Exhibit 10.26
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AGREEMENT OF MERGER AND JOINT VENTURE
BY AND AMONG
UNITED WISCONSIN SERVICES, INC.
UWS ACQUISITION CORPORATION
BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN
HMO-W, INCORPORATED
AND
HMO OF WISCONSIN INSURANCE CORPORATION
OCTOBER 11, 1994
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AGREEMENT OF MERGER AND JOINT VENTURE
This AGREEMENT OF MERGER AND JOINT VENTURE (the "Agreement") is made
and entered into as of the [__] day of October, 1994, by and among Blue Cross &
Blue Shield United of Wisconsin, a service insurance corporation organized under
Chapter 613 of the Wisconsin Statutes ("Blue Cross"), United Wisconsin Services,
Inc., a corporation organized under Chapter 180 of the Wisconsin Statutes
("UWS"), UWS Acquisition Corporation, a corporation organized under Chapter 180
of the Wisconsin Statutes ("Subsidiary"), HMO-W, Incorporated, a corporation
organized under Chapter 180 of the Wisconsin Statutes (the "Holding Company"),
and HMO of Wisconsin Insurance Corporation, a health maintenance organization
insurer organized under Chapter 611 of the Wisconsin Statutes ("HMOW").
RECITALS
1. The respective Board of Directors of Subsidiary, Holding Company and
DWS, the Subsidiary's sole shareholder, have approved this Agreement and the
Plan of Merger attached hereto as Exhibit A (the "Plan") and deem it desirable
to merge Subsidiary into Holding Company as provided in this Agreement and the
Plan, whereby each holder of the issued and outstanding capital stock of Holding
Company at the Merger Effective Time will have the right to receive a cash
payment upon the terms and subject to the conditions set forth in this Agreement
and the Plan.
2. MOW desires to obtain the resources and insurance expertise
necessary to further its goals of delivering quality managed care programs with
particular focus on Wisconsin's rural population.
3. UWS and Blue Cross desire to establish a managed care operation
utilizing the relationships with rural providers and the strong HMO foundation
that HMOW has built in the region and therefore desires to enter into the
various transactions contemplated in this Agreement.
4. HMOW, UWS and Blue Cross wish to coordinate the design and marketing
of various managed care products, including, without limitation, one or more
Preferred Provider Organization, Point of Service and Health Maintenance
Organization products and programs.
5. HMOW, DWS and Blue Cross believe that the formation of a cooperative
arrangement to take the form of a joint venture (the "Joint Venture") upon the
terms and conditions set forth in this Agreement will assist them in achieving
the objectives contained in Recitals 2 through 4.
1.4. Consideration for the Merger; Conversion or Cancellation of Shares
in the Merger.
A. UWS agrees to provide the Merger Price in cash on behalf of
Subsidiary to be used as the Merger Consideration.
B. Each share of Holding Company Common Stock (as defined in
Section 2.1.C of this Agreement) issued and outstanding immediately
prior to the Merger Effective Time (the "Shares") (other than Holding
Company Common Stock owned by UWS and other than the Dissenting Shares,
as defined in Section 1.6, below) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into
and shall represent the right to receive cash in the amount equal to
the Merger Consideration as defined in Section 1.8 below.
C. All Shares to be converted into cash pursuant to this
Section 1.4 shall, by virtue of the Merger and without any action on
the part of the holders thereof, cease to be outstanding, be canceled
and cease to exist, and each holder of a certificate representing any
such Shares (each a "Certificate" and collectively, the "Certificates")
shall thereafter cease to have any rights with respect to such Shares,
except the right to receive for each of the Shares, in accordance with
Section 1.5, the Merger Consideration.
D. At the Merger Effective Time, each share of Subsidiary
capital stock then issued and outstanding shall be converted into one
share of the common stock of the Surviving Corporation.
1.5. Payment for Shares in the Merger.
A. UWS or such person as it shall select shall act as the
paying agent ("Paying Agent"). Within three (3) business days after the
Closing Date, the Paying Agent shall mail to each holder of record of a
Certificate or Certificates (i) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and (ii) instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender of Certificates to the Paying Agent, together with such
letter of transmittal duly executed and any other required documents,
the holder of such Certificates shall be entitled to receive from the
Paying Agent and the Paying Agent shall pay for each of the Shares
represented by such Certificates the Merger Consideration together with
any interest as provided in Section 1.8.C. Until so surrendered, such
Certificates shall represent solely the right to receive the Merger
Consideration with respect to each of the Shares represented thereby.
No interest shall be paid or accrue on the Merger Consideration payable
upon surrender of the Certificates other than as provided in Section
1.8.C. If any payment of the Merger Consideration is to be made to a
person other than the one in whose name the Certificate surrendered
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in exchange therefor is registered, it shall be a condition of such
payment that the Certificate so surrendered be properly endorsed and
otherwise in proper form for transfer and that the person requesting
such payment shall pay to the Paying Agent any applicable transfer or
other similar taxes, or shall establish to the satisfaction of the
Paying Agent that any such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither UWS nor any party hereto shall
be liable to a holder of Shares for any Merger Consideration delivered
to a public official pursuant to applicable escheat law. In the event
UWS selects a person to be the Paying Agent, UWS shall on or before the
Merger Effective Time deposit with such person on behalf of Subsidiary
a cash payment equal to the Merger Price or portion thereof determined
as provided in Section 1.8.C hereof. UWS shall pay all fees and
expenses of any such person it selects to be the Paying Agent.
B. Any portion of the Merger Price which remains unclaimed by
the former Shareholders of the Holding Company for six (6) months after
the Closing Date shall be retained by or returned to UWS and any former
Shareholders shall thereafter look only to UWS for payment of their
claim for the Merger Consideration for their Shares.
C. UWS shall be entitled to deduct and withhold from any
Merger Consideration payable pursuant hereto such amounts as UWS is
required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code or any provision of State,
local or foreign tax law. To the extent that amounts are withheld by
UWS, such withheld amounts shall be treated for purposes of this
Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by UWS.
1.6. Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of the Holding Company which immediately prior to the
Merger Effective Time are held by Shareholders who have properly exercised and
perfected appraisal rights-under Subchapter XIII of the WBCL (the "Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration as provided in Section 1.4 hereof, but the holder of Dissenting
Shares shall be entitled to receive such consideration as shall be determined
pursuant to Subchapter XIII of the WBCL; provided, however, that, if any such
holder shall have failed to perfect or shall withdraw or lose his or her right
to appraisal and payment under the WBCL, such holder's shares shall thereupon be
deemed to have been converted as of the Merger Effective Time into the right to
receive the Merger Consideration per share, without any interest thereon, as
provided in Section 1.4 and such shares J shall no longer be Dissenting Shares.
Holding Company agrees that prior to the Merger Effective Time it will not,
except with the prior written consent of UWS, voluntarily make any payment with
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respect to the exercise of any dissenter's rights.
1.7. Transfer of Shares After the Closing Date. No transfers of Shares
shall be made on the stock transfer books of the Holding Company after the close
of business on the day prior to the Closing Date.
1.8. Merger Consideration.
A. The term "Merger Consideration" means an amount of cash per
share equal to the Merger Price divided by the number of Shares.
B. The term "Merger Price" means one hundred percent (100%) of
the net worth ("Net Worth") of the Holding Company as of September 30, 1994, as
determined by the Holding Company's regular accountant, McGladrey & Xxxxxx (the
"Accountant"). Net Worth shall be determined by applying the same accounting
principles applied in determining the Holding Company's 1993 Net Worth, except
as such accounting principles violate generally accepted accounting principles
("GAAP") and except that any goodwill asset shall be excluded from the
calculation. The Merger Price shall be paid to the Shareholders in cash as
provided herein.
C. If Holding Company's Net Worth as of September 30, 1994 has
not yet been determined by the Accountant by the Merger Effective Time, the
portion of the Merger Price to be paid at the Merger Effective Time shall be 90%
of the Net Worth of Holding Company using the unaudited June 30, 1994 financial
statement for the Holding Company. As soon as the Accountant has determined the
actual Net Worth of Holding Company as of September 30, 1994, but no later than
December 31, 1994, such actual Net Worth less the amount of the Merger Price
previously paid shall be paid or caused to be paid by DWS, together with
interest thereon at 5% per annum from the Merger Effective Time, within three
(3) business days after such determination to the persons entitled thereto.
