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EXHIBIT 10.46
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into in Chicago,
Illinois, as of this 2nd day of October, 1998 by and between Coventry Health
Care, Inc., a Delaware corporation (hereinafter "Seller"), and First American
Group of Companies, Inc., an Illinois corporation (hereinafter "Buyer").
W I T N E S S E T H:
WHEREAS, Seller will, at Closing Date (as such term is defined below),
own 100% of the issued and outstanding shares of common stock of Principal
Health Care of Illinois, Inc., an Illinois corporation (the "Company"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, all of
the shares of the Company's common stock on the terms set forth herein.
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I. PURCHASE AND SALE OF THE STOCK; RELATED TRANSACTION
A. Purchase and Sale. Upon the terms and conditions contained herein, and
subject to the representations, warranties and covenants contained
herein, at Closing Seller will sell to Buyer, and Buyer will purchase
from Seller, all of the outstanding shares of common stock of the
Company all of which shall be owned by Seller (the "Stock") without a
resulting step-up in asset value, and all of Seller's right, title and
interest therein and thereto, free and clear of all liens,
encumbrances and claims of every kind.
B. Related Transaction.
1. At or before Closing, Company shall transfer to Seller or a
subsidiary of Seller all of the assets held by Company
immediately prior to the Closing, except for the Retained Assets
described in Section I.B.2, below, (the "Transferred Assets"),
and such Transferred Assets shall be available to fund the
Account to the extent required by and as described in Section
V.G.
2. Anything in this Agreement to the contrary notwithstanding, all
right, title, and interest in the following Retained Assets shall
remain with Company:
a. All contracts of the Company relating to its individual,
group and government health care benefits business,
including but not limited
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to enrollment, group, and provider agreements; its licenses
and Certificates of Authority; and
b. The statutory deposits maintained pursuant to requirements
of regulatory authorities.
3. Pursuant to Section VI.B, Seller shall, as of the Closing,
indemnify Buyer for any liabilities, costs, obligations, or
expenses of the Company occurring or arising from actions or
omissions taken by the Company prior to the Closing, other than
those required by this Agreement ("Transferred Liabilities"),
including but not limited to the following:
a. Employees and employment contracts;
b. Trade accounts payable, including lease obligations and any
incentive or bonus obligations payable to any employer or
group as a result of or incident to any claims or medical
expense experience occurring before the Closing;
c. Medical Claims payable, including any incentive or bonus
obligations payable as a result of or incident to any claims
or medical expense experience occurring before the Closing;
d. Payroll benefits and payroll taxes accrued, accruable or
payable before the Closing;
e. Litigation pending, threatened, or arising as a result of an
act or omission occurring before the Closing; and
f. Taxes accrued, accruable, paid or payable for any period
prior to the Closing.
C. Purchase Price; Payment. The total purchase price for the Stock shall
be Four Million Dollars ($4,000,000.00) plus the amount of the
statutory deposits and interest accrued thereon as of the Closing
Date, which purchase price may be increased or reduced as set forth in
Section I.D.3 and I.D.4 (the "Purchase Price"), and which shall be
paid by wire transfer to an account or accounts of Seller identified
in writing to Buyer not less than five days prior to the Closing Date.
D. Closing
1. Closing of this Agreement ("Closing") shall occur at 10:00 a.m.
on the Closing Date and will be held at the offices of Lord
Bissell & Brook, 115
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South LaSalle Street, Chicago, Illinois, or at such other time
and place as may be agreed by the parties.
2. (i) "Satisfaction of Conditions Date" shall mean the date on
which all regulatory and governmental approvals necessary
for the consummation of the transactions contemplated by
this Agreement are received, any applicable waiting period
expires or is terminated, and all other conditions required
by this Agreement are either satisfied or waived.
(ii) "Closing Date" shall mean the date on which the Escrow
Agent, as defined below, releases, among other things, the
Purchase Price to the Seller and the certificate or
certificates representing the Stock to Buyer and shall be
set as described below.
3. In the event the Dry Closing, as defined below, occurs on or
prior to November 15, 1998, the Purchase Price shall be decreased
by the amount of $25,000.00 multiplied by the number of days by
which the Dry Closing precedes November 16, 1998. Notwithstanding
the foregoing, if the Dry Closing is November 16, 1998, then the
Purchase Price shall be decreased by $25,000.
4. In the event the Satisfaction of Conditions Date occurs on or
after November 20, 1998, the Purchase Price shall be increased by
the amount of $16,666.67 multiplied by the number of days by
which the Satisfaction of Conditions Date follows November 19,
1998; provided, however, that there shall be no increase in the
Purchase Price attributable to those days by which the
Satisfaction of Conditions Date exceeds November 19, 1998 to the
extent such days of delay in the Closing are solely and directly
caused by the negligence of Seller or the Company. Any increase
in the Purchase Price pursuant to this Section I.D.4 shall be
nonrefundable regardless of whether Closing occurs and shall be
paid as follows:
(i) on December 4, 1998, for increases in the Purchase Price
attributable for the periods from November 20, 1998 through
December 3, 1998;
(ii) on December 17, 1998, for increases in the Purchase
Price attributable for the periods from December 4, 1998
through December 16, 1998;
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(iii) on December 31, 1998, for increases in the Purchase
Price attributable for the periods from December 17, 1998
through December 31, 1998; and
(iv) at Closing, for increases in the Purchase Price
attributable for the periods from January 1, 1999 through
the Closing Date.
5. (i) No later than two business days after the Satisfaction of
Conditions Date, the parties shall close the transaction for
purposes of fixing the Purchase Price and obligating the
parties to effect the Closing (the "Dry Closing"), if the
Satisfaction of Conditions Date is prior to December 1,
1998. At the Dry Closing, the parties shall execute all
documents effective as of the Closing Date and shall deliver
them to a mutually acceptable national bank (the "Escrow
Agent"). In addition, Seller shall execute stock powers
transferring the Stock to Buyer and deliver such stock
powers and the certificate or certificates representing the
Stock to the Escrow Agent at the Dry Closing. Buyer shall
remit the Purchase Price to the Escrow Agent at the Dry
Closing.
(ii) The Closing Date shall occur on November 2, 1998 if the Dry
Closing occurs prior to October 31, 1998. The Closing Date
shall occur on December 1, 1998 if the Dry Closing occurs
after October 31, 1998 and prior to December 1, 1998. If the
Satisfaction of Conditions Date occurs after November 30,
1998, then the Closing Date shall be two business days after
the Satisfaction of Conditions Date.
(iii) Notwithstanding the Dry Closing of this transaction, Seller
shall continue to operate the Company and have financial
responsibility for the Company through the Closing Date.
Notwithstanding the foregoing, if the transaction closes on
any day during the first 15 days of December, 1998, Seller's
obligation for Transferred Liabilities and Seller's rights
in the Transferred Assets shall continue only to and through
November 30, 1998 and if the transaction closes on or after
December 16, 1998, Seller's obligation for Transferred
Liabilities and Seller's rights in the Transferred Assets
shall continue to and through December 31, 1998.
6. If the Dry Closing or the Closing Date does not take place solely
due to the failure of the Buyer to obtain the Limited License
discussed in Section V.O
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herein, then the Purchase Price shall be fixed as of the date
that all other closing conditions have been met.
E. Recapitalization. Buyer shall recapitalize Company to meet surplus,
reserve, and/or net worth requirements.
