaware corporation, as seller ("Seller"),
and TOTAL HEALTH CHOICE, INC., a Florida nonprofit corporation, as buyer
("Buyer"), with reference to the following facts:
PREAMBLE
A. Buyer and Seller have entered into that certain Stock Purchase
Agreement, dated as of January 21, 1996 (the "Agreement"), pursuant to which
Buyer has agreed to purchase all of the issued and outstanding shares of capital
stock of the Company, and Seller has agreed to purchase the capital stock of the
Company.
B. Notwithstanding the conditions to Closing set forth in the Agreement,
applicable Florida law pertaining to HMO Regulatory Approval permits Buyer and
Seller to consummate the transactions contemplated under the Agreement subject
to obtaining HMO Regulatory Approval as a condition subsequent to such
transactions.
C. In view of the flexibility under applicable regulatory law, among
other reasons, Buyer and Seller desire to amend the Agreement as of the Closing
in accordance with the terms and subject to the conditions set forth in this
First Amendment.
NOW, THEREFORE, in consideration of the above premises and the promises,
covenants, conditions, representations and warranties exchanged by the parties
hereinbelow, Buyer and Seller hereby agree as follows:
1. AMENDMENTS TO THE AGREEMENT. Buyer and Seller agree to amend the
Agreement as follows:
1.1 Article 1, Section 1.1, entitled DEFINED TERMS, is amended by
adding the following new definitions:
"ADJUSTED REAL ESTATE VALUE: (i) With respect to those parcels
of Real Estate which are owned or held by the Company, Buyer or one of
their subsidiaries or affiliates at the end of the Regulatory
Negotiation Period, the depreciated book value of such parcels; plus
(ii) with respect to those parcels of Real Estate which have been sold
prior to the end of the Regulatory Negotiation Period, the greater of
the assumed book value (as reflected on Schedule 2.4) of such parcels
on the Closing Date or the proceeds received from the sale of such
parcels.
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PUT OPTION: As defined in Section 10.11(c).
PUT OPTION PERIOD: The thirty (30) day period which follows (if
applicable) the Regulatory Negotiation Period.
PUT OPTION PRICE: The Final Purchase Price minus Three Million
Dollars ($3,000,000.00).
REGULATORY NEGOTIATION PERIOD: The thirty (30) day period which
follows (if applicable) the earlier to occur of (i) DOI's final and
nonappealable rejection or disapproval of Buyer's completed application for
HMO Regulatory Approval, or (ii) the expiration of one (1) year after Buyer
has submitted its completed application for HMO Regulatory Approval without
having obtained such approval."
1.2 Article 1, Section 1.1, entitled DEFINED TERMS, is further
amended by deleting the definition of "Assets" in its entirety and
substituting the following definition therefor:
"ASSETS: The assets, properties, business, goodwill and rights
of every kind and description, whether real, personal or mixed or
tangible or intangible, wherever situated, of the Company and of its
Subsidiaries, except for the (i) Excluded Claims, (ii) the items
listed in the last column of Schedule 2.4 entitled "Balances Retained
by PacifiCare"; and (iii) account number 22072, entitled Accrued
Legal, with the current balance of approximately $25,182, which
account was inadvertently excluded from the "Balances Retained by
PacifiCare" column."
1.3 Article 1, Section 1.1, entitled DEFINED TERMS, is further
amended by deleting the definition of "Closing Date" in its entirety and
substituting the following definition therefor:
"CLOSING DATE: February 21, 1997."
1.4 Article 1, Section 1.1, entitled DEFINED TERMS, is further
amended by deleting the definition of "Purchase Refund" in its entirety and
substituting the following definition therefor:
"PURCHASE REFUND: To compensate Buyer for the deterioration in
the value of the Company due to the Company's projected losses in the
month of February, 1997, the Preliminary Purchase Price shall be
reduced by an amount equal the product of (i) Four Hundred Thousand
Dollars ($400,000.00), multiplied by (ii) a fraction the numerator of
which is the number of days which
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have elapsed in the month of February through the Closing Date and
the denominator of which is twenty-eight (28), the number of days
in the month of February."
1.5 Article 2 is amended by adding a new Section 2.7 as follows:
"2.7 SUBSEQUENT HMO REGULATORY APPROVAL. Without limiting any
other provision of this Agreement, the purchase and sale of the
Company's Shares as contemplated hereunder is subject to Buyer
obtaining HMO Regulatory Approval as a condition subsequent to such
transaction. Buyer's inability to obtain HMO Regulatory Approval
shall result in a rescission of the purchase and sale of the Shares in
accordance with the provisions of Section 10.10 below."
1.6 Article 6, Section 6.1, entitled REPRESENTATIONS AND WARRANTIES
TRUE; CLOSING CONDITIONS SATISFIED, is amended by (1) deleting the first clause
designated "(iii)" in its entirety, which reads as follows: "(iii) all of the
conditions to Seller's obligations set forth in this Article 6 have been fully
satisfied or waived in writing by Seller" and (2) deleting the second clause
designated "(iii)" in its entirety and substituting the following provision
therefor: "(iii) all of the conditions to Buyer's obligations set forth in this
Article 6 have been fully satisfied by Seller or waived in writing by Buyer."