1.9. Closing. The consummation of the Merger and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxxx & Xxxxx, One South Xxxxxxxx Street, Madison, Wisconsin, or at such
other place as may be mutually agreed upon by the parties. The Closing shall
occur at 10:00 a.m., Central Standard Time, on or before November 1, 1994
assuming that all of the conditions set forth in Articles 6 and 7 herein have
been fulfilled or waived in accordance with this Agreement. If said conditions
have not been fulfilled or waived on or before November 1, 1994 in accordance
with this Agreement, the Closing shall occur at such other time as may be agreed
upon by the parties hereto (the time and date of the Closing being referred to
herein as the "Closing Date")
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ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
2.1. The Holding Company and HMOW.
Except as may be disclosed in the Disclosure Schedule attached
as Exhibit B hereto (the "Disclosure Schedule"), the Holding Company and HMOW
hereby represents and warrants to UWS that:
A. Organization and Qualification. The Holding Company is a
corporation duly organized, validly existing and in current standing under the
laws of the State of Wisconsin. Each of HMOW and Hometown Insurance Services,
Inc. ("Hometown") (Holding Company, HMOW and Hometown is each individually
sometimes referred to herein as "HMOW Entity" and collectively as the "HMOW
Entities") are corporations duly organized and validly existing under the laws
of the State of Wisconsin (HMOW and Hometown hereinafter are sometimes
individually referred to as "Company Subsidiary" and collectively as "Company
Subsidiaries"). The HMOW Entities (a) are duly qualified as foreign corporations
under the laws of each jurisdiction where the failure to qualify would have a
Material Adverse Effect (as hereinafter defined) upon them; (b) have the
requisite corporate power and authority and the legal right to own, lease and
operate their properties, to lease the property they operate under lease and to
conduct their business as now conducted; (c) have all necessary licenses,
permits, consents or approvals (the "Company Approvals") from or by, and have
made all necessary filings with, and have given all necessary notices to, all
federal and state governmental authorities having jurisdiction over the HMOW
Entities (said filings and notices for all HMOW Entities collectively the
"Company Reports"), to the extent required for such ownership, operation and
conduct except where the failure to obtain such licenses, permits, consents or
approvals or to make such filings will not have a Material Adverse Effect upon
them; (d) are in compliance with their articles of incorporation and bylaws and
are not in default or in violation of any material agreement to which any HMOW
Entity is a party or by which it is bound except where the failure to comply
will not have a Material Adverse Effect upon the HMOW Entities taken as a whole;
and (e) are in compliance in all respects with all applicable provisions of
Laws, as hereinafter defined, applicable to them except where the failure to
comply will not have a Material Adverse Effect upon them. The Holding Company
owns beneficially and of record all of the outstanding shares of capital stock
of HMOW and 80% of the outstanding shares of capital stock of Hometown and owns
no interest in any other subsidiaries. Neither of the Company Subsidiaries owns
any interest in any subsidiary. No HMOW Entity has received any notice of
proceedings relating to the revocation 3 or modification of any Company
Approvals. The term "Material Adverse Effect" as used in this Agreement shall
mean any change or effect that is or is reasonably likely to be materially
adverse to a party's business, operations, properties (including intangible
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properties), condition (financial or otherwise), assets or liabilities
(including contingent liabilities); though said term shall not include any
change or effect to the parties resulting from changes in applicable laws or
from other changes in general economic conditions affecting the parties.
B. Authorization. The execution, delivery and performance of
this Agreement and all documents to be executed and delivered by the HMOW
Entities hereunder: (a) are within their respective corporate power; (b) have
been duly authorized by all necessary or proper corporate and other action,
including the consent of shareholders (subject to the requisite approval of the
transactions contemplated herein by the Holding Company!s shareholders which
approval shall be obtained prior to the Closing Date, as hereinafter defined),
members or boards of directors, where required; (c) are not in contravention of
any provision of their respective articles of incorporation or bylaws; (d) do
not violate any law, statute, ordinance, rule or regulation or any order or
decree of any court or governmental instrumentality (collectively the "Laws")
applicable to them; and (e) do not conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any HMOW Entity is a party or by which it
or any of its property is bound, and the same do not require the consent or
approval of any governmental body, agency, authority or other entity other than
those that will have been obtained by the Closing Date (as hereinafter defined).
This Agreement has been duly executed and delivered by the Holding Company and
HMOW and constitutes the legal, valid and binding obligation of each,
enforceable against them in accordance with its terms except as such
enforceability may be limited by bankruptcy or similar laws affecting the
enforceability of creditor's rights generally and by general principles of
equity.
C. Capitalization. The authorized capital stock of the Holding
Company consists of 200,000 shares of common stock, $.01 par value, consisting
of 100,000 shares of a class designated "Class A" and 100,000 shares of a class
designated "Class B", which is further subdivided into 50,000 shares of a series
designated "Class B, Series 1" and 50,000 shares of a series designated "Class
B, Series 2" (collectively the Class A and Class B Common Stock, the "Holding
Company Common Stock"). As of the date of this Agreement, 11,576 shares of Class
A Common Stock, 2,014 shares of Class B, Series 1 Common Stock and 2,000 shares
of Class B, Series 2 Common Stock are issued and outstanding, all of which
shares are validly issued, fully paid and non-assessable (except as provided in
Section 180.0622(2)(b) of the WBCL) and not issued in violation of any
preemptive right of any Holding Company shareholder, and all of which have been
issued in compliance with applicable securities laws, and 10 shares of Holding
Company Common Stock are held in the treasury of the Holding Company. As of the
date of this Agreement; (i) there are no options, warrants or other rights,
agreements
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(including voting or shareholders' agreements), arrangements or commitments of
any character relating to the issued or unissued capital stock of any HMOW
Entity or obligating any HMOW Entity to issue or sell any shares of its
respective capital stock of, or other equity interests in, any HMOW Entity, and
(ii) there are no obligations, contingent or otherwise, of the Holding Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares
of Holding Company Common Stock or the capital stock of any Company Subsidiary
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any Company Subsidiary or any other entity. The
authorized capital stock of Hometown consists of 2,800 shares of common stock,
no par value, of a class designated "Class I" (the "Hometown Common Stock"). The
authorized capital stock of HMOW consists of 100,000 shares of common stock,
$.01 par value, consisting of one class designated "Common Stock" (the "HMOW
Common Stock"). As of the date of this Agreement, 100,000 shares of HMOW Common
Stock and 2,000 shares of Hometown Common Stock (and no other securities of any
Company Subsidiary) are outstanding, all of which shares are validly issued,
fully paid and non-assessable (except as provided in Section 180.0622(2)(b) of
the WBCL) and not issued in violation of any preemptive right of any Company
Subsidiary shareholder, and all of which have been issued in compliance with
applicable securities laws, and the shares of HMOW Common Stock and Hometown
Common Stock owned by the Holding Company are held free and clear of all )
security interests, liens, claims, pledges, agreements, limitations of Holding
Company's voting rights, charges or other encumbrances of any nature whatsoever.
D. Financial Statements. Except as and to the extent set forth
on the balance sheet of the Holding Company, HMOW and Hometown as -of December
31, 1993, including all notes thereto, neither the Holding Company nor any
Company Subsidiary have any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet, or in the notes thereto, except for liabilities or
obligations incurred in the ordinary course of business since December 31, 1993
that would not, individually or in the aggregate, have a Material Adverse Effect
on the HMOW Entities taken as a whole.
E. Absence of Certain Changes or Events. Since December 31,
1993 to the date of this Agreement, each HMOW Entity has conducted its business
only in the ordinary course and in a manner consistent with past practice and,
since December 31, 1993, there has not been: (i) any change in the financial
condition, results of operations or business of an HMOW Entity having a Material
Adverse Effect on the Holding Company or any Company Subsidiary, other than
changes which are reflected in the financial statements of the HMOW Entities,
(ii) any damage, destruction or loss (whether or not covered by insurance) with
respect to any assets of an HMOW Entity having a Material Adverse Effect on the
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HMOW Entities taken as a 3 whole, (iii) any change by an HMOW Entity in its
respective accounting methods, principles or practices, (iv) any revaluation by
an HMOW Entity of any of its material assets, (v) any declaration, setting aside
or payment of any dividends or distributions in respect of shares of Holding
Company Common Stock or the equity securities of any Company Subsidiary or any
redemption, purchase or other acquisition of any of securities of an HMOW
Entity, or (vi) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other material or unscheduled
increase in compensation payable or to become payable to any officers or key
employees of an HMOW Entity.
F. Absence of Litigation. No HMOW Entity is a party to any
litigation or administrative proceeding, nor so far as is known by them is any
litigation or adverse administrative proceeding or hearing threatened against
any HMOW Entity which in either case relates to the execution, delivery or
performance of this Agreement.
G. Title to Property.
(1) Each of the HMOW Entities has good and defensible title to
all of its properties and assets, real and personal, tangible and
intangible free and clear of all mortgage liens, and free and clear of
all other liens, charges and encumbrances except liens for taxes not
yet due and payable, and such minor imperfections of title, if any, as
to not materially detract from the value of or interfere with the
present use of the property affected thereby or which, individually or
in the aggregate, would not have a Material Adverse Effect on the HMOW
Entities taken as a whole, and all leases pursuant to which any of the
HMOW Entities leases from others material amounts of real or personal
property are in good standing, valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any
existing material default or event of default by any HMOW Entity (or
event which with notice or lapse of time, or both, would constitute a
material default and in respect of which an HMOW Entity has not taken
adequate steps to prevent such a default from occurring). The
facilities and equipment of the HMOW Entities in regular use have been
reasonably maintained and are in good and serviceable condition,
reasonable wear and tear excepted.
(2) Each HMOW Entity possesses or has the right to
use any and all trade names, trademark registrations and common law
trademarks ("Intangible Assets") necessary to carry
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on its business as heretofore conducted. No claim or demands are
currently pending in any proceeding, or to the knowledge of each HMOW
Entity, threatened which challenge the rights of an HMOW Entity in
respect thereof. With the exception of the against Mercy Hospital for
an infringement on the state registered trademark of EMOW, and to the
knowledge of each HMOW Entity, none of such Intangible Assets infringes
on, or is being infringed by, other patents, trade names, trademarks or
copyrights, and none is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting its use. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated herein will give any licensor or licensee of
any Intangible Asset of the HMOW Entities any right to change the terms
or provisions of, or terminate or cancel, any license to which any of
the HMOW Entities is a party, wherein such change, termination, or
cancellation may have a Material Adverse Effect on the HMOW Entities
taken as a whole. None of the HMOW Entities has given, and none is
bound by, any written indemnification for trade name or trademark
infringement as to any property used by it. No HMOW Entity pays
royalties or fees for the use of trademarks or trade names.