F. Termination. If Closing has not occurred by December 31, 1998, then
either party may terminate this Agreement on written notice to the
other party with no further obligation or liability (other than the
payment of any amounts pursuant to Section I.D.4), unless the reason
for failure to close is the bad faith or breach of one of the parties.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the disclosure schedules attached hereto and made a
part hereof by reference, ("Disclosure Schedules") Seller represents and
warrants to Buyer that:
A. Ownership of Shares. Seller is the lawful record and beneficial owner
of all of the issued and outstanding Shares of Stock of the Company.
All such Shares are owned free and clear of all liens, encumbrances
and restrictions of every kind except for restrictions on transfer
under federal and state securities laws. Seller has full power and
authority to transfer the Stock and all of Seller's right, title and
interest in and to the Stock without the consent of any other person,
and upon the delivery of the Shares in the manner contemplated under
this Agreement, Buyer will acquire the beneficial and legal, valid and
indefeasible title to such Shares, free and clear of all liens,
encumbrances and restrictions of every kind except for restrictions on
transfer under federal and state securities laws.
B. Due Execution. This Agreement has been duly executed and delivered by
Seller and (assuming due execution and delivery by Buyer) constitutes
a valid and legally binding obligation of Seller, enforceable in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar rights
affecting creditors' rights generally, provided, however, that the
parties acknowledge that the approvals of the Illinois and Indiana
Departments of Insurance to this transaction and the expiration or
termination of the applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx ("HSR") Act are conditions precedent to Closing.
C. Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
Illinois, has all corporate power and authority to carry on business
as now being conducted in the states of Illinois and Indiana, and to
own its properties and is duly licensed or qualified and in good
standing as a foreign corporation in each jurisdiction in which it is
required to be so licensed or so qualified, except where the failure
to be so licensed or so
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qualified would not have a material adverse effect on the business,
condition or assets of the Company. The Company has no subsidiaries
nor does it own stock in any other corporation.
D. Capitalization. The authorized capital of the Company consists of 200
shares of common stock, $100 par value (the "Common Stock"), of which
200 shares are issued and outstanding and zero shares are reflected on
the books and records of the Company as Treasury Shares. All such
issued and outstanding shares have been validly issued and are fully
paid and non-assessable. Except for the rights created pursuant to
this Agreement, there are no subscriptions, calls, contracts,
commitments, understandings, restrictions, outstanding options,
warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company or Seller
of any shares of the Company's capital stock. There are no voting
trusts or other agreements or understandings with respect to any of
the Stock.
E. No Violation. Neither the execution and delivery of this Agreement,
nor the performance and the consummation of the transactions
contemplated hereby will (i) violate or conflict with any provision of
the Articles of Incorporation or Bylaws of the Company, (ii) violate,
or be in conflict with, or constitute a default (or an event which,
with or without due notice or lapse of time, or both, would constitute
a default) under, or result in the modification or termination of, or
cause or permit the acceleration of the maturity of any material debt,
obligation, contract, commitment or other agreement to which the
Company is a party or by which its property may be bound, (iii) with
the exception of the Account Agreement set forth in Section V.G
herein, would result in the creation or imposition of any mortgage,
pledge lien, security interest, encumbrance, restriction, charge or
limitation of any kind of a material nature, upon any property or
assets of the Company under any debt, obligation, contract, agreement
or commitment to which the Company is a party or by which the Company
is bound, or (iv) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority.
F. Pending Litigation. There is no action, suit or governmental,
administrative, arbitration or regulatory proceeding or investigation
("Action") pending or, to the best of Seller's or Company's knowledge,
threatened against or relating to the Company, or any of the
businesses, assets or properties of the Company. None of such Actions,
if adversely determined against the Company, would have a material
adverse effect on the business, condition or assets of the Company,
taken as a whole.
G. Information Provided.
1. All information, data, and documents delivered by Seller or
Company to Buyer or made available by Seller to Buyer prior to
this Agreement ("Due Diligence Information"), when considered
together, fairly represented the
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condition of the Company in all material respects. In explanation
but not in limitation of the preceding sentence, except for
normal year-end adjustments with respect to the unaudited
financial statements, all financial statements contained in the
Due Diligence Information were complete and correct in all
material respects and were prepared in accordance with generally
accepted accounting principles consistently applied throughout
the periods indicated, and present fairly the financial position
of the Company at such dates and the results of its operations
for the periods then ended.
2. The Due Diligence Information was provided for the purpose of
allowing Buyer to determine whether to enter into this Agreement
and the terms which Buyer would offer or accept in this
Agreement, and Buyer reasonably relied upon such Information.
H. Financial Statements. To the best of Seller's knowledge, there are no
liabilities, debts, obligations or claims against the Company of any
nature, absolute or contingent, except (i) as and to the extent
reflected or specifically reserved against in the balance sheet of
August 31, 1998, and (ii) other liabilities, debts, obligations, or
claims arising since then in the ordinary course of business
consistent with past practices.
I. Corporate Records. Seller has provided Buyer with true, correct and
complete copies of the Articles of Incorporation and bylaws of the
Company.
J. Tax Matters. Since April 1, 1998, the Company or Seller on Company's
behalf has (i) timely filed or caused to be filed all federal state,
local, and foreign tax returns (including, without limitation,
consolidated and/or combined tax returns) required to be filed prior
to the date hereof, except where a timely extension has been obtained
and has not expired; and (ii) has paid or fully accrued for all taxes,
interest, penalties, assessments, and deficiencies shown to be due or
payable on such returns (which taxes are all the taxes due and payable
under such returns or pursuant to any assessment received with respect
to the Company). There are no tax liens on any of the assets of the
Company including without limitation income, franchise, real estate,
sales and withholding taxes and other employment-related taxes except
for taxes accrued and not yet due and payable. All tax returns filed
by Company since April 1, 1998 constitute complete and accurate
representations of the tax liabilities of Company for such years and
accurately set forth all items (to the extent required to be included
or reflected in such returns) relevant to future tax liabilities,
including the tax basis of its properties and assets. No examinations
of the federal, state, local, or foreign tax returns of Company is
currently in progress and since April 1, 1998 the Company has not
waived or extended any applicable statute of limitations relating to
the assessment of federal, state, local, or foreign taxes. Except as
set forth in Schedule II.J, no deficiency with respect to the Company
in the payment of taxes in
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any period has been asserted in writing by any taxing body and
received by the Company since April 1, 1998 which remains unsettled as
of the date hereof. Since April 1, 1998, the Company has withheld and
paid all taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
K. Intellectual Property. To the best knowledge of Seller, none of the
processes currently used by the Company or any of the services or
programs sold by the Company, or trademarks, trade names, labels or
other marks or copyrights used by the Company, infringe the patent,
industrial property, trademark, trade name, label, other xxxx, right
or copyright of any other person or entity, and the Company has not
received any notice of adverse claim by any third party with respect
thereto. The Company has license agreements in force to the extent
necessary to permit its full use of all of the processes used by it
with respect to its business, properties and assets and to permit such
operations and sales in accordance with its present and planned
practices.
L. Accounts Receivable. The accounts receivable appearing on the balance
sheet of the Company as of August 31, 1998 and all accounts receivable
created since that date represent valid obligations owing to the
Company, and fully collectible by the Company, subject to the reserve
for doubtful accounts appearing on such balance sheet, and the
accounting policy for such reserves has been maintained since then.