1.7 Article 6, Section 6.4, entitled CONSENTS AND APPROVALS, is
amended by deleting the first sentence thereof in its entirety. The deleted
sentence read as follows: "HMO Regulatory Approval shall have been obtained."
1.8 Article 7, Section 7.1, entitled REPRESENTATIONS AND WARRANTIES
TRUE; CLOSING CONDITIONS SATISFIED, is amended by deleting clause "(iii)" in its
entirety and substituting the following provision therefor: "(iii) all of the
conditions to Seller's obligations set forth in this Article 7 have been fully
satisfied by Buyer or waived in writing by Seller."
1.9 Article 7, Section 7.4, entitled CONSENTS AND APPROVALS, is
amended by deleting the first sentence thereof in its entirety. The deleted
sentence read as follows: "HMO Regulatory Approval shall have been obtained."
1.10 Article 10 is amended by adding the following provisions at the
end of Section 10.5:
"After the Closing, Buyer shall fully cooperate with any appropriate
requests made by Seller or others to review, copy or otherwise
duplicate any books, records or other written materials or information
respecting the conduct of the
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Company's business which may be reasonably necessary under the
circumstances."
1.11 Article 10 is amended by adding new Sections 10.11 and Section
10.12 as follows:
"10.11 SEEKING HMO REGULATORY APPROVAL. (a) Seller shall use
its best good faith efforts to continue to seek and to diligently
pursue HMO Regulatory Approval. In connection with its pending
application for HMO Regulatory Approval, Buyer shall, and shall cause
the Company to, promptly respond to all governmental requests for
additional information and comments to the application. Buyer shall,
and shall cause the Company to, provide DOI or AHCA with all
information and documentation necessary to obtain HMO Regulatory
Approval. Buyer shall comply with all reasonable regulatory
requirements of DOI or AHCA in obtaining regulatory approval.
(b) During the continued pendency of HMO Regulatory
Approval, Buyer shall preserve the Company's value and shall comply
with the remaining obligations of this Section 10.11(b). Buyer shall
promote the Company's HMO business and market the Company's health
benefit plans. Buyer shall use reasonable and customary business and
financial practices to enhance the Company's value and to preserve the
Company's financial condition. Buyer shall cause the Company to be
operated in compliance with applicable regulatory and other laws.
(c) In the event that HMO Regulatory Approval cannot be
obtained prior to January 31, 1998 or, prior to such time, DOI has
rendered a final and nonappealable order disapproving or rejecting
such completed application, then Buyer and Seller shall work
cooperatively, diligently and in good faith during the Regulatory
Negotiation Period to persuade DOI and/or AHCA to provide HMO
Regulatory Approval. If HMO Regulatory Approval has not been obtained
prior to the expiration of the Regulatory Negotiation Period, then
Buyer shall have the option (the "Put Option") to cause Seller to
repurchase the Shares in exchange for the Put Option Price; provided,
however, that Buyer's right to exercise the Put Option is conditioned
upon satisfaction of the following obligations:
(i) Buyer shall have complied with its obligations
under Section 10.11(a) and 10.11(b) with respect to obtaining HMO
Regulatory Approval and the conduct of the Company's business;
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(ii) The Tangible Net Equity of the Company as of the
end of the Regulatory Negotiation Period shall not be less than the
Adjusted Real Estate Value; and
(iii) Buyer agrees to and shall be solely
responsible for and shall defend, indemnify and hold harmless Seller
and Seller's shareholders, directors, officers, subsidiaries,
affiliates, successors, successors-in-interest and assigns from and
against: (A) any balance sheet liabilities necessary to increase the
Company's Tangible Net Equity to the Adjusted Real Estate Value; and
(B) any other Liabilities of the Company or of any of its Subsidiaries
which have arisen, occurred or accrued from and after the Closing Date
through the date of repurchase of the Shares by Seller.
Provided that the conditions in the foregoing clauses
(i), (ii) and (iii) are satisfied, then, upon the conditions described
in this Section 10.11(c), including Buyer's timely exercise of the Put
Option, Seller shall be required to repurchase the Shares for the Put
Option Price. Seller shall be required to effect such repurchase
within ten (10) business days after Buyer's proper exercise of the Put
Option. Upon Buyer's exercise of the Put Option, the Put Option
Price, in Seller's sole discretion, may be reduced by any known
balance sheet liabilities or other known Liabilities of the Company
for which Buyer has agreed to indemnify Seller pursuant to clause
(iii) of this Section 10.11(c). The covenants and obligations of this
Section 10.11 shall survive the Closing.