H. Taxes. The HMOW Entities have timely filed all Tax Returns
(as defined below) required to be filed by the respective entity, and each of
the HMOW Entities has timely paid and discharged all Taxes (as defined below)
due in connection with the filing of such Tax Returns and has paid all other
Taxes as are due, and shall prepare and file all such Tax Returns required to be
filed after the date hereof and on or before the Closing Date. The liability for
Taxes set forth on each such Tax Return adequately reflects the Taxes required
to be reflected on such Tax Return. For purposes of this Agreement, "Tax" or
"Taxes" shall mean taxes, charges, fees, levies, and other governmental
assessments and impositions of any kind, payable to any federal, state, local or
foreign governmental entity or taxing authority or agency, including, without
limitation, (i) income, franchise, profits' gross receipts, estimated, ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes,
(ii) customs duties, imposts, charges, levies or other similar assessments of
any kind, and (iii) interest, penalties and additions to tax imposed with
respect thereto; and "Tax Returns" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the Internal Revenue
Service (the "IRS") or any other governmental entity or taxing authority or
agency, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns. Neither the IRS nor any other governmental
entity or taxing authority or agency is now asserting, either
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through audits, administrative proceedings, court proceedings or otherwise, or
threatening to assert against any HMOW Entity any deficiency or claim for
additional Taxes. No HMOW Entity has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. There are no tax liens on any assets of an HMOW Entity. No HMOW Entity
has received a ruling or entered into an agreement with the IRS or any other
governmental entity or taxing authority or agency that would have a Material
Adverse Effect on the HMOW Entities taken as a whole after the Closing Date. The
accruals and reserves for taxes reflected in the Holding Company and Company
Subsidiary balance sheet for the period ended December 31, 1993 are adequate to
cover all Taxes accruable through the date thereof.
I. Title to Common Stock. The Holding Company Common Stock,
the HMOW Common Stock and the Hometown Common Stock at Closing shall be free and
clear of all liens, pledges or encumbrances of any type or kind at the Closing
Date.
J. Labor Matters. Except as will not have a Material Adverse
Effect on the HMOW Entities taken as a whole: (i) the HMOW Entities are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice, (ii) there is no unfair labor practice
complaint against an HMOW Entity pending before the National Labor Relations
Board, (iii) there is no labor strike, dispute, slowdown, representation
campaign or work stoppage actually pending or threatened against or affecting an
HMOW Entity, and (iv) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claim therefor has been
asserted against an HMOW Entity.
K. Full Disclosure. No statement contained in any document,
certificate, or other writing furnished or to be furnished by an HMOW Entity to
UWS pursuant to the provisions of this Agreement contains or shall contain any
untrue statement of a material fact or omits or shall omit to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
L. Proxy Statement. None of the information supplied by the
Holding Company in the proxy statement to be provided to the Holding Company
shareholders (the "Shareholders") in connection with the approval of the
transactions contemplated in this Agreement (or any amendment or supplement
thereto) will at the time of the mailing of the proxy statement and at the time
of the shareholders' meeting to which such proxy statement relates contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
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2.2. UWS and Subsidiary.
Except as may be disclosed in Exhibit B-1 hereto, UWS and Subsidiary
hereby represent and warrant to the Holding Company as follows:
A. Organization. Blue Cross, DWS and Subsidiary (the
"UWS Entities" ) are corporations duly organized and validly
existing under the laws of Wisconsin.
B. Authorization. The execution, delivery and performance of
this Agreement by each of the UWS Entities: (a) is within its corporate power;
(b) has been duly authorized by all necessary or proper corporate action,
including the consent of shareholders where required; (c) does not contravene
any provision of its certificate or articles of incorporation or bylaws; (d)
does not violate any law or regulation, or any order or decree of any court or
governmental instrumentality applicable to it; and (e) does not conflict with or
result in the breach of, or constitute a default under, any indenture, mortgage,
deed of trust, lease, agreement or other instrument to which it is a party or by
which it or any of its property is bound, and the same do not require the
consent or approval of any governmental body, agency, authority of other entity
other than those that have been obtained; except for such contravention,
violation or conflict which would not individually or in the aggregate have a
Material Adverse Effect on the UWS Entities taken as a whole. This Agreement has
been duly executed and delivered by each of the UWS Entities and constitutes the
legal, valid and binding obligation of each of the UWS Entities, enforceable
against it in accordance with its terms except as such enforceability may be
limited by bankruptcy or similar laws affecting the enforceability of creditors
rights generally.
C. U-Care Documents. UWS has delivered to HMOW a true and
correct copy of the letter of intent, dated August 24, 1994, among the UWS
Entities, UHC and U-Care (as hereafter defined) and any documents or agreements
related thereto (collectively, the "U-Care Letter of Intent"), which have not
been amended or modified and remain in full force and effect. The definitive
U-Care documents (as discussed in Section 4.2.C, below) will constitute true,
complete, and correct copies of such documents as of the date delivered to HMOW.
D Compliance; Permits. Each of the UWS Entities: (a) is duly
qualified as a foreign corporation under the 1aws of each jurisdiction where
failure to qualify would have a Material Adverse Effect upon it; (b) has the
requisite corporate power and authority and the legal right to own, pledge and
operate its properties, to lease the property it operates under lease and to
conduct its business as now conducted; (c) has all necessary licenses, permits,
consents or approvals from or by, and has made all necessary
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filings with, and has given all necessary notices to, all governmental
authorities having jurisdiction, to the extent required for such ownership,
operation and conduct, except where the failure to obtain such licenses,
permits, consents or approvals or to make such filings will not have a Material
Adverse Effect upon it; (d) is in compliance with its articles of incorporation
and bylaws and all material agreements to which it is a party or by which it is
bound except where the failure to comply will not have a Material Adverse Effect
upon it; and (e) is in compliance in all respects with all applicable provisions
of law except where the failure to comply will not have a Material Adverse
Effect upon it.
E. Absence of Litigation. None of the UWS Entities is a party
to any litigation or administrative proceeding, nor so far as is known by them
is any litigation or adverse administrative proceeding or hearing threatened
against any UWS Entity which in either case relates to the execution, delivery
or performance of this Agreement.
F. No Misstatements. To its knowledge, no information, exhibit
or report, whether written or oral, furnished by the UWS Entities to the HMOW
Entities in connection with the negotiation or execution of this Agreement
contained any misstatement of a material fact or omitted to state a material
fact necessary to make the statements contained therein not misleading as of the
date when made.
ARTICLE 3 - JOINT VENTURE
3.1. Joint Venture. Blue Cross, UWS and HMOW (the
"Participants") are entering into this agreement with one another in order to
produce, market and administer managed care products which utilize a provider
network. They will coordinate the design and marketing of various managed care
products, including, without limitation one or more Preferred Provider
Organization ("PPO"), Point of Service ("POS") and Health Maintenance
Organization ("HMO") products and programs, all of which may be fully insured or
self-funded. This Joint Venture shall become effective with the Closing
contemplated in Section 1.9. The Participants may, but do not intend to, create
hereby a separate entity to conduct the business of the Joint Venture. Rather,
the term "Joint Venture" as used in this Agreement refers to the cooperation and
coordination which the Participants intend will exist among them. The mechanism
for such cooperation and coordination shall be a Governing Board (described in
Section 3.6) which shall make decisions for the Joint Venture.
3.2. Agency Relationship. This Agreement shall not
create any agency relationship between the Participants other than
those specifically enumerated herein and in any related Joint
Venture documents. The relationships between the parties are that
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of independent contractors in a cooperative arrangement. It is not the intent of
the Participants to create, nor should this Agreement be construed to create, a
partnership under Chapter 178 of the Wisconsin Statutes or an employment
relationship between the Participants. This Agreement creates no fiduciary
relationship between the Participants.
3.3. U-Care Joint Venture. The UWS Entities are currently negotiating
with University Health Care, Inc. ("UHC") and U-Care HMO, Inc. ("U-Care") to
form a joint venture and for UWS to acquire one hundred percent (100~) of the
assets of U-Care (the "U-Care Joint Venture"). Should the U-Care Joint Venture
be completed, the parties agree that the business of the Joint Venture and the
business of the U-Care Joint Venture shall be merged.
3.4. Other Joint Ventures.
A. If the UWS Entities enter into a new joint venture (the
"Fox Valley Joint Venture") with another person covering the Wisconsin Counties
of Winnebago, Fond du Lac, Waushara and Green Lake (the "Fox Valley Area"), the
UWS Entities may, within their sole discretion and without approval by the
Governing Board, transfer HMO membership and provider relationships in the Fox
Valley Area to such new joint venture. In the event of any such transfer, the
Governing Board of the Joint Venture shall approve the amount of consideration
to be paid by UWS to LLC therefor pursuant to the Service Agreement, if any. The
amount of consideration, if any, to be paid by UWS shall be calculated to
reflect any adverse impact to LLC as to the amount of payment LLC is entitled to
receive under the Service Agreement. If the governing board of the Joint Venture
does not approve the amount of such consideration offered by UWS, then the
amount of consideration to be paid by UWS to LLC shall be arbitrated as provided
in Article 9 below.
B. Effective with the time the Fox Valley Joint Venture is
established, if any, the primary care physicians located in the Fox Valley Area
shall not be included in the calculation used to determine any Bonus Payment
under Sections 3.5.A(i) and (ii), nor shall the hospitals located in the Fox
Valley Area be used to determine compliance with Section 3.5.B.