M. No Material Change. Other than as disclosed on the unaudited financial
statements, since the date of the last audited financial statement of
the Company, there has been no material adverse change in the
financial condition, assets, liabilities (contingent or otherwise),
results of operations, or business or to the best knowledge of the
Sellers, business prospects of the Company considered as a whole,
except for the operating losses of the same approximate magnitude as
experienced through August 31, 1998, and except for the transfer of
assets and liabilities as contemplated in this Agreement.
N. Compliance with Laws, Contracts, and Environmental Regulations. Except
for when a failure to do so would not have a material adverse effect
on the Company's business, to the best of Seller's knowledge, the
Company is operating the Company's business in accordance with all
contracts or agreements binding on it, and the business of the Company
is not being conducted in violation of any law, ordinance, or
regulation of any governmental entity, whether federal, state, or
local, (including but not limited to authorities with jurisdiction
over environmental matters). All governmental approvals, permits, and
licenses, including those relating to environmental quality, required
by the Company to conduct its business (the "Permits") have been
obtained and are in full force and effect and are being complied with
in all material respects, except where the failure to obtain or
failure to comply
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with such Permits would not have a materially adverse effect on the
business, condition or assets of the Company. Neither Seller nor the
Company has received any notification from a governmental agency or a
claimant's counsel that its business is being conducted in violation
of any state or federal laws, regulations, or statutes; or of any
local ordinances; or of any orders or decrees of any state, federal or
local governmental body or court. The Company's business is not being
conducted in violation of any state or federal laws, regulations or
statutes governing or effecting protection of the environment; or any
local ordinance governing or effecting protection of the environment;
or any presently or previously existing orders or decrees of any
state, federal, or local governmental body or court governing or
effecting protection of the environment, except for when a failure to
do so would not have a material adverse effect on the Company's
business.
O. No Defaults. There is not under any contract material to the business
of the Company set forth in the Due Diligence Information:
1. any existing material default by the Company or, to the best
knowledge of the Seller, by any other party thereto, or
2. an event which, after notice or lapse of time or both, would
constitute a material default by the Company or, to the best
knowledge of the Seller, by any other party, or result in a right
to accelerate or result in a loss of material rights as against
the Company.
P. Insurance. All of the Company's insurance polices are in full force
and effect, all premiums with respect thereto have been paid, and no
notice of cancellation or termination has been received with respect
to any such policy.
X. Xxxxxx of Attorney. The Company has not granted any powers of attorney
to any entity or person.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the representations and
warranties contained herein are true and correct as of the date of this
Agreement and shall be true and correct as of the closing:
A. Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Illinois, has
all corporate power and authority to carry on its business as now
being conducted, and to own its properties and is duly licensed or
qualified and in good standing as a foreign corporation in each
jurisdiction in which it is required to be so licensed or so
qualified, except where the
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failure to be so licensed or so qualified would not have a material
adverse effect on the business, condition or assets of the Buyer.
B. Power and Authority. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will conflict with or violate the Articles of Incorporation or Bylaws
of Buyer. The execution, delivery and performance of this Agreement by
Buyer have been duly authorized by all necessary corporate actions on
the part of Buyer. This Agreement constitutes the valid and binding
obligation of Buyer enforceable in accordance with its terms.
C. Due Execution. This Agreement has been duly executed and delivered by
Buyer and (assuming due execution and delivery by Seller) constitutes
a valid and legally binding obligation of Buyer, enforceable in
accordance with its terms, provided, however, that the parties
acknowledge that the approvals of the Illinois and Indiana Departments
of Insurance to this transaction and the expiration or termination of
the applicable waiting periods under the HSR Act are conditions
precedent to Closing.
D. No Violation. Neither the execution and delivery of this Agreement,
nor the performance and the consummation of the transactions
contemplated hereby will (i) violate or conflict with any provision of
the Articles of Incorporation or Bylaws of Buyer, (ii) violate, or be
in conflict with, or constitute a default (or an event which, with or
without due notice or lapse of time, or both, would constitute a
default) under, or result in the modification or termination of, or
cause or permit the acceleration of the maturity of any material debt,
obligation, contract, commitment or other agreement to which the Buyer
is a party or by which its property may be bound, (iii) with the
exception of the Account Agreement set forth in Section V.G herein,
would result in the creation or imposition of any mortgage, pledge
lien, security interest, encumbrance, restriction, charge or
limitation of any kind of a material nature, upon any property or
assets of the Company under any debt, obligation, contract, agreement
or commitment to which the Company is a party or by which the Company
is bound, or (iv) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority.
E. Compliance with Securities Laws. Buyer is acquiring the shares for its
own account for investment only, with no present intention of
reselling or otherwise disposing of all or any portion of the shares
in a manner which would constitute a violation of the federal or
applicable state securities laws and regulations. Buyer currently has,
or has made legally enforceable arrangements making available to
Buyer, sufficient funds to cover the Purchase Price.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES AS OF CLOSING
A. Representations and Warranties True as of Closing. The representations
and warranties contained in Articles II and III above shall be true on
and as of the Closing Date with the same effect as if such
representations and warranties had been made on and as of the Closing
Date and shall survive the execution of this Agreement for a period of
one year following the Closing.
ARTICLE V. COVENANTS
A. Access. Within (5) business days after the execution of this
Agreement, Seller shall provide Buyer such information as Seller
possesses, and as is reasonably necessary for Buyer to complete
applications for regulatory approval of the transactions contemplated
by this Agreement. To assist Buyer in planning the transition of the
business after Closing, (i) within ten (10) business days after the
Buyer's request, Seller shall provide such requested information as
Seller has reasonably available and (ii) upon request from Buyer
specifying the particular aspect of the Company's operations it needs
to understand, Seller shall arrange for one or more of the Buyer's
employees, at Buyer's sole cost and expense, to visit the premises of
the Company under the supervision of the Company's General Manager to
gather such information during such hours as are designated by the
General Manager, and in such a manner as is not disruptive of the
Company's business operations.
B. Certain Filings, Consents and Action. Buyer and Seller shall (i)
cooperate with each other in determining whether any other filings are
required to be made or consents, approvals, permits or authorizations
are required to be obtained under any federal, state or foreign law or
regulation or whether any consents, approvals or waivers are required
to be obtained from other parties to other contracts of the Company in
connection with the consummation of the transactions contemplated
hereunder, (ii) actively assist each other in obtaining any consents,
permits, authorizations, approvals or waivers which are required, and
(iii) use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective as
promptly practicable the transactions contemplated by this Agreement
and to cooperate with each other in connection therewith.
C. Company Employees. The Company shall terminate all employment
relationships or contracts maintained by the Company effective as of
the Closing Date. Buyer shall have the right (but not the obligation)
to offer employment to any employees of the Company who are employed
by the Company immediately prior to the Closing Date ("Employees").
Seller shall be responsible for all pay, severance, incentive
compensation, profit sharing, retirement, pension, salary
continuation, post-retirement benefits, death benefits, continuation
of health benefits (sometimes called
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COBRA continuation) or other pay benefits to which Employees may be
entitled as a result of employment or contracts of employment with the
Company prior to or on the Closing Date, and for administering such
benefits.
D. Company Name Change. As soon as reasonably practicable after the
Closing Date, Buyer shall change the name of Company to a name which
is different than, and not confusing with, Company's name as of
Closing.
E. Payment of Claims and Trade Payables. All claims for medical goods and
services for which Company is or may be liable and having dates of
service occurring on or before the Closing Date shall be adjudicated
and paid by Seller or Account in accordance with the applicable
subscriber certificate or other evidence of coverage and provider
agreement, if any, as in the ordinary course of business but in no
event later than 30 days after the appropriate billing therefor has
been received by Company. Any inpatient treatment commencing on or
before the Closing Date shall be treated as having occurred, in its
entirety, on or before the Closing Date.
F. Collection of Receivables. Seller shall be responsible for xxxxxxxx
and collections for premium revenue accrued for the billing period
through the date described in Article I.D.5 ("Financial Closing Date")
and for collections for tax benefits, COB payments, subrogation
payments and proceeds from insurance policies relating to periods
prior to the Financial Closing Date; provided, however, that Buyer
shall be entitled to retain any monies for tax benefits, COB payments,
subrogation payments and proceeds from insurance policies relating to
periods prior to the Financial Closing Date but collected three years
after the Closing Date through Buyer's or Company's efforts begun
after the aforesaid three year period elapsed. Buyer shall be
responsible for xxxxxxxx and collections for premium revenue for
billing periods after the Financial Closing Date. Buyer and Seller
shall use their best efforts to coordinate the transition of these
functions and to reconcile premiums received versus premium remitted
by customers. The identification and application of premiums remitted
to the proper billing period shall take into account factors including
but not limited to: customer's historical payment patterns,
identification by customer of period to which remittance relates,
correspondence included with the remittance, matching amount of
remittance to previous or current billing, and discussions with
customers as necessary to reconcile remittances to xxxxxxxx.
G. Account Agreement.
1. Prior to Closing, Buyer and Seller shall enter into a mutually
acceptable Account Agreement to collateralize Seller's obligation
to satisfy Transferred Liabilities. At the Closing, Seller shall
deposit into the Account cash or cash equivalents in an amount
equal to the accrued Transferred Liabilities. The Account
Agreement shall contain such terms and conditions such that the
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amount in the Account shall be recognized by the Illinois and
Indiana Departments of Insurance as an admitted asset of Company
after Closing. The Account Agreement shall, among other things,
provide the following: (i) any withdrawals from the Account shall
be used solely to pay Transferred Liabilities that actually
become due and owing as legal obligations of the Company, (ii)
withdrawals from the Account may be made only at the mutual
direction of and consent of the Seller and Buyer, and (iii) any
and all income and interest earned by the Account shall be
retained in the Account; (iv) the custodian of the Account shall
pay over to Seller such amounts as may remain in the Account
twelve months after the Closing or, if claims have been forwarded
to Seller, such additional time until such claims are paid, at
which time all funds remaining in the Account shall be delivered
to the Seller and the Account shall thereupon terminate
(notwithstanding the foregoing, at the end of the aforesaid
twelve month period, the custodian shall remit any funds
remaining in the Account to Seller that exceed the amount of
claims forwarded to Seller).
2. The parties shall evaluate the amount of Transferred Liabilities
from time to time during the duration of the Account but not less
frequently than quarterly. In the event that accrued liabilities
contained within the Transferred Liabilities are adjusted based
on claims experience and as a result of such adjustment it is
determined that the amount in the Account is insufficient to
cover the entirety of such accruals, then Seller shall contribute
additional funds to the Account such that the balance in the
Account at all times shall be equal to or greater than the
aggregate unpaid Transferred Liabilities.
3. Notwithstanding the termination of the Account, Seller shall
remain liable to Company and Buyer for any and all of the
obligations of the Company described in Section I.B.3 as
Transferred Liabilities.
4. The parties agree to cooperate and use all reasonable efforts to
achieve the stated objectives set forth in this Section V.G in a
manner acceptable to the relevant regulatory authorities.
H. Non-HMO Risk. Buyer acknowledges and understands that through
agreements ("POS Contracts") the Principal Life Insurance Company
("Principal Life"), Company arranges for coverage for medical benefits
risk which the Company cannot lawfully assume solely under its
certificate of authority as an HMO. Copies of the standard forms of
the POS Contracts are attached hereto as Exhibit V.H. Seller shall
cooperate with Buyer in requesting of Principal Life that Principal
Life reach agreement with Buyer, on terms acceptable to Buyer,
regarding the continuation or termination of POS Contracts. Buyer
understands that Seller has no control over Principal Life and
Seller makes no covenant as to the outcome.
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I. Transition Activities. Starting immediately upon the execution of this
Agreement and continuing through and including the Closing Date,
Seller shall cooperate with Buyer in a commercially reasonable manner
so as to permit, after the Closing, the continuation of all services,
payments, and benefit plans to Company's customers, enrollees, and
providers in an uninterrupted manner and (with the exception of
notices of change in ownership and name during the transition period).
Subject to applicable law, Seller shall make a reasonable effort to do
so in a manner which is transparent to any customer, enrollee or
provider. Without limiting the generality of the foregoing:
1. Seller shall provide to Buyer in such magnetic media and format
as Buyer shall reasonably specify, all data possessed by Seller
or by Company as to customers and groups, enrollment and
eligibility, claims and claims history, provided however, that
Seller shall not be required to provide or arrange for data
conversion except to the extent agreed by technical staffs of
Seller and Buyer.
2. Seller shall also provide in hard copy and magnetic media (in
such format as the same may be maintained by Seller) such forms
(including subscriber certificates or other evidences of coverage
and provider directories) and form letters and other internal or
external communications routinely used in the operation of
Company's business.
3. Prior to Closing, Seller shall provide Buyer with the following
materially complete, correct and detailed lists, in form and
substance reasonably acceptable to Buyer, specifying with respect
to the business, assets and obligations of the Company each and
every item in the following categories referred to below, and
shall make available for inspection by Buyer the documents and
other material that underlie such lists:
a. List 1 - all current in-force contracts to which Company is
a party, including but not limited to provider contracts,
group and individual subscriber agreements, vendor contracts
and contracts with the Health Care Financing Administration
("HCFA");
b. List 2 - the policies of insurance and reinsurance presently
in force.
c. List 3 - the name, current annual compensation rate
(including bonus and commissions), title, current base
salary rate of all current Company employees.
d. List 4 - all federal, state, local and foreign governmental
licenses, permits and other authorizations necessary in the
conduct of the
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business of the Company ("Permits"); all federal, state,
local and foreign governmental or judicial consents, orders,
decrees and other compliance agreements relating to the
Company under which the Company is operating or bound; all
reports of inspection of the Company which are in the
possession of Seller or Company under all applicable federal
and state laws and regulations; and copies of all of the
foregoing and applications relating thereto. Without
limiting the generality of the foregoing, such approvals
shall include all applications for and evidence of
regulatory approval of all subscriber certificates or other
evidences of coverage which Company has distributed to
enrollees and which are in the possession of Seller or
Company, all applications for and evidence of regulatory
approval of rates to be charged for any of the Company's
products which are in the possession of Seller or Company,
and all other applications for and evidence of regulatory
approval of any other document, act, or omission for which
regulatory approval is required by law, regulation, or
custom of regulatory agency;
e. List 5 - As of the date of this Agreement, all pending
grievances and appeals (or other written complaints, however
characterized) by any customer, subscriber or enrollee and
relating to any decision by Company to decline coverage for
any medical service or limit the amount of medical services
desired by any customer, enrollee, or provider), stating,
with respect to each such grievance, appeal, or complaint,
whether communication has been received from any regulatory
or governmental agency (including but not limited to the
Health Care Financing Administration and the federal Office
of Personnel Management) with respect to same.
4. Prior to Closing, Seller shall make available to Buyer all
Company files containing communications received from any
governmental or regulatory agency having or claiming jurisdiction
or authority over any aspect of the Company's business, including
but not limited to any state Department of Insurance or
Department of Health (or state agency, whatever named, designated
by such state as having regulatory authority over the operation
of health maintenance organizations, health insuring
corporations, or other managed care entities), to the extent
within the possession of Seller or Company. For purposes of this
paragraph, the Health Care Financing Administration and the
federal Office of Personnel Management shall be considered
regulatory agencies.
5. Prior to Closing, Seller shall make available to Buyer all
Company files containing materials relating to pending grievances
and appeals (or other
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written complaints, however characterized) by any customer,
subscriber or enrollee and relating to any decision by Company to
decline coverage for any medical service or limit the amount of
medical services desired by any customer, enrollee, or provider)
within the possession of Seller or Company.
J. Post-Closing Cooperation. If requested by Buyer, Seller agrees to
enter into good faith negotiations with Buyer to reach a final written
agreement to be executed no later than at the Closing, pursuant to
which Seller will agree to continue, for as long as one year following
the Closing, to Provide the Company with certain of the administrative
services currently provided by Seller to Company, and Buyer will agree
to compensate Seller therefor pursuant to a formula or fee schedule to
be set forth in such agreement by the parties.
K. Absence of Change or Event. From and after the date of this Agreement
and through Closing the Company will conduct its businesses only in
the ordinary course so as to preserve its business organization
intact, to retain the services of its employees and to preserve its
goodwill and relationship with its employees, customers, suppliers,
creditors and others having business relationships with it, and
without Buyer's prior written consent shall not (nor will Seller with
regard to the Company or the Stock):
1. incur any obligation or liability, absolute, accrued, contingent
or otherwise, whether due or to become due, except liabilities or
obligations incurred in the ordinary course of business and
consistent with past practices;
2. institute any litigation, action or proceeding before any court
or governmental body relating to it or its property, or waive or
compromise any right of a substantial value to the Company,
except for litigation instituted and waivers and compromises
given, in the ordinary course of business and consistent with
past practice;
3. grant any option, warrant or other right in respect of any
capital stock of the Company;
4. make any loan to any officer, director, employee or agent of the
Company or Affiliate or family member of the foregoing;
5. take any action or omit to take any action in violation of any
contract, commitment or other obligation to which it is bound
which would cause (after lapse of time, notice or both) the
breach, default or acceleration of any right, contract or
commitment or other obligation of the Company, any of which would
have a material and adverse effect on the business of Company
taken as a whole; or
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6. make any agreement or commitment to do any of the foregoing.
L. After the Closing, Seller and its representatives shall be afforded
complete access, at Seller's sole cost and expense, at the offices of
the Company to (and may, at Seller's expense, make copies of) all
records, files and documents relating in whole or in part to the
Company and its business and operations (including bank account
records) prior to the Closing for the sole purpose of (i) responding
to claims against or expenses incurred by the Seller from is ownership
of the Company or its obligations hereunder or (ii) recovering monies
to which Seller is entitled relating to tax benefits, COB payments,
subrogation payments and recoveries under insurance policies. Seller's
rights under this subparagraph X.X shall expire three years after
Closing; provided, however, that such rights shall continue after the
aforesaid three year period only to allow Seller to complete
investigations that began prior to the expiration of the three year
period. Seller's access to records hereunder shall be during such
hours as are designated by the Buyer, and in such a manner as is not
disruptive of the Company's business operations.
M. All data and information provided by Seller or Company to Buyer
pursuant to this Section V.I, Section V.A and the Due Diligence
Information shall, until Closing, remain the sole property of Seller
and Company, shall be held by Buyer as confidential; and Buyer shall
use standard industry measures to protect such data and information
from access by persons not authorized by law or by Seller to have
access, and shall promptly return such data and information (including
any and all copies thereof) to Seller in the event this Agreement is
terminated or expires without the occurrence of the Closing.
N. With the execution of this Agreement and continuing until Closing,
Seller shall notify Buyer as soon as reasonably practicable (a) after
learning about any labor union organizing activity or action,
threatened employees' strike, work stoppages, slow-downs or lock-outs,
or (b) after becoming aware of any loss or threatened loss of any
permit, license, qualification, special charter or certificate of
authority which would have a material adverse effect on the Company.
O. Seller shall cooperate with and assist Buyer in obtaining a limited
license from Principal Life to use the Company=s name for a period of
90 days after the Closing Date, on reasonable terms that are customary
in the industry (including, without limitation, without cost to Buyer)
and which meet Buyer's needs to operate the Company's business (the
"Limited License").
ARTICLE VI. INDEMNIFICATION
A. Buyer Indemnification. Buyer shall indemnify Seller against, and hold
it harmless from, any and all obligations and liabilities in respect
of suits, proceedings, demands,
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claims, judgments, damages, expenses and costs (including, without
limitation, interest, penalties and reasonable counsel fees) asserted
against, relating to, imposed on or suffered or incurred by Seller by
reason of or resulting from: (i) any failure by Buyer to pay, perform,
or discharge any of the obligations and liabilities which are assumed
by Buyer under this Agreement; (ii) any breach by Buyer of the
covenants, representations and warranties set forth in this Agreement.
B. Seller Indemnification. Seller shall indemnify, defend and hold
harmless Buyer from and against any suits, proceedings, demands,
judgments, claims, damages, expenses and costs (including, without
limitation, interest, penalties and reasonable counsel fees) asserted
against, relating to, imposed on or suffered or incurred by Buyer by
reason of or resulting from: (i) any breach by Seller of the
covenants, representations and warranties or agreements herein of
Seller; and (ii) the assertion against Buyer of any Transferred
Liabilities.
C. Time for Indemnification. The obligation of either party to hold
harmless, defend, and indemnify the other as set forth in this Article
shall extend to and until the first anniversary of the Closing,
provided, however, that Seller's indemnification of Buyer as to claims
for Transferred Liabilities under VI.B.(ii), above, shall extend to
and until the third anniversary of the Closing; provided further,
however, that if within such time either party has provided the other
notice of a claim or assertion of liability by any third party, and
regardless of whether such claim or assertion is groundless, false or
fraudulent, the obligation to hold harmless, defend, and indemnify
with respect to each such claim or assertion shall extend to and until
such claim or assertion is finally compromised, settled, or
adjudicated and all applicable appeals have been finally exhausted.
D. Indemnification Procedure. The obligations and liabilities of the
parties hereunder shall be subject to the following terms and
conditions:
1. Notice of Claims. Any party seeking indemnification under this
Agreement (the "Indemnified Party") shall give to the party from
which indemnification is sought (the "Indemnitor") a notice (a
"Claim Notice") describing in reasonable detail the facts giving
rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim, and a reference to the
provisions of this Agreement or any other agreement, document or
instrument executed or delivered hereunder or in connection
herewith upon which such claim is based; provided, that a Claim
Notice in respect of any claim, action at law or suit in equity
by or against a third Person as to which indemnification will be
sought shall be given promptly after such claim is made or after
the action or suit is commenced; and provided further that
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failure to give such notice shall not relieve the Indemnitor of
its obligations hereunder except to the extent it shall have been
prejudiced by such failure.
2. Third-Party Claims. The Indemnitor shall have twenty (20)
business days after receipt of any Claim Notices or information
necessary to make the Claim Notice complete, relating to any
third Person claim, action or suit (collectively, "Claim") to
notify the Indemnified Party of its election to conduct and
control the defense, compromise or settlement of such Claim.
Unless the Indemnitor gives the foregoing notice, the Indemnified
Party shall have the right to conduct and control, through
counsel of its own choosing, the defense, compromise or
settlement of such Claim, and in any such case the Indemnitor
shall cooperate in connection with such Claim and shall furnish
such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnified Party in
connection therewith unless the Indemnitor notified the
Indemnified Party that it believes that it has no obligation to
provide indemnification hereunder; provided that, should the
Indemnitor fail to timely give notice as provided above in this
Section, (a) the Indemnitor may, in any event, participate,
through counsel chosen by it and at its own expense, in the
defense of any such Claim and (b) if the Indemnitor has
acknowledged and agreed in writing that it has the obligation to
provide indemnification under this Agreement for any Loss
incurred in connection with or arising from such Claim, the
Indemnitor shall have the right to assume control of the defense,
compromise or settlement of such Claim from the Indemnified Party
at any time (provided it has fully paid all expenses of the
Indemnified Party theretofore and such change in control of the
Claim does not prejudice the position of the Indemnified Party in
the proceeding) by giving written notice of such election to the
Indemnified Party. If the Indemnitor timely gives notice as
provided above in this Section or assumes control of the defense,
compromise or settlement of any Claim, the Indemnified Party
shall cooperate in connection with such Claim and shall furnish
such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnitor in connection
therewith; provided, that the Indemnified Party may participate,
through counsel chosen by it and at its own expense, in the
defense of any such Claim, as to which the Indemnitor has so
elected to conduct and control the defense thereof; and provided
further, that the Indemnitor shall not, without the written
consent of the Indemnified Party (which consent shall not be
unreasonably withheld) pay, compromise or settle any such Claim
(a) in any case where the Indemnitor has not acknowledged in
writing its obligation to provide indemnification to the
Indemnified Party under this Agreement, or (b) seeking any relief
other than monetary damages; and provided further, that
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the Indemnitor shall, at any time prior to the settlement or
commencement of trial with respect to any Claim, tender the
defense, compromise and settlement of such Claim to the
Indemnified Party should the Indemnitor reasonably determine,
based upon the information furnished to it by the Indemnified
Party or obtained by the Indemnitor in the course of defending
the Claim, that the Indemnitor is not obligated to provide
indemnification to the Indemnified Party under this Agreement. In
the event that the Indemnified Party conducts and controls the
defense of any Claim, the Indemnified Party shall not, without
the prior written consent of the Indemnitor (which consent shall
not be unreasonably withheld), compromise or settle such Claim
unless the Indemnitor notifies the Indemnified Party that it
believes that it has no obligation to provide indemnification
hereunder.
E. Determination of Loss. Indemnification pursuant to this Article shall
be payable with respect to any claim described herein as subject to
indemnification upon the happening of the earliest of any of the
following:
1. Resolution of such claim by mutual agreement between Seller and
Buyer; or
2. The issuance of a final (not subject to appeal or not timely
appealed) judgment, award, order or other ruling by a court,
agency, arbitrator or any other tribunal or organization or
person having legal jurisdiction over the parties and the subject
matter of such claim or to whom such claim was submitted for
resolution by joint agreement between the Seller and Buyer; or
3. Final settlement of such claim by a third party pursuant to
mutual authorization by Seller and Buyer.
4. There shall be allowed as a setoff against any amount of any loss
the amounts of recovery attributable to such loss which is
received by way of coordination of benefits, subrogation, or
payment under any contract of insurance.
F. Set Off. Notwithstanding any other provision herein, and without
limiting any other right or remedy available, either party shall have
the right to set off any final (not subject to appeal or timely
appealed) determination of damages incurred as a result of any breach
of a representation, warranty, covenant in this Agreement or any other
Agreement, against any amount to be paid hereunder.
ARTICLE VII. TAXES
A. Tax Responsibility. Seller shall be responsible for all taxes not
scheduled herein that are attributable to the Company, its operations,
and the Company's assets for all periods through or which are paid
prior to or on the Closing Date. Seller will
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indemnify Buyer for any additional taxes relating to the ultimate
settlement of the Company's Closing balance sheet (including a
reduction in the Transferred Liabilities which may cause taxable
income to the Company subsequent to the Closing Date). Buyer will
reimburse Seller for any tax benefit received relating to the ultimate
settlement of the Closing balance sheet (including an increase in the
Transferred Liabilities which may cause a tax deduction to the Company
subsequent to the Closing Date).
B. Tax Returns. Seller has filed or will timely file all tax returns and
reports which it is required to file with respect to: (i) the Company,
its plant and its operations prior to the Closing Date; and (ii) the
Company's assets. Seller represents that the Company has paid or will
timely pay all Taxes for which the Company is responsible that could
create any liens or charges on or against any of the Company's assets
or which could subject the Company to any liability including any
corporate estimated income payments due the federal or state taxing
authorities, which payments would be statutorily due prior to the
Closing Date. Any personal property tax returns and reports with
respect to the Company's assets with due dates after the Closing Date
(and any other tax returns and reports for periods beginning after the
Closing Date) shall be prepared and timely filed by Buyer after the
Closing Date.
ARTICLE VIII. COVENANT NOT TO COMPETE
A. Non-Competition. From the Closing Date for a period of three (3) years
thereafter (the "Non-Competition Period"), Seller shall not, directly
or indirectly, within the following listed counties in the States of
Illinois and Indiana or any county contiguous thereto (the "Restricted
Area"), own, manage, operate, control or be employed by, participate
in, consult with or be otherwise connected in any manner with the
ownership, management, operation or control of any HMO business that
is directly competitive with the present HMO business of the Company.
The counties to which this restriction shall apply are Xxxx, DuPage,
Xxxx, Lake, McHenry, and Will Counties in the State of Illinois and
Lake and Xxxxxx Counties in the State of Indiana and all counties
contiguous to these counties. This Section VIII.A shall not apply to
any of the following:
(1) HMO business conducted in the Restricted Area by Seller or a
successor to or affiliate of Seller as a result of Seller
acquiring or being acquired after the date of this Agreement by
an entity (whether by merger, consolidation, stock purchase,
asset purchase or otherwise) which, at the time of such
acquisition, conducts HMO business in the Restricted Area
accounting for 25 percent or less of such other entity's total
HMO business;
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(2) HMO business conducted as of the date of this Agreement by Seller
or a subsidiary of Seller (other than the Company) in the
Restricted Area within Indiana; or
(3) HMO business commenced after the date of this Agreement by Seller
or a subsidiary of Seller (other than the Company), which HMO
business consists of group accounts where the group is located
primarily outside of the Restricted Area within Indiana, but
which has 25 percent or fewer of its members/beneficiaries (and
their dependents) located within the Restricted Area of Indiana.
B. Confidentiality. Seller recognizes and acknowledges that certain
confidential business information of the Company that includes,
without limitation, the identity of the Company's suppliers, and all
of the Company's internal procedures and processes, costs, pricing
techniques, operational procedures and operational policies, is a
valuable, special and unique asset of the Company. Seller shall not,
at any time, whether during or after the Non-Competition Period,
disclose such information, or any part thereof, to any person, firm,
corporation, association or other entity, for any purpose or reason
whatsoever. Nothing contained herein, however, shall prevent Seller
from serving as a consultant after the non-competition period to
entities who provide the same products or services as the Company as
long as such knowledge utilized by Seller in such consulting would
involve knowledge of procedures and processes generally known within
the industry and not be processes and procedures unique to the
Company.
C. No Solicitation of Employees or Suppliers. During the Non-Competition
Period Seller shall not, directly or indirectly, on its own behalf or
on behalf of any other person, firm or company: (i) in any manner
whatsoever induce, or assist others to induce, any employee, agent,
representative or other person associated with the Company to
terminate his or her association with the Company, or in any manner
interfere with the relationship between the Company and any such
person; or (ii) in any manner whatsoever induce, or assist others to
induce, any supplier of the Company to terminate its association with
the Company, or do anything, directly or indirectly, to interfere with
the business relationship between the Company and any of its current
or prospective suppliers. Seller shall not be deemed to be in breach
of the provisions of this paragraph solely by continued employment of
individuals which are employed by Company as of the date of this
Agreement, so long as such individuals do not thereafter become
employed by Buyer.
D. Scope of Restrictions. Buyer and Seller agree that should any covenant
set forth in paragraphs A, B or C of this Article VIII be
unenforceable because of the scope thereof, or the period covered
thereby, or otherwise, the covenant shall be deemed to be reduced and
limited to enable it to be enforced to the extent permissible under
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the laws and public policies applied in the jurisdiction in which
enforcement is sought.
E. Specific Performance. Buyer and Seller acknowledge and agree that
Seller's violation of the covenants and agreements stated in this
Article would cause irreparable damage to the Company and to Buyer,
and that the Company and Buyer would not have an adequate remedy at
law. Seller therefore agrees that the Company and Buyer shall be
entitled to an injunction restraining such conduct by Seller in the
event of a breach or threatened breach by Seller of this Article or
any of the terms or conditions hereof.
F. Enforcement. In the event that Buyer and/or the Company brings an
action against Seller to enforce the terms of this Article, the
prevailing party in such action shall be entitled to recover from the
other party any and all losses, costs, damages and expenses, including
reasonable attorneys' fees and disbursements, incurred or suffered by
the prevailing party in connection with such action, in addition to
any and all other remedies that the prevailing party may possess at
law or in equity.
ARTICLE IX. CONDITIONS TO CLOSING
The obligations of both Buyer and Seller to consummate the transactions
contemplated herein are subject to the fulfillment of the following conditions
on or prior to the Closing Date, provided, however, that the fact of Closing
shall not of itself constitute a waiver of any subsequent claim for breach of
any representation, warranty, or other obligation hereunder.
A. Conditions to Buyer's Obligations. The obligations of the Buyer under
this Agreement are subject to the satisfaction at or prior to the
Closing of the following conditions, any of which may be waived in
writing by the Buyer:
1. Each representation and warranty made by Seller in this Agreement
shall be true and correct in all material respects as of the
Closing;
2. Seller shall have fully performed all of its obligations under
this Agreement;
3. Seller shall have tendered and delivered the required documents,
instruments and certificates at the Closing as set forth in
Section X.A, below.
4. No investigation, suit, action, or other proceeding shall have
been commenced, pending or threatened in writing before any
agency or judicial forum (i) in which it is sought to restrain,
prohibit, or obtain damages or other relief in connection with
this Agreement, or the consummation of the transaction
contemplated hereby, or (ii) that may have the effect of
restraining, prohibiting, or otherwise materially interfering
with the
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transaction contemplated hereby or otherwise adversely affect any
License of the Company which is material to the operations of the
Company.
5. All necessary consents including the approval of the Illinois and
Indiana Departments of Insurance, licenses, and regulatory
approvals of the transaction contemplated hereby shall have been
received by Buyer, provided, however, in the event any such
approvals contain any terms or conditions which vary from those
currently imposed under any operative contract or License to
which the Company is currently a party, that such terms and
conditions be reasonably acceptable to Buyer.
6. The Related Transaction contemplated in Section I.B has been
completed; the Account Agreement contemplated in Section V.G has
been executed, and if Buyer requests post-closing services
agreement contemplated in Section X.X, such agreement has been
executed.
7. The Limited License has been given by Principal Life to Buyer.
If any one of the aforesaid conditions is not satisfied, this
Agreement shall be voidable prior to the Closing upon written election
of Buyer.
B. Conditions to Seller's Obligations. The obligations of Seller
hereunder are subject to the satisfaction at or prior to the Closing
of all of the following conditions, any of which may be waived by
Seller:
1. Each representation and warranty made by Buyer in this Agreement
shall be true and correct in all material respects as of the
Closing;
2. Buyer shall have fully performed all of its obligations under
this Agreement;
3. Buyer shall have tendered the purchase price and delivered the
required documents, instruments and certificates at the Closing
as set forth in Section X.B.
4. No investigation, suit, action, or other proceeding shall have
been commenced, pending or threatened in writing before any
agency or judicial forum (i) in which it is sought to restrain,
prohibit, or obtain damages or other relief in connection with
this Agreement, or the consummation of the transaction
contemplated hereby, or (ii) that may have the effect of
restraining, prohibiting, or otherwise materially interfering
with the transaction contemplated hereby or otherwise adversely
affect any License of the Company which is material to the
operations of the Company.
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5. All necessary consents including the approval of the Illinois and
Indiana Departments of Insurance, licenses, and regulatory
approvals of the transaction contemplated hereby shall have been
received by Buyer, provided, however, in the event any such
approvals contain any terms or conditions which vary from those
currently imposed under any operative contract or License to
which the Company is currently a party, that such terms and
conditions be reasonably acceptable to Buyer.
6. The Related Transaction contemplated in Section I.B has been
completed; the Account Agreement contemplated in Section V.G has
been executed, and if Buyer requests post-closing services
agreement contemplated in Section X.X, such agreement has been
executed.
If any one of the aforesaid conditions is not satisfied, this
Agreement shall be voidable prior to the Closing upon written election
of Seller.
ARTICLE X. CLOSING
A. Deliveries by Seller. At the Closing, Seller shall deliver to Buyer the
following:
1. Share certificates representing the Stock together with duly
executed stock powers executed in blank for transfer to
Buyer without any restriction whatsoever and free and clear
of all liens, claims, encumbrances, charges and security
interests.
2. The Company's minute books, stock transfer books, and
corporate seal.
3. A Certificate of good corporate standing for the Company
issued by the Illinois Secretary of State, dated within 14
days of the Closing Date, and evidencing the corporate
existence and good standing of Company in Illinois.
4. To the extent such certificates are customarily provided,
Certificates by the Illinois and Indiana Departments of
Insurance, dated within 14 days of the Closing Date,
evidencing the licensure and good standing of Company to
conduct health maintenance organization business in the
respective states.
5. The signed resignations of all directors and officers of the
Company, effective as of Closing.
6. The Account Agreement, signed by Seller and Custodian
thereof, as contemplated by Section X.X.
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0. The Post-Closing Services Agreement signed by Seller, if
requested by Buyer.
8. All books, records, and documents (whether kept by Company
or any corporate parent, subsidiary, or other corporate
entity over which Seller has control), used in the prior and
present operations of Company and its corporate
predecessors, including any entity purchased or merged or
operationally integrated into Company.
9. A certificate executed by the President or other duly
authorized officer of Seller certifying that all corporate
action on the part of Seller necessary to authorize the
execution, delivery and performance of this Agreement by
Seller has been duly taken.
10. A certificate executed by the President or other duly
authorized officer of Seller certifying that (i) all
representations and warranties of Seller are true and
correct in all material respects on and as of the Closing
Date with the same effect as though such representations and
warranties had been made on and as of such Closing Date; and
(ii) Seller has performed and complied with all of its
obligations under this Agreement which are to be performed
or complied with prior to or on the Closing Date.
11. Such other documents and instruments as Buyer may reasonably
request to accomplish this Transaction.
B. Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller:
1. The Purchase Price, by wire transfer to an account
designated by Seller not fewer than five days prior to
Closing.
2. A certificate of good corporate standing for Buyer issued by
the Illinois Secretary of State, dated within 14 days of the
Closing Date, and evidencing the corporate existence and
good standing of Buyer in Illinois.
3 The Account Agreement, signed by Buyer and Custodian
thereof, as contemplated by Section V.G.
4. The Post-Closing Services Agreement signed by Buyer, if such
agreement is requested by Buyer.
5. A certificate executed by the President or other duly
authorized officer of Buyer certifying that all corporate
action on the part of Buyer necessary to
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authorize the execution, delivery and performance of this
Agreement by Buyer has been duly taken.
6. A certificate executed by the President or other duly
authorized officer of Buyer certifying that (i) all
representations and warranties of Buyer are true and correct
in all material respects on and as of the Closing Date with
the same effect as though such representations and
warranties had been made on and as of such Closing Date; and
(ii) Buyer has performed and complied with all of its
obligations under this Agreement which are to be performed
or complied with prior to or on the Closing Date.
7. Such other documents and instruments as Seller may
reasonably request to accomplish this Transaction.
ARTICLE XI. RESOLUTION OF DISPUTE
All disputes between Buyer and Seller which cannot be resolved
between the parties shall be submitted to binding arbitration in
Chicago, Illinois in accordance with the rules of the American
Arbitration Association. Notwithstanding the provisions of this
paragraph, either party shall have the right to seek injunctive
relief in relation to any threatened conduct, which is permitted
by applicable law. Expenses of arbitration shall be borne by the
non-prevailing party in the arbitration proceeding, unless the
selected arbitrator shall determine otherwise. The procedure for
arbitration shall be in accordance with the rules of the American
Arbitration Association, except that Buyer and Seller shall each
endeavor to select one arbitrator agreeable to both parties; if
no agreement can be reached as to a single arbitrator within 15
days after arbitration is sought then each party shall select one
arbitrator, and the two selected arbitrators shall choose a third
arbitrator. Should either the Buyer or Seller fail to select an
arbitrator within days after expiration of the time within which
a single arbitrator could be chosen, or if the two arbitrators
shall fail to select a third arbitrator within 10 days after the
appointment of the latter of them, the American Arbitration
Association shall select the arbitrator.
ARTICLE XII. MISCELLANEOUS
A. Successors and Assigns. This Agreement and all of the covenants
and agreements contained herein shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
successors, assigns and personal representatives. However,
neither party may assign the benefits and obligations of this
Agreement without the prior written consent of the other party
which consent shall not be unreasonably withheld, and Buyer may,
without the prior written consent of Seller assign this Agreement
to any subsidiary thereof, provided, however, that no such
assignment shall relieve Buyer of any of its obligations under
this Agreement.
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B. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
C. Entire Agreement; Amendment. This Agreement including all
schedules, exhibits, lists and related documents embodies the
entire agreement and understanding between the parties hereto
with respect to the subject matter hereof, and may not be amended
except in a writing signed by both of the parties hereto. This
Agreement supersedes all prior agreements and understandings,
written or oral, including without limitation that Letter of
Intent dated September 11, 1998.
D. Further Assurances. Seller and Buyer shall take any and all
further actions and execute any and all further documents
necessary to fully consummate the transactions contemplated
herein.
E. Waiver. Neither of the parties to this Agreement will be deemed
to have waived any right, power or privilege under this Agreement
unless such waiver will have been duly executed in writing and
acknowledged by the party to be charged with such waiver. The
failure of either party to enforce at any time any of the
provisions of this Agreement will in no way be construed to be a
waiver of such provisions, nor in any way affect the validity of
this Agreement or any part of it, or the right of any party to
thereafter enforce each and every such provision. No waiver of
any breach of this Agreement will be held to be a waiver of any
other or subsequent breach. All remedies afforded in this
Agreement will be taken and construed as cumulative and in
addition to every other remedy provided for herein or by law or
in equity.
F. Expenses. Buyer and Seller will pay their own expenses,
including, without limitation, the fees and expenses of their
respective brokers, agents, representatives, counsel,
accountants, and other experts, in connection with the
preparation, negotiation and consummation of this Agreement, even
if this Agreement is terminated.
G. Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, but all of which together shall
constitute one and the same instrument.
H. Knowledge. Any matter of which any officer of Company (including
but not limited to its General Manager or Medical Director) has
knowledge on or before the Closing Date shall be imputed to
Seller.
I. Notices. Any notices required to be given under this Agreement
shall be deemed to have been properly made if made in writing and
delivered (including delivery by telecopier)to the following
persons at the following addresses or to such other persons or
addresses as Seller and Buyer may from time to time set forth in
a notice conforming to this Section:
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1. If provided to Seller: Xxxx Xxxx
Executive Vice President, Chief
Financial Officer and Treasurer
Coventry Health Care, Inc.
0000 Xxxxxxxxx Xxxxx - Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
With a copy to (which shall not
constitute notice): Xxxxxx Xxxxx, Esq.
Xxxxxxx, Xxxxxx & Green
0000 00xx Xxxxxx X Xxxxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
2. If provided to Buyer: M. Xxxxxx Xxxxxx
Senior Executive Vice President
First American Group
of Companies, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
With a copy to (which shall not
constitute notice: Xxxxxxx X. Xxxxxxxx, Esq.
Lord, Bissell & Brook
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
J. Announcements. Buyer and Seller agree that, except for any press release
made by Seller as required by law, no publicity announcements or
disclosures of any kind concerning this Agreement or the terms of this
Agreement shall be made without the mutual consent of Buyer and Seller,
except to the extent that disclosure is required by legal process or is to
accountants, counsel, other professionals, and to lenders on a "need to
know" basis who similarly agree to maintain the confidentiality of this
Agreement and its terms. The parties shall jointly develop a mutually
acceptable press release for distribution upon execution of this Agreement
and upon the Closing.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
SELLER:
Coventry Health Care, Inc.
/s/ Xxxx Xxxx
----------------------------------------------
By: Xxxx Xxxx
Its: Executive Vice President, Chief Financial
Officer and Treasurer
BUYER:
First American Group of Companies, Inc.
/s/ Xxxx X. Xxxxxx
-----------------------------------------------
By: Xxxx X. Xxxxxx
Its: President and Chief Executive Officer
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