10.12 OTHER NOTICES, CONSENTS AND APPROVALS. In the event
that any notices to, or filings or registrations with, Governmental
Authorities or other Persons necessary to consummate the purchase and
sale of the Shares as contemplated hereunder were not given or made
prior to Closing, then Buyer and Seller, as the case may be, shall
provide such notice or make such filings or registrations as soon
after Closing as possible. In the event that any consents or
approvals, other than HMO Regulatory Approval, necessary to, or
contemplated by, the purchase and sale of the Shares hereunder were
not obtained prior to Closing ("Other Consents"), Buyer shall
diligently continue to use its best good faith efforts to obtain such
Other Consents as expeditiously as possible. In order to obtain such
Other Consents, Buyer shall, or shall cause the Company to, comply
with all requests for information and all other reasonable requests
required by the Person whose consent or approval is required. Buyer
acknowledges that Seller has, prior to the Closing, provided Buyer
with copies of all requests for the Other Consents required to be
obtained on Seller's part to consummate the transactions contemplated
hereunder. The covenants and obligations of this Section 10.12 shall
survive the Closing.
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1.12 Schedule 3.16 is deleted in its entirety and Schedule 3.16
attached to this First Amendment ("Revised Schedule 3.16") is substituted
therefor. Revised Schedule 3.16 attached to this First Amendment shall fully
replace and supersede Schedule 3.16 to the Agreement. From and after the date
hereof, all references in the Agreement to Schedule 3.16 shall mean and refer to
Revised Schedule 3.16.
1.13 Schedule 3.21 is deleted in its entirety and Schedule 3.21
attached to this First Amendment ("Revised Schedule 3.21") is substituted
therefor. Revised Schedule 3.21 attached to this First Amendment shall fully
replace and supersede Schedule 3.21 to the Agreement. From and after the date
hereof, all references in the Agreement to Schedule 3.21 shall mean and refer to
Revised Schedule 3.21.
1.14 Part A of Schedule 3.24 is deleted in its entirety and Part A of
Schedule 3.24 attached to this First Amendment ("Revised Schedule 3.24(A)") is
substituted therefor. Revised Schedule 3.24(A) attached to this First Amendment
shall fully replace and supersede Part A of Schedule 3.24 to the Agreement.
From and after the date hereof, all references in the Agreement to Part A of
Schedule 3.24 shall mean and refer to Revised Schedule 3.24(A).
2. EXHIBITS AND SCHEDULES. References in this First Amendment to
exhibits and schedules are to exhibits and schedules of and to this First
Amendment. All exhibits or schedules of or to this First Amendment are hereby
incorporated herein by this reference.
3. EFFECT OF THIS FIRST AMENDMENT. Except as amended by this First
Amendment, the Agreement shall not be further amended, modified or revised and
the Agreement, as hereby amended, shall continue in full force and effect and
shall be enforced in accordance with its terms and conditions.
4. INTEGRATED AGREEMENT. This First Amendment, together with the
exhibits and schedules, collectively constitute the final written integrated
expression of all of the agreements and understandings between Buyer and Seller
with respect to the subjects addressed herein and is a fully integrated
agreement with respect to such subjects. As a fully integrated agreement, this
First Amendment supersedes all prior or contemporaneous, written or oral,
memoranda, arrangements, contracts or understandings between the parties hereto
relating to the subject matter hereof. Any representations, promises,
warranties or statements made by any party which differ in any way from the
terms of this First Amendment shall be given no force or effect. The parties
specifically represent, each to the other, that there are no additional or
supplemental agreements or contracts between them related in any way to the
matters herein contained unless specifically included or referred to herein. No
addition to or modification of any provision of this First Amendment shall be
binding upon any party unless embodied in a dated written instrument signed by
Buyer and Seller.
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5. CAPITALIZED TERMS. The capitalized terms used in this First Amendment
which are not otherwise defined herein shall have the meanings ascribed to them
in the Agreement.
6 SEVERABILITY. In the event that any provision in this First Amendment
shall be found by a Governmental Authority or arbitrator of competent
jurisdiction to be invalid, illegal or unenforceable, such provision shall be
construed and enforced as if it had been narrowly drawn so as not to be invalid,
illegal or unenforceable, and the validity, legality and enforceability of the
remaining provisions of this First Amendment shall not in any way be affected or
impaired thereby.
7. GOVERNING LAW. This First Amendment shall be governed by and
construed in accordance with the laws of the State of Florida.
8. SUCCESSORS AND ASSIGNS. This First Amendment shall be binding upon
the parties hereto and their respective successors, successors-in-interests,
transferees and assigns.
9. CONSTRUCTION. This First Amendment has been drafted with the joint
participation of each of the parties hereto and shall be construed to be neither
against nor in favor of any party hereto, but rather in accordance with the fair
meaning hereof.
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10. COUNTERPARTS. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Buyer and Seller have executed this First Amendment as
of the date first written above.
BUYER: TOTAL HEALTH CHOICE, INC.,
a Florida nonprofit corporation
By: /s/ K.G. Xxxxxx
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Title: CEO
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SELLER: PACIFICARE HEALTH SYSTEMS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx
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Title: Secretary
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