3.5. HMOW Provider Agreements.
A. Medical Services. HMOW shall enter into a provider
agreement with the Community Physicians' Network, Inc. ("CPN") to serve as the
central provider of professional medical services within the network for the HMO
plan. The provider agreement shall have a term which shall not expire prior to
the date which is five (5) years from January 1, 1995 (the "Initial CPN Provider
Agreement.~). The Initial CPN Provider Agreement shall adopt the capitation
rates in effect with HMOW on the Closing Date (after
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eliminating the adjustment to said rates which reimbursed CPN for its purchase
in 1993 of Holding Company Class B Common Stock held by HMOW employees) and
provide for annual adjustments not to exceed the medical component of the
Consumer Price Index ("CPI"). The Initial CPN Provider Agreement may be
modified, at the Governing Board's discretion, with respect to the scope of
services that is covered by the capitation payment. Should such services be
excluded from CPN's capitation risk, the capitation rate shall be actuarially
adjusted to reflect the reduction in risk.
(i) UWS shall make a bonus payment (the "Bonus
Payment") of up to $1,500,000 to CPN if CPN obtains five (5) year
contracts with the current participating primary care physicians, at
the terms presently in effect, for providers located in the following
Wisconsin counties: Xxxxx, Columbia, Xxxxxxxx, Xxxx, Fond du Lac,
Grant, Green, Green Lake, Iowa, Juneau, Lafayette, Marquette, Monroe,
Richland, Sauk, Xxxxxx, Waushara and Winnebago. The contracts must be
fully executed and presented at the offices of HNOW within 120 days
following the Closing Date. CPN may use any or all of this Bonus
Payment as incentive payments to the primary care physicians for
signing the contracts.
(ii) The Bonus Payment will be paid according to the
following schedule, which represents the percentage of the total number
of current participating primary care physicians in the geographic area
identified in (i) above who sign the five-year contracts:
60% of Current Participating
Primary Care Physicians $.50 million
65% $.75 million
70% $1.0 million
75% $1.25 million
80% or more $1.50 million
No Bonus Payment will be made if fewer than sixty percent (60%) of the
current primary care physicians sign the contracts.
B. Hospital Services. HMOW shall obtain five (5) year
contracts with the hospitals that represent at least 90% of the inpatient and
institutional care provided to HMOW subscribers during benefit year 1993 in the
counties identified in 3.5.A(i) above. Though different reimbursement
methodologies may be allowed, the contracts must provide substantially similar
aggregate reimbursement levels as the existing contracts with annual adjustments
not to exceed the medical component of the CPI.
C. Discretionary Payments. UWS shall provide $500,000 for
distribution to CPN, at the discretion of the Governing Board, for the
development, enhancement and maintenance of independent
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physician practices.
3.6. Governance.
A. Governing Board. The Joint Venture shall be managed by a
governing board ("Governing Board") which shall also serve as the HMOW board of
directors. The Governing Board shall consist of the members appointed as
follows:
(a) In the event that UWS enters into the U-Care
Joint venture:
UWS four members
LLC (as hereinafter defined) four members
UHC three members
(b) In the event that UWS does not enter into the
U-Care Joint Venture or the U-Care Joint Venture is terminated:
UWS four members
LLC four members
B. The Governing Board shall meet at least once in each fiscal
quarter at the Joint Ventures' home office facility or such other place as the
Governing Board may from time to time agree. Any individual member of the
Governing Board shall have the power and authority, upon three days written
notice, to call a meeting of the Governing Board to discuss and administer the
business of the Joint Venture. Members of the Governing Board may participate in
meetings either telephonically or in person. The Joint Venture shall not pay
members of the Governing Board.
C. A chairman shall preside over each meeting of the Governing
Board. The chairman shall be a member of the Governing Board and the entities
entitled to appoint members shall each have the power to appoint the chairman
for a one (1) year term on a rotating basis.
D. In the event that UWS enters into the U-Care Joint Venture,
eight (8) members of the Governing Board shall constitute a quorum for the
transaction of business, subject to the voting requirements in Section 3.6.F
below. In the event that UWS does not enter into the U-Care Joint Venture, five
(5) members of the Governing Board shall constitute a quorum, subject to the
voting requirements in Section 3.6.F below.
E. Any action that the Governing Board could take at a meeting
may be taken instead by a written consent signed by all of the members of the
Governing Board.
F. Voting Requirement. The Governing Board may not take
any action without the approval of at least five of its
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members (or, if UWS enters into the U-Care Joint Venture, eight of its members),
which shall include at least one member elected by each entity appointing
members to the Governing Board. UWS agrees to cause the Bylaws of HMOW to
provide for the number of directors, appointment and election thereof, the
voting requirements and any other matters of governance set forth in this
Section 3 6.
G. Duties of the Governing Board.
(a) The Governing Board shall be responsible for the
general management of the Joint Venture. Notwithstanding the
foregoing, the Underwriters (as defined in Section 3.7.A)
shall have the sole authority, without the approval of the
Governing Board, to establish rates and arrange reinsurance
for the Joint Venture business.
(b) The Governing Board shall establish such books,
records and accounts for the Joint Venture as it deems
reasonably necessary and allow each of the parties, upon
request, to review such books, records and accounts. The
Governing Board shall maintain records of all of its meetings
and actions taken in a manner substantially similar to that
which a Board of Directors of a corporation organized under
Chapter 180 of the Wisconsin Statutes (the "Wisconsin Business
Corporation Law" or "WBCL") would maintain.
H. Committees. The Governing Board may establish such
committees with such authority to act on its behalf as it may deem necessary or
appropriate; provided, however, that any committee so created must contain at
least one member from each of the entities entitled to appoint members to the
Governing Board.
3.7. Operations.
A. Underwriting. Blue Cross shall be the underwriter for any
PPO plans offered by the Joint Venture and HMOW shall be the underwriter of the
HMO and HMO portion of the POS plans (the indemnity portion to be underwritten
by Blue Cross or an affiliate) offered by the Joint Venture (in such capacity,
Blue Cross, its affiliates, and HMOW shall be referred to as "Underwriters").
B. Benefit Administration. On self-funded programs, Blue Cross
shall administer benefits under the PPO plans and HMOW shall administer benefits
under the HMO and POS plans (in such capacity, Blue Cross and HMOW shall be
referred to as "Administrators").
C. Other Administrative Services. The Underwriters and
Administrators shall enter into an administrative services agreement with the
applicable UWS Entities as of the Closing Date
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(the "Administrative Services Agreement"). The UWS Entities will be compensated
for providing the administrative services on a cost basis such that all
administrative "profit" will remain with the product to be divided as
underwriting profit. All such Administrative Services Agreements shall be
subject to approval by the Governing Board of the Joint Venture. The
administrative services to be provided by the UWS Entities may include
accounting, actuarial, financial reporting, management information, legal, and
any other administrative services needed by the Underwriter or Administrator.
D. Medical Management and Review. Notwithstanding that the
center of operations for the Joint Venture will be in Sauk City, Wisconsin (see
Section 4.2.I, below), in the event that UWS enters into the U-Care Joint
Venture, medical management and review services which relate directly to U-Care
Joint Venture business with U-Care providers shall be located in Madison,
Wisconsin. Notwithstanding the provisions of Section 4.2.H, below, the Governing
Board may determine that additional services should be performed at a facility
other than the HMOW Sauk City facility.
E. Assumption Reinsurance Agreement. In the event that UWS
enters into the U-Care Joint Venture, U-Care's insurance business will be
transferred to HNOW, an indirect wholly owned subsidiary of UWS, by means of an
Assumption Reinsurance Agreement. Under the Assumption Reinsurance Agreement, to
be executed by HMOW and U-Care, U-Care will cede its insurance business to HMOW,
and HMOW will reinsure such business.
F. Establishment of LLC. Prior to the Closing Date, certain of
the Holding Company Shareholders shall establish a limited liability company
organized under Chapter 183 of the Wisconsin Statutes (the "LLC") which shall
appoint the Governing Board and HMOW Board members as provided in Section 3.6.A
during the term of this Agreement and which shall enter into a service agreement
with UWS substantially in the form attached hereto as Exhibit C (the "Service
Agreement"). No shareholder of the Holding Company who exercises dissenters'
rights in the Merger will be a member of the LLC.
ARTICLE 4 - COVENANTS
4.1. The HMOW Entities.
A. Due Diligence. During the period from the date hereof until
the Closing Date, the HMOW Entities shall give each of the UWS Entities, their
counsel, accountants and other representatives (including, without limitation,
representatives of UHC and U-Care) (a) access during normal business hours to
all of the properties, books, records, contracts and documents of the HMOW
Entities that relate to the HMOW Entities or the business of the
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HMOW Entities for the purpose of such inspection, investigation and testing as
the UWS Entities deem appropriate; and (b) subject to such restrictions as HMOW
may reasonably impose, access to employees, agents and representatives of the
HMOW Entities for the purposes of such meetings and communications that relate
to HMOW or the HMOW business as the UWS Entities may reasonably desire.
B. Conduct of Business Prior to the Mercer Effective
Time.
(1) Affirmative Covenants. Prior to the Merger Effective Time,
unless the prior written consent of UWS shall have been obtained and
except as otherwise contemplated herein, each of the HMOW Entities
shall: (a) operate its business only in the usual, regular and ordinary
course consistent with past practices; (b) use its reasonable best
efforts to preserve intact its business organization and assets,
maintain its rights and franchises, retain the services of its officers
and key employees and maintain its relationships with customers; (c)
maintain and keep its properties in as good repair and condition as at
present, ordinary wear and tear excepted; (d) keep in full force and
effect insurance and bonds comparable in amount and scope of coverage
to that now maintained by it; (e) perform in all material respects all
obligations required to be performed by it under all contracts, leases,
and documents relating to or affecting its assets, properties, and
business; (f) take all action prior to Closing that may be reasonably
necessary to obtain all requisite consents for the consummation of the
transactions contemplated hereby including, without limitation, all
requisite regulatory approvals; (g) on or before the 20th day prior to
the Closing Date, deliver to the UWS Entities all of the documents
requested in writing by UWS; and (h) comply with and perform in all
material respects all obligations and duties imposed upon it by all
applicable Laws.
(2) Negative Covenants. Except as specifically contemplated
by this Agreement, from the date of this Agreement until the Merger
Effective Time, no HMOW Entity shall, without the prior written consent
of UWS, do any of the following:
(a) (i) grant any general increase in compensation to
its employees, officers or directors, except in accordance
with past practice, or as required by Law, or increases which
are not material, (ii) effect any change in retirement
benefits to any class of employees or officers (unless any
such change shall be required by applicable Law) which would
increase its retirement benefit liabilities, (iii) adopt,
enter into, amend or modify any Employee Benefit Plan or make
any adjustments pursuant to any employee benefit plan, except
as required
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by Law, or (iv) enter into or amend any employment, severance
or similar agreements or arrangements with any directors,
officers or employees, other than pursuant to this Agreement;
(b) declare or pay any dividend on, or make any other
distribution in respect of, the outstanding shares of Holding
Company Common Stock, HMOW Common Stock or Hometown
Common Stock;
(c) (i) redeem, purchase or otherwise acquire any
shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital
stock, or any options, warrants, conversion or other rights to
acquire any shares of its capital stock or any such securities
or obligations, (ii) merge with or into any other corporation,
permit any other corporation to merge into it or consolidate
with any other corporation, or effect any reorganization or
recapitalization, (iii) purchase or otherwise acquire any
substantial portion of the assets, or more than 5% of any
class of stock, of any corporation, or other business, other
than in the ordinary course of business and consistent with
past practice, (iv) liquidate, sell, dispose of, or
encumber.any assets or acquire any assets, other than in the
ordinary course of its business and consistent with past
practice, or (v) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(d) issue, deliver, award, grant or sell, or
authorize or propose the issuance, delivery, award, grant or
sale of, any shares of any class of capital stock of an HMOW
Entity (including shares held in treasury) or any rights,
warrants or-options to acquire, any such shares;
(e) propose or adopt any amendments to the Articles
of Incorporation or Bylaws of an HMOW Entity in any way
adverse to-UWS;
(f) purchase or offer to purchase any shares of
Holding Company Common Stock, HMOW Common Stock or Hometown
Common Stock, except that Holding Company may purchase the
issued and outstanding shares of Hometown Common Stock not
presently owned by Holding Company for a price not to exceed
the book value per share of the Hometown Common Stock on the
purchase date;
(g) change any of its methods of accounting in effect
at December 31, 1993, or change any of its methods
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of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal
income tax returns for the taxable years ending December 31,
1992 and December 31, 1993, except as may be required by law
or regulatory accounting standards;
(h) change any material policies concerning the
business or operations of the HMOW Entities, except as
required by Law;
(i) incur or assume any material obligation or
liability, including without limitation any obligation for
borrowed money whether or not evidenced by a note, bond,
debenture or similar instrument, or investment in an amount
greater than Seventy-Five Thousand Dollars ($75,000), make any
investment in assets in an amount greater than Seventy-Five
Thousand Dollars ($75,000), assume, guaranty, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
person or entity or mortgage, license, pledge or grant a
security interest in any of its material assets or allow to be
created any material lien thereon, except for liabilities and
obligations incurred in the ordinary course of business,
consistent with past practices and in amounts not material to
the HMOW Entities taken as a whole and as may be required
under existing agreements to which the HMOW Entity is a party;
(j) enter into any agreement with respect to any
acquisition of a material amount of assets or securities or
any discharge, waiver, satisfaction, release or relinquishment
of any material contract rights, liens, encumbrances, debt or
claims-, not in the ordinary course of business and consistent
with past practices, settle any claim, action, suit,
litigation, proceeding, arbitration, investigation or
controversy of any kind, for any amount in excess of Five
Thousand Dollars ($5,000.00) or in any manner which would
restrict in.any material respect the operations or business of
the HMOW Entities, enter into any contract not terminable on
thirty (30) days written notice and without penalty of any
kind, or take any action or fail to take any action which
individually or in the aggregate can be expected to have a
Material Adverse Effect on the HMOW Entities taken as a whole;
and
(k) agree in writing or otherwise to do any of the
foregoing.
C. Closing Date. The HMOW Entities shall use all
reasonable efforts to cause a fulfillment by November 1, 1994, or
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an earlier date if possible, of all of the conditions to the parties'
obligations to consummate the transactions contemplated in this Agreement, on
terms and conditions reasonably acceptable to the UWS Entities.
4.2 UWS Entities.
A. Closing Date. Each of the UWS Entities shall use all
reasonable efforts to cause a fulfillment by November 1, 1994, or an earlier
date if possible, of all of the conditions to their obligations to consummate
the transactions contemplated in this Agreement, on terms and conditions
reasonably acceptable to the HMOW Entities.
B. Due Diligence of U-Care. The UWS Entities shall permit two
(2) representatives of the HMOW Entities to accompany the UWS Entities during
UWS's due diligence of U-Care. If the Holding Company Entities wish to send more
than two (2) representatives, they shall so notify the UWS Entities prior to the
applicable meeting and shall be entitled to send such additional representatives
unless the UWS Entities shall reasonably object. The UWS entities shall provide
to the HMOW Entities copies of all U-Care due diligence reports prepared by
third party consultants retained by the UWS Entities. The UWS Entities covenant
that no expense, loss or liability attributable to that approximate $4.4 million
in debt assumed and owed by U-Care to University of Wisconsin Hospitals and
Clinics referenced in Section 14.4 of the Joint Venture Agreement by and among
Blue Cross, UWS, UHC, U-Care and Health Professionals, Inc. will be taken into
account in computing the payments to LLC under the Service Agreement.
C. U-Care Documents. The UWS Entities shall deliver to HMOW as
soon as available, but in no event later than ten (10) days prior to the Closing
Date all definitive agreements entered into, or the latest draft of any such
agreements proposed to be entered into, by any UWS Entity in connection with the
U-Care Joint Venture, including, but not limited to, the Assumption Reinsurance
Agreement to be executed by HMOW and U-Care.
D. HMOW Employees. Employees providing services to HMOW at
closing shall remain employees of HMOW and no such employee shall be terminated
during the first twelve (12) months of the Joint Venture except for cause. UWS
agrees to continue each such employee's employment with HMOW at a salary
substantially similar to the salary the employee is receiving from HMOW on the
Closing Date and with substantially the same fringe benefits. It is agreed by
the parties that no exception on an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), may be
made for any employee that may cause a presently qualified plan to lose its
qualification under ERISA. UWS shall make a good faith effort to offer to an
employee for any fringe benefit the employee may lose as a result of the Joint
Venture.
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X. Xxx-xxx or Termination of HMOW Employees. Individuals
employed by HMOW as of the Closing Date and who are laid off prior to a date
which is twelve (12) months from the Closing Date shall receive from UWS
severance pay in an amount equal to the wages and health insurance premium
contribution the employee would have been expected to receive during the balance
of said twelve (12) month period had the individual continued employment with
HMOW. Upon the request of UWS, the Governing Board may approve the payment of
severance pay in a lesser amount than provided herein. In the event that after
the Closing Date an individual employed by HMOW as of the Closing Date is
terminated for cause or terminated with the approval of the Governing Board
prior to a date which is twelve (12) months from the Closing Date, the Governing
Board may approve a lesser amount of severance pay than is otherwise
contemplated herein or no severance pay.
F. No Subsidiary Business. Subsidiary will not engage in
any business or enter into any transactions whatsoever except such as related
to the Merger and the Plan and the performance of its obligations hereunder.
G. HMOW President. UWS agrees to offer the President of
HMOW (Xxxxx X. Xxxxxx) a three (3) year employment contract with HMOW
consisting of a total compensation package (salary, profit sharing, incentive
programs and fringe benefits) with a value substantially similar to the total
compensation package he is receiving from HMOW on the Closing Date. The
specific terms of the total compensation package will be determined by the
parties prior to the Closing Date. If a question arises between the parties
regarding the interpretation or application of the total compensation
package, such questions shall be presented to the Governing Board for a final
decision.
H. Rural Hospital Representation on the Blue Cross Board of
Directors. Blue Cross agrees to appoint one rural hospital representative to
its Board of Directors.
I. HMOW Office Facility. The UWS Entities agree that Joint
Venture operations will be located in HMOW's office facility in Sauk City,
Wisconsin. UWS shall pay off the mortgage on the HMOW office building within
90 days of the Closing Date and will strive to utilize fully the capacity of
the building through growth of HMOW and acquisition of other insurance
business or transfer of existing Blue Cross or UWS operations to Sauk City.
4.3. Mutual Covenants.
A. Implementation Plan. Prior to Closing, the Participants
shall develop a marketing plan, budget and transition plan (which shall include
the U-Care business if the UWS Entities enter into the U-Care Joint Venture)
relating to the Joint Venture business that is mutually acceptable to the
parties (the
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"Implementation Plan").
B. Bylaws. Prior to Closing, the Participants shall
prepare mutually acceptable Bylaws for the Governing Board, which
the Governing Board shall adopt.
C. Information; Filings; Consents.
(a) Upon request by UWS, the Holding Company shall, and shall
cause each Company Subsidiary to, promptly furnish UWS with all
information concerning an HMOW Entity required for inclusion in any
application or statement made by UWS to any government agency or
authority in connection with the transactions contemplated by this
Agreement.
(b) Each of the parties hereto agrees to use its reasonable
best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable
under applicable Laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. In case at any time
after the Closing any further action is necessary or desirable to carry
out the purposes of this Agreement, each party to this Agreement shall
use all reasonable efforts to take such necessary action.
D. Notification of Certain Matters. The Holding Company shall
give prompt notice to UWS, and UWS shall give prompt notice to Holding Company
of (i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate, and (ii) any failure of
an HMOW Entity or UWS Entity, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however that the delivery of any notice pursuant to this
Section 4.3.D shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice. The parties hereto agree that,
should any party receive written communications from any regulatory agency
regarding the proposed transaction, the recipient shall send a copy of such
correspondence to the other parties within three (3) business days of receipt,
except as prohibited by any applicable Law.
E. Public Announcements. Except as may be required by
applicable securities laws or any listing agreement with any national securities
exchange, the UWS Entities and HMOW Entities will consult with and obtain the
approval of one another before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation and mutual approval. If UWS is
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required by applicable securities laws or any listing agreement with any
national securities exchange to disclose the existence of this Agreement or make
disclosures regarding the transactions contemplated herein, UWS shall provide
notice of said disclosure to the Holding Company prior to the issuance or
publication of such notice.
F. Employment of Officer. Following the Closing, Xxxxx X.
Xxxxxx shall continue in his position as President of HMOW, pursuant to the
terms of an employment and non-competition agreement substantially similar to
Exhibit D to this Agreement.
ARTICLE 5 - NON-COMPETITION
5.1. Noncompete with Joint Venture.
A. Unless otherwise agreed by the Governing Board pursuant to
Section 3.6, neither the HMOW Entities nor the UWS Entities shall during the
term of the Joint Venture, directly or indirectly offer or participate in the
offering, except through the Joint Venture, of any HMO, PPO, POS or other
managed care products, either insured or self-funded, which utilize a provider
network, which has a location in HMOW's current service area of the Wisconsin
counties listed in Section 3.5.A(i). Notwithstanding the foregoing, should UWS
or Blue Cross develop a new joint venture with another partner in the Fox Valley
Area, as described in Section 3.4, the Participants agree that the establishment
of such joint venture shall not violate this Section 5.1. The Participants
further agree that providers that have contracted with CPN or HMOW shall have a
right of first refusal regarding any new PPO relationship established within the
counties identified in Section 3.5.A(i)
B. The parties agree that if UWS should enter into the U-Care
Joint Venture, Dodge County will be added to the counties referenced in Section
3.5.A(i).
C. The parties acknowledge that Blue Cross has existing PPO
relationships, and it is agreed that these existing relationships do not violate
this Section 5.1, provided that Blue Cross delivers to the HMOW Entities a list
describing and identifying these relationships prior to the Closing Date.
5.2. Standstill.
A. Until November 1, 1994, or the actual Closing Date if
later, the HMOW Entities shall not discuss or negotiate with any third party or
entity to authorize (and shall use reasonable efforts to prohibit) any of its
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by the HMOW Entities or a Holding Company
Shareholder to
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take any such action) the possible acquisition of the assets or equity
securities of Holding Company or HMOW or the possible structuring of a
comparable joint venture or partnership involving the development and furnishing
of HMO, PPO, POS or other managed care products, either insured or self-funded,
which utilize a provider network and which has a location in any of the
Wisconsin counties specified in Section 3.5.A(i).
ARTICLE 6 -- CONDITIONS TO THE OBLIGATION OF
THE UWS ENTITIES TO CLOSE
The obligations of the UWS Entities to consummate the transactions
contemplated herein shall be subject to the satisfaction, on or prior to the
Closing Date, of all of the following conditions (any of which may be waived by
the UWS Entities):
6.1. Completion of Due Diligence. The UWS Entities shall have completed
to their satisfaction a thorough due diligence review of the financial
condition, legal matters and operational information and other matters
associated with the HMOW Entities and no material adverse change in the
operations or financial condition of the HMOW Entities between the date hereof
and the Closing shall have occurred.
6.2. Legal Opinion. The UWS Entities shall have been furnished with an
opinion of their own counsel regarding the tax, anti-trust and other
considerations as they may reasonably require, subject to whatever changes the
opinion giver may deem reasonably necessary to comply with the legal opinion
standards of such opinion giver; provided, however, that the opinion as changed
provides the same comfort to the recipient, in the reasonable opinion of the
recipient.
6.3. Regulatory Approvals and Third Party Consents.
A. This Agreement, and all aspects of the transactions
contemplated hereby, shall have received all appropriate and necessary
regulatory and third party approvals, waivers or consents, including without
limitation, the approvals of the State of Wisconsin Office of the Commissioner
of Insurance, Securities and Exchange Commission, and Department of Justice, and
all third party consents and approvals (collectively the "Approvals"), which
Approvals shall be in full force and effect;
B. any conditions and directions contained in the Approvals
shall have been fully complied with in all material respects; and
C. the Approvals shall not modify the terms and conditions
of this Agreement, and the transactions contemplated
-25-
herein, in any material respect.
6.4. Representations and Warranties Accurate. The representations and
warranties of the Holding Company and HMOW contained in this Agreement shall be
true and accurate on and as of the Closing Date with the same force and effect
as if made on and as of the Closing Date, except for those representations and
warranties which address matters only as of a particular date (which shall
remain complete and correct as of such date).
6.5. Compliance. The HMOW Entities shall have performed and complied
with all of their respective obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date.
6.6. Government Order, Injunction. No court, domestic or foreign, shall
have entered and maintained in effect an injunction or other similar order
enjoining consummation of the transactions provided for herein, and no action or
proceeding shall have been instituted and remain pending before a court or other
governmental body by any governmental agency or public authority to restrain or
prohibit the transactions contemplated by this Agreement, nor shall any
governmental agency have notified any party to this Agreement that consummation
of the transactions contemplated hereby would constitute a violation of the laws
of the United States or the State of Wisconsin and that it intends to commence
proceedings to restrain the consummation of the transactions contemplated hereby
unless such agency shall have withdrawn such notice prior to the Closing.
6.7. Other Contingencies. The parties shall satisfy such other
contingencies as are set forth in this Agreement.
6.8. Delivery of Items at Closing. At the Closing, the HMOW
Entities shall have delivered to the UWS Entities:
A. A certificate, dated as of the Closing Date and reasonably
satisfactory in form and substance to the DWS Entities and their counsel, of an
executive officer of the Holding Company and HMOW, certifying that the
conditions in Sections 6.4 and 6.5 have been met.
B. The resolutions of the boards of directors and shareholders
of the Holding Company and HMOW, authorizing the transactions contemplated by
this Agreement, duly certified as of the Closing Date.
C. An executed original of the Assumption Reinsurance
Agreement referred to in Section 3.7.E.
D. Executed originals of the Administrative Services
Agreements referred to in Section 3.7.C.
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E. Executed originals of the provider agreements referred to
in Section 3.5.
6.9. Employment Agreement. Xxxxx X. Xxxxxx shall have entered into an
Employment and Non-competition Agreement substantially in the form attached
hereto as Exhibit D which agreements shall become effective immediately
following the Closing, and any employment agreement with Xxxxx X. Xxxxxx
existing as of the date of this Agreement to which an HMOW Entity is a party
shall have been terminated as of the Closing Date.
6.10. No Challenge. There shall not be pending any action, proceeding
or investigation before any court or administrative agency or by any government
agency or any other person: (i) challenging or seeking material damages in
connection with the Merger or Joint Venture, or (ii) seeking to restrain,
prohibit or limit the exercise of full rights of ownership or operation by UWS
of any portion of the business or assets of the Holding Company.
6.11. No Material Adverse Change. The business, properties and
operations of the HMOW Entities shall not have been materially adversely
affected in any way from the date of this Agreement to the Closing Date.
6.12. No Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger or Joint Venture, by any federal or state governmental
entity which, in connection with the grant of any regulatory approval, imposes
any condition or restriction upon the UWS Entities, including, without
limitation, any requirement to raise additional capital, which -would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger or Joint Venture.
6.13. Execution of Service Agreement. At the Closing Date, the LLC
shall execute and deliver to UWS the Service Agreement.
6.14. Dissenting Shares. Holders of Dissenting Shares shall hold no
more than 10% of the Shares.
ARTICLE 7 - CONDITIONS TO THE OBLIGATION OF
THE HMOW ENTITIES TO CLOSE
The obligations of the HNOW Entities to consummate the transactions
contemplated herein shall be subject to the satisfaction, on or prior to the
Closing Date, of all of the following conditions (any of which may be waived by
the HMOW Entities):
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7.1. Legal Opinion. The HMOW Entities shall have been furnished with an
opinion of their counsel regarding the tax, antitrust and other considerations
as they may reasonably require, subject to whatever changes the opinion giver
may deem reasonably necessary to comply with the legal opinion standards of such
opinion giver; provided, however, that the opinion as changed provides the same
comfort to the recipient, in the reasonable opinion of the recipient.
7.2. Completion of Due Diligence. The HMOW Entities shall have
completed to their satisfaction a thorough due diligence review of the financial
condition, legal matters and operational information and other matters
associated with the UWS Entities (including UHC and U-Care if the U-Care Joint
venture is established), and no material adverse change in the operations of any
UWS Entity (and UHC or U-Care if the U-Care Joint Venture is established)
between the date hereof and the Closing shall have occurred.
7.3. Regulatory Approvals and Third Party Consents.
A. This Agreement, and all aspects of the transactions
contemplated hereby, shall have received all Approvals, which Approvals shall be
in full force and effect;
B. any conditions and directions contained in the Approvals
shall have been fully complied with in all material respects; and
C. the Approvals shall not modify the terms and conditions of
this Agreement, and the transactions contemplated herein, in any material
respect.
7.4. Representations and Warranties Accurate. The representations and
warranties of UWS and Subsidiary contained herein shall be true and accurate on
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, except for those representations and warranties which
address matters only as of a particular date (which shall remain complete and
correct as of such date).
7.5. Compliance. The UWS Entities shall have performed and complied
with in all material respects, all of their respective obligations under this
Agreement which are to be performed or complied with by them prior to or on the
Closing Date.
7.6. Government Order, Injunction. No court, domestic or foreign, shall
have entered and maintained in effect an injunction or other similar order
enjoining consummation of the transactions provided for herein, and no action or
proceeding shall have been instituted and remain pending before a court or other
governmental body by any governmental agency or public authority to restrain or
-28-
prohibit the transactions contemplated by this Agreement, nor shall any
governmental agency have notified any party to this Agreement that consummation
of the transactions contemplated hereby would constitute a violation of the laws
of the United States or Wisconsin and that it intends to commence proceedings to
restrain the consummation of the transactions contemplated hereby unless such
agency shall have withdrawn such notice prior to the Closing.
7.7. U-Care Documents. If the UWS Entities shall have entered into
definitive agreements with respect to the U-Care Joint Venture, copies of all
such agreements, including without limitation all amendments thereto and all of
the definitive U-Care documents, shall have been furnished to the Holding
Company. Such agreements shall not contain any terms or conditions not otherwise
contained in the U-Care Letter of Intent that are adverse to the HMOW Entities
in any material respect.
7.8 Other Contingencies. The parties shall satisfy such other
contingencies as are set forth in this Agreement.
7.9. Delivery of Items at Closing. At the Closing, the UWS Entities
shall have delivered to the HMOW Entities:
A. A certificate, dated as of the Closing Date and reasonably
satisfactory in form and substance to the HMOW Entities and their counsel, of an
executive officer of UWS and Blue Cross that the conditions in Sections 7.4 and
7.5 have been met.
B. The resolution of the board of directors of Blue Cross, UWS
and Subsidiary authorizing the transactions contemplated by this Agreement, duly
certified as of the Closing Date by their respective Secretaries.
C. An executed original of the Assumption Reinsurance
Agreement referred to in Section 3.7.E.
D. Executed originals of the Administrative Services
Agreements referred to in Section 3.7.C.
7.10. Employment Agreement. Xxxxx X. Xxxxxx shall have entered into an
Employment and Non-competition Agreement substantially in the form attached
hereto as Exhibit D which agreement shall become effective immediately following
the Closing, and any employment agreement with Xxxxx X. Xxxxxx existing as of
the date of this Agreement to which an HMOW Entity is a party shall have been
terminated as of the Closing Date.
7.11. No Challenge. There shall not be pending any action, proceeding
or investigation before any court or administrative agency or by any government
agency or any other person: (i) challenging or seeking material damages in
connection with the Merger or Joint Venture, or (ii) seeking to restrain,
-29-
prohibit or limit the exercise of full rights of ownership or operation by UWS
of any portion of the business or assets of the Holding Company.
7.12. No Material Adverse Change. The business, properties and
operations of the UWS Entities shall not have been materially adversely affected
in any way from the date of this Agreement to the Closing Date.
7.13. No Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger or Joint Venture, by any federal or state governmental
entity which, in connection with the grant of any regulatory approval, imposes
any condition or restriction upon any of the HMOW Entities, including, without
limitation, any requirement to raise additional capital, which would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger or Joint venture.
7.14. Execution of Service Agreement. At the Closing Date, UWS
shall execute and deliver to LLC the Service Agreement.
ARTICLE 8 -- TERM AND TERMINATION
8.1. Term. The joint Venture shall have an initial term of ten (10)
years from October 1, 1994 (the "Effective Date"), unless terminated in
accordance with this Article. If the LLC does not exercise its option to acquire
the Holding Company set forth in the Service Agreement at either the fifth (5th)
or tenth (lOth) anniversary of the Closing Date, the Joint Venture shall
automatically renew for additional five (5) year terms until written notice of
termination is given at least 180 days prior to the end of the then current
term.
8.2. Termination of Agreement. This Agreement may be terminated as
follows:
A. The parties may terminate this Agreement prior to the
Closing by mutual agreement.
B. This Agreement may be terminated by any party hereto if
Closing does not occur by November 1, 1994 (or a later date if the parties
mutually agree) for a reason other than the failure of the terminating party, or
an affiliate thereof, to comply with its obligations under this Agreement;
C. This Agreement may be terminated by any party hereto if any
permanent injunction preventing the consummation of the transactions
contemplated hereby shall have become final and nonappealable.
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8.3. Termination of Joint Venture.
A. The Joint Venture may be terminated at the end of the
initial ten (10) year term if written notice is given at least 180 days prior to
the end of said term.
B. The Joint Venture will automatically terminate if the LLC
exercises its right to acquire the Holding Company set forth in the Service
Agreement, unless the parties agree otherwise.
C. The Joint Venture may be terminated by UWS on the date
which is five (5) years from the Effective Date in the event that any one or
more of the following events exists on said date:
(i) There exists an Aggregate Joint Venture Net Loss as
hereinafter defined for the period October 1, 1994 through September
30, 1999 calculated and determined by the accounting firm selected by
the Governing Board.
(ii) UWS demonstrates to the Governing Board and the Governing
Board agrees that there is a reasonable likelihood that an Aggregate
Joint Venture Net Loss will likely be incurred for the period October
1, 1999 through September 30, 2004, calculated and determined as
provided in Sections 8.3.D.(i) or 8.3.D.(ii), whichever is applicable;
provided that in the event the Governing Board prohibits UWS from
exercising its termination rights hereunder, said decision shall be
subject to the provisions of Article 9 hereof.
(iii) HMOW fails to procure a provider agreement with CPN to
serve as the central provider of professional medical services within
the geographic area of the Joint Venture referred to in Section
3.5.A(i) for the period October 1, 1999 through September 30, 2004,
which agreement shall have such terms and conditions as are
satisfactory to the Governing Board.
(iv) UWS demonstrates to the Governing Board and the Governing
Board has determined that HMOW shall have failed to procure service
agreements with an adequate number of hospitals serving the geographic
area of the Joint Venture referred to in Section 3.5.A(i), which
agreements shall have terms and conditions as are satisfactory to the
Governing Board of the Joint Venture; provided that in the event the
Governing Board prohibits UWS from exercising its termination rights
hereunder, said decisions shall be subject to the provisions of Article
9 hereunder.
D. For purposes of Section 8.3.C(i) and 8.3.C(ii), the term
Aggregate Joint Venture Net Loss means for period(s) indicated therein an
aggregate net loss determined as follows:
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(i) If the UWS Entities do not enter into the UCare Joint
Venture, the sum of:
(a) the aggregate income (loss) before
income taxes for the applicable period of all HMO and POS
plans offered by the Joint Venture determined in accordance
with generally accepted accounting principles ("GAAP"); plus
(b) the aggregate income (loss) before
income taxes for the applicable period of all insured PPO
plans offered by the Joint Venture, which shall mean for each
such plan (A) net earned premium, minus (B) the sum of
incurred claims and administrative expenses, plus (C) net
investment income earned.
(ii) If the UWS Entities enter into the U-Care Joint Venture,
the aggregate income (loss) before income taxes for the applicable
period(s) of all PPO (calculated as provided above), HMO and POS plans
offered by the Joint Venture, determined in accordance with GAAP.
(iii) For purposes of the foregoing calculations,
(A) the administrative expenses of each plan shall
not exceed the actual costs incurred by the Underwriter of
such plan;
(B) income does not include investment income
attributable to funds of UWS not withdrawn from the Joint
Venture;
(C) the amount of an aggregate loss for the
applicable period shall carry over and reduce income from the
plans offered by the Joint Venture in the successive
applicable period(s) to the extent of such loss:
(D) no expense, loss or liability attributable to
that approximate $4.4 million debt assumed and owed by U-Care
to University of Wisconsin Hospitals and Clinics referenced in
Section 14.4 of the Joint Venture Agreement by and among Blue
Cross, UWS, UHC, U-Care and Health Professions, Inc. ("U-Care
Joint Venture Agreement") shall be taken into account; and
(E) Income (loss) before income taxes shall be
computed without regard to: administrative service payments by
UWS affiliates to UWS pursuant to any administrative service
agreement between DWS and any of its affiliates in connection
with the payments to LLC contemplated herein; any payment to
LLC under the Service Agreement; and any payment to UHC
contemplated in the
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U-Care Joint Venture Agreement other than pursuant to provider
agreements.
8.4. Effect of Termination Prior to Closing.
A. If this Agreement is terminated prior to the Closing and
the transactions contemplated hereby are not consummated as described above
caused otherwise than by breach of a party hereto, the parties hereto each shall
pay their own Expenses (as hereinafter defined) and this Agreement shall
immediately terminate and become null and void and of no further force and
effect, except as set forth in Section 10.6 hereof.
B. If this Agreement is terminated prior to the Closing and
such termination shall have been caused by breach of this Agreement by any party
hereto, then, in addition to other remedies at law or equity for breach of this
Agreement, the party so found to have breached this Agreement shall indemnify
the other parties for their respective Expenses.
C. "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including without limitation, all fees and
expenses of counsel, accountants, experts and consultants to the party and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation and execution of this Agreement, the
solicitation of shareholder approvals and all other matters related to the
closing of the transactions contemplated hereby.
8.5. Effect of Termination of Joint Venture. The termination of the
Joint Venture shall have no effect on the provider agreements entered into by
the parties, which shall continue until their scheduled termination date. The
reimbursement arrangement contained in the provider agreements then in effect
shall continue following termination of the Joint Venture.
ARTICLE 9 - ARBITRATION
9.1 Negotiation. In the event of any dispute between the UWS Entities
on the one hand and the HMOW Entities on the other hand arising out of or
relating to the formation, interpretation, performance or breach of this
Agreement, the UWS Entities and the HMOW Entities shall use their best efforts
to resolve such dispute. If they are unable to do so, such dispute shall be
submitted to the Governing Board for resolution. The Governing Board shall have
the authority to consult legal, financial or other advisors for the purpose of
resolving such dispute, and the fees and expenses of any such advisors shall be
shared equally by the UWS Entities on the one hand and the HMOW Entities on the
other hand. If the Governing Board is unable to resolve such dispute by the vote
required by Article 3 within 30 days, such dispute may be submitted to
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arbitration in accordance with Section 9.2.
9.2 Arbitration.
A. Each side shall appoint an individual as arbitrator and the
two so appointed shall then appoint a third arbitrator. If either side refuses
or neglects to appoint an arbitrator within thirty (30) days of receipt of a
written notice of demand for arbitration, the other side may appoint the second
arbitrator. If the two arbitrators do not agree on a third arbitrator within
thirty (30) days of their appointment, each of the arbitrators shall nominate
three individuals. Each arbitrator shall then decline two of the nominations
presented by the other arbitrator. The third arbitrator shall then be chosen
from the remaining two nominations by drawing lots. The arbitrators shall be
active or former officers of insurance or reinsurance companies, managed care
organizations, or Lloyd's of London Underwriters; the arbitrators shall not have
a personal or financial interest in the result of the arbitration.
B. The arbitration hearings shall be held in Madison,
Wisconsin, or such other place as may be mutually agreed. Each side shall submit
its case to the arbitrators within thirty (30) days of the selection of the
third arbitrator or within such longer period as may be agreed by the
arbitrators. The arbitrators shall not be obliged to follow judicial formalities
or the rules of evidence except to the extent required by governing law, that
is, the state law of the situs of the arbitration as herein agreed; they shall
make their decisions according to the practice of the reinsurance business. The
decision rendered by a majority of the arbitrators shall be final and binding on
both sides. Such decision shall be a condition precedent to any right of legal
action arising out of the arbitrated dispute which either side may have against
the other. Judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
C. Each side shall pay (i) the fees and expenses of its own
arbitrator, (ii) one-half of the fees and expenses of the third arbitrator and
(iii) one-half of the other expenses that the parties jointly incur directly
related to the arbitration proceeding. Other than as set forth above, each party
shall bear its own costs in connection with any such arbitration including,
without limitation, (i) all legal, accounting, and other professional fees and
expenses and (ii) all other costs and expenses each party incurs to prepare for
such arbitration.
D. Except as provided above, arbitration shall be based,
insofar as applicable, upon the Commercial Arbitration Rules of the American
Arbitration Association.
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ARTICLE 10 - GENERAL PROVISIONS
10.1. Survival of Representations. Warranties and Agreements. The
representations and warranties of the Holding Company and HMOW set forth in
Section 2.1 and of UWS and Subsidiary set forth in Section 2.2 hereof shall not
survive the Merger Effective Time.
10.2. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement. It is intended that this Agreement benefit the LLC.
10.3. Expenses. Except as provided in Section 8.4 above, all Expenses
incurred by the parties hereto shall be borne solely and entirely by the party
which has incurred the same.
10.4. Amendments. This Agreement may be amended only by the consent of
the parties expressed in a written addendum; and such addendum, when executed by
all parties, shall be deemed to be an integral part of this Agreement and
binding on the parties.
10.5. Successors and Assigns. This Agreement shall inure to the benefit
of and bind each of the parties and their successors and assigns. Neither this
Agreement nor any right hereunder nor any part hereof may be assigned by any
party without the prior written consent of the other parties and all necessary
regulatory authorities.
10.6. Confidential Information. The parties acknowledge that all
information of a given party which has or will come into the possession of
another party in connection with this Agreement is non-public, confidential or
proprietary in nature. Each party agrees to hold such information in strictest
confidence, not to make use thereof other than for the performance of this
Agreement, and not to release or disclose it to any third party other than for
the performance of this Agreement or as required by law. In the event that any
party (the "Disclosing Party") is requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any such
information of another party, the Disclosing Party shall provide such other
party with prompt notice of such request to enable such other party to seek an
appropriate protective order. The Disclosing Party shall cooperate with such
other party in connection with such matter.
10.7. Interpretation. This Agreement shall be interpreted to preserve
the purposes of the Joint Venture and to maintain its integrity. It is the
intent of the parties that minor, technical and immaterial violations of this
Agreement and related documents and minor inconsistencies and ambiguities should
be resolved in
-35-
favor of continuation of the Joint Venture.
10.8. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Wisconsin (without giving effect to
principles of conflicts of laws) applicable to a contract executed and to be
performed in such state.
10.9. Entire Agreement. This Agreement, and the documents contemplated
herein, supersede all prior discussions and agreements between, and contain the
sole and entire agreement between, the parties with respect to the subject
matter hereof.
10.10. Headings. The headings used in this Agreement have been inserted
for convenience and do not constitute matter to be construed or interpreted in
connection with this Agreement. Unless the context of this Agreement otherwise
requires, (a) words of any gender will be deemed to include each other gender,
(b) words using the singular or plural number will also include the plural or
singular number, respectively, (c) the terms hereof, herein, hereby, and
derivative or similar words will refer to this entire Agreement, and (d) the
conjunction "or" will denote any one or more, or any combination or all, of the
specified items or matters involved in the respective list.
10.11. Waiver. At any time prior to the Closing Date, any party hereto
may: (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby. In the event of an inaccuracy or misrepresentation in any of the
representations or warranties, the HMOW Entities or UWS Entities may elect to
close the transaction contemplated hereby and seek reimbursement from the
breaching party with respect to any expenses associated with the resolution of
such inaccuracy or misrepresentation. The failure of any party at any time to
enforce any provision of this Agreement shall not be construed as a waiver of
that provision and shall not affect the right of any party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
10.12. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of any party will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be
-36-
affected by the illegal, invalid, or unenforceable provision or by its severance
herefrom, and (d) in lieu of such illegal, invalid, or unenforceable provision,
there will be added automatically as a part of this Agreement, a legal, valid,
and enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.
10.13. Notices. Any notice or communication given pursuant to this
Agreement must be in writing and will be deemed to have been duly given if
mailed (by registered or certified mail, postage prepaid, return receipt
requested), or if transmitted by facsimile, or if delivered by courier, as
follows:
To Blue Cross
Blue Cross & Blue Shield United of Wisconsin
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Facsimile: 0-000-000-0000
Attention: Xxxxxxx Xxxxxxxxx
To UWS
United Wisconsin Services, Inc.
000 xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Facsimile: 0-000-000-0000
Attention: Xxxxxxx Xxxxxxxxx
To HMOW or Holding Company
HMO-W, Incorporated
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxx 00000
Facsimile: 0-000-000-0000
Attention: Xxxxx X. Xxxxxx
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this paragraph will, whether sent by mail,
facsimile, or courier, be deemed given upon the first business day after actual
delivery to the party to whom such notice or other communication is sent (as
evidenced by the return receipt or shipping invoice signed by a representative
of such party or by the facsimile confirmation). Any party from time to time may
change its address for the purpose of notices to that party by giving a similar
notice specifying a new address, but no such notice will be demand to have been
given until it is actually received by the party sought to be charged with the
contents thereof.
10.14. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which will be
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deemed an original, but all of which will constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
first set forth above.
BLUE CROSS & BLUE SHIELD UNITED OF
WISCONSIN
By:
-------------------------------
Title:
----------------------------
UNITED WISCONSIN SERVICES, INC.
By:
-------------------------------
Title:
----------------------------
UWS ACQUISITION CORPORATION
By:
-------------------------------
Title:
----------------------------
HMO-W, INCORPORATED
By:
-------------------------------
Title:
----------------------------
HMO OF WISCONSIN INSURANCE CORPORATION
By:
-------------------------------
Title:
----------------------------
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FIRST AMENDMENT
TO
AGREEMENT OF MERGER AND JOINT VENTURