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PURCHASE AND SALE AGREEMENT
between
▇▇▇▇ ▇▇▇▇▇▇▇ MUTUAL LIFE INSURANCE COMPANY
("Seller")
and
WELLPOINT HEALTH NETWORKS INC.
("Buyer")
Dated as of October 10, 1996
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TABLE OF CONTENTS
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ARTICLE I SALE OF GBO SUBSIDIARIES SHARES, TRANSFER OF GBO
DIVISION ASSETS AND ASSUMPTION OF GBO DIVISION
LIABILITIES........................................................................ 2
Section 1.1 Sale of the GBO Subsidiaries Shares, Transfer of the GBO Division
Assets and Assumption of the GBO Division Liabilities.............................. 2
Section 1.2 Transfers Requiring Consent........................................................ 4
Section 1.3 ASO Contracts...................................................................... 5
Section 1.4 Closing............................................................................ 7
Section 1.5 Closing GAAP Equity Amount......................................................... 7
Section 1.6 Manner of Payment.................................................................. 10
Section 1.7 Fees............................................................................... 10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AS TO THE
GBO INCLUDED BUSINESS AND GBO SUBSIDIARIES......................................... 10
Section 2.1 Organization....................................................................... 10
Section 2.2 No Conflict........................................................................ 11
Section 2.3 Financial Statements............................................................... 11
Section 2.4 Undisclosed Liabilities; Absence of Changes........................................ 12
Section 2.5 Representations Regarding GBO Included Assets and Real Property.................... 12
Section 2.6 Reserves........................................................................... 12
Section 2.7 Filings and Notices; Approvals and Consents........................................ 12
Section 2.8 Contracts.......................................................................... 13
Section 2.9 Litigation......................................................................... 15
Section 2.10 Labor Relations; Employees......................................................... 15
Section 2.11 Pension Plans...................................................................... 16
Section 2.12 Intellectual Property.............................................................. 17
Section 2.13 Taxes.............................................................................. 17
Section 2.14 Capitalization of the GBO Subsidiaries............................................. 18
Section 2.15 Subsidiaries and Investments in Affiliates......................................... 18
Section 2.16 Employees.......................................................................... 18
Section 2.17 Insurance Business................................................................. 18
Section 2.18 Compliance with Law; Permits and Licenses.......................................... 19
Section 2.19 No Brokers......................................................................... 20
Section 2.20 Compliance with Legislation Regulating Environmental Quality....................... 20
Section 2.21 No Extraordinary Items or Accounting Changes....................................... 21
Section 2.22 No Misrepresentations.............................................................. 21
Section 2.23 Adequacy and Completeness of GBO Included Assets................................... 21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER............................................ 21
Section 3.1 Organization....................................................................... 21
Section 3.2 Authority; No Conflict; Binding Effect............................................. 21
Section 3.3 Filings and Notices; Approvals and Consents........................................ 22
Section 3.4 Brokers or Finders................................................................. 22
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Section 3.5 Investment Intent.................................................................. 22
Section 3.6 Actions Pending.................................................................... 22
Section 3.7 Reports; Financial Statements...................................................... 23
Section 3.8 Authority to Conduct GBO Included Business......................................... 24
Section 3.9 No Misrepresentations.............................................................. 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AS TO
ITSELF............................................................................. 25
Section 4.1 Organization....................................................................... 25
Section 4.2 Authority; No Conflict; Binding Effect............................................. 25
Section 4.3 Filings and Notices; Approvals and Consents........................................ 25
Section 4.4 Title to GBO Subsidiaries Shares................................................... 25
Section 4.5 Actions Pending.................................................................... 26
ARTICLE V COVENANTS OF SELLER................................................................ 26
Section 5.1 Operation of the Business.......................................................... 26
Section 5.2 Access............................................................................. 27
Section 5.3 Additional Financial Statements.................................................... 27
Section 5.4 Third-Party Reinsurance Agreements................................................. 28
Section 5.5 Updating of Information............................................................ 28
Section 5.6 Employment Loss.................................................................... 28
Section 5.7 GBO Employees...................................................................... 28
Section 5.8 Regulatory Filings, etc............................................................ 28
Section 5.9 Covenant Not to Compete............................................................ 28
Section 5.10 Amounts Due to or Due From Affiliates.............................................. 29
Section 5.11 Termination or Modification of Existing GBO Policies............................... 29
Section 5.12 Healthcare Providers and Networks.................................................. 30
ARTICLE VI COVENANTS OF BUYER................................................................. 31
Section 6.1 Updating of Information............................................................ 31
Section 6.2 Post-Closing Access by Seller...................................................... 31
Section 6.3 Regulatory Filings, etc............................................................ 31
ARTICLE VII JOINT COVENANTS.................................................................... 32
Section 7.1 Filings and Notices; Approvals and Consents........................................ 32
Section 7.2 Policyholder Confidentiality....................................................... 32
Section 7.3 Form and Rate Filings.............................................................. 32
ARTICLE VIII TRANSITIONAL MATTERS............................................................... 32
Section 8.1 GBO Included Business Real Property................................................ 32
Section 8.2 Certain Support Services........................................................... 33
Section 8.3 Reinsurance........................................................................ 33
Section 8.4 Transitional Marketing Arrangements................................................ 33
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Section 8.5 Use of Name Post-Closing........................................................... 33
Section 8.6 Change of HASG Name................................................................ 33
Section 8.7 Lease of Furniture, Fixtures and Equipment......................................... 33
Section 8.8 Transfer of MIS Software........................................................... 35
Section 8.9 Commissions and Expenses Due....................................................... 35
Section 8.10 Seller Life and Health Account..................................................... 36
ARTICLE IX CERTAIN TAX MATTERS................................................................ 36
Section 9.1 Section 338(h)(10) Election........................................................ 36
Section 9.2 Returns; Indemnification; Liability for Taxes...................................... 37
Section 9.3 Cooperation; Refunds and Credits................................................... 38
Section 9.4 Termination of Tax Sharing Agreements.............................................. 39
Section 9.5 Conduct of Audits and Other Procedural Matters..................................... 39
Section 9.6 Resolution of Disagreements Among Parties.......................................... 39
ARTICLE X GBO EMPLOYEES...................................................................... 40
Section 10.1 GBO Employees...................................................................... 40
ARTICLE XI CONDITIONS TO OBLIGATIONS OF BUYER................................................. 42
Section 11.1 Representations and Warranties Correct............................................. 42
Section 11.2 Performance; No Default............................................................ 42
Section 11.3 Absence of Injunction.............................................................. 42
Section 11.4 Governmental Approvals............................................................. 42
Section 11.5 Consents........................................................................... 42
Section 11.6 Intercompany Accounts.............................................................. 43
Section 11.7 Transfer Taxes..................................................................... 43
Section 11.8 No Material Adverse Effect......................................................... 43
Section 11.9 Resignation of Directors........................................................... 43
Section 11.10 Other Transactional Agreements..................................................... 43
Section 11.11 Opinion of Counsel for Seller...................................................... 43
ARTICLE XII CONDITIONS TO OBLIGATIONS OF SELLER................................................ 43
Section 12.1 Representations and Warranties Correct............................................. 43
Section 12.2 Performance; No Default............................................................ 44
Section 12.3 Absence of Injunction.............................................................. 44
Section 12.4 Governmental Approvals............................................................. 44
Section 12.5 No Material Adverse Effect......................................................... 44
Section 12.6 Other Transaction Documents........................................................ 44
Section 12.7 Offers to GBO Employees............................................................ 44
Section 12.8 Buyer Capital Contribution to Buyer................................................ 44
Section 12.9 Opinion of Counsel for Buyer....................................................... 44
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ARTICLE XIII DELIVERIES AT CLOSING.............................................................. 44
Section 13.1 Deliveries by Seller............................................................... 44
Section 13.2 Deliveries by Buyer................................................................ 45
Section 13.3 Deliveries by Seller and Buyer..................................................... 45
ARTICLE XIV INDEMNIFICATION.................................................................... 46
Section 14.1 Indemnification.................................................................... 46
Section 14.2 Defense of Third Party Claims...................................................... 47
Section 14.3 Direct Claims...................................................................... 49
ARTICLE XV ARBITRATION........................................................................ 49
Section 15.1 General............................................................................ 49
Section 15.2 Initiation of Arbitration.......................................................... 49
Section 15.3 Appointment of Arbitrators......................................................... 49
Section 15.4 Decision........................................................................... 50
Section 15.5 Expenses of Arbitration............................................................ 50
Section 15.6 Location of Arbitration............................................................ 50
Section 15.7 Survival of Article................................................................ 50
Section 15.8 Other Actions...................................................................... 50
ARTICLE XVI MISCELLANEOUS PROVISIONS AND AGREEMENTS............................................ 50
Section 16.1 Confidentiality.................................................................... 50
Section 16.2 Expenses........................................................................... 51
Section 16.3 Notices............................................................................ 51
Section 16.4 Amendments; Termination............................................................ 52
Section 16.5 Consent to Jurisdiction............................................................ 52
Section 16.6 Assignment; Affiliate of Buyer..................................................... 53
Section 16.7 Entire Agreement................................................................... 53
Section 16.8 Applicable Law..................................................................... 53
Section 16.9 Survival........................................................................... 53
Section 16.10 Further Assurances................................................................. 54
Section 16.11 Definition of "Knowledge."......................................................... 54
Section 16.12 Parties in Interest................................................................ 54
LIST OF ANNEXES & SCHEDULES
Annex A Definitions
B Form of Coinsurance Agreement
C Form of Assumption Reinsurance Agreement
D Form of License Agreement
E Form of Administration Agreement
F Form of Service Agreement
G Form of Lease Agreement (Boston)
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H Form of Lease Agreement (Dearborn)
I Form of Lease Assignment
J Omitted
K Form of Closing GAAP Balance Sheet
L Agreed GAAP Principles and Procedures
Schedule 2.1(c) Jurisdictions Where Seller and CCI Licensed
as a Utilization Review Agent
2.2 Conflicts
2.3(a) Audited Financial Statements
2.3(b) Interim Financial Statements
2.3(c) Statutory Financial Statements
2.4 Undisclosed Liabilities; Absence of Change
2.5(a) Title to GBO Included Assets; Liens
2.5(b) Real Property
2.7 Filings and Notices; Approvals and Consents
2.8(a) Contracts
2.8(b) GBO Subsidiary Contracts
2.8(c) Validity of Contracts
2.8(d) ASO Contract and Existing GBO Policies
Notice of Cancellation, Material Changes
2.9(a) GBO Included Division Litigation
2.9(b) GBO Subsidiaries Litigation
2.10(a) GBO Division Employee Litigation; GBO
Subsidiary Employee Litigation
2.10(b) State or Local Law Notices of Employee
Terminations
2.12 GBO Intellectual Property
2.13 Taxes
2.15 Investments in Subsidiaries and Affiliates
2.17(a) Insurance Business-Conduct of GBO Included
Business
2.17(b) Insurance Licenses of Seller
3.8 Insurance Licenses of Buyer
8.10 Administrative Service Performance Standards
11.5 Third Party Consents and Approvals
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated as of October 10, 1996
(together with the Annexes and Schedules hereto, this "Agreement"), is entered
into between ▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company, a mutual life insurance
company organized under the laws of Massachusetts ("Seller"), and WellPoint
Health Networks Inc., organized under the laws of California ("Buyer").
A. Seller is engaged in the GBO Business and desires to sell
the GBO Included Business to Buyer and to retain the GBO Excluded Business (in
each case, as defined in Annex A).
B. Seller and Buyer desire that Buyer or Buyer's designated
Affiliate, UNICARE Life & Health Insurance Company, a Delaware stock life
insurance company ("Unicare"), shall purchase the GBO Division Assets and assume
the GBO Division Liabilities, and Buyer shall purchase the GBO Subsidiaries
Shares, and Buyer or Unicare shall have the business capacity to conduct the GBO
Included Business independently of Seller as of the Closing, except as
specifically provided in this Agreement.
C. Seller's wholly owned subsidiary, ▇▇▇▇ ▇▇▇▇▇▇▇
Subsidiaries, Inc. ("JHSI"), owns all of the outstanding capital stock of Cost
Care, Inc. ("CCI") (the "CCI Shares") and all of the outstanding capital stock
of ▇▇▇▇▇▇▇ Association Services Group, Inc. ("HASG") (the "HASG Shares") and
sixty percent (60%) of the outstanding capital stock of TriState, Inc.
("TriState") (the "TriState Shares") (CCI owns the remaining forty percent (40%)
of the outstanding capital stock of TriState) (the CCI Shares, the HASG Shares
and the TriState Shares being collectively referred to as the "GBO Subsidiaries
Shares").
D. Buyer desires to purchase the GBO Included Business and
Seller desires to sell the GBO Included Business to Buyer on the terms and
conditions hereinafter set forth, such sale to be effected by the following
transactions at Closing:
(i) the sale and transfer by Seller, and acceptance
by Buyer or Unicare, of the GBO Division Assets and the
assignment by Seller, and assumption by Buyer or Unicare, of
the GBO Division Liabilities;
(ii) the sale by JHSI to Buyer of the GBO
Subsidiaries Shares; and
(iii) the reinsurance on an indemnity reinsurance
basis of all net retained risk of Seller after Third Party
Reinsurance under the Existing GBO Policies pursuant to the
Coinsurance Agreement and the Administration Agreement to be
entered into by Seller and Unicare.
E. Seller and Buyer desire to enter into certain transitional
arrangements that are intended to preserve the value of the GBO Included
Business for an agreed period following the Closing.
F. The definitions of certain capitalized terms used herein
are set forth on Annex A hereto.
In consideration of the premises and of the mutual covenants
and agreements contained herein, Seller and Buyer hereby agree as follows:
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ARTICLE I
SALE OF GBO SUBSIDIARIES SHARES,
TRANSFER OF GBO DIVISION ASSETS
AND ASSUMPTION OF GBO DIVISION LIABILITIES
Section 1.1 Sale of the GBO Subsidiaries Shares, Transfer of
the GBO Division Assets and Assumption of the GBO Division Liabilities.
(a) On the terms and subject to the conditions set forth in
this Agreement, at the Closing, for the consideration specified below, effective
as of the Effective Time:
(i) Subject to the modifications described below, at
the Effective Time, Buyer will acquire from Seller those
categories of GBO Division Assets identified on the Form of
Closing GAAP Balance Sheet, and Buyer will assume from Seller
those categories of GBO Division Liabilities identified on the
Form of Closing GAAP Balance Sheet, which shall contain the
following modifications and adjustments:
(1) The amount of cash and Investment Assets
to be acquired by Buyer will be subject to, and
adjusted by, the terms of Section 1.5 and by the
terms of the Coinsurance Agreement.
(2) Those "Premiums and Accounts Receivable"
relating to (i) Persons who are not a customer of the
GBO Included Business on the date following the
Closing and (ii) Persons who are in bankruptcy or
receivership at the Effective Time will not be
assigned to Buyer as GBO Included Assets. In
addition, no "Premium or Account Receivable" which is
one hundred twenty (120) or more days delinquent
under the terms of Seller's arrangement or agreement
with the account party will be assigned to Buyer as a
GBO Included Asset. Buyer shall, however, use
reasonable commercial efforts to collect for the
account of Seller those Premiums and Accounts
Receivable that are not being assigned to Buyer
pursuant to the foregoing, if requested by Seller.
Any payments received after Closing from a customer
owing Premiums and Accounts Receivable not assigned
to Buyer hereunder shall be applied on a first-in-
first-out basis to amounts then due to Seller and
Buyer from such customer, unless the customer shall
otherwise specifically designate in writing
application of such payment.
(3) For purpose of the Closing GAAP Balance
Sheet, the net book value of the "Furniture and
equipment" to be transferred as a GBO Included Asset
to Buyer will be reduced by $3,500,000.
(4) Only fifty percent (50%) of the "Deficit
recoverable" amount immediately prior to the
Effective Time will be assigned to Buyer as a GBO
Division Asset. The remaining fifty percent (50%)
will be retained by Seller.
(5) The parties have agreed that, except as
provided in Section 5.10, or as otherwise specified
in the Transaction Documents, (i) no amounts due to
the GBO Subsidiaries from their Affiliates, or due
from the GBO Subsidiaries to their Affiliates, will
remain outstanding at Closing and (ii) no amounts of
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payables or receivables due to or due from Affiliates
of the GBO Subsidiaries will be assigned or assumed,
either directly or through the purchase of the GBO
Subsidiaries Shares by Buyer at Closing. All such
amounts due to the GBO Subsidiaries from their
Affiliates, or due from the GBO Subsidiaries to their
Affiliates, that will not so remain outstanding will
be settled at face value at or prior to Closing.
(6) Liabilities for pre-Closing employee
benefits will be retained by Seller as provided in
Section 10.1(f). Seller shall be responsible for
payment of all accrued vacation amounts for the
employees of the GBO Included Business and none of
such amounts shall be assumed by Buyer at the
Effective Time.
(7) Neither Buyer nor Unicare shall assume
or have any liability with respect to any contract or
agreement of insurance except the Coinsured Policies
pursuant to the terms of the Coinsurance Agreement or
the Assumption Reinsurance Agreement.
(8) Seller will update Schedule 2.9, the
schedule of litigation, as of the Closing Date and
all litigation included in such updated schedule
shall have reserves established therefor in the
Closing GAAP Balance Sheet. Buyer or Unicare shall
assume liability and responsibility for litigation
reflected on the updated Schedule 2.9 other than
liability or litigation arising out of or based on
bad faith claims practices, willful misconduct or
gross negligence of the Seller or its Affiliates
(without attributing to the Seller or its Affiliates
the actions of Buyer or its Affiliates), and Seller
shall retain all other liability with respect to
claims or causes of actions accruing prior to the
Effective Time and not assumed by Buyer or Unicare as
above provided or otherwise assumed by Buyer or
Unicare, it being understood and agreed that Unicare
will, as provided in the Coinsurance Agreement and/or
the Assumption Reinsurance Agreement, assume
responsibility for claims and certain liabilities on
Existing GBO Policies.
(ii) Seller and Buyer or Unicare shall execute and
deliver an assignment and assumption agreement with respect to
the GBO Division Liabilities, which agreement shall provide
that Seller shall assign and transfer to Buyer or Unicare, and
Buyer or Unicare shall absolutely and irrevocably assume
without further liability or recourse to Seller (other than as
provided for in the Transaction Documents), and thereafter to
be solely liable for and pay, perform and discharge when due,
the GBO Division Liabilities.
(iii) Seller shall cause JHSI to transfer to Buyer
the certificates representing the CCI Shares, the TriState
Shares and the HASG Shares duly endorsed for transfer or
accompanied by stock powers in favor of Buyer.
(iv) Seller and Unicare shall execute and deliver the
Coinsurance Agreement.
(v) Seller and Unicare will execute and deliver the
Assumption Reinsurance Agreement.
(vi) Seller and Unicare will execute and deliver the
License Agreement.
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(vii) Seller and Unicare will execute and deliver the
Administration Agreement.
(viii) Seller and Unicare will execute and deliver
the Service Agreement.
(ix) Seller and Unicare will execute and deliver the
Lease Agreements with respect to the Seller's Facilities
located in Boston, Massachusetts and Dearborn, Michigan, and
will execute and, subject to the terms of Section 1.2(b),
deliver Lease Assignments with respect to each of the GBO
Division Leases.
The sale, assignment, transfer, license, sublicense and
conveyance to Buyer (or Unicare as appropriate) of the GBO Subsidiaries Shares
and the GBO Division Assets (including without limitation the GBO Intellectual
Property of Seller), and the assumption of the GBO Division Liabilities, as
herein provided, shall be effected by appropriate deeds, bills of sale, stock
transfer powers or endorsements, assignments, license agreements, sublicense
agreements and assumption agreements on the part of the Buyer or Unicare, as
appropriate, drafts, checks and other instruments of transfer, conveyance and
assumption in form reasonably acceptable to Buyer or Unicare, as appropriate,
and Seller (the "GBO Conveyancing Documents").
The assignment and transfer of the GBO Included Assets shall
consist of (x) those GBO Division Assets required to be transferred pursuant to
the Coinsurance Agreement and (y) all remaining GBO Division Assets and the GBO
Subsidiaries Shares (by which the GBO Included Assets owned by the GBO
Subsidiaries are transferred) which shall be transferred pursuant to this
Agreement. Such assignment and transfer of the GBO Included Liabilities shall
consist of (i) those GBO Division Liabilities required to be assigned and
transferred pursuant to the Coinsurance Agreement and (ii) all remaining GBO
Division Liabilities, and the GBO Division Liabilities owed by the GBO
Subsidiaries which shall be assigned and transferred (either directly or by
transfer of the GBO Subsidiary Shares) pursuant to this Agreement.
(b) In full consideration of the sale, assignment, transfer
and conveyance to Buyer (or Unicare, as the case may be) of the GBO Included
Business, including the GBO Subsidiaries Shares, Buyer shall pay to Seller an
amount equal to $86,700,000 (the "Purchase Price"). At the Effective Time, the
Purchase Price shall be paid by Buyer to Seller by a wire transfer of
immediately available funds to such account as Seller shall designate in writing
to Buyer.
Section 1.2 Transfers Requiring Consent.
(a) At or prior to the Closing, Seller, with Buyer's
cooperation and assistance, shall obtain all approvals, consents or waivers
necessary to assign to Buyer or Unicare the GBO Division Contracts specified on
Schedule 11.5. Seller shall use reasonable commercial efforts to terminate
without cost effective after the Effective Time any vendor contract designated
by Buyer to the extent permitted by the terms of such vendor contract.
(b) With respect to the GBO Division Leases and GBO Division
Contracts (other than GBO Division Contracts provided for in Sections 1.3, 5.12
and 8.8) for which consent is not obtained, Seller, instead of obtaining any
approval, consent or waiver necessary to sell, assign, transfer, sublease or
otherwise convey to Buyer such GBO Division Leases and GBO Division Contracts,
shall take all steps necessary to confer upon Buyer, or otherwise obtain for
Buyer, the benefits of such GBO Division Leases and GBO Division Contracts at no
cost or expense to Buyer other than those costs and
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expenses that would otherwise be payable by Buyer (i) in the case of such GBO
Division Lease, had the applicable Lease Assignment in the form requested been
executed by the landlord thereunder, or (ii) in the case of such GBO Division
Contract, had such approval, consent or waiver been executed by the other party
thereto. If any approval, consent or waiver referred to in Section 1.2(a) above
with respect to any such GBO Division Lease or GBO Division Contract has not
been obtained by Seller, as of Closing, Seller shall, following the Closing and
with Buyer's cooperation, continue to use commercially reasonable efforts to
obtain such approval, consent or waiver; provided, however, that Seller shall
not be required to pay or incur any cost or expense to any counter-party to a
lease or contract to obtain such counter-parties' consent which Seller is not
otherwise required to pay or incur in accordance with the terms of the
applicable GBO Division Lease or GBO Material Contract. Until such time as
Seller has obtained any necessary approval, consent or waiver, Seller shall take
all steps necessary to confer all benefits of such GBO Division Leases and GBO
Division Contracts on Buyer until the earliest to occur of (i) such time as all
such approvals, consents or waivers are obtained or (ii) the expiration of the
applicable term of the GBO Division Lease or GBO Division Contract, as the case
may be. During the above time period with respect to any GBO Division Lease and
GBO Division Contract for which such approval, consent or waiver has not been
obtained, Seller shall authorize Buyer (A) to enforce, to the extent permitted
by law and at Buyer's expense, any and all rights of Seller arising from such
GBO Division Lease or GBO Division Contract against any other party or parties
thereto in Seller's name and on behalf of Seller and (B) to amend or terminate,
to the extent permitted by law and the terms of the applicable GBO Division
Lease or GBO Division Contract and at Buyer's expense, any such GBO Division
Lease or GBO Division Contract in Seller's name and on behalf of Seller with
Seller's consent for any such amendment, which will not be unreasonably
withheld, provided, however, that consent is not required for any amendment made
by Buyer that does not increase the liability of Seller under the applicable GBO
Division Lease or GBO Division Contract. If the benefits of any GBO Division
Lease or any GBO Division Contract for which such approvals, consents and
waivers have not been obtained are not able to be conferred on Buyer by Seller,
and (i) in the case of GBO Division Leases, if Buyer has to vacate the premises
thereunder prior to the end of the then current term under such GBO Division
Lease, or is required to pay additional amounts to remain in the tenancy, Seller
will reimburse Buyer or otherwise make Buyer whole for any such additional
amounts or for any out-of-pocket costs and expenses incurred by Buyer in moving
the GBO Business conducted on such premises to a new leased location in the
vicinity of such premises and for any increase in rent or other lease costs or
payments incurred by Buyer above the amount of rent or other cost Buyer would
otherwise be required to pay under such GBO Division Lease during the remainder
of the then current term under such GBO Division Lease, and (ii) with respect to
GBO Division Contracts, if Buyer has to replace any GBO Division Contract with a
new third party contract in order to enable Buyer to operate the GBO Business,
Seller will reimburse Buyer or otherwise make Buyer whole for any increase in
costs or expenses to Buyer in procuring from such third party the same or
similar services above the costs or expenses Buyer would otherwise be required
to pay under such GBO Division Contract during the remainder of the then current
term under such GBO Division Contract or for such lesser period during which the
third party to such GBO Division Contract would have been otherwise required to
render the services thereunder to Seller had not the transactions contemplated
by this Agreement taken place.
Section 1.3 ASO Contracts.
(a) At or prior to the Closing, Seller, with Buyer's
cooperation and assistance, shall use commercially reasonable efforts to obtain
all approvals, consents or waivers necessary to the sale, assignment and
transfer to Buyer of each of the ASO Contracts previously designated by Buyer
after consultation with Seller and in accordance with the transition plan
developed jointly by Buyer and Seller. Except as provided herein, Seller shall
not be required to pay or incur any cost or expense to obtain any third-party
approval, consent or waiver which Seller is not otherwise required to pay or
incur in
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accordance with the terms of the applicable ASO Contract. Seller and
Buyer shall each pay their respective out-of-pocket costs and expenses in
connection with the foregoing, including, without limitation, travel costs,
salaries and attorneys' fees. Notwithstanding the foregoing, the parties have
agreed that the obtaining of such approvals, consents and waivers is not a
condition to Closing, and in each case where consent is not obtained prior to
Closing subsection (b) below shall govern.
(b) Following the Closing, Buyer and Seller shall use good
faith efforts to obtain approvals, consents or waivers with respect to each ASO
Contract for which such approval, consent or waiver is necessary for the sale,
assignment and transfer of each of such ASO Contract to Buyer which has not been
obtained as of the Closing, until the earliest to occur of (i) the second
renewal or anniversary date of such ASO Contract occurring after the Closing
Date (it being understood that anniversary dates shall occur annually on the day
immediately following the expiration of the then-current Period (as defined in
the applicable ASO Contract)), (ii) such time as such approval, consent or
waiver is obtained, (iii) the date of termination by Buyer of such ASO Contract
in Seller's name as permitted under the provisions of such ASO Contract under
the authority to be granted pursuant to clause (C) of the immediately succeeding
sentence and (iv) the date Buyer or any Affiliate of the Buyer has entered into
a Contract with the counterparty to such ASO Contract providing for services
similar to those provided under such ASO Contract (with respect to each such ASO
Contract, its "Continuation Period"). During the Continuation Period with
respect to each such ASO Contract, Seller shall: (A) at Seller's expense,
transfer to Buyer an amount equal to all revenues and fees received by Seller or
its agents or Affiliates with respect to such ASO Contract; (B) authorize Buyer
through subcontract or delegation of duties at Buyer's expense, to perform all
obligations of Seller under, and enforce any and all rights of Seller arising
from such ASO Contract against any party or parties thereto in Seller's name and
on behalf of Seller (including bringing legal action in the name of Seller) to
the extent permitted by law and the terms of the applicable ASO Contract; and
(C) authorize Buyer at Buyer's expense, to amend or terminate any such ASO
Contract in Seller's name and on behalf of Seller, to the extent permitted by
law and the terms of the applicable ASO Contract, provided that no amendment
shall be effected pursuant to this clause which would reflect a substantial
deviation from the prevailing industry standards without Seller's consent, which
consent shall not be unreasonably withheld and shall be deemed given with
respect to any amendment if Seller has not given written notice to the contrary
within ten (10) days of receiving written notice of the proposal therefor.
During the Continuation Period with respect to each ASO Contract, Buyer shall,
at its own expense (except for expenses incurred by Seller in carrying out the
immediately preceding sentence), be solely responsible for the performance of
Seller's obligations under such ASO Contract, and Buyer shall on demand
indemnify, defend and hold harmless Seller and its Affiliates, and their
respective directors, officers and employees from and against any and all
demands, actions, proceedings, costs and Liabilities (including, without
limitation, the costs and expenses of defending any and all actions, suits,
proceedings, demands, assessments, judgments, settlements and compromises and
attorneys' fees in connection therewith), paid or incurred, resulting from,
arising out of or relating to Buyer's performance or non-performance thereunder
during the Continuation Period or failure to provide timely notice of
termination or cancellation pursuant to the penultimate sentence in this Section
1.3(b). Seller shall on demand indemnify, defend and hold harmless Buyer and its
Affiliates, and their respective directors, officers and employees, from and
against any and all demands, actions, proceedings, costs and Liabilities
(including, without limitation, the costs and expenses of defending any and all
actions, suits, proceedings, demands, assessments, judgments, settlements and
compromises and attorneys' fees in connection therewith), paid or incurred,
resulting from, arising out of or relating to Seller's failure to obtain, prior
to Closing, any approval, consent or waiver for the assignment and transfer of
any ASO Contract to Buyer; provided, however, that Seller shall not be obligated
to indemnify Buyer for any of Buyer's damages from its loss of profits,
revenues, or business opportunities resulting from, arising out of or relating
to any ASO Contract. The Liability of Seller or Buyer pursuant to this Section
1.3 shall not be subject to the threshold articulated in Article XIV, but shall
be measured from the first dollar.
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Buyer shall, on behalf of Seller and itself, to the extent permitted by law and
the terms of the applicable ASO Contract, send appropriate and timely notices,
advance copies of which shall have been provided to Seller by Buyer or Unicare,
to counterparties of ASO Contracts so that all ASO Contracts for which such
approvals, consents or waivers have not been obtained and which have not been
terminated or cancelled shall be cancelled or terminated effective as of the
second renewal or anniversary date thereof occurring after the Closing Date. As
of such second renewal or anniversary date, Seller shall be relieved of any
further obligation accruing after such date under this Section 1.3(b).
Section 1.4 Closing. The closing of the sale, assignment,
transfer and conveyance of the GBO Included Business, including, without
limitation, the GBO Subsidiaries Shares (the "Closing"), will take place at the
offices of ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00
A.M., Eastern Time, following the fulfillment or waiver of the conditions
precedent specified in Article XI and XII, on or after January 2, 1997 and on or
before January 31, 1997, unless the parties shall have agreed in writing to such
other date, time and place (the "Closing Date"). The transactions contemplated
by this Agreement shall be effective at 12:01 A.M., Eastern Time, on the Closing
Date, or such other time as the parties shall agree in writing ("Effective
Time").
Section 1.5 Closing GAAP Equity Amount.
(a) Buyer and Seller agree that the amount of the GBO Included
Assets (including without limitation cash and Investment Assets and including
the GBO Included Assets of the GBO Subsidiaries which are transferred by the
sale of the GBO Subsidiaries Shares) transferred by Seller and accepted by Buyer
pursuant to this Agreement shall be equal to the amount of the GBO Included
Liabilities (and including the GBO Included Liabilities of the GBO Subsidiaries
which are transferred by the sale of the GBO Subsidiaries Shares) assigned by
Seller and assumed by Buyer pursuant to this Agreement, as provided in Section
1.1 hereof and elsewhere herein. Thus, the net equity value of the GBO Included
Business (i.e., the book value of the GBO Included Assets less the book value of
the GBO Included Liabilities as determined pursuant to this Section 1.5) (the
"Closing GAAP Equity Amount") shall be $0. For these purposes, the book value of
the GBO Included Assets and the GBO Included Liabilities shall be determined in
accordance with GAAP applied on a basis consistent with the Agreed GAAP
Principles and Procedures (as defined below) through the preparation and audit
of a balance sheet, which shall represent a consolidated balance sheet of the
GBO Included Business purchased by Buyer at Closing, except that cash and
Investment Assets shall be listed in the amount required to produce a Closing
GAAP Equity Amount of $0 (the "Closing GAAP Balance Sheet"). The Closing GAAP
Balance Sheet and Closing GAAP Equity Amount shall take into account and reflect
the inclusion or exclusion as the case may be of those assets and liabilities
identified in this Agreement. The parties have agreed that the form of Closing
GAAP Balance Sheet attached to this Agreement as Annex K (the "Form of Closing
GAAP Balance Sheet") shall represent the form in which the Closing GAAP Balance
Sheet shall be prepared and that the categories of assets and liabilities set
forth on such balance sheet shall represent the categories of assets and
liabilities to be included on the Closing GAAP Balance Sheet. The net amount of
cash and Investment Assets required to be transferred from Seller to Buyer as
part of the GBO Included Assets, and the timing of such transfers, shall be
determined pursuant to this Section 1.5.
(b) Not less than ten (10) Business Days nor more than fifteen
(15) Business Days prior to the Closing, Seller shall make and provide to Buyer
a good faith estimate of the value (the "Estimated Value") of cash and
Investment Assets necessary to result in a Closing GAAP Equity Amount equal to
$0 at the Effective Time. Seller shall at Closing (i) deliver to Buyer cash in
an amount equal to the (i) Estimated Amount minus (ii) an amount, as of such
Business Day, equal to the value of the cash and Investment Assets recorded on
the books of the GBO Subsidiaries (the "Delivery Amount") or (ii) deliver cash
and Investment Assets selected by Buyer in an amount equal to the Delivery
Amount.
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Seller has provided Buyer with a list of available Investment Assets of
Seller, which Seller shall revise and update from time to time at the request of
Buyer. Within ten (10) Business Days before Closing, Buyer may notify Seller of
(i) its election to receive a combination of cash and Investment Assets and (ii)
its selection of Investment Assets from the list previously provided by Seller.
For these purposes, Investment Assets that are U.S. Treasury securities or
publicly traded bonds of United States corporations shall be valued at their
published values as of the close of business on the Business Day immediately
prior to the Closing Date as reported in the Wall Street Journal. All Investment
Assets shall be rated in NAIC Categories 1 or 2 at the time of delivery to
Buyer.
(c) Promptly following the Closing Date (but not more than one
hundred twenty (120) days thereafter), management of the GBO Included Business
and Buyer shall prepare, in consultation with members of Seller's finance
department senior management, (i) a Closing GAAP Balance Sheet reflecting the
GBO Included Liabilities assigned and assumed on the Closing Date, the GBO
Included Assets other than cash and Investment Assets transferred and accepted
on the Closing Date, and the amount of cash and Investment Assets required to
produce a Closing GAAP Equity Amount of $0, and (ii) a closing statement (the
"Closing Statement") showing either the excess of the amount of cash and
Investment Assets contained in the Closing GAAP Balance Sheet over the Estimated
Amount (the "Deficiency Amount") or the excess of the Estimated Amount over the
amount of cash and Investment Assets contained in the Closing GAAP Balance Sheet
(the "Excess Amount"). A summary of the accounting principles, procedures,
methodologies and assumptions to be employed in the preparation of the Closing
GAAP Balance Sheet is set forth in Annex L hereto (the "Agreed GAAP Principles
and Procedures"). A copy of the Closing GAAP Balance Sheet and the Closing
Statement prepared by the management of the GBO Included Business and Buyer
shall be simultaneously delivered by management of the GBO Included Business to
Buyer, Seller, Coopers & ▇▇▇▇▇▇▇ and Ernst & Young.
(d) Buyer and Seller shall jointly engage Coopers & ▇▇▇▇▇▇▇,
under said firm's form of engagement as previously circulated to the parties, to
audit the Closing GAAP Balance Sheet and the Closing Statement following
generally accepted auditing standards and applying the Agreed GAAP Principles
and Procedures. Coopers & ▇▇▇▇▇▇▇ shall provide a summary of all audit findings
and differences, both favorable and unfavorable, and shall recommend that the
management of the GBO Included Business make such adjustments to the Closing
GAAP Balance Sheet and the Closing Statement prepared by the management of the
GBO Included Business as Coopers & ▇▇▇▇▇▇▇ shall determine are required for the
Closing GAAP Balance Sheet and the Closing Statement to comply with the
requirements of this Agreement. Coopers & ▇▇▇▇▇▇▇ shall complete its audit and
issue its report thereon simultaneously to Buyer and Seller within sixty (60)
days after receiving the Closing GAAP Balance Sheet and the Closing Statement
prepared by management of the GBO Included Business. The cost of such engagement
of Coopers & ▇▇▇▇▇▇▇ shall be borne equally by Seller and Buyer.
(e) Seller and Buyer shall be afforded the opportunity to
review the Closing GAAP Balance Sheet and the Closing Statement, as audited by
Coopers & ▇▇▇▇▇▇▇, and in that regard shall be afforded full access to the
books, records, and other documents of the GBO Included Business (whether in the
possession of Buyer or Seller) containing information on which the Closing GAAP
Balance Sheet and the Closing Statement are based, as well as the work papers of
Coopers & ▇▇▇▇▇▇▇ relating to its audit of the Closing GAAP Balance Sheet and
the Closing Statement, for the purpose of conducting a review thereof.
Appropriate confidentiality agreements shall be entered into by the parties in
connection with such review and access. Buyer shall cause the management of the
GBO Included Business to provide reasonable assistance to Seller and its
representatives in connection with such review. To the extent Seller retains
books, records and other documents of the GBO Included Business, including the
work papers of Ernst & Young, Seller shall provide reasonable assistance to
Buyer and its representatives in connection with such review. Seller and Buyer
and their representatives (including, with respect to
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Seller, Ernst & Young) shall, to the extent deemed necessary by them, be
permitted to repeat any of the auditing procedures employed by Coopers & ▇▇▇▇▇▇▇
in its audit of the Closing GAAP Balance Sheet and the Closing Statement. If
Seller chooses to retain Ernst & Young to perform any procedures with respect to
the Closing GAAP Balance Sheet, Ernst & Young shall complete such procedures
within a period of sixty (60) days after the receipt by Seller of Coopers &
▇▇▇▇▇▇▇'▇ recommended Closing GAAP Balance Sheet and recommended Closing
Statement together with its report thereon. In the absence of manifest error,
the recommended Closing GAAP Balance Sheet and the recommended Closing Statement
shall become final and binding on the parties hereto on the later of (i) the
tenth (10th) or (ii) if Seller chooses to retain Ernst & Young, the seventieth
(70th) Business Day following the day such Closing GAAP Balance Sheet and such
Closing Statement are delivered to Seller and Buyer by Coopers & ▇▇▇▇▇▇▇
together with its report thereon, unless either Seller or Buyer shall deliver a
Proposed Adjustment Notice (as defined below) during either period specified
above.
(f) If either Seller or Buyer shall object to any
recommendation made, or its failure to make a recommendation, by Coopers &
▇▇▇▇▇▇▇ in connection with the Closing GAAP Balance Sheet and the Closing
Statement as not having been made in accordance with the requirements of this
Agreement, then Seller or Buyer, as the case may be, shall deliver to the other
party and Coopers & ▇▇▇▇▇▇▇ a proposed adjustment notice (the "Proposed
Adjustment Notice"). Seller and Buyer agree that any proposed adjustments shall
be limited to those adjustments required for the Closing GAAP Balance Sheet
and/or Closing Statement to be consistent with the requirements of this
Agreement.
(g) If a Proposed Adjustment Notice is delivered within the
period set forth in Section 1.5(e), then Seller and Buyer shall negotiate in
good faith for a ten (10) Business Day period commencing on the date of delivery
of the Proposed Adjustment Notice to resolve such dispute. If Seller and Buyer
cannot resolve such dispute with such ten (10) Business Day period, then Seller
and Buyer shall retain a mutually acceptable firm of independent public
accountants of nationally recognized reputation (other than Coopers & ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Young or Deloitte & Touche) to act as the arbitrator of such dispute.
Any such arbitration shall be conducted at a location to be determined by the
arbitrator appointed pursuant to the terms hereof. If the parties are not able
to agree to an arbitrator, then the Denver, Colorado office of the American
Arbitration Association shall select a firm of independent public accountants of
nationally recognized reputation (other than Coopers & ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ or
Deloitte & Touche) to act as arbitrators and the arbitration shall be held in
Denver, Colorado. Seller and Buyer shall cause the arbitrator to act promptly to
resolve any disputed issues in accordance with the terms of this Agreement, and
to issue their written decision within thirty (30) Business Days after the
appointment of the arbitrator, which decision shall be final, binding and
conclusive on both Seller and Buyer.
(h) On the day the Closing Statement becomes final and binding
on the parties hereto in accordance with Section 1.5(e) or Section 1.5(g), if
the Closing Statement contains a Deficiency Amount, then Seller promptly shall
pay to Buyer in cash in immediately available funds an amount equal to the
Deficiency Amount plus interest thereon compounded monthly from the Closing Date
to the payment date at the interest rate for 30 day United States Treasury Notes
on the Closing Date as published in the Wall Street Journal. If the Closing
Statement contains an Excess Amount, then Buyer promptly shall pay to Seller in
cash in immediately available funds an amount equal to the Excess Amount plus
interest thereon compounded monthly from the Closing Date to the payment date at
the interest rate for 30-day United States Treasury Notes on the Closing Date as
published in the Wall Street Journal.
(i) In an effort to facilitate the audit of the Closing GAAP
Balance Sheet and Closing Statement by Coopers & ▇▇▇▇▇▇▇ and permit Coopers &
▇▇▇▇▇▇▇ to familiarize itself with the books, records and systems of Seller and
with the application of the Agreed GAAP Principles and Procedures,
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Seller shall allow Coopers & ▇▇▇▇▇▇▇ to review the financial books, records and
systems of Seller with respect to the GBO Included Business, to the extent such
review does not unreasonably interfere with the conduct of Seller's business.
Seller shall engage Ernst & Young to assist and cooperate with Coopers & ▇▇▇▇▇▇▇
in its review. Such review shall be commenced as soon as practicable following
the execution of this Agreement. Seller shall pay all fees of Ernst & Young and
Buyer shall pay all fees of Coopers & ▇▇▇▇▇▇▇ for the purpose of such review.
Section 1.6 Manner of Payment. Each cash payment required to
be made by any party hereto pursuant to the terms of this Agreement shall be
made by transferring the amount thereof in immediately available United States
Dollars to the account or accounts designated in writing by the party entitled
to such payment.
Section 1.7 Fees. Buyer shall pay the filing fee in connection
with any filings made under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
AS TO THE GBO INCLUDED BUSINESS AND GBO SUBSIDIARIES
Seller hereby represents and warrants to Buyer as follows:
Section 2.1 Organization.
(a) Each of the GBO Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation with the corporate power to own, lease and operate its assets and
carry on the business conducted by it as conducted on the date hereof, and to
carry on that portion of the GBO Included Business conducted by it.
(b) Each of the GBO Subsidiaries is duly qualified and is in
good standing as a foreign corporation in each jurisdiction in which such
qualification is required and is necessary to conduct its business except in
such jurisdictions where failure to so qualify could not reasonably be expected
to have a Material Adverse Effect.
(c) Neither Seller nor any of the GBO Subsidiaries is required
to be licensed as a third party administrator. Neither TriState nor HASG is
licensed or required to be licensed as a utilization review agent in any
jurisdiction. Seller in the conduct of the GBO Included Business provides
utilization review services only in those jurisdictions listed on Schedule
2.1(c), none of which requires Seller to be licensed, certified, registered or
authorized as a utilization review agent. CCI is duly licensed, certified,
registered or authorized as a utilization review agent in good standing in the
jurisdictions set forth on Schedule 2.1(c), which to the knowledge of Seller are
the only jurisdictions in which such license, certification, registration or
authorization is required.
(d) Complete and correct copies of the Certificate of
Incorporation and Bylaws of each of the GBO Subsidiaries, as in effect on the
date hereof, have been delivered to Buyer. Except as set forth on Schedule 2.15,
none of the GBO Subsidiaries has any Subsidiaries nor owns or controls, directly
or indirectly, any shares of capital stock or other interest in any other
corporation, partnership, joint venture or any other enterprise.
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(e) Seller is duly licensed as a life and health insurance
company in good standing in all states of the United States, Guam and Puerto
Rico, and is duly qualified and is in good standing in each jurisdiction in
which such qualification is required and is necessary to conduct the GBO
Included Business.
Section 2.2 No Conflict. Except as set forth on Schedule 2.2,
the execution, delivery and performance of this Agreement by Seller (i) do not
and will not conflict with, result in a breach of, or entitle any party (with
due notice or lapse of time or both) to terminate, accelerate or declare a
default with respect to the Certificate of Incorporation or Bylaws of any of the
GBO Subsidiaries, or any GBO Material Contract (with the exception in the case
of GBO Material Contracts of conflicts or breaches arising from violations of
any non-assignment or non-delegation related prohibitions contained in such GBO
Material Contracts) or result in the creation or imposition of any Lien upon the
GBO Subsidiaries Shares or any GBO Included Asset (other than a Permitted Lien
or a Lien removed by Seller or bonded against by Seller to Buyer's satisfaction
at or prior to Closing), and (ii) will not result in any violation of any law,
rule or regulation applicable to Seller or the GBO Included Business, other than
such violations as individually or in the aggregate would not be reasonably
expected to have a Material Adverse Effect.
Section 2.3 Financial Statements.
(a) Attached hereto as Schedule 2.3(a) are the audited
financial statements containing balance sheets of the GBO Included Business as
of December 31, 1994 and 1995 (collectively, the "Balance Sheets"), and the
related statements of income and cash flows for the fiscal years then ended, in
each case together with the related notes thereto (collectively, "Financial
Statements"). The Balance Sheets (including the related notes thereto) fairly
present the financial condition of the GBO Included Business as of the
respective dates thereof, and the year-end statements included in the Financial
Statements (including the related notes thereto) fairly present the results of
operations of the GBO Included Business for the respective fiscal years then
ended in accordance with GAAP as consistently applied historically by Seller as
set forth in Annex L (except as otherwise set forth therein). The balance sheet
of the GBO Included Business as of December 31, 1995 included in Schedule 2.3(a)
is hereinafter referred to as the "1995 Balance Sheet".
(b) Attached hereto as Schedule 2.3(b) are true and complete
copies of the unaudited balance sheet (the "Recent Balance Sheet") of the GBO
Included Business as of June 30, 1996 (the "Recent Balance Sheet Date") and the
related statements of income and cash flows of the GBO Included Business
(collectively, the "Unaudited Financial Statements"). The Recent Balance Sheet
fairly presents the financial condition of the GBO Included Business, as at the
Recent Balance Sheet Date, and the other related unaudited statements included
in the Unaudited Financial Statements fairly present the results of operations
of the GBO Included Business for the period then ended. The Unaudited Financial
Statements have been prepared in accordance with GAAP consistently applied
historically by Seller as set forth in Annex L (except as otherwise set forth
therein), subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount and are not or may not be necessarily
indicative of results for the full fiscal year, and except that the Unaudited
Financial Statements do not contain full footnote disclosures in accordance with
GAAP.
(c) Attached hereto as Schedule 2.3(c) are balance sheets of
the GBO Included Business and the related statements of income of the GBO
Included Business as of and for the fiscal year ending December 31, 1995 and for
the six (6) months ended June 30, 1996, which fairly present the statutory
financial condition and results of operations of the GBO Included Business at
and as of the dates and for the periods indicated therein and have been prepared
in accordance with Statutory Accounting
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Principles ("SAP") as consistently applied historically by Seller throughout the
periods indicated, except as expressly set forth therein ("Statutory Financial
Statements"). The Statutory Financial Statements were prepared by Seller and
have not been audited or reviewed by independent accountants.
Section 2.4 Undisclosed Liabilities; Absence of Changes.
Except (i) as set forth on Schedule 2.4, (ii) as and to the extent of amounts
specifically reflected or reserved against in the Recent Balance Sheet, and
(iii) Liabilities that have arisen in the ordinary course of business since the
Recent Balance Sheet Date, the GBO Included Business does not have any material
Liabilities of a nature required by GAAP to be reflected in a corporate balance
sheet or disclosed in the notes thereto. Except as disclosed on Schedule 2.4 or
as contemplated by this Agreement, since the Recent Balance Sheet Date, the GBO
Included Business has not suffered any change which would reasonably be
expected, individually or in the aggregate with all such changes, to have a
Material Adverse Effect.
Section 2.5 Representations Regarding GBO Included Assets and
Real Property.
(a) Except as set forth on Schedule 2.5(a) hereto, Seller has
good and valid title to all the GBO Division Assets wherever situated, subject
to no Liens, other than Permitted Liens and other than Liens removed by Seller
or bonded against by Seller to Buyer's satisfaction at or prior to Closing.
Except as set forth on Schedule 2.5(a) hereto, the GBO Subsidiaries have good
and valid title to all the GBO Included Assets other than the GBO Division
Assets wherever situated, subject to no Liens, other than Permitted Liens and
other than Liens removed by the GBO Subsidiaries or bonded against by the GBO
Subsidiaries to Buyer's satisfaction at or prior to Closing.
(b) Schedule 2.5(b) hereto sets forth a complete list of all
real property owned by Seller and all real estate leases entered into by Seller
(as lessee or as lessor, other than leases at the Dearborn facility) and used
principally or exclusively by Seller in the operations of the GBO Included
Business (the "GBO Division Leases") and a complete list of real estate leases
entered into by CCI (the "CCI Leases," and collectively with the GBO Division
Leases referred to herein as the "GBO Leases," and the facilities that are the
subject of the GBO Leases are referred to herein as the "Leased Facilities").
There is no real property owned by CCI. There is no real property owned or real
estate leases entered into by TriState or HASG. The operations of the GBO
Included Business are conducted in the Leased Facilities or in the Dearborn
facility or Seller's headquarters located at ▇▇▇▇ ▇▇▇▇▇▇▇ Place, Boston,
Massachusetts (the Dearborn facility and Seller's headquarters are collectively
defined herein as "Seller's Facilities"). Seller or CCI, as the case may be, has
a valid leasehold interest in all Leased Facilities that are used principally or
exclusively in the GBO Included Business.
Section 2.6 Reserves. The aggregate reserves (including any
experience refunds) of the GBO Included Business as recorded in the Recent
Balance Sheet (i) have been determined in accordance with generally accepted
actuarial standards consistently applied (except as set forth therein) and are
fairly stated in accordance with sound actuarial principles; (ii) are consistent
with statutory accounting practices prescribed or permitted by the Insurance
Department of the Commonwealth of Massachusetts (except for adjustments made
thereto reflecting differences between GAAP and SAP); (iii) include adequate
provision for all actuarial reserves and related statement items which ought to
be established under the foregoing standards, principles and practices; and (iv)
are consistent with GAAP and the principles and procedures set forth in Annex L.
Section 2.7 Filings and Notices; Approvals and Consents. No
consent, waiver, approval, authorization or order of, or registration,
qualification or filing with, any court or other Governmental Entity is required
for the execution, delivery and performance by Seller of the Transaction
Documents and the consummation by Seller of the transactions contemplated
thereby, other than (i) the filing by
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Seller of applications with, and the obtaining of approvals of Buyer's
reinsurance of the Coinsured Policies by, the Department of Insurance of the
Commonwealth of Massachusetts and any other insurance regulatory jurisdictions
listed on Schedule 2.7(i), and the delivery of notices and consents, including
pre- and post-acquisition competition filings, to certain other state insurance
departments, (ii) the delivery of notices of the transfer of ownership of CCI
from Seller to Buyer to, and, to the extent necessary for CCI to conduct
business immediately following the Effective Date, the receipt of consents to
such transfer from and/or the relicensure of CCI to conduct utilization review
by, those regulatory authorities in, those jurisdictions listed on Schedule
2.7(ii), and (iii) compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and expiration of the waiting period thereunder.
Section 2.8 Contracts.
(a) Schedule 2.8(a) contains a complete and accurate list of
the following Contracts to which Seller is a party or to which Seller is bound
and which are principally or exclusively used by Seller in the operations of the
GBO Included Business categorized as follows:
(i) all Contracts with health care providers or
networks that cannot be terminated at the election of Seller on prior
notice of one hundred twenty (120) days or less without the imposition
of cost or penalty;
(ii) all Existing GBO Policies;
(iii) reinsurance agreements, retrocession contracts
and treaties with third-party reinsurers which reinsure any of the
Existing GBO Policies (designating those which are related solely
to Existing GBO Policies, those which cover in part Existing GBO
Policies and in part GBO Excluded Business, and those which are
required by the clients of GBO Included Business);
(iv) Broker Contracts regarding the GBO Included
Business;
(v) all Contracts with vendors which are material
to the GBO Included Business, including, without limitation, (A) all
such Contracts with software vendors that are reasonably necessary for
the operations of the GBO Included Business management information
systems, and (B) all such Contracts with vendors which provide for
services jointly to Seller's business generally and the GBO Included
Business ("Shared Contracts") which are used in the GBO Included
Business;
(vi) ASO Contracts;
(vii) Contracts which contain covenants limiting the
freedom of the GBO Included Business to engage in any line of business,
or of Seller to engage in the operations of the GBO Included Business,
in any geographic area or to compete with any Person;
(viii) employment or severance Contracts applicable to
any GBO Employee, which are or will be an obligation of the GBO
Included Business, other than any such Contract which by its terms is
terminable on not more than 60 days' notice without additional
liability; and
(ix) all other Contracts which are principally or
exclusively used in the operations of, and are material to, the GBO
Included Business.
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All of the foregoing (other than the Shared Contracts) and the GBO Division
Leases are herein referred to collectively as the "GBO Division Contracts." The
"GBO Division Contracts" and the "Subsidiary Material Contracts," as defined in
Section 2.8(b), are herein sometimes collectively referred to as the GBO
Material Contracts.
(b) Schedule 2.8 (b) contains a complete and accurate list of
the following Contracts to which any of the GBO Subsidiaries is a party or to
which any of the GBO Subsidiaries is bound, categorized as follows:
(i) Contracts with health care providers or
networks that cannot be terminated at the election of the GBO
Subsidiaries on prior notice of one hundred twenty (120) days or less
without the imposition of cost or penalty on the GBO Subsidiaries;
(ii) Contracts with sales agents and field
representatives;
(iii) Contracts with vendors which are material to
the GBO Included Business (including, without limitation, all contracts
that are necessary for the operations of the GBO Included Business
management information systems operated by the GBO Subsidiaries);
(iv) Contracts with customers;
(v) Contracts which contain covenants limiting
the freedom of any of the GBO Subsidiaries to engage in any line of
business in any geographic area or to compete with any Person;
(vi) employment or severance contracts applicable
to any GBO Subsidiary Employee other than any such contract which by
its terms is terminable on not more than sixty (60) days' notice
without additional liability;
(vii) Contracts between or among any of the GBO
Subsidiaries and Seller or any Affiliate; and
(viii) all other Contracts which are material to
the operations of any of the GBO Subsidiaries.
All of the foregoing and the CCI Leases are herein referred to collectively as
the "Subsidiary Material Contracts."
(c) With respect to each of the GBO Material Contracts, except
as set forth in Schedule 2.8(c):
(i) such GBO Material Contracts are, to Seller's
knowledge with respect to other parties thereto, valid and binding upon
each party thereto and are in full force and effect; and
(ii) there is no material default or claim of
material default thereunder by the Seller, any of the GBO Subsidiaries
or any Affiliate (and, to the Seller's knowledge, no other party
thereto) and to Seller's knowledge, no event has occurred which, with
the passage of time or the giving of notice (or both), would constitute
a material default thereunder, or would permit material modification,
acceleration or termination thereof.
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(d) Seller has heretofore provided to Buyer a list of the top
75 ASO Contracts and top 75 Existing GBO Policies by annualized revenue or
premiums, and to the extent such information is reasonably available to Seller:
all notices received of intention to cancel, intention to put out for bid,
material changes in coverages and material price changes in the last two (2)
years (which for this purpose shall be defined as price changes of 10% or more).
Section 2.9 Litigation.
(a) Except as expressly set forth on Schedule 2.9(a) or
expressly reflected or reserved against and identified in the Recent Balance
Sheet, there is no action, suit, grievance, arbitration or proceeding pending
or, to the knowledge of Seller, threatened against or affecting the GBO Included
Business at law or in equity, before any federal, state, municipal or other
governmental court, department, commission, board, arbitrator, bureau, agency or
instrumentality. There is no default with respect to any judgment against Seller
with respect to the GBO Included Business, and all such judgments have been
satisfied or appropriately stayed.
(b) Except as expressly set forth on Schedule 2.9(b), there is
no action, suit, grievance, arbitration or proceeding pending or, to the
knowledge of Seller, threatened against or affecting any of the GBO Subsidiaries
at law or in equity before any federal, state, municipal or other governmental
court, department, commission, board, arbitrator, bureau, agency or
instrumentality. There is no default with respect to any judgment against any of
the GBO Subsidiaries and all such judgments have been satisfied or appropriately
stayed.
Section 2.10 Labor Relations; Employees.
(a) Except as set forth in the Ford Group Office Collective
Bargaining Contract 1995, (i) none of the GBO Division Employees is represented
by any labor organization, and, to the knowledge of Seller, no union claims to
represent the GBO Division Employees and there have been no material union
organizing activities with respect to GBO Division Employees within the past
three (3) years, (ii) Seller is not a party to any agreements (including,
without limitation collective bargaining agreements, work rules or practices)
with and, to the knowledge of Seller, there are no pending petitions for
recognition of, a labor union or employee association as the exclusive
bargaining agent for any or all of the GBO Division Employees, and no such
petitions have been pending with Seller within the past five (5) years, (iii)
except as set forth on Schedule 2.10(a), there is no unfair labor practice
charge or complaint, grievance or arbitration under any collective bargaining
agreement, discrimination or equal employment opportunity charge or complaint,
or other complaint or proceeding pending, or to the knowledge of Seller,
threatened by or on behalf of any present or former GBO Division Employee, (iv)
there is no labor strike, dispute, lock-out, slowdown or stoppage pending or, to
the knowledge of Seller, threatened against the GBO Division, nor has there been
any such activity within the past five (5) years, (v) there are no pending
collective bargaining negotiations relating to the GBO Division Employees and
(vi) no Governmental Entity has given written notice to Seller of its intention
to conduct or, to the knowledge of Seller, intends to conduct, any investigation
of employment conditions or practices of the GBO Division.
(b) Seller has not during the past two (2) years prior to the
date hereof effectuated (i) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the GBO Division or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the GBO Division; nor, except as set forth on Schedule 2.10(b), has
the GBO Division been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to independently trigger
application
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of any similar state or local law. None of the GBO Division Employees has
suffered an "employment loss" (as defined in the WARN Act) within the 90-day
period prior to the date hereof. To Seller's knowledge all GBO Division
Employees have been hired in compliance with the Immigration Reform and Control
Act of 1986.
(c) None of the GBO Subsidiary Employees is represented by any
labor organization and, to the knowledge of Seller, no union claims to represent
any of the GBO Subsidiary Employees and there have been no material union
organizing activities with respect to GBO Subsidiary Employees within the past
three (3) years, (ii) neither Seller nor any of the GBO Subsidiaries is a party
to any agreements (including, without limitation collective bargaining
agreements, work rules or practices) with and, to the knowledge of Seller or any
of the GBO Subsidiaries, there are no pending petitions for recognition of, a
labor union or employee association as the exclusive bargaining agent for any or
all of the GBO Subsidiary Employees, and no such petitions have been pending
with Seller or any of the GBO Subsidiaries within the past five (5) years, (iii)
except as set forth in Schedule 2.9(b), there is no unfair labor practice charge
or complaint, grievance or arbitration under any collective bargaining
agreement, discrimination or equal employment opportunity charge or complaint,
or other complaint or proceeding pending, or to the knowledge of Seller or any
of the GBO Subsidiaries, threatened by or on behalf of any present or former GBO
Subsidiary Employee, (iv) there is no labor strike, dispute, lock-out, slowdown
or stoppage pending or, to the knowledge of Seller or any of the GBO
Subsidiaries, threatened against any of the GBO Subsidiaries, nor has there been
any such activity within the past five (5) years, (v) there are no pending
collective bargaining negotiations relating to the GBO Subsidiary Employees and
(vi) no Governmental Entity has given written notice to Seller or any of the GBO
Subsidiaries of its intention to conduct or, to the knowledge of Seller or any
of the GBO Subsidiaries, intends to conduct, any investigation of employment
conditions or practices of any of the GBO Subsidiaries.
(d) None of the GBO Subsidiaries has during the past two (2)
years effectuated (i) a "plant closing" (as defined in the WARN Act) affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of such subsidiary or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of any of
the GBO Subsidiaries; nor has any of the GBO Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law. None of the GBO
Subsidiary Employees has suffered an "employment loss" (as defined in the WARN
Act) within the 90-day period prior to the date hereof. To Seller's knowledge,
all GBO Subsidiary Employees have been hired in compliance with the Immigration
Reform and Control Act of 1986.
Section 2.11 Pension Plans.
(a) As used herein, "Pension Plan" shall mean any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which (x) is a defined benefit plan which Seller or any
ERISA Affiliate maintained, contributed to or has been required to contribute to
at any time which is no more than six (6) years prior to the Closing Date, or
(y) is a plan intended to be treated as qualified, and which Seller or any ERISA
Affiliate maintained, contributed to or has been required to contribute to at
any time which is no more than three (3) years prior to the Closing Date, (B)
which did (during the applicable periods described in clauses (x) and (y)
hereof) or does cover any employee or former employee of Seller or any ERISA
Affiliate with respect to their relationship with such entities, and (C) which
is or was subject to Title IV or ERISA.
(b) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each Pension Plan as to its
qualification under the Tax Reform Act of 1986 which did or does cover GBO
Employees or former GBO Employees of Seller or any of the GBO Subsidiaries with
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respect to their relationship with Seller or such entities and which has been
treated as qualified under the provision of Code Section 401(a).
(c) No Pension Plan will be binding or impose any liability
upon Buyer or the GBO Subsidiaries or any of their respective Subsidiaries after
the Closing.
(d) To the knowledge of Seller, no fact or circumstance
exists, including, without limitation, any "reportable event" (within the
meaning of ERISA, but excluding events with respect to which the applicable
notice requirements have been waived), in connection with any Pension Plan which
did or does cover GBO Employees or former GBO Employees of Seller or any of the
GBO Subsidiaries which might constitute grounds for termination of such Pension
Plan by the Pension Benefit Guarantee Corporation (the "PBGC") or of the
appointment by a court of a trustee to administer such Pension Plan.
(e) As of January 1, 1996, all of the Pension Plans which did
or does cover GBO Employees or former GBO Employees of Seller or any of the GBO
Subsidiaries were fully funded on an ongoing basis using the actuarial
assumptions used in the most recent actuarial valuations of the Pension Plans.
(f) There are no pending or threatened claims (other than
routine claims for benefits) that have been asserted or instituted against any
employee benefit plan, the assets of any employee benefit plan or against the
sponsor, administrator or any fiduciary of any employee benefit plan with
respect to the operation of such employee benefit plan that could subject the
GBO Included Business or any GBO Subsidiary to any liability or expense, nor
does Seller or any GBO Subsidiary have any knowledge of any facts which could
form the basis for any such claim or of any pending investigations by any
governmental agency that could result in any such liability or expense.
(g) With respect to the employees and former employees of the
GBO Business or any GBO Subsidiary, their spouses and their dependents, Seller
and each GBO Subsidiary are in compliance with the notice and continuation
coverage requirements of Section 4980B(f) of the Code and regulations thereunder
("COBRA").
(h) No event has occurred in connection with which the GBO
Included Business or any GBO Subsidiary, directly or indirectly, could be
subject to any material liability (A) under any statute, regulation or
governmental order relating to any Pension Plan which covers GBO Employees or
employee benefit plan which covers GBO Employees or (B) pursuant to any
obligation of the GBO Included Business or any GBO Subsidiary to indemnify any
Person against liability incurred under any such statute, regulation or order as
they relate to the employee benefit plans.
Section 2.12 Intellectual Property. Schedule 2.12 sets forth a
list of the GBO Intellectual Property, which list is true and complete in all
material respects. Except as set forth on Schedule 2.12, Seller does not have
any knowledge of any claim that any of its material rights in the GBO
Intellectual Property infringe upon any intellectual property rights of any
Person, or that any other person has any claim therein.
Section 2.13 Taxes. Except as disclosed on Schedule 2.13: (a)
the GBO Subsidiaries are members of an affiliated group of which Seller is the
common parent, and Seller has filed a consolidated federal income tax return on
behalf of such affiliated group for the taxable year ending on December 31,
1995; (b) Seller and the GBO Subsidiaries have (i) duly and timely filed (or
there have been duly filed on their behalf) all Tax Returns required to be filed
by or on behalf of Seller and the GBO Subsidiaries on or before the date hereof,
and all such Tax Returns were true, accurate and complete in
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all material respects, and (ii) paid in full on a timely basis (or there has
been paid on their behalf) all Taxes shown to be due on such Tax Returns and (c)
the provision for Taxes on the 1995 Financial Statements and the Closing GAAP
Balance Sheet through the date thereof has been or will be determined in
accordance with GAAP (and consistent with the obligations of Seller under
Section 9.2 in the case of the Closing GAAP Equity Amount) and is adequate in
amount for the payment of all material Liabilities for Taxes for which the
Seller and the GBO Subsidiaries will be liable for the period up to and
including the Effective Time.
Section 2.14 Capitalization of the GBO Subsidiaries. The GBO
Subsidiaries Shares, together with the shares of TriState owned by CCI,
represent all of the issued and outstanding equity securities of the GBO
Subsidiaries. The GBO Subsidiaries Shares have been duly authorized by the GBO
Subsidiaries, respectively, have been validly issued and are fully paid,
non-assessable and free of preemptive or similar rights, are subject to no Liens
and are owned beneficially and of record by JHSI. There is no option, warrant,
call, registration right, convertible security, arrangement, agreement or
commitment of any character, whether oral or written, relating to any security
of, or phantom security interest in, any of the GBO Subsidiaries, and there are
no voting trusts or other agreements or understandings with respect to the
voting of the capital stock of the GBO Subsidiaries.
Section 2.15 Subsidiaries and Investments in Affiliates.
Except for CCI ownership of TriState shares, Schedule 2.15 hereto sets forth all
investments in Affiliates of any of the GBO Subsidiaries and any joint ventures
entered into by Seller related to the operations of the GBO Included Business.
Except as to the shares of TriState owned by CCI, there are no Contracts
pursuant to which the GBO Division or Seller on behalf of the GBO Division or
any of the GBO Subsidiaries is obligated, bound or otherwise required, under any
circumstance, to make contributions to the capital of any of its Affiliates, any
joint venture or any other Person.
Section 2.16 Employees.
(a) Seller has provided to Buyer a list, which is complete and
accurate in all material respects as of the date of this Agreement (and will be
updated as of the Closing Date), of the names, titles, salaries, original hire
dates, compensation (whether in the form of salaries, bonuses, commissions or
other supplemental compensation now or hereafter payable) of all GBO Division
Employees.
(b) Seller has provided to Buyer a list, which is complete and
accurate in all material respects as of the date of this Agreement (and will be
updated as of the Closing Date), of the names, titles, salaries, original hire
dates, compensation (whether in the form of salaries, bonuses, commissions or
other supplemental compensation now or hereafter payable) of all CCI Employees.
(c) Neither TriState nor HASG has any employees.
Section 2.17 Insurance Business.
(a) Except as set forth on Schedule 2.17(a), to the knowledge
of Seller, and except where the failure to comply, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect, the GBO Included Business is being conducted in compliance with all
applicable insurance laws and regulations.
(b) Except as set forth in Schedule 2.17(b), Seller has all
Insurance Licenses the use and exercise of which are necessary for the conduct
of the GBO Included Business, and such Insurance Licenses are in full force and
effect and are listed, described and categorized in Schedule 2.17(b). To
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the knowledge of Seller, the GBO Included Business has been, and is being,
conducted in material compliance with all such Insurance Licenses except such
non-compliance as would not reasonably be expected to have a Material Adverse
Effect. There is no proceeding or investigation pending, or, to the knowledge of
Seller threatened, that would reasonably be expected to lead to the revocation,
amendment, failure to renew, limitation, suspension or restriction of any
Insurance License.
(c) To the knowledge of Seller, all Existing GBO Policies are,
as of the date of this Agreement, to the extent required under applicable law,
on forms approved by the insurance regulatory authority of the jurisdiction
where issued, other than such deviations which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.
(d) Seller has heretofore provided to Buyer a complete and
accurate list, on a state-by-state basis, of all insurance policy forms and
rates in use by the GBO Included Business.
(e) All outstanding Existing GBO Policies were issued in
conformity in all material respects with Seller's underwriting standards and,
with respect to such Existing GBO Policies reinsured or retroceded in whole or
in part, conform in all material respects to the standards agreed to with
reinsurers in the related reinsurance, retrocession or other similar Contracts
other than such deviations which are immaterial individually or in the
aggregate.
(f) To the knowledge of Seller, all Persons through whom
Seller on behalf of the GBO Included Business has placed or sold insurance are
duly licensed (to the extent such licensing is required by the relevant
Governmental Entity) to sell or place insurance in the jurisdictions where they
do so.
(g) Seller has made available to Buyer all correspondence with
respect to the GBO Included Business between Seller, or any of the GBO
Subsidiaries, and any Governmental Entity, including, but not limited to, all
state insurance regulatory authorities regarding any material violation of laws,
rules or regulations within the last two (2) years.
Section 2.18 Compliance with Law; Permits and Licenses.
(a) To the knowledge of Seller, Seller is in compliance with
all applicable laws, statutes, ordinances and regulations, whether federal,
foreign, state or local affecting the GBO Included Business except where the
failure to comply would not have a Material Adverse Effect. To the knowledge of
Seller, neither Seller nor any GBO Subsidiary has received any written notice to
the effect that, or has otherwise been advised that, they are not in compliance
with any such statute, regulation, order, ordinance or other law affecting the
GBO Included Business where the failure to comply would have a Material Adverse
Effect on the GBO Subsidiaries or the GBO Included Business, and Seller has no
knowledge of any presently existing circumstances that are likely to result in
violations of any such regulations which would, individually or in the
aggregate, have a Material Adverse Effect on the GBO Included Business.
(b) To the knowledge of Seller, it holds all permits,
licenses, registrations, and certifications necessary for the ownership and
conduct of the GBO Included Business (including third party administrator and
utilization review authority) in all jurisdictions where the GBO Included
Business is conducted and such permits, licenses, registrations, and
certifications are in full force and effect except where the failure to hold any
permit or license or the failure of any permit or license to be in full force
and effect would not have a Material Adverse Effect on the GBO Subsidiaries or
the GBO Included Business. To the knowledge of Seller, the consummation of the
transactions contemplated by this
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Agreement will not result in any revocation, cancellation or suspension of any
such permit, license, registration or certification and, to the knowledge of
Seller, there are no pending or threatened suits, proceedings or investigations
with respect to revocation, cancellation, suspension or nonrenewal thereof, and,
to the knowledge of Seller, there has occurred no event which (whether with
notice or lapse of time or both) will result in such a revocation, cancellation,
suspension or nonrenewal thereof in any such case except where such a
revocation, cancellation, suspension or non-renewal would not have a Material
Adverse Effect on Seller or the GBO Included Business.
(c) To the knowledge of Seller, neither the GBO Division nor
the GBO Subsidiaries has violated or are in violation of any law, rule or
regulation punishable by criminal penalties that could result in the imposition
of a fine of $100,000 or more or imprisonment for a period of one (1) year or
more, or both.
Section 2.19 No Brokers. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.,
Incorporated and Monitor, Inc., the fees of which shall be paid by Seller,
neither Seller nor its Affiliates has retained any agent, broker, investment
bank, financial advisor or other person that is or will be entitled to any
broker's or finder's fees or any other commission or similar fee in connection
with any of the transactions contemplated by the Transaction Documents. Seller
agrees to indemnify and hold Buyer harmless from and against any and all loss,
claims, damage, cost, or expense arising out of or in connection with any claim
against Buyer or its Affiliates for any such broker's or finder's fee, other
commission or similar fee resulting from actions taken by Seller. Seller's
obligations under this Section 2.19 shall be from the first dollar and shall not
be subject to any threshold amount or limitation.
Section 2.20 Compliance with Legislation Regulating
Environmental Quality.
(a) To the knowledge of Seller with respect to the Facilities
(as defined below): (i) there has not been any release (as defined in 42 U.S.C.
Section9601(22)) or other discharge or disposal of chemicals, petroleum,
asbestos, PCBs, radon or other toxic, hazardous, or regulated wastes,
substances, or materials (collectively, "Hazardous Substances") at, in, on,
under or from the Facilities except in compliance with Environmental Laws; (ii)
no such Hazardous Substances are being stored or otherwise are present at, in,
on or under the Facilities except in compliance with Environmental Laws; (iii)
the Facilities are and have been maintained in compliance with all applicable
federal, state and local environmental protection, occupational, health and
safety or similar laws, regulations, ordinances, licenses and other restrictions
(collectively, "Environmental Laws"), including, without limitation, the Federal
Water Pollution Control Act (33 U.S.C. SectionSection1251 et seq.), Resource
Conservation and Recovery Act (42 U.S.C. SectionSection6901 et seq.), Safe
Drinking Water Act (21 U.S.C. Section349, 42 U.S.C. SectionSection201, 300f),
Toxic Substances Control Act (15 U.S.C. SectionSection2601 et seq.), Clean Air
Act (42 U.S.C. SectionSection7401 et seq.), and Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. SectionSection9601 et seq.);
and (iv) there are no suits, actions, proceedings, demands, notices, or other
claims, either pending or threatened or reasonably anticipated to be made, which
relate to the Facilities and to Hazardous Substances or Environmental Laws, or
which are against Seller with respect to the GBO Included Business or which are
against any of the GBO Subsidiaries and which relate to Hazardous Substances or
Environmental Laws.
(b) "Facilities" means the Leased Facilities and Seller's
Facilities.
(c) Notwithstanding anything to the contrary contained in this
Agreement, this Section 2.20 contains the sole and exclusive representations and
warranties of Seller with respect to any and all matters relating to
Environmental Laws or Hazardous Substances with respect to the Facilities and
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otherwise in connection with the respective businesses of Seller and the GBO
Subsidiaries (other than the insuring of risks).
Section 2.21 No Extraordinary Items or Accounting Changes.
Except as disclosed in Annex L hereto, to the knowledge of Seller, as of the
date of this Agreement there are no current or anticipated extraordinary items
(as defined by GAAP) applicable to the GBO Included Business in 1996.
Section 2.22 No Misrepresentations. To the knowledge of
Seller, no representation, warranty or statement made, or information provided
by Seller or its Affiliates in this Agreement or in any other document or
instrument furnished or to be furnished by or on behalf of the Seller or its
Affiliates pursuant hereto or as contemplated hereby, when considered in the
aggregate together with all such other representations, warranties, statements
and information (including information in the Financial Statements, the
Unaudited Financial Statements and the Statutory Financial Statements), contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading or necessary in order to provide the Buyer with
complete and accurate information as to the GBO Included Business.
Section 2.23 Adequacy and Completeness of GBO Included Assets.
Except as otherwise provided in or contemplated by this Agreement, the GBO
Included Assets, including, without limitation, the Intellectual Property, being
sold or assigned to Buyer or Unicare pursuant to this Agreement or provided to
Unicare pursuant to the Transaction Documents, together with the GBO Included
Assets held by the GBO Subsidiaries, are sufficient for Unicare and Buyer to
continue to operate the GBO Included Business in material respects in the manner
heretofore conducted by the Seller and its Affiliates. Except as otherwise
provided in or contemplated by this Agreement, there is no asset of Seller or
its Affiliates which is used primarily or exclusively in connection with the
operation of the GBO Included Business and which is not being acquired by or
provided to Unicare or Buyer pursuant to the Transaction Documents other than
assets disposed of in the ordinary course of business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
Section 3.1 Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Unicare is an insurance corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware. Buyer and Unicare
have the corporate power to consummate the transactions contemplated of them,
respectively, by the Transaction Documents, and to carry on the GBO Included
Business following the Closing, to the extent contemplated by the Transaction
Documents.
Section 3.2 Authority; No Conflict; Binding Effect. Buyer and
Unicare have the corporate power and authority to execute, deliver and perform
their respective obligations under the Transaction Documents. Such execution,
delivery and performance have been duly authorized by all necessary action on
the part of Buyer and Unicare as the case may be and do not and will not
contravene the organizational documents of Buyer or Unicare or conflict with,
result in a breach of, or entitle any party (with due notice or lapse of time or
both) to terminate, accelerate or cause a default with respect to, any of the
Articles of Incorporation or Bylaws of Buyer or Unicare or any material
agreement or instrument to which Buyer or Unicare is a party or by which Buyer
or Unicare or their respective assets
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are bound, except such termination, acceleration or default which individually
or in the aggregate would not have a Material Adverse Effect on either Buyer or
Unicare or the GBO Included Business. The execution, delivery and performance by
Buyer or Unicare, as appropriate, of the Transaction Documents will not result
in any violation by Buyer or Unicare, as appropriate, of any law, rule or
regulation applicable to Buyer or Unicare. Buyer or Unicare is not a party to,
nor subject to or bound by, any judgment, injunction or decree of any court or
other Governmental Entity which may restrict or interfere with the performance
of the Transaction Documents by Buyer or Unicare. This Agreement is (and when
executed and delivered by Buyer or Unicare, as appropriate, each of the
Transaction Documents will be) a valid and binding obligation of Buyer or
Unicare, as appropriate, enforceable against it in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
Section 3.3 Filings and Notices; Approvals and Consents. No
consent, waiver, approval, authorization or order of, or registration,
qualification or filing with, any court or other Governmental Entity is required
for the execution, delivery and performance by Buyer or Unicare of the
Transaction Documents and the consummation by Buyer of the transactions
contemplated thereby, other than (i) the filing by Unicare of applications with,
and the obtaining of approvals of Buyer's reinsurance of the Coinsured Policies
by, the Department of Insurance of the State of Delaware, the Department of
Insurance of the State of California and the other insurance regulators listed
on Schedule 2.7, and the delivery of notices and consents, including pre-and
post-acquisition competition filings, to certain other state insurance
departments, and (ii) compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvement Act of 1976, as amended, and expiration of the waiting period
thereunder. No consent or waiver of any party to any material contract to which
Buyer or Unicare is a party is required for the execution, delivery and
performance by Buyer or Unicare of the Transaction Documents or the conduct of
the GBO Included Business following the Closing.
Section 3.4 Brokers or Finders. Except for Lazard Freres & Co.
LLC, the fees of which shall be paid by Buyer, neither Buyer nor its Affiliates
has retained any agent, broker, investment banker, financial advisor or other
firm or person that is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by the Transaction Documents. Buyer agrees to indemnify and hold
Seller harmless from and against any and all loss, claims, damage, cost, or
expense arising out of or in connection with any claim against Seller or its
Affiliates for any such broker's or finder's fee, other commission or similar
fee resulting from actions taken by Buyer. Buyer's obligations under this
Section 3.4 shall be from the first dollar and shall not be subject to any
threshold amount or limitation.
Section 3.5 Investment Intent. Buyer is acquiring the GBO
Subsidiaries Shares for its own account for investment and not with a view to
the distribution thereof, and Buyer shall not offer to sell or otherwise dispose
of any of the GBO Subsidiaries Shares so acquired by it in violation of the
registration requirements of the Securities Act or applicable state securities
laws.
Section 3.6 Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of Buyer, threatened
against Buyer or Unicare or any of its properties or rights by or before any
court, arbitrator or administrative body or Governmental Entity which questions
the validity of the Transaction Documents or any action taken or to be taken
pursuant thereto which could reasonably be expected to impair or restrict
Buyer's or Unicare's ability to perform its obligations thereunder or to
consummate the transactions contemplated by the Transaction Documents.
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Section 3.7 Reports; Financial Statements.
(a) Since December 31, 1991, Buyer has filed (i) all forms,
reports, statements and other documents required to be filed with (A) the
Securities and Exchange Commission (the "SEC") including, without limitation,
(1) all Annual Reports on Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3)
all proxy statements relating to meetings of stockholders (whether annual or
special), (4) all required Current Reports on Form 8-K, (5) all other reports or
registration statements and (6) all amendments and supplements to all such
reports and registration statements (collectively, the "Buyer SEC Reports") and
(B) any applicable state securities authorities; and (ii) all forms, reports,
statements, notices and other documents required to be filed with any other
applicable federal or state regulatory authorities, including, without
limitation, state insurance and health regulatory authorities, except where the
failure to file any such forms, reports, statements, notices and other documents
under this clause (ii) would not be reasonably expected to have a material
adverse effect on the conduct of the business of Buyer (all such forms, reports,
statements, notices and other documents in clauses (i) and (ii) of this Section
3.7(a) being collectively referred to as the "Buyer Reports"). The Buyer
Reports, including all Buyer Reports filed after the date of this Agreement and
prior to the Closing, (i) were or will be prepared in all material respects in
accordance with the requirements of applicable laws (including, with respect to
the Buyer SEC Reports, the Securities Act and the Exchange Act, as the case may
be), and (ii) did not at the time they were filed, or will not at the time they
are filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were or
will be made, not misleading.
(b) Each of the consolidated financial statements (including
in each case any related notes thereto) contained in the Buyer SEC Reports,
including any Buyer SEC Reports filed after the date of this Agreement and prior
to the Closing, (i) have been or will be prepared in all material respects in
accordance with the published rules and regulations of the SEC and GAAP applied
on a consistent basis throughout the periods involved except (A) to the extent
required by change in GAAP and (B) with respect to Buyer SEC Reports filed prior
to the date of this Agreement, as may be indicated in the notes thereto; and
(ii) fairly present or will fairly present the consolidated financial position
of Buyer and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated,
except that (A) any unaudited interim financial statements (1) were or will be
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount and (2) are not or may not be necessarily
indicative of results for the full fiscal year and (B) any pro forma financial
information contained in such consolidated financial statements is not or may
not be necessarily indicative of the consolidated financial position of Buyer
and its Subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated.
(c) Buyer has delivered to Seller Unicare's Annual Statement
for the fiscal year ending December 31, 1995 and statutory financial statements
for the six months ending June 30, 1996, as filed with the Delaware Insurance
Department, and containing in part statements of assets, liabilities, surplus
and other funds; summary of operations; capital and surplus accounts; and cash
flow ("Unicare's SAP Financial Statements"). Unicare's SAP Financial Statements
(including, without limitation, the interrogatories therein) fairly present the
statutory financial condition and results of operations of Unicare at and as of
the dates and for the periods indicated therein and have been prepared in
accordance with SAP consistently applied throughout the periods indicated,
except as expressly set forth therein. Unicare's SAP Financial Statements were
prepared by Unicare and have not been audited or reviewed by independent
accountants.
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(d) Since December 31, 1994, Unicare has filed all forms,
reports, statements, notices and other documents required to be filed with any
applicable federal or state regulatory authorities, including, without
limitation, state insurance and health regulatory authorities, except where the
failure to file any such forms, reports, statements, notices and other documents
would not be reasonably expected to have a Material Adverse Effect on the
conduct of the business of Unicare (all such forms, reports, statements, notices
and other documents being collectively referred to as the "Unicare Reports").
The Unicare Reports and all Unicare Reports filed after the date of this
Agreement and prior to the Closing, (i) were or will be prepared in all material
respects in accordance with the requirements of applicable laws and (ii) did not
at the time they were filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were or will be made, not misleading.
(e) Except as and to the extent set forth on the balance sheet
of Buyer at December 31, 1995, including all notes thereto, contained in Buyer's
SEC Reports, Buyer has no liabilities or obligations of any nature (whether
known or unknown, matured or unmatured, and whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of Buyer or in the notes thereto, prepared in
accordance with GAAP except (i) as otherwise reported in the financial
statements contained in Buyer's SEC Reports, for the quarter ended June 30,
1996, or (ii) for Liabilities incurred in the ordinary course of business since
December 31, 1995, or (iii) Liabilities incurred outside the ordinary course of
business that would not have a Material Adverse Effect on the conduct of the
business of Buyer taken as a whole. Since December 31, 1995, no event has
occurred which has resulted in a Material Adverse Effect with respect to Buyer.
(f) Except as and to the extent set forth on the balance sheet
of Unicare at December 31, 1995, including all notes thereto, contained in
Unicare's SAP Financial Statements, Unicare has no liabilities or obligations of
any nature (whether known or unknown, matured or unmatured, and whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of Unicare or in the notes thereto,
prepared in accordance with SAP except (i) as otherwise reported in the
financial statements contained in Unicare's SAP Financial Statements for the
quarter ended June 30, 1996, or (ii) for Liabilities incurred in the ordinary
course of business since December 31, 1995, or (iii) Liabilities incurred
outside the ordinary course of business that would not have a Material Adverse
Effect on the conduct of the business of Buyer taken as a whole. Since December
31, 1995, no event has occurred which has resulted in a Material Adverse Effect
with respect to Unicare.
Section 3.8 Authority to Conduct GBO Included Business. Except
as set forth on Schedule 3.8, Buyer believes that Buyer and its Affiliates have
all Insurance Licenses the use and exercise of which are necessary for the
conduct of the GBO Included Business, and such Insurance Licenses are in full
force and effect and are listed, described and categorized in Schedule 3.8.
There is no proceeding or investigation pending, or, to the knowledge of Buyer
threatened, that would reasonably be expected to lead to the revocation,
amendment, failure to renew, limitation, suspension or restriction of any
Insurance License.
Section 3.9 No Misrepresentations. To the knowledge of Buyer,
no representation, warranty or statement made, or information provided by Buyer
or Unicare in this Agreement or in any other document or instrument furnished or
to be furnished by or on behalf of Buyer or Unicare pursuant hereto or as
contemplated hereby, when considered in the aggregate together with all other
such representations, warranties, statements or information (including
information in the Buyer SEC Reports
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and Unicare's SAP Financial Statements), contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLER AS TO ITSELF
Seller hereby represents and warrants to Buyer that:
Section 4.1 Organization. Seller is a mutual life insurance
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts and has all requisite power and authority
to own (directly, or indirectly through JHSI) the GBO Subsidiaries Shares and to
carry on, directly or indirectly, the GBO Included Business.
Section 4.2 Authority; No Conflict; Binding Effect. Seller has
the corporate power and authority to execute, deliver and perform its
obligations under the Transaction Documents. Such execution, delivery and
performance have been duly authorized by all necessary action on the part of
Seller and do not and will not contravene the organizational documents of Seller
or conflict with, result in a breach of, or entitle any party (with due notice
or lapse of time or both) to terminate, accelerate or call a default with
respect to, any agreement or instrument to which Seller is a party or by which
Seller or the GBO Included Assets are bound, except such termination,
acceleration or default which individually or in the aggregate would not have a
Material Adverse Effect on the GBO Included Business. The approval of the
policyholders of Seller is not required in connection with the execution,
delivery and performance by Seller of the Transaction Documents (other than the
approval of policyholders of Coinsured Policies under the Assumption Reinsurance
Agreement) or the consummation by Seller of the transactions contemplated
thereby. The execution, delivery and performance by Seller of the Transaction
Documents will not result in any violation by Seller of any law, rule or
regulation applicable to Seller. Seller is not a party to, nor subject to or
bound by, any judgment, injunction or decree of any court or other Governmental
Entity which may restrict or interfere with the performance of the Transaction
Documents by Seller. This Agreement is (and when executed and delivered by
Seller each of the Transaction Documents will be) a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally or the rights of creditors of insurance companies
generally and (ii) the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 4.3 Filings and Notices; Approvals and Consents.
Except as set forth on Schedule 2.7, no consent, waiver, approval, authorization
or order of, or registration, qualification or filing with, any court or other
Governmental Entity is required for the execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby. Except as otherwise disclosed or expressly provided for in
this Agreement, no consent or waiver of any party to any Contract to which
Seller is a party or by which it is bound is required for the execution,
delivery and performance by Seller of the Transaction Documents.
Section 4.4 Title to GBO Subsidiaries Shares. JHSI is the
record and beneficial owner of, and has good and valid title to, the GBO
Subsidiaries Shares free and clear of all Liens. Other than
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as contemplated by this Agreement, Seller is not a party to, or bound by, any
agreement, instrument, proxy, understanding or commitment restricting the
transfer of the GBO Subsidiaries Shares. No Person other than JHSI is the record
or beneficial owner of any of the GBO Subsidiaries Shares. Assuming Buyer has
the requisite power and authority to be the lawful owner of the GBO Subsidiaries
Shares and is a "bona fide purchaser" (as defined under applicable law), upon
delivery to Buyer at the Closing of certificates representing the GBO
Subsidiaries Shares, duly endorsed by JHSI for transfer to Buyer or with stock
powers attached, and upon Seller's receipt of the Purchase Price therefor, good
and valid title will pass to Buyer, free and clear of all Liens other than those
arising from acts of Buyer or its Affiliates.
Section 4.5 Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of Seller, threatened
in writing against Seller or any of its properties or rights by or before any
court, arbitrator or administrative body or Governmental Entity which questions
the validity of the Transaction Documents or any action taken or to be taken
pursuant hereto which could reasonably be expected to impair or restrict
Seller's ability to perform its obligations hereunder.
ARTICLE V
COVENANTS OF SELLER
Section 5.1 Operation of the Business. Except as specifically
provided in this Agreement, prior to Closing Seller will conduct the GBO
Included Business in the ordinary course and substantially in the same manner as
heretofore conducted and in accordance with applicable law and will use
reasonable efforts to cause the GBO Included Business to be diligently carried
on, in the ordinary course consistent with past practice. In furtherance
thereof, Seller shall use reasonable efforts to (i) preserve the GBO Included
Assets, including, without limitation, the ASO Contracts and the Existing GBO
Policies and the material permits and licenses necessary to conduct the GBO
Included Business in full force and effect, (ii) keep available the services of
the senior staff of the GBO Included Business, (iii) keep intact the workforce,
taken as a whole, of the GBO Included Business so that the conduct of the GBO
Included Business as presently conducted is not impeded, (iv) maintain present
suppliers and customers of the GBO Included Business, and (v) preserve the
goodwill of the GBO Included Business. Without limiting the foregoing, prior to
the Closing, Seller (unless otherwise consented to in writing by Buyer):
(a) will give prompt notice to Buyer of (i) any breach or
default (or notice thereof) of any of the GBO Material Contracts or (ii) any
other event that could reasonably be expected to have a Material Adverse Effect
on the GBO Included Business;
(b) will not amend, alter or modify any material provision of
any GBO Material Contract except as may be deemed necessary to maintain
compliance with applicable laws, rules or regulations;
(c) will not increase in any manner the rate of compensation
or bonus of any of the GBO Employees, other than (i) increases in the ordinary
course of business consistent with past practice and other increases in
compensation customary on a periodic basis or required by agreement or
understanding and (ii) bonus and incentive arrangements entered into by Seller
in contemplation of the sale of the GBO Included Business, except as provided in
Article X hereof, and for which Seller assumes sole responsibility and
Liability;
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(d) will not increase in any substantial amount the number of
GBO Employees, or, increase the terms of any insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with any such GBO
Employees, except as provided in Article X hereof;
(e) will not make any material change in accounting methods or
practices or in actuarial reserving practices with respect to the GBO Included
Business, including, without limitation, any change with respect to
establishment of reserves for unearned premiums, losses (including without
limitation the current practice of calculating the reserve for incurred but not
reported losses) and loss adjustment expenses, or any change in depreciation or
amortization policies or rates adopted by it, except as required by law or GAAP
(and Seller shall advise Buyer of any change so required);
(f) without prior consultation with Buyer, will not, and will
not permit any of the GBO Subsidiaries to, make or propose to make any material
change from the past underwriting, investment and other insurance practices of
the GBO Included Business (including practices for the processing of claims and
the issuance of explanations of benefits or non-benefits), or permit any of the
GBO Subsidiaries to buy any investment asset rated Below Investment Grade;
(g) will not permit any of the GBO Subsidiaries to pay any
dividend or make any distribution of cash or assets to Seller or any Affiliate
of Seller; provided, however, that Seller may cause each GBO Subsidiary to make
payments from time to time to Seller and Affiliates of Seller on account of
service fees, expense charges, insurance fees, overhead charges, taxes and other
fees and charges consistent with past practices; and
(h) will not enter into any Contract to do any of the
foregoing in clauses (b) through (g) inclusive.
Section 5.2 Access. Seller will permit Buyer and its
authorized representatives at all reasonable times, without unreasonable
disruption of the normal operations of the GBO Included Business, to have access
to and to examine all premises, properties, files, books, documents, records,
financial information (including working papers and data in the possession of
Seller's independent public accountants, internal audit reports, and "management
letters" from such accountants with respect to the systems of internal control
of the GBO Included Business) and other information relating to the GBO Included
Business (including the right to make extracts therefrom or copies thereof), and
will cooperate with Buyer in its investigation of the GBO Included Business.
Seller will permit representatives of Buyer, to the extent reasonably necessary
or desirable, to consult with GBO Employees concerning all financial and
operational matters relating to the GBO Included Business. Seller may take such
steps as are reasonably appropriate in the circumstances to protect the
confidentiality of information that does not relate to the GBO Included Business
that is contained in books and records that include information relating to the
GBO Included Business. To the extent permitted by law, Seller will transfer to
Buyer at or immediately following the Closing physical possession of all
original files, books, documents, records and financial and other information
related to the GBO Included Business. To the extent Seller is prohibited by law
from transferring any of such original files or other information, Seller shall
provide true and correct copies of such files and information to Buyer.
Section 5.3 Additional Financial Statements. As soon as
reasonably practicable after they become available, Seller shall furnish to
Buyer the unaudited GAAP financial statements of the GBO Included Business for
all interim quarterly and annual periods subsequent to the Recent Balance Sheet
Date but prior to the Closing Date, which shall be prepared in accordance with
GAAP consistently applied with the 1995 Financial Statements.
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Section 5.4 Third-Party Reinsurance Agreements. Except
pursuant to the Underwriting Manager Agreement between Seller and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ Reinsurance Corporation, effective April 1, 1991, Seller shall not,
without the prior written approval of Buyer, which approval will not be
unreasonably withheld, (i) enter into or commit to enter into any commutation,
loss portfolio transfer or other similar transaction, agreement or arrangement
or series of related transactions, agreements or arrangements involving any
assumed or ceded reinsurance included in the GBO Included Business or (ii) enter
into or commit to enter into any new reinsurance Contract, treaty or other
arrangement or series of such Contracts, treaties or other arrangements that
create any GBO Included Liability.
Section 5.5 Updating of Information. From the date hereof
until the Closing Date, Seller will promptly inform Buyer in writing of Seller's
knowledge of the occurrence or failure to occur of any action or event which
would violate its representations and warranties hereunder or render them
inaccurate as of the date hereof, or that would constitute a breach of any
covenant of Seller hereunder or a failure of any condition to the obligations of
Seller hereunder. Through the Closing date, Seller may supplement any Schedule
or Annex hereto; provided, however, that the delivery of any such supplement
shall not cure any breach of representation or warranty requiring disclosure of
such matter at the date hereof.
Section 5.6 Employment Loss. Without regard to the actions
contemplated by Section 10.1, Seller will not take any action in respect of the
GBO Employees within the 90-day period prior to the Closing Date which would
result in an "employment loss" (as defined in the WARN Act).
Section 5.7 GBO Employees. Prior to the second anniversary of
the Closing Date, without the consent of Buyer, Seller shall not knowingly
re-employ or attempt to re-employ any former GBO Employee who has been employed
by Buyer pursuant to Section 10.1; provided, however, that this Section 5.7
shall not prohibit Seller from employing any such individual whose employment
with Buyer or its Affiliates has been involuntarily terminated. Notwithstanding
any other provision of this Agreement to the contrary, the covenant set forth in
this Section 5.7 will survive the Closing for a period of two (2) years.
Section 5.8 Regulatory Filings, etc.
(a) Seller shall use all reasonable efforts to prepare and
file with the Department of Insurance of the Commonwealth of Massachusetts (the
"Massachusetts Department"), and the Departments of Insurance in New York,
Wisconsin, Connecticut and Colorado as promptly as practicable, such
documentation which Buyer, acting in good faith, believes is reasonably
necessary to obtain such Departments' review of Buyer's application to reinsure
the Coinsured Policies.
(b) Seller shall use all reasonable efforts to prepare and
file, as promptly as practicable, all applications, forms and other
documentation related to the approvals and consents contemplated by Section 2.7
which Buyer, acting in good faith, believes to be reasonably necessary in order
(i) to notify the applicable Governmental Entity, and (ii) if applicable, to
obtain a review by and a decision from the applicable Governmental Entity in
connection with the consummation of the transactions contemplated hereby.
Section 5.9 Covenant Not to Compete.
(a) So long as Buyer or its Affiliates is in the same line of
business in the United States, for a period of five (5) years from the date of
this Agreement, neither Seller nor any Affiliate of Seller shall, directly or
indirectly, offer in the United States such managed care or group or individual
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health (including, without limitation, group or individual pharmacy, dental or
vision products, or accident and sickness), long-term disability or short-term
disability insurance products, administrative services relating to managed care
or health or long-term disability or short-term disability benefits
(collectively, the "Subject Business").
(b) Subject to the provisions of Section 5.9(c) below, the
covenant not to compete contained in this Section 5.9 shall not apply to any
acquisition after the Closing Date by Seller or any Affiliate of Seller of (i) a
Person that is engaged in a business that is substantially similar to the
Subject Business, if such business is incidental to a substantially larger
business conducted by the Person which is not substantially similar to the
Subject Business, or (ii) a Person that is engaged in a business that is
substantially similar to the Subject Business, if such Person is acquired as
part of a substantially larger transaction where such Person is not the
principal Person acquired in such larger transaction. Seller agrees to negotiate
in good faith with Buyer on an exclusive basis for a period of ninety (90) days
following any acquisition described in the immediately preceding sentence to
determine whether Seller and Buyer can agree upon the sale to Buyer of the
business that is substantially similar to the Subject Business; provided,
however, that Seller shall not be obligated to sell such business to Buyer, and
Buyer shall not be obligated to purchase such business from Seller, unless
Seller and Buyer execute a definitive agreement relating thereto on terms and
conditions acceptable to each party in its sole discretion; and, provided,
further, that Seller and its Affiliates shall have no obligations with respect
to such business under this Section 5.9 if Seller and Buyer after such good
faith negotiations do not execute such a definitive agreement for the sale of
such business during such ninety (90) day period. In addition, the covenant not
to compete contained in this Section 5.9 shall not apply to any Person if such
Person becomes an Affiliate of the Seller by virtue of such Person or an
Affiliate of such Person having acquired all or part of the Seller and such
Person conducted a business that is substantially similar to the Subject
Business for at least twelve (12) months prior to such acquisition.
(c) Notwithstanding anything contained in Section 5.9(b) to
the contrary, in the event Seller or any Affiliate of Seller is relieved of its
obligation under Section 5.9(a) as described under Section 5.9(b), Seller shall
not utilize the "▇▇▇▇ ▇▇▇▇▇▇▇" name or any derivative thereof in brochures,
advertisement or other materials used in marketing business that is the same or
substantially similar to the Subject Business during the period that the
covenant not to compete contained in Section 5.9(a) would otherwise apply.
Section 5.10 Amounts Due to or Due From Affiliates. Except
with respect to amounts due under the following Contracts, which Contracts will
remain in effect following the Closing, (i) the service agreement between Seller
and CCI, effective July 1, 1990, as described in item (vii)(a)(3) of Schedule
2.8(b), for CCI to provide utilization review services to Seller; (ii) the
Contracts described in item (vii)(b) of Schedule 2.8(b), (iii) the Maritime Life
Insurance Company 100% Quota Share Reinsurance Agreement described on Exhibit C
to Schedule 2.8(a), (iv) the contracts relating to life and health insurance and
administrative services described in Section 8.10, and (v) the Transaction
Documents, all other amounts due to or due from Affiliates of the GBO
Subsidiaries or the GBO Included Business shall be settled at face value at or
prior to Closing.
Section 5.11 Termination or Modification of Existing GBO
Policies. After the Closing, Seller shall, as requested by Buyer, terminate,
amend or otherwise modify any Existing GBO Policy, to the extent permitted by
the terms of such Existing GBO Policy, the Coinsurance Agreement and the
Administration Agreement and by applicable law, or otherwise modify the terms or
pricing, subject to the terms and conditions of the Administration Agreement,
upon renewals effective at or prior to the time such Existing GBO Policy is
transferred onto Unicare forms.
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Section 5.12 Healthcare Providers and Networks.
(a) As promptly as practical after execution of this
Agreement, Seller will provide to Buyer a computer generated schedule showing on
a state by state basis, the name (listed alphabetically), address, zip code, tax
identity number, specialty and applicable payment code for each health care
provider participating in a network established, managed or utilized by Seller
or an Affiliate in the conduct of the GBO Included Business, and access to
Seller's files and records with respect to each such provider.
(b) Buyer (or Unicare) and Seller shall, if requested by Buyer
(or Unicare, as the case may be), immediately upon execution of this Agreement
jointly engage one or more vendors who are not Affiliates of Buyer or Seller to
review all of Seller's (and/or its Affiliates') existing agreements with health
care providers participating in networks established or managed by Seller in
providing services to subscribers of the GBO Included Business, whether or not
listed in Seller's provider directories (the "GBO Providers") and where
necessary use reasonable commercial efforts to obtain valid and binding
amendments to such existing agreements or new agreements so that Unicare will be
assured that (i) a valid and binding agreement exists with each GBO Provider and
(ii) the subscribers of the GBO Included Business, Unicare and Seller are
entitled to the negotiated discounted fee structure. In the case of provider
networks not established or managed by Seller, the outside vendor shall also
review Seller's agreements with such provider networks and shall engage in
appropriate discussions with such provider networks to facilitate assignment of
the agreements to Unicare and appropriate amendments thereto to assure that
Unicare has the benefit of those agreements. The period of engagement for each
such vendor shall not exceed one year from the date of this Agreement. Buyer (or
Unicare) and Seller shall each pay one-half of the costs and expenses of each
such vendor. The obtaining of such valid and binding amendments and agreements
shall not be a condition to Closing under this Agreement.
(c) With respect to claims incurred by subscribers of the GBO
Included Business prior to the Effective Time and during the 90-day period
immediately following the Closing Date, if the GBO Provider with respect to such
claims alleges that such GBO Provider does not have at the time a valid and
binding agreement with Seller or Unicare, as the case may be, and as a result
such GBO Provider will not provide a discount (after Unicare makes commercially
reasonable efforts to obtain such a discount) in an amount equal to the discount
expected to be available to Seller at the Effective Time under contracts or
arrangements with such GBO Provider, then Seller shall promptly pay to Unicare
the amount by which the discount available to Seller exceeds the discount, if
any, available to such subscriber.
(d) Seller shall on demand indemnify, defend and hold harmless
Buyer and its Affiliates, and their respective directors, officers and employees
from and against any and all demands, actions, proceedings, costs and
Liabilities (including, without limitation, the costs and expenses of defending
any and all actions, suits, proceedings, demands, assessments, judgments,
settlements and compromises and attorneys' fees in connection therewith), paid
or incurred, resulting from, arising out of or relating to Seller's failure to
have appropriately credentialed the GBO Providers; provided, however, that
Seller's obligation to indemnify Buyer shall be limited to claims arising prior
to Closing and the one hundred eighty (180) day period following Closing. The
Liability of Seller pursuant to this Section 5.12(d) shall not be subject to the
threshold articulated in Article XIV, but shall be measured from the first
dollar.
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ARTICLE VI
COVENANTS OF BUYER
Section 6.1 Updating of Information. From the date hereof
until the Closing Date, Buyer will (i) keep Seller informed of the progress of
all regulatory and other filings required to be made by Buyer pursuant to
Section 6.4 and 7.3 and (ii) promptly inform Seller in writing of Buyer's
knowledge of the occurrence or failure to occur of any action or event that
would violate its representations or warranties hereunder or render them
inaccurate as of the date hereof, or would constitute a breach of any covenant
of Buyer hereunder or a failure of any condition to the obligations of Buyer
hereunder.
Section 6.2 Post-Closing Access by Seller. Buyer shall, and
shall cause its Affiliates to, permit Seller and its authorized representatives
at all reasonable times, without unreasonable disruption of the normal
operations of the GBO Included Business, to have access to and to examine all
premises, properties, files, books, documents, records, financial and tax
information (including working papers and data in the possession of Buyer's
independent financial accountants, internal audit reports and "management
letters" from such accountants with respect to the systems of internal control
of the GBO Included Business), computerized information and other information
(including the right to make extracts therefrom or copies thereof at Seller's
sole cost and expense) in connection with (i) any audit or other investigation
by any Taxing Authority or any required reports or submissions to any
Governmental Entity with respect to the GBO Included Business, (ii) Third Party
Claims (as defined in Section 14.2) and investigations and insurance relating
thereto and (iii) litigation relating to the GBO Included Business and involving
the Seller and (iv) transitional matters and activities of any of the GBO
Subsidiaries pursuant to Article VIII; provided, however, compliance by Buyer
with provisions of this Section 6.2 shall not constitute a waiver of Buyer's
attorney-client privilege. Buyer shall, and shall cause its Affiliates to,
preserve and maintain such files, books, documents, records, financial and tax
information, computerized information and other information for the greater of
(A) the period during which Buyer may make a claim against Seller for
Indemnifiable Losses (as defined in Section 14.1) hereunder or (B) five (5)
years and, thereafter, shall dispose of the same only after it shall have given
Seller prior notice of such disposition and the opportunity to remove and retain
such files, books, documents, records, financial and tax information,
computerized information and other information. Buyer shall, and shall cause its
Affiliates to, permit Seller or its representatives, to the extent reasonably
necessary or desirable, to consult with GBO Employees concerning all financial
and operational matters in connection with proceedings, claims and requirements
described in clauses (i), (ii), (iii) and (iv) above.
Section 6.3 Regulatory Filings, etc.
(a) Buyer shall use all reasonable efforts to cause Unicare to
prepare and file with the Department of Insurance of the State of Delaware (the
"Delaware Department"), as promptly as practicable, such documentation which
Buyer, acting in good faith, believes is reasonably necessary to obtain Delaware
Department's review of Unicare's application to reinsure the Coinsured Policies.
(b) Buyer shall use all reasonable efforts to prepare and file
such documentation which Buyer, acting in good faith, believes is reasonably
necessary to obtain approval of the acquisition of CCI under statutes providing
for regulation of utilization review agents.
(c) Buyer shall use all reasonable efforts to prepare and
file, or to cause its Affiliates to prepare and file, as appropriate, as
promptly as practicable, all applications, forms and other documentation related
to the approvals and consents contemplated by Section 3.3 which Seller, acting
in good faith, believes to be reasonably necessary in order (i) to notify the
applicable Governmental Entity,
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and (ii) if applicable, to obtain a review by and a decision from the applicable
Governmental Entity in connection with the consummation of the transactions
contemplated hereby.
ARTICLE VII
JOINT COVENANTS
Section 7.1 Filings and Notices; Approvals and Consents.
(a) Seller and Buyer will, as promptly as practicable after
the execution and delivery of this Agreement (or at or prior to the date
otherwise agreed herein), cooperate to make and give all governmental filings
and governmental and third party notices (and to provide requested information
supplemental thereto) required to be made or given by Seller or Buyer, including
those described in Sections 2.7 and 3.3 and on Schedule 11.5 in order to
consummate the transactions contemplated by this Agreement. Any such filing, and
any supplemental information requested by the relevant Governmental Entity in
connection therewith, shall be in substantial compliance with the requirements
of such Governmental Entity. Seller and Buyer will keep each other apprised of
the status of the governmental approval process and of any communications with,
and any inquiries or requests for additional information from, the relevant
Governmental Entity, and will comply promptly with any such inquiry or request.
Seller and Buyer will use their respective reasonable best efforts to promptly
obtain all such governmental approvals and third party consents.
(b) Seller and Buyer will furnish to each other such necessary
information and reasonable assistance as either party may request in connection
with its preparation of any filing or submission to be made in accordance with
this Section 7.1.
Section 7.2 Policyholder Confidentiality. Buyer and Seller
agree to maintain the confidentiality of all records and other information
relating to customers and plan participants of the GBO Included Business in
accordance with applicable laws.
Section 7.3 Form and Rate Filings. Buyer, with Seller's
cooperation, will, as soon as possible after the execution of this Agreement,
proceed or cause its Affiliates to proceed with the necessary regulatory filings
and applications so that Buyer may begin conducting the GBO Included Business
directly through Buyer and its Affiliates, as appropriate. Such filings and
applications shall include, but are not limited to, making form and rate filings
in all jurisdictions where such filings are required for the conduct of the GBO
Included Business. Buyer, with Seller's cooperation, will use reasonable efforts
to obtain approval of such forms and rates as promptly as possible. For purposes
of this Section 7.3, "reasonable efforts" shall include, but not be limited to,
the use of reference filings, where appropriate, with respect to policy forms
and rates.
ARTICLE VIII
TRANSITIONAL MATTERS
Section 8.1 GBO Included Business Real Property. At the
Closing, Seller and Unicare shall enter into the Lease Agreements, which provide
the terms and conditions concerning Unicare's occupancy of the premises in the
Seller's Facilities where the GBO Included Business is conducted.
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Section 8.2 Certain Support Services. Following the Closing,
Seller will also make available to Unicare certain data processing and other
support services pursuant to the terms of the Service Agreement to be entered
into by Seller and Unicare at the Closing.
Section 8.3 Reinsurance.
(a) At the Effective Time, Unicare shall reinsure Existing GBO
Policies on a coinsurance basis pursuant to the terms and conditions of the
Coinsurance Agreement, which Seller and Unicare will enter into at the Closing.
(b) After the Effective Time, Seller agrees to issue
Transition GBO Policies as requested by Unicare, which shall automatically and
immediately be 100% coinsured by Unicare pursuant to the terms and conditions,
and subject to the limitations, set forth in the Coinsurance Agreement.
(c) From and after the Effective Time, Unicare shall provide
to Seller all necessary administrative and other services with respect to the
Coinsured Policies in accordance with the terms and conditions of the
Administration Agreement which Seller and Unicare will enter into at the
Closing.
(d) After the Effective Time, Seller and Unicare will
cooperate in obtaining all required insurance regulatory approvals, transmitting
notices to policyholders and obtaining any required policyholder consents, for
the assumption reinsurance of Coinsured Policies on the terms and conditions,
and subject to the limitations, set forth in the Assumption Reinsurance
Agreement which Seller and Unicare will enter into at the Closing. Any such
assumption reinsurance will be effected in a manner creating a novation and
complete release of liability (subject to the terms of the Assumption
Reinsurance Agreement) of Seller under the Coinsured Policies being assumption
reinsured, with Unicare being substituted as the insurer thereunder.
Section 8.4 Transitional Marketing Arrangements. In order to
assist in effectively implementing the reinsurance arrangements described in
Section 8.3(b), Seller will permit Unicare and its Affiliates to market the
Coinsured Policies during the Transition Period using Seller's Insurance Policy
forms and other marketing materials used in the conduct of the GBO Included
Business and to utilize the Names as permitted in the License Agreement and the
Administration Agreement to be entered into by Seller and Unicare at the
Closing.
Section 8.5 Use of Name Post-Closing. The rights of Unicare
and its Affiliates to use the Names following the Closing Date will be governed
by the terms of the License Agreement.
Section 8.6 Change of HASG Name. The name of HASG shall be
changed to remove any reference to "▇▇▇▇▇▇▇" before the Closing.
Section 8.7 Lease of Furniture, Fixtures and Equipment.
(a) Subject to the provisions of this Section 8.7, Seller
hereby grants to Buyer or its assignee (and by its acceptance of any such
assignment, such assignee shall be deemed to have agreed to the terms and
conditions of this Section 8.7), a license to use all furniture, fixtures and
equipment (the "Leased Equipment") held under the Leases (as hereinafter
defined) for use by the GBO Employees in operating the GBO Included Business and
identified pursuant to the Inventory to be conducted by Buyer pursuant to
subsection (d) below for the period commencing on the Closing Date and ending
eight (8) years thereafter (the "Use Period"). Such license shall be (i)
revocable to the extent, and only to the extent, set forth in this Section 8.7,
and (ii) without additional cost to Buyer or its assignee. All costs
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and expenses of Seller under the Leases shall be borne solely by Seller and none
of such costs and expenses shall be borne by Buyer or its assignee.
(b) For purposes of this Section 8.7, (i) the term "Lease"
means the 1987 Lease or the 1988 Lease, as the case may be; (ii) the term
"Leases" means the 1987 Lease and the 1988 Lease; (iii) the term "1987 Lease"
means that certain Lease Agreement dated as of December 23, 1987 between JHM
Funding, Inc. as lessor (the "Lessor") and Seller as lessee, as amended by
Amendment No. 1 dated as of November 17, 1988 and Amendment No. 2 dated as of
November 30, 1994, and as further amended, supplemented or modified from time to
time; and (iv) the term "1988 Lease" means that certain Lease Agreement dated as
of November 17, 1988 between the Lessor as lessor and Seller as lessee, as
amended by Amendment No. 1 dated as of November 30, 1994, and as further
amended, supplemented or modified from time to time. Buyer acknowledges that it
has been provided with a copy of the Leases as in effect on the date hereof,
that it has reviewed same and is familiar with the terms thereof, and that some
of the Leased Equipment is leased to Seller under the 1987 Lease and some of the
Leased Equipment is leased to Seller under the 1988 Lease. Subject to the terms
of subsection (f) below, Seller agrees to deliver to Buyer a copy of any
amendment, supplement or modification of each Lease reasonably promptly after
the same shall have become effective.
(c) Buyer agrees that, without Seller's prior written consent,
which shall not be unreasonably withheld or delayed (it being agreed that the
refusal of the Lessor to grant any consent required under the Leases shall
constitute a reasonable basis to withhold consent), it shall (i) not have any
right to assign, sublease or relinquish possession of the Leased Equipment to
any party (other than to Unicare); (ii) not change the location of the Leased
Equipment; and (iii) not do, or omit to do, any act or omission which would
constitute an Event of Default under either or both of the Leases.
(d) As soon as reasonably practical after the Closing, Buyer
shall cause a physical inventory (the "Inventory") to be taken of the Leased
Equipment solely for the purpose of locating and identifying the Leased
Equipment and for no other purpose, and upon completion thereof shall promptly
provide a certified copy of the Inventory to Seller. Such Inventory shall be
completed at the expense of Buyer. Seller shall cooperate in all reasonable
respects with Buyer in connection with the taking of the Inventory.
(e) On the last day of the Use Period or such earlier date as
may be specified by Buyer from time to time as to all or any portion of the
Leased Equipment, Buyer or its assignee shall make available to Seller the
Leased Equipment or portion of the Leased Equipment, as the case may be, at the
same location as the Leased Equipment, or particular piece of Leased Equipment,
shall have been delivered to Buyer on the Closing Date or such other location
where such Leased Equipment shall be located at such time (after having received
consent to the move of the Leased Equipment in accordance with subsection (c)
above) in the same condition as received, reasonable wear and tear excepted.
Upon termination of use by Buyer or its assignee, Buyer or its assignee shall
give at least 30 days' advance notice to Seller of such termination, and it
shall be Seller's responsibility to remove or recover the Leased Equipment and
bear all costs associated with its return to the Lessor.
(f) Buyer hereby acknowledges and agrees that its rights under
this Section 8.7 to use the Leased Equipment are expressly subject and
subordinate to the provisions of the Leases and are subject to termination upon
termination of either or both of the Leases for any reason permitted thereunder,
and neither the provisions of this Section 8.7 nor the use of the Leased
Equipment by Buyer hereunder shall in any way be construed as a modification or
limitation of any right or power the Lessor may have under the Leases.
Notwithstanding the foregoing, however, (i) Buyer shall have a right of quiet
enjoyment with respect to the Leased Equipment during the Use Period on the
terms and conditions
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provided in the Leases without any interference from Seller or the Lessor or
anyone claiming through or under Seller or the Lessor, (ii) Seller shall not
propose or consent to any amendment, modification or termination of any term of
the Leases during the Use Period that would materially adversely impact the
right of Buyer or its assignees to use the Leased Equipment during the Use
Period, and (iii) Seller shall comply in all material respects with its
obligations under the Leases.
(g) All Leased Equipment shall be delivered in "as-is"
condition, and is located in the premises covered by the Lease Agreements and
the Lease Assignments, without material diminution from the date hereof.
(h) The provisions of this Section 8.7 shall survive the
Closing indefinitely.
Section 8.8 Transfer of MIS Software. Seller shall transfer to
Unicare all computer hardware used exclusively in the GBO Included Business, and
all the software applications, programs and licenses used exclusively in the GBO
Included Business (including without limitation those listed in Attachment 1 to
Appendix C to the Service Agreement), which hardware and software are owned by
Seller, as a part of the GBO Division Assets. Seller shall provide under the
Service Agreement on the terms set forth therein such computer hardware as is
used by Seller in both its GBO Included Business and its other businesses and
software applications, programs and licenses included in the Shared Contracts.
Seller shall also transfer, license or otherwise provide to Buyer all other
software applications, programs and licenses from third parties and used by
Seller in the conduct of the GBO Business, (including without limitation those
listed in Attachment 1 to Appendix C to the Service Agreement) (together with
the owned software described in the first sentence of this Section 8.8, the "MIS
Software"), as shall be reasonably necessary, together with the transferred
owned hardware and software (but excluding Shared Contracts and Seller's
mainframe computer), for Buyer to operate the management information, accounting
and billing systems currently operated by the GBO Included Business at a level
of functionality comparable to that enjoyed by the GBO Included Business at the
time of Closing, but not an increased level of functionality associated with an
increased number of employees or volume of the GBO Included Business and not at
locations not occupied by the GBO Included Business at the time of Closing. In
making and arranging for such transfer, Seller agrees that it will be
responsible for (i) any one-time charge imposed on Buyer or Seller by the vendor
of any such Shared Contracts or MIS Software in connection with the transfer to
Buyer thereof or the provision of services by Seller under the Service Agreement
and (ii) any increase in the periodic payments of license costs and other
charges associated with any such Shared Contracts or MIS Software imposed on
Buyer by the vendor thereof during the two-year period following the Closing (or
following the transfer in the case of MIS Software transferred to Buyer) above
the license cost and other charges imposed by such vendor on Seller prior to the
Closing, in each case, arising solely as a result of the consummation of the
transactions contemplated by this Agreement and not attributable to an increase
in the number of employees of the GBO Included Business or a change in the
volume of business or a second or subsequent change in the location of the GBO
Business after the relocation from the Berkeley Headquarters Building.
Section 8.9 Commissions and Expenses Due. All commissions and
expenses due with respect to third party reinsurers which are included in the
Closing GAAP Balance Sheet and are not collected within three hundred sixty-five
(365) days of the day on which such commissions and expenses shall have become
due under their original terms shall be transferred back to Seller, and Seller
concurrently with such transfer shall pay Buyer therefor the amount at which
such items shall have been included in the Closing GAAP Balance Sheet. Buyer
shall attempt in good faith, using commercially reasonable efforts, (i) during
the three hundred sixty-five (365) day period following the Closing to collect
or settle such commissions and expenses due, and (ii) during the period
following such three hundred sixty-five (365) days to collect or settle from the
applicable third party reinsurer any amounts represented by amounts transferred
to Seller pursuant to the preceding sentence. Any amounts collected or settled
by Buyer under clause (ii) above shall be remitted promptly to Seller.
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Section 8.10 Seller Life and Health Account. In order to
ensure life and health coverage for Seller's employees for the next calendar
year, both Seller and Buyer agree that for a period beginning as of the Closing
and ending on the first anniversary of the Effective Time, Seller shall contract
with Buyer or an Affiliate of Buyer to serve as the provider of life insurance
and health insurance and/or administrative services relating thereto for those
of the Seller's employee benefit plans that are currently insured or serviced by
the Seller (excluding long term care services), which contract shall contain the
performance standards set forth in Schedule 8.10. Seller represents and
covenants to Buyer that the performance standards set forth on such Schedule
8.10 represent the performance standards presently being complied with or
exceeded by Seller in connection with its servicing of Seller's employee benefit
plans and will be complied with or exceeded by Seller as of the Effective Time.
Seller and Buyer shall work together in good faith prior to the Closing to set
rates for such insurance and benefits that will permit Buyer to maintain a level
of profitability on a per member basis and permit Seller to establish a level of
expenses payable to the Buyer on a per member basis that are substantially
equivalent to the level of profitability and expenses currently earned and
sustained by Seller with respect thereto. At the end of this period, both Seller
and Buyer agree to negotiate, in good faith, regarding additional periods of
coverage for Seller's employees.
ARTICLE IX
CERTAIN TAX MATTERS
Seller and Buyer hereby covenant and agree with respect to
certain tax matters as follows:
Section 9.1 Section 338(h)(10) Election.
(a) With respect to the acquisition of the GBO Subsidiaries
Shares hereunder, (i) Buyer shall make a timely election under Section 338(g) of
the Code and any corresponding elections under state and local tax laws with
respect to the acquisition hereunder of such GBO Subsidiaries Shares, and Seller
and Buyer shall jointly make a timely election under Section 338(h)(10) of the
Code and any corresponding elections under state and local tax laws
(collectively, the "Election") with respect to such acquisition, (ii) Seller and
Buyer shall, as promptly as practicable following the Closing Date, cooperate
with each other to take all actions necessary and appropriate (including filing
such forms, returns, elections, schedules and other documents as may be
required) to effect and preserve a timely Election in accordance with Section
338 of the Code or any successor provisions (and all corresponding state and
local tax laws) and (iii) Seller and Buyer shall report the sale and acquisition
of the GBO Subsidiaries Shares pursuant to this Agreement consistent with the
Election.
(b) In connection with the Election, within sixty (60) days of
Closing, Seller shall provide to Buyer a schedule which sets forth the tentative
allocation (the "Tentative Allocations Schedule") of the Purchase Price (i)
between the Assets other than the GBO Subsidiaries Shares and the GBO
Subsidiaries Shares and (ii) a further allocation of the amount assigned to the
GBO Subsidiaries Shares among the assets held by the GBO Subsidiaries in a
manner that is consistent with the preliminary estimated Modified Aggregate
Deemed Sales Price and the Adjusted Gross-Up Basis resulting from the Election.
Buyer and Seller acknowledge that the allocations contained in the Tentative
Allocations Schedule will be revised to reflect the actual Purchase Price, which
allocations shall take into account the post-closing adjustment to the Purchase
Price pursuant to Section 1.5 hereof. As soon as practicable, but no later than
30 days after the Closing GAAP Balance Sheet becomes final pursuant to Section
1.5, Seller shall provide to Buyer a final revised allocation (the "Final
Allocations Schedule") of the amounts allocated in the Tentative Allocation
Schedule. Such allocations shall be made in accordance with
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Section 338(b) and Section 338(h)(10) of the Code and any applicable Treasury
Regulations, provided, however, that Buyer will be entitled to add its
transaction costs to the Adjusted Grossed- Up Basis of the GBO Subsidiaries
Shares for purposes of allocating such Adjusted Grossed-Up Basis among the GBO
Included Assets held by the GBO Subsidiaries, and Seller will be entitled to
take into account its transaction costs when calculating its gain or loss from
the sale of the Assets. Buyer shall have the right to review the Final
Allocation Schedule, and Seller and Buyer shall consult and resolve in good
faith any issues arising as a result of Buyer's review of such schedule. If the
parties accept the Final Allocation Schedule, it shall be final and binding on
the parties. However, if the parties are unable to resolve any dispute within
fifteen (15) Business Days of the receipt by Buyer or Seller of the Final
Allocation Schedule, the parties shall jointly request Coopers & ▇▇▇▇▇▇▇, or
other independent accountants agreed by the parties, to resolve any issue in
dispute as promptly as possible, with one-half of the costs of such resolution
to be borne by each of Seller and Buyer. The determination made by such
independent accountants shall be final and binding upon the parties hereto. If
such independent accountants are unable to make a determination with respect to
any dispute prior to the due date for the filing of any Tax Return for which
such determination is necessary, Buyer and Seller shall file such Tax Return
without such determination having been made, subject, however, to the parties'
obligation thereafter to file amended Tax Returns reflecting the final decision
of the independent accountants.
Section 9.2 Returns; Indemnification; Liability for Taxes.
(a) Seller shall prepare and file (or cause to be prepared and
filed) on a timely basis all Tax Returns with respect to the GBO Subsidiaries
for all taxable periods ending on or before the Closing Date ("Seller Tax
Returns") and shall pay, and shall indemnify and hold Buyer harmless against and
from (i) all Taxes of the GBO Subsidiaries for all taxable years or periods
which end on or before the Closing Date; (ii) all Taxes for all taxable years or
periods of all members (other than the GBO Subsidiaries) of any affiliated group
of which the GBO Subsidiaries is or has been a member prior to the Closing Date;
and (iii) with respect to any taxable period commencing before the Closing Date
and ending after the Closing Date (a "Straddle Period") all Taxes of the GBO
Subsidiaries attributable to the portion of the Straddle Period prior to and
including the Closing Date (the "Pre-closing Period"). For purposes of this
Agreement, the portion of any Tax that is attributable to the Pre-closing Period
shall be (i) in the case of a Tax that is not based on net income, gross income,
premiums or gross receipts, the total amount of such Tax for the period in
question multiplied by a fraction, the numerator of which is the number of days
in the Pre-closing Period, and the denominator of which is the total number of
days in such Straddle Period, and (ii) in the case of a Tax that is based on any
of net income, gross income, premiums or gross receipts, the Tax that would be
due with respect to the Pre-closing Period if such Pre-closing Period were a
separate taxable period, except that exemptions, allowances, deductions or
credits that are calculated on an annual basis (such as the deduction for
depreciation or capital allowances) shall be apportioned on a per diem basis.
For purposes hereof, all Taxes which are the subject of this Article IX arising
out of the transaction contemplated by Article I hereof, including Taxes
resulting from the Election, shall be deemed to be Taxes attributable to the
Pre-closing Period.
(b) Buyer shall prepare and file (or cause to be prepared and
filed) on a timely basis all Tax Returns of the GBO Subsidiaries relating to
periods ending after the Closing Date and shall pay, and, except as provided in
subsection (c) hereof, shall indemnify and hold Seller harmless against and from
(i) all Taxes of the GBO Subsidiaries for any taxable year or period commencing
after the Closing Date; and (ii) all Taxes of the GBO Subsidiaries for any
Straddle Period other than Taxes attributable to the Pre-closing Period.
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(c) Notwithstanding any other provision of this Article IX,
Seller shall indemnify and hold Buyer and the GBO Subsidiaries harmless against
any guarantee fund assessment to the extent that it is based upon premiums
written prior to Closing.
(d) In the event that any refunds are paid or made available
by any Taxing Authority (or other Governmental Entity) that relate to any
guarantee fund assessment that was indemnified by Seller or any of its
Affiliates pursuant to Section 9.2(c) hereof, Buyer shall cause such refunds to
be repaid to Seller, in accordance with the provisions of Section 9.3(d) hereof.
(e) In the event that any guarantee fund assessment that was
indemnified by Seller or any of its Affiliates pursuant to Section 9.2(c) hereof
gives rise to a credit against any liability for Tax of Buyer or any Affiliate
of Buyer, Buyer shall cause the amount of such credit to be paid to Seller as
such credit becomes available to Buyer or any of its Affiliates to reduce any
such liability for Tax, in accordance with the provisions of Section 9.3(d)
hereof.
Section 9.3 Cooperation; Refunds and Credits.
(a) All refunds or credits of Taxes for or attributable to
taxable years or periods of the GBO Subsidiaries ending on or before the Closing
Date (or the Pre-closing Period, in the case of a Straddle Period) shall be for
the account of Seller; all other refunds or credits of Taxes for or attributable
to the GBO Subsidiaries shall be the account of Buyer. Following the Closing,
Buyer shall cause the GBO Subsidiaries to forward to Seller any such refunds or
credits due Seller pursuant to this Section 9.3(a) after receipt or realization
thereof by Buyer, and Seller shall forward (or cause to be forwarded) to Buyer
any refunds or credits due to Buyer pursuant to this Section 9.3(a) after
receipt or realization thereof by Seller, in each case in accordance with the
provisions of Section 9.3(d) hereof.
(b) If an audit examination of any Tax Return of Seller or its
Subsidiaries for any taxable period ending on or before the Closing Date shall
result (by settlement or otherwise) in any adjustment the effect of which is to
increase deductions, losses or tax credits or decrease income, gains, premiums,
revenues or recapture of tax credits ("Changes") reflected on a Tax Return of
Buyer, CCI and its Subsidiaries for any taxable period ending after the Closing
Date, Seller will notify Buyer and provide it with all necessary information so
that it can reflect on the appropriate Tax Return of Buyer any appropriate
Changes. If as a result of such Changes, Buyer or its Subsidiaries enjoy a net
Tax benefit from an increase in deductions, losses or tax credits and/or a
decrease in income, gains, premiums, revenues or recapture of tax credits
("Buyer Benefits") for taxable periods ending after the Closing Date, Buyer
shall pay to Seller the amount of such Buyer Benefit, as and when such Buyer
Benefits are realized by Buyer in accordance with Section 9.3(d) hereof.
(c) If an audit examination of any Tax Return of Buyer or its
Subsidiaries for taxable periods ending after the Closing Date shall result (by
settlement or otherwise) in any Change reflected on a Tax Return of Seller or
its Subsidiaries for any taxable periods ending on or before the Closing Date,
Buyer will notify Seller and provide it with all necessary information so that
Seller can reflect any appropriate Changes on its Tax Return. If as a result of
such Changes, Seller or its Subsidiaries enjoy a net Tax benefit from an
increase in deductions, losses or tax credits and/or a decrease in the income,
gains, premiums, revenues or recapture of tax credits ("Seller Benefits") for
taxable periods ending on or before the Closing Date, Seller shall pay to Buyer
the amount of such Seller Benefits as and when such Seller Benefits are realized
by Seller, in accordance with Section 9.3(d) hereof.
(d) Any payments of refunds or credits for Taxes, or any
payment of Buyer Benefits or Seller Benefits, that are required to be paid under
this Article IX hereof shall be made within ten (10)
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Business Days of the receipt of any refund or thirty (30) Business Days of the
realization of any tax benefit, as the case may be. Any payments not made within
such time period shall be subject to an interest charge of ten percent (10%) per
annum.
Section 9.4 Termination of Tax Sharing Agreements. Seller and
Buyer hereby agree and covenant that any obligation of or to GBO Subsidiaries
pursuant to any tax sharing agreement or any similar arrangement in effect at
the Closing Date shall be paid on or before the Closing Date and any further
obligations otherwise existing thereunder shall be extinguished on the Closing
Date.
Section 9.5 Conduct of Audits and Other Procedural Matters.
Each party shall, at its own expense, control any audit or
examination by any Taxing Authority, and have the right to initiate any claim
for refund or amended return, and contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed adjustment of
Taxes ("Proceedings") for any taxable period for which that party is charged
with payment or indemnification responsibility under this Agreement. Each party
shall promptly forward to the other in accordance with Section 15.3 copies of
all written notifications and other written communications, including if
available the original envelope showing any postmark, from any Taxing Authority
received by such party or its Affiliates relating to any liability for Taxes for
any taxable period for which such other party or any of its Affiliates is
charged with payment or indemnification responsibility under this Agreement and
each indemnifying party shall promptly notify, and consult with, each
indemnified party as to any action it proposes to take with respect to any
liability for Taxes for which it is required to indemnify another party and
shall not enter into any closing agreement or final settlement with any Taxing
Authority with respect to any such liability without the written consent of the
indemnified parties, which consent shall not be unreasonably withheld. In the
case of any Proceedings relating to any Straddle Period, Buyer shall control
such Proceedings and shall consult in good faith with Seller as to the conduct
of such Proceedings. Seller shall reimburse Buyer for such portion of the costs,
including legal costs, of conducting such Proceedings as is represented by the
portion of the Tax with respect to such Straddle Period for which Buyer is
liable pursuant to Section 9.2 hereof. Each party shall, at the expense of the
requesting party, execute or cause to be executed any powers of attorney or
other documents reasonably requested by such requesting party to enable it to
take any and all actions such party reasonably requests with respect to any
Proceedings which the requesting party controls. The failure by a party to
provide timely notice under this Section 9.5 shall relieve the other party from
its obligations under this Article IX with respect to the subject matter of any
notification not timely forwarded, to the extent the other party has suffered a
loss or other economic detriment because of such failure to provide notification
in a timely fashion.
Section 9.6 Resolution of Disagreements Among Parties. If
Seller and Buyer disagree as to the matters governed by this Article IX, Seller
and Buyer shall promptly consult with each other in an effort to resolve such
dispute. If any such disagreement cannot be resolved within twenty (20) Business
Days of the date of initial consultation, Seller and Buyer shall jointly request
such independent accountants as shall be mutually agreed by the parties, to
resolve any issue in dispute as promptly as possible, with one-half of the costs
of such resolution to be borne by each of Buyer and Seller. The determination
made by such accountants shall be final and binding upon the parties hereto.
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ARTICLE X
GBO EMPLOYEES
Section 10.1 GBO Employees.
(a) Buyer or Unicare will make an offer of employment to each
employee of the GBO Included Business who is an "active employee" as of the
Effective Time; provided that Buyer may terminate at any time following the
Closing Date the employment of any employee who accepts such offer and may
change or alter the terms of such employment at any time following the Closing
Date. For purposes of this Agreement, the term "active employee" shall mean any
Person who, at the Effective Time, is actively employed by Seller in the GBO
Included Business (including, without limitation, part-time employees) or who is
on short-term disability leave, personal unpaid leave or family medical leave,
as of the Effective Time (such employees on short-term disability, personal
unpaid leave or family medical leave shall be offered employment by Buyer as of
the date they return to active employment provided that Buyer shall not be
responsible for holding more than fifty-five (55) positions open for persons on
short-term disability, personal unpaid leave or family medical leave as of the
Effective Time), but shall exclude all other Persons. Any such offers of
employment with Buyer shall generally be on the terms and conditions as
described in this Agreement; provided, however, that Buyer will be permitted to
make appropriate adjustments and modifications to such terms and conditions in
the instances where in good faith it believes such adjustment or modification
shall be necessary in order to integrate such employees into the existing Buyer
workforce and management structure; and provided further that Buyer shall not be
required to offer any post-retirement medical or health benefits to such
employees. Notwithstanding anything contained in this Section 10.1(a) to the
contrary, Buyer's offer of employment shall include compensation for such
employees at the same base salary as received by such employees as of the
Effective Time and such employees shall have the same responsibilities and title
(except as otherwise previously disclosed to Seller) as they had with Seller as
of the Effective Time. Each Transferring Employee's vacation days available in
1997 shall be at least equal to the number of days that would have been
available for 1996 if the Transferring Employee were employed by the Buyer for
the full year, counting all of the Transferring Employee's service with Seller
as service for the Buyer. Buyer shall recognize all service with Seller of those
employees of the GBO Included Business who accept employment with Buyer (a
"Transferring Employee") for purposes of vesting and eligibility to participate
in Buyer's vacation, pension, 401(k), severance (which will become effective 180
days after the Effective Time) and sick pay programs and for vesting purposes
under Buyer's pension plan. The pre-existing condition requirements of Buyer's
medical benefit plans and the evidence of insurability requirements of Buyer's
group term life insurance program shall be waived for Transferring Employees.
The parties agree to cooperate in the period prior to Closing with respect to
employment transition matters that may arise and with respect to issues that may
arise in connection with such transition under the WARN Act.
Buyer and Seller agree that assets (including any outstanding
loans) equal to all of the account balances of the Transferring Employees
(except for Transferring Employees who are eligible for retirement under
Seller's Pension Plans and who elect not to have their account balances
transferred) in any Seller defined contribution pension plan will be
transferred, in trustee-to-trustee transfer, to Buyer's 401(k) plan pursuant to
applicable law. Buyer's 401(k) plan shall accept such transfers which shall
occur as soon as reasonably possible subsequent to the contribution of Seller's
profit sharing contribution to its defined contribution pension plan for the
1996 calendar year. Buyer has provided Seller with a copy of the most recent
favorable determination letter issued by the Internal Revenue Service with
respect to Buyer's 401(k) plan and Buyer represents that nothing has occurred on
or prior to the transfers described in this Section 10.1 which will cause
Buyer's 401(k) plan to fail to be tax-qualified. Buyer and Seller
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shall cooperate in making, and shall make, all the appropriate filings required
under the Code and ERISA, and the regulations thereunder, and shall further
cooperate to ensure that the transfers described in this Section 10.1 satisfy
the applicable requirements of Sections 401(k), 414(l) and 401(a)(12) of the
Code and the regulations thereunder.
(b) Seller has adopted the modifications to its severance plan
in the manner previously disclosed to Buyer.
(c) Buyer shall reimburse Seller for one-half of any severance
costs (cash compensation and costs for payroll taxes, 401(k) plan contributions,
pensions and group health and life insurance ("Additional Benefit Costs") under
Seller's modified severance plan (a copy of which has been provided to Buyer)
that Seller may be required to pay to any employee of the GBO Included Business
who is offered employment by Buyer (or one of its Affiliates) at the time of
Closing, but who elects not to accept such offer and whose employment with
Seller terminates; provided, however, that Buyer's reimbursement obligation
pursuant to this subsection (c) shall not exceed $3,000,000 in the aggregate if
Buyer relocates employees at the Berkeley Headquarters Building to a location
within the Interstate 495 loop and Buyer provides to such relocated employees a
reasonable commute assistance program. There shall be no limitation on Buyer's
reimbursement obligation under this Section 10.1(c) if Buyer (i) relocates
employees at the Berkeley Headquarters Building to a location outside a 20-mile
radius from the Berkeley Headquarters Building and does not provide such a
reasonable commute assistance program, or (ii) relocates outside the area
bounded by the Interstate 495 loop corridor.
(d) Buyer shall reimburse Seller for three-quarters of any
severance costs (cash compensation and Additional Benefit Costs) that Seller may
be required to pay to any employee of the GBO Included Business who accepts
Buyer's offer of employment at the time of Closing but whose employment with
Buyer (or one of its Affiliates) is terminated without cause within six (6)
months after the Effective Time.
(e) Buyer shall reimburse Seller for amounts up to a maximum
of $5,000,000 that Seller may be required to pay or incur (including any
Additional Benefit Costs) with respect to payments to GBO Division Employees
under Seller's retention bonus plan (a copy of which has been furnished to
Buyer). With respect to payments to be made under pension plans attributable to
such retention bonus plan, Buyer shall pay Seller a lump sum payment equal to
the net present value of such future pension plan payments computed using a
discount rate equal to 7.5%. Such reimbursements or payments shall be made by
Buyer to Seller within five (5) Business Days after Buyer has received from
Seller a request for such reimbursement or payments together with such
information relating to the payments for which reimbursement or payments is
requested as shall be reasonably requested by Buyer.
(f) Except as set forth in this Section 10.1, Buyer shall have
no liability to any employee or any former employee of Seller or the GBO
Included Business or to Seller by reason of the past employment by Seller or its
affiliated company or by reason of any benefit plan including any severance or
disability plan for any of such employees and any retirement or post retirement
benefit plan of Seller; and Seller will indemnify and hold harmless Buyer
against any claim or Liability to any such employee by reason of such employment
or any such benefit arising by reason of service (or termination of service) at
any time up to and including the Closing Date. Except as expressly above
provided in this Section 10.1, it is the intention of the parties that all
accrued vacation of the Transferring Employees be paid on or prior to the
Closing Date by Seller and that bonus and other benefit amounts of the
Transferring Employees be paid when due by Seller. Seller shall have no
liability with respect to any Transferring Employee under an employee benefit
plan maintained by Buyer or any Affiliate of Buyer
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and Buyer will indemnify and hold harmless Seller against any claim or Liability
to any employee of Buyer (including Transferring Employees) with respect to such
employee benefit plans.
(g) Nothing herein shall be construed to cause any person to
be deemed to be other than an "at will" employee.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions
contemplated by this Agreement at the Closing is subject to the satisfaction by
Seller or waiver by Buyer of the following conditions on or before the Closing
Date:
Section 11.1 Representations and Warranties Correct. All of
Seller's representations and warranties shall be true and correct in all
material respects on the date hereof and on the Closing Date as if made on such
date and the aggregate effect of all inaccuracies in Seller's representations
and warranties contained herein as of the date hereof shall not have had a
Material Adverse Effect (for this purpose treating each such representation
which has a Material Adverse Effect qualification as if it did not have such a
qualification). Buyer shall have received from appropriate officers of Seller a
certificate or certificates to such effect, in form and substance reasonably
satisfactory to Buyer.
Section 11.2 Performance; No Default. Seller shall have
performed and complied in all material respects with all the material
obligations, agreements and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing and Buyer shall have
received from appropriate officers of Seller a certificate or certificates to
such effect, in form and substance reasonably satisfactory to Buyer.
Section 11.3 Absence of Injunction. There shall be no order or
decree entered in any action or proceeding before a Governmental Entity of
competent jurisdiction restraining, enjoining or prohibiting the consummation of
this Agreement or the transactions contemplated hereby.
Section 11.4 Governmental Approvals. The consents, approvals,
permits and licenses (including any third party administrator and utilization
review authority) of Governmental Entities contemplated by Sections 2.7 and 3.3
shall have been obtained, or waiting periods referenced therein shall have
expired without adverse action, and no Governmental Entity having jurisdiction
over the business of Buyer shall have imposed any materially burdensome new
condition on Buyer. For purposes hereof, the imposition of a requirement to
maintain total adjusted capital at a level higher than 150% of "Company action
level" risk based capital by the Delaware Department, or the imposition of the
Delaware Department of other restrictions on ordinary dividends so long as such
total adjusted capital level is met, shall be considered materially burdensome.
Notwithstanding the provisions of the first sentence hereof, if notwithstanding
compliance with the terms of Section 7.1, any required relicensure contemplated
by Section 2.7(ii) has not been obtained prior to the Effective Time, such
failure to obtain relicensure shall not constitute a failure to satisfy the
condition set forth in this Section 11.4 unless such failure would have a
Material Adverse Effect with respect to the GBO Business.
Section 11.5 Consents. The consents and approvals of third
parties (other than Governmental Entities) set forth on Schedule 11.5 shall have
been obtained, and such consents and approvals shall not impose upon the Buyer
or the GBO Included Business any conditions or other
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requirements which would (i) cause the Buyer or the GBO Included Business any
material additional costs or (ii) materially interfere with the continued
operations of the GBO Included Business as it is presently conducted.
Section 11.6 Intercompany Accounts. Except as otherwise
provided in Section 5.10 hereof, there shall be no intercompany obligation of
the GBO Subsidiaries to Seller or its Affiliates reflected on the Closing GAAP
Balance Sheet.
Section 11.7 Transfer Taxes. Seller shall have paid, or caused
to be paid, all stock transfer and other transfer taxes required to be paid in
connection with the sale and delivery by Seller of the GBO Subsidiaries Shares
and the sale, assignment, transfer and conveyance of the GBO Included Assets, or
the execution, delivery and performance of contracts or agreements pursuant to
or contemplated by this Agreement and shall have caused all appropriate stock
transfer tax stamps to be affixed to the certificate or certificates
representing the GBO Subsidiaries Shares so sold and delivered.
Section 11.8 No Material Adverse Effect. No event shall have
occurred which shall have resulted or is reasonably likely to result in a
Material Adverse Effect with respect to the GBO Included Business; provided,
however, that the failure to obtain consent to the assignment of any or all GBO
Included Contracts (other than those GBO Included Contracts listed on Schedule
11.5) shall not constitute a Material Adverse Effect.
Section 11.9 Resignation of Directors. The directors of each
of the GBO Subsidiaries shall have resigned effective as of the Closing.
Section 11.10 Other Transactional Agreements. The License
Agreement, Coinsurance Agreement, Administration Agreement, Assumption
Reinsurance Agreement, Lease Agreements, Lease Assignments, and Service
Agreement shall have been entered into at Closing.
Section 11.11 Opinion of Counsel for Seller. Buyer shall have
received an opinion, dated the date of Closing, from ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to
the Seller, in form and substance reasonably satisfactory to Buyer.
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions
contemplated by this Agreement at the Closing is subject to the satisfaction by
Buyer or waiver by Seller of the following conditions, on or before the Closing
Date:
Section 12.1 Representations and Warranties Correct. All of
Buyer's representations and warranties shall be true and correct in all material
respects on the date hereof and on the Closing Date as if made on such date, and
the aggregate effect of all inaccuracies in Buyer's representations and
warranties contained herein as of the date hereof shall not have had a Material
Adverse Effect (for this purpose treating each such representation which has a
Material Adverse Effect qualification as if it did not have such a
qualification). Seller shall have received from appropriate officers of Buyer a
certificate or certificates to such effect, in form and substance reasonably
satisfactory to Seller.
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Section 12.2 Performance; No Default. Buyer shall have
performed, observed and complied in all material respects with all the material
obligations and conditions required by this Agreement to be performed, observed
or complied with by it at or prior to the Closing, and Seller shall have
received from appropriate officers of Buyer a certificate to such effect, in
form and substance reasonably satisfactory to Seller.
Section 12.3 Absence of Injunction. There shall be no order or
decree entered in any action or proceeding before a Governmental Entity of
competent jurisdiction materially restraining, enjoining or prohibiting the
consummation of this Agreement or the transactions contemplated hereby.
Section 12.4 Governmental Approvals. Buyer shall have complied
with its obligations under Section 6.4, and the consents and approvals of
Governmental Entities contemplated by Section 2.7 shall have been obtained.
Section 12.5 No Material Adverse Effect. No event shall have
occurred which shall have resulted or is reasonably likely to result in a
Material Adverse Effect with respect to Buyer or Unicare.
Section 12.6 Other Transaction Documents. The License
Agreement, Coinsurance Agreement, Administration Agreement, Assumption
Reinsurance Agreement, Lease Agreements, Lease Assignments, and Service
Agreement shall have been entered into at Closing.
Section 12.7 Offers to GBO Employees. Buyer shall have made
the offers of employment to the GBO Employees required by Article X.
Section 12.8 Buyer Capital Contribution to Buyer. Buyer shall
have made a capital contribution, if necessary, to Unicare sufficient to provide
Unicare with a 150% Company Action Risk Based Capital level, and Seller shall
have received a certificate from the chief financial officer of Buyer certifying
to such effect, in form and substance reasonably satisfactory to Seller.
Section 12.9 Opinion of Counsel for Buyer. Seller shall have
received an opinion, dated the date of Closing, from ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇
LLP, counsel to the Buyer, in form and substance reasonably satisfactory to
Seller.
ARTICLE XIII
DELIVERIES AT CLOSING
At or prior to the Closing, the parties will deliver the
following documents or such documents in substitution therefor as are
satisfactory to the recipient:
Section 13.1 Deliveries by Seller. Seller will deliver to
Buyer:
(a) certificates representing all of the GBO Subsidiaries
Shares, accompanied by stock powers duly executed in blank or duly
executed instruments of transfer and any other documents that are
necessary to transfer to Buyer good title to all the GBO Subsidiaries
Shares free and clear of all Liens, including all required transfer and
documentary stamps;
(b) the certificates executed by officers of Seller provided
for in Sections 11.1 and 11.2;
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(c) duly executed counterparts of the GBO Conveyancing
Documents conveying title to all of the GBO Included Assets;
(d) the resignation of directors of each of the GBO
Subsidiaries;
(e) the Opinion of Counsel for Buyer;
(f) evidence, reasonably satisfactory in form and substance to
Buyer, of final unappealable approvals of the applicable Governmental
Authorities of the reinsurance of the Coinsured Policies required to be
obtained by Seller as contemplated by this Agreement;
(g) such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to,
Buyer.
Section 13.2 Deliveries by Buyer. Buyer will deliver to
Seller:
(a) the Purchase Price;
(b) the certificates executed by officers of Buyer provided
for in Sections 12.1, 12.2 and 12.8;
(c) duly executed counterparts of the GBO Conveyancing
Documents;
(d) duly executed assumption and indemnification agreements in
connection with all the GBO Included Liabilities;
(e) the Opinion of Counsel for Seller;
(f) evidence, reasonably satisfactory in form and substance to
Seller, of final unappealable approvals of the Delaware Insurance
Department of the reinsurance of Coinsured Policies as contemplated by
this Agreement;
(g) such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to,
Seller.
Section 13.3 Deliveries by Seller and Buyer. Seller and Buyer
shall each deliver:
(a) a duly executed counterpart of the Coinsurance Agreement;
(b) a duly executed counterpart of the Administration
Agreement;
(c) a duly executed counterpart of the Assumption Reinsurance
Agreement;
(d) a duly executed counterpart of the License Agreement;
(e) a duly executed counterpart of each of the Lease
Agreements;
(f) a duly executed counterpart of the Service Agreement; and
(g) a duly executed counterpart of each of the Lease
Assignments.
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ARTICLE XIV
INDEMNIFICATION
Section 14.1 Indemnification.
(a) Seller will indemnify, defend and hold harmless Buyer and
its Affiliates, and their respective directors, officers and employees from and
against any and all demands, actions, proceedings, suits (by any Person, entity
or group, including, without limitation, any Governmental Entity) and
Liabilities, paid or incurred, resulting from or arising out of any Third Party
Claim (as defined in Section 14.2 hereof) or Direct Claim (as defined in Section
14.3) (including, without limitation, the reasonable costs and expenses of
defending any and all actions, suits, proceedings, demands, assessments,
judgments, settlements and compromises arising out of Third Party Claims or
Direct Claims and reasonable attorneys' fees in connection therewith)
(individually and collectively "Buyer Indemnifiable Losses") relating to,
resulting from or arising out of any breach of any of the representations,
warranties, covenants or agreements of Seller contained in this Agreement;
provided, however, that Seller shall not have any Liability for such
indemnification (other than indemnification with respect to liabilities imposed
on Buyer in respect of GBO Excluded Liabilities, liability arising out of the
failure to obtain consent to assignment of any GBO Division Leases or GBO
Division Contracts and any amount payable pursuant to Section 1.2(b), liability
arising out of the failure to obtain consent to assignment or delegation of
duties of ASO Contracts and any amount payable pursuant to Section 1.3,
inability of Buyer to obtain discounts from GBO Providers pursuant to Sections
5.12(b) and 5.12(e), failure of Seller to have properly credentialed GBO
Providers pursuant to Section 5.12(d), failure to assign and transfer to Buyer
the hardware and MIS Software pursuant to Section 8.8 and covenants to be
performed after the Closing, including, without limitation, covenants to be
performed after the Closing pursuant to the Coinsurance Agreement, the
Assumption Reinsurance Agreement, the Administration Agreement, the Service
Agreement, the License Agreement, the Lease Agreements and the Lease Assignments
(the "Separate Transaction Documents") unless the aggregate of all Buyer
Indemnifiable Losses for which Seller would, but for this proviso, be liable
exceeds on a cumulative basis an amount equal to $2,500,000, in which case
Seller's Liability shall be only for such excess, but no more than the amount of
the Purchase Price.
(b) Buyer will indemnify, defend and hold harmless Seller and
its Affiliates, and their respective directors, officers and employees from and
against any and all demands, actions, proceedings, suits (by any Person, entity
or group, including, without limitation, any Governmental Entity) and
Liabilities, paid or incurred, resulting from or arising out of any Third Party
Claim or Direct Claim (including, without limitation, the reasonable costs and
expenses of defending any and all actions, suits, proceedings, demands,
assessments, judgments, settlements and compromises arising out of Third Party
Claims and Direct Claims, and reasonable attorneys' fees in connection therewith
(individually and collectively, "Seller Indemnifiable Losses") relating to,
resulting from or arising out of (i) any breach of any of the representations,
warranties, covenants or agreements of Buyer contained in this Agreement, and
(ii) any of the GBO Included Liabilities; provided, however, that Buyer shall
not have any Liability for such indemnification (other than indemnification with
respect to liabilities imposed on Seller in respect of GBO Included Liabilities
assumed by Buyer under the terms of the Transaction Documents, performance of
obligations under ASO Contracts pursuant to Section 1.3(b) and for covenants to
be performed after the Closing, including, without limitation, covenants to be
performed after the Closing pursuant to the Separate Transaction Documents)
unless the aggregate of all Seller Indemnifiable Losses for which Buyer would,
but for this proviso, be liable exceeds on a cumulative basis an amount equal to
$2,500,000, in which case Buyer's Liability shall be only for such excess.
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(c) Except as set forth in subsection (i) below, this Article
XIV shall be the exclusive remedy for Buyer and Seller, as the case may be,
relating to, resulting from or arising out of any breach by the other party of
any of the representations, warranties, covenants or agreements of such other
party contained in this Agreement. Indemnification under the indemnification
provisions contained in the Separate Transaction Documents is to be determined
in accordance with the terms of such Separate Transaction Documents.
(d) For purposes of this Agreement, "Indemnity Payment" means
any amounts of Indemnifiable Losses required to be paid pursuant to this Section
14.1.
(e) For purposes of this Agreement, "Indemnitee" means any
Person entitled to indemnification under this Agreement.
(f) For purposes of this Agreement, "Indemnifying Party" means
any Person required to provide indemnification under this Agreement.
(g) All statements contained herein or in any Schedule hereto,
or in any certificate delivered at the Closing, will be deemed representations
and warranties within the meaning of this Article XIV.
(h) No claim for Indemnifiable Losses made hereunder with
respect to any representation or warranty shall be made after expiration of the
survival period relating thereto set forth in Section 15.9.
(i) Notwithstanding any provisions of this Article XIV to the
contrary, the provisions of Sections 1.2(b), 1.3, 2.19, 3.4, 5.12 and 8.8 shall
be separate from and in addition to the obligations of the Buyer under this
Article XIV.
Section 14.2 Defense of Third Party Claims.
(a) If an Indemnitee receives notice of the assertion or
commencement, as the case may be, of any claim, demand, action, proceeding or
suit by any Person (including, without limitation, any Governmental Entity) who
is not a party to this Agreement or who is not an Indemnitee hereunder against
such Indemnitee, with respect to which any Indemnifying Party is obligated to
provide indemnification under Section 14.1 of this Agreement (a "Third Party
Claim"), the Indemnitee will give the Indemnifying Party prompt written notice
thereof. Such notice will describe the Third Party Claim in reasonable detail,
will be accompanied by all notices and documents (including court papers)
received by the Indemnitee with respect thereto and will indicate the estimated
amount, if practicable, of the Indemnifiable Loss that has been or may be
sustained by the Indemnitee. The Indemnifying Party will have the right to
participate in or, by giving written notice to the Indemnitee, to elect to
assume, the defense of any Third Party Claim at the Indemnifying Party's own
expense and by the Indemnifying Party's own counsel (which counsel will be
reasonably satisfactory to the Indemnitee) and the Indemnitee will, to the
extent requested, cooperate in good faith in such defense; provided, however,
that the Indemnitee may at its own expense retain separate counsel to
participate in such defense, it being understood, however, that if the
Indemnitee so chooses to participate in the defense, the Indemnifying Party
nevertheless shall be entitled to control the defense. The cooperation referred
to in the preceding sentence shall include the retention and (upon the
Indemnifying Party's reasonable request) the provision to the Indemnifying Party
of records and information which are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder and
for testimony.
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(b) If an Indemnitee is given written notice from the
Indemnifying Party that such Indemnifying Party has elected to assume the
defense of any Third Party Claim, the Indemnifying Party will not be liable for
any legal expenses incurred by the Indemnitee after such notice is given in
connection with the defense thereof and the assumption of such defense by the
Indemnified Party; provided, however, that if the Indemnifying Party fails to
assume the defense of such Third Party Claim within thirty (30) calendar days
after receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense, and the Indemnifying Party will be liable for any reasonable
expenses therefor. Notwithstanding anything contained herein to the contrary,
the Indemnitee will have the right to employ separate counsel at the
Indemnifying Party's expense and to control its own defense of such action or
proceeding if the named parties to any such suit, action or proceeding include
both the Indemnifying Party and the Indemnitee and if representation of both
parties by the same counsel would be inappropriate because, in the reasonable
opinion of counsel to the Indemnitee, (i) there are or may be legal defenses
available to the Indemnitee that are different from or additional to those
available to the Indemnifying Party, or (ii) a conflict or potential conflict
exists between the Indemnifying Party and the Indemnitee; provided, however,
that the Indemnifying Party shall not, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate counsel (in addition to
any local counsel) for all such Indemnities.
In the event that any Indemnifying Party does not elect to
assume the defense of any Third Party Claim in accordance with this Section
14.2, such Indemnifying Party will be obligated as provided in this Section 14.2
for all costs of defense of the Indemnitee.
The Indemnitee shall not knowingly or intentionally admit any
liability with respect to, or settle, compromise or discharge any Third Party
Claim prior to expiration of the 30-day period provided in the first paragraph
of this Section 14.2(b). If the Indemnifying Party shall elect not to assume the
defense of a Third Party Claim, the Indemnitee nevertheless will not enter into
a settlement, compromise or discharge of such claim without the consent of the
Indemnifying Party, which consent will not be unreasonably withheld. Without
obtaining a complete and unconditional release of the Indemnitee from any
further liability in respect of a Third Party Claim, the Indemnifying Party will
not enter into any settlement, compromise or discharge of such Claim without the
consent of the Indemnitee, which consent will not be unreasonably withheld.
(c) A failure to give timely notice as provided in this
Section 14.2 will not affect the rights or obligations of any party hereunder
except as provided in Section 14.1(g) and except and only to the extent that, as
a result of such failure, any party which was entitled to receive such notice
was deprived of its right to recover any payment under its applicable insurance
coverage or was adversely affected in its ability to defend a claim or there was
an increase in the amount of the Indemnifiable Losses which such party is
obligated to pay hereunder or such party was otherwise actually prejudiced as a
result of such failure.
(d) Upon making any Indemnity Payment, the Indemnifying Party
will, to the extent of such Indemnity Payment, be subrogated to all rights of
the Indemnitee against any third party in respect of the Indemnifiable Loss to
which the Indemnity Payment relates; provided, however, that until the
Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims
of the Indemnifying Party against any such third party on account of said
Indemnity Payment are hereby made expressly subordinated and subjected in right
of payment to the Indemnitee's rights against such third party. Without limiting
the generality of any other provision hereof, each such Indemnitee and
Indemnifying
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Party will duly execute upon request all instruments reasonably necessary to
evidence and perfect the above-described subrogation and subordination rights.
Section 14.3 Direct Claims. In the event of any Indemnitee
should have a claim under this Article XIV against any Indemnifying Party that
does not involve a Third Party Claim (a "Direct Claim"), the Indemnitee shall
deliver a written notification of an Indemnifiable Loss under this Article XIV
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Indemnifiable Loss (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party and, in any event, within the time period
referred to in Section 14.1(g). So long as Indemnitee provides the Indemnity
Notice within the time period referred to in Section 14.1(g), the failure by any
Indemnitee to give the Indemnifying Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby or if the Indemnity Notice is not given.
If the Indemnifying Party notifies the Indemnitee that it does not dispute the
Indemnifiable Loss described in such Indemnity Notice or fails to notify the
Indemnitee within thirty (30) calendar days following receipt by an Indemnifying
party of an Indemnity Notice whether the Indemnifying Party disputes the
Indemnifiable Loss described in such Indemnity Notice, the Indemnifiable Loss in
the amount specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Article XIV and the Indemnifying Party
shall pay the amount of such Indemnifiable Loss to the Indemnitee on demand. If
the Indemnifying Party has timely disputed its liability with respect to such
Indemnifiable Loss, the Indemnifying Party and the Indemnitee will proceed in
good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within the period ending sixty (60) calendar days following
receipt by the Indemnifying Party of the Indemnity Notice, such dispute shall be
resolved by a court of competent jurisdiction.
ARTICLE XV
ARBITRATION
Section 15.1 General. Any dispute or difference between the
parties with respect to the operation or interpretation of this Agreement or any
of the other Transaction Documents on which an amicable understanding cannot be
reached shall be decided by binding arbitration in Denver, Colorado. The
arbitrators may rely upon principles of fairness, equity, reason and custom in
the insurance and reinsurance industry in reaching their decision.
Section 15.2 Initiation of Arbitration. To initiate
arbitration, a party shall send by certified mail, return receipt requested, to
the other party, at the address specified in Section 16.3 hereof, a notice
demanding arbitration.
Section 15.3 Appointment of Arbitrators. A panel of three (3)
arbitrators will decide any dispute or difference between the parties. All
arbitrators must be (a) disinterested officers or retired officers of life
insurance or life reinsurance companies other than the parties to this Agreement
or their Affiliates, or (b) disinterested persons of comparable experience. Each
of the parties agrees to appoint one of the arbitrators. In the event that
either party should fail to appoint its arbitrator within twenty (20) Business
Days following receipt of the notice demanding arbitration set forth in Section
15.2 hereof, the party demanding such arbitration may appoint the second
arbitrator before entering upon arbitration. The two party-appointed arbitrators
shall select a third arbitrator. In the event that the two party-appointed
arbitrators shall not be able to agree on the choice of the third arbitrator
within twenty (20) Business Days following their appointment, the parties may
agree on a third arbitrator within the next twenty (20)
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Business Days, and if they have not then so agreed, the Denver, Colorado office
of the American Arbitration Association shall, at the request of either party,
appoint as such third arbitrator a person who meets the qualifications specified
in the second sentence of this Section 15.3.
Section 15.4 Decision. The decision in writing by any two
arbitrators shall be final and binding on both of the parties. Judgment may be
entered upon a final decision of the arbitrators in any court of competent
jurisdiction. Arbitrators pursuant to this Article XV shall be governed by the
Federal Arbitration Act, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code.
Section 15.5 Expenses of Arbitration. Each party shall bear
the expense of its own arbitrator (whether selected by that party, or by the
other party pursuant to the procedures set out in Section 15.3 hereof) and
related outside attorneys' fees, and shall jointly and equally bear with the
other party the expenses of the third arbitrator and of the arbitration.
Section 15.6 Location of Arbitration. Any arbitration
instituted pursuant to this Article shall be held in Denver, Colorado or at such
other location as the parties hereby shall agree.
Section 15.7 Survival of Article. This Article XV shall
survive termination of this Agreement.
Section 15.8 Other Actions. Submission of a matter to
arbitration shall be a condition precedent to any right to institute a
proceeding at law or in equity concerning such matter, except for injunctive or
other provisional relief pending the arbitration of a matter subject to
arbitration pursuant to this Reinsurance Agreement.
ARTICLE XVI
MISCELLANEOUS PROVISIONS AND AGREEMENTS
Section 16.1 Confidentiality. The parties hereto agree that
the terms of this Agreement and all technical, financial, insurance, data
processing, performance and client information owned by a party and furnished or
disclosed to the other party hereunder, shall be treated as proprietary and
confidential information and shall be held in strict confidence and shall not,
without the prior written consent of the party furnishing or disclosing such
information, be made available or disclosed to any third party or be used by the
other party thereto other than as contemplated hereunder; provided, however that
Seller and Buyer may explain and reveal information concerning the transactions
contemplated by this Agreement to the extent necessary in the ordinary course of
business, to their agents, customers, employees and intermediaries; and
provided, further, that the parties shall have the right to disclose and make
available any such information that (i) was publicly known or otherwise known to
the party receiving the information prior to the time of such disclosure, (ii)
subsequently becomes publicly known through no act or omission by the party
receiving the information or any person acting on its behalf or (iii) otherwise
becomes known to the party receiving the information other than through
disclosure by such party or an affiliate thereof; and provided, further, that
the party receiving such information may deliver or disclose such information to
(a) its directors, officers, employees, agents, attorneys and Affiliates (to the
extent such disclosure reasonably relates to this Agreement and the transactions
contemplated hereby), (b) its financial advisors and other professional advisors
who agree to hold confidential such information substantially in accordance
with the terms of this Section 16.1, (c) any federal or state regulatory
authority having jurisdiction over such party, (d) the National Association of
Insurance Commissioners or any similar organization or any nationally
recognized ratings agency that
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requests access to such information, or (e) any other Person to which such
delivery or disclosure may be necessary or appropriate (1) to effect compliance
with any law, rule, regulation or order applicable to such party, (2) in
connection with any litigation to which such party is a party, or (3) if a
default has occurred and is continuing, to the extent such party may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under this
Agreement; and provided, further, that in connection with any disclosure made
pursuant to (e)(1) or (e)(2) above, the disclosing party shall to the extent
reasonably practicable provide prompt prior written notice of such disclosure so
that the other party may seek a protective order or other appropriate remedy;
and provided, further, that Buyer may file this Agreement with its current and
periodic reports to the SEC. Buyer and Seller will continue to comply with the
provisions of the Confidentiality Agreement dated April 25, 1995 as amended and
restated on October 10, 1996.
Section 16.2 Expenses. Each party will bear its own expenses,
including the fees of any attorneys, accountants, investment bankers or others
engaged by it, in connection with this Agreement and the transactions
contemplated hereby, except as otherwise expressly provided herein.
Section 16.3 Notices. All notices, requests, demands and other
communications made hereunder will be in writing and will be deemed duly given
upon delivery if delivered personally, upon confirmation of transmission if sent
by telex or facsimile, upon the third Business Day after mailing if sent by
registered or certified mail, postage prepaid, and upon receipt if sent by
reputable overnight courier, as follows, or to such other address or Person as
either party may designate by notice to the other parties hereunder:
If to Seller:
▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Vice President
and Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Buyer:
WellPoint Health Networks Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman and
Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With copies to:
WellPoint Health Networks Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., General
Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Section 16.4 Amendments; Termination. This Agreement cannot be
changed or terminated orally and no waiver of compliance with any provision or
condition hereof and no consent provided for herein will be effective unless
evidenced by an instrument in writing duly executed by the proper party. This
Agreement (except for the provisions of Sections 3.4, 4.6, 15.1 and 15.2 which
will continue in effect) and the transactions contemplated hereby may be
terminated and abandoned at any time prior to the Closing Date (i) by mutual
written agreement of Buyer and Seller, (ii) by Buyer or Seller upon written
notice given to the other after entry of a restraining order or injunction
restraining or prohibiting the transactions contemplated by this Agreement and
the expiration or unfavorable disposition of all appeals related thereto, (iii)
by Buyer or Seller, upon ten (10) Business Days' written notice to the other, if
the Closing shall not have taken place by January 31, 1997 other than by reason
of a matter within the control of the party asserting such termination. In the
event of any termination permitted by the preceding sentence, the parties hereto
will have no liabilities pursuant to this Agreement to the other party hereto,
except for liabilities arising under Sections 3.4, 4.6, 15.1 and 15.2. Without
prejudice to any other rights or remedies which it may have, either party may,
prior to the Closing, forthwith abandon the transactions contemplated hereby by
written notice to the other party if any of the conditions to the obligations of
the abandoning party to close the transactions contemplated hereby have not been
fulfilled prior to January 31, 1997 and shall not have been waived.
Section 16.5 Consent to Jurisdiction. Each of Buyer and Seller
irrevocably submits to the exclusive jurisdiction of (i) the Court of Chancery
of the State of Delaware and (ii) the United States District Court for the
District of Delaware, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
Seller and Buyer agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the District of Delaware
or, if such suit, action or proceeding may not be brought in such court for
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jurisdictional reasons, in the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇. Buyer further agrees that service of process, summons, notice or
document by hand delivery or U.S. registered mail in care of WellPoint Health
Networks Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention
of the General Counsel shall be effective service of process for any action,
suit or proceeding brought against Buyer in any such court. Seller further
agrees that service of process, summons, notice of document by hand delivery or
registered mail in care of ▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, shall be effective service of
process for any action, suit or proceeding brought against Seller in any such
court. Each of Buyer and Seller irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) the Chancery
Court of the State of Delaware, New Castle County or (ii) the United States
District Court for the District of Delaware, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
Section 16.6 Assignment; Affiliate of Buyer. This Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors (including, but not limited to, the surviving
company of any merger involving a party), legal representatives and assigns, but
this Agreement may not be assigned by either party without the written consent
of the other party; provided, however, that Buyer may assign this Agreement to
Unicare for purposes of causing Unicare to purchase the GBO Division Assets and
assume the GBO Division Liabilities, but such assignment shall not relieve Buyer
of ultimate liability under this Agreement if Unicare shall fail to perform the
obligations of Buyer hereunder.
Section 16.7 Entire Agreement. This Agreement, the Annexes and
Schedules attached hereto and the other agreements among the parties referred to
herein, contain the entire agreement among the parties hereto with respect to
the transactions contemplated hereby and supersede all previous written or oral
negotiations, commitments and writings. The section headings of this Agreement
are for convenience of reference only and do not form a part hereof and do not
in any way modify, interpret or construe the intentions of the parties. This
Agreement may be executed in two or more counterparts, and all such counterparts
will constitute one and the same instrument.
Section 16.8 Applicable Law. This Agreement will be governed
by and construed and enforced in accordance with the internal laws of the State
of Delaware applicable to agreements made and to be performed entirely within
such State, without regard to the conflicts of law principles of such State.
Section 16.9 Survival.
(a) The representations and warranties of Seller contained in
Article II and Article IV of this Agreement shall survive the Closing and shall
terminate on the second anniversary of the Closing; provided, however, that the
representations contained in Sections 2.13 and 2.20 shall survive until the
expiration of the relevant statute of limitations.
(b) The representations and warranties of Buyer contained in
Article III of this Agreement shall survive the Closing and shall terminate on
the second anniversary of the Closing; provided, however, that the
representations and warranties in Section 3.5 shall terminate on the third
anniversary of the Closing.
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Section 16.10 Further Assurances. Each of Seller and Buyer
will use its reasonable best efforts to do or cause to be done all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement.
Section 16.11 Definition of "Knowledge." In each case in this
Agreement or in any Schedule hereto or in any certificate delivered pursuant
hereto in which a Person makes a representation or warranty based on the
"knowledge" or on what is "known" to such Person, such Person represents and
warrants only as to the knowledge of Executive Officers of such Person having
direct or indirect responsibility for the matter in question, including in the
case of any Subsidiary, the Executive Officers of such Subsidiary.
Section 16.12 Parties in Interest. Nothing in this Agreement
is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the parties hereto and their respective
successors and assignees. Nothing in this Agreement is intended to relieve or
discharge the obligations or liability of any third Persons to the parties
hereto. No provision of this Agreement shall give any third Persons any right of
subrogation or action over or against the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
▇▇▇▇ ▇▇▇▇▇▇▇ MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
WELLPOINT HEALTH NETWORKS INC.
By:
-------------------------------------
Name: D. ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Executive Vice President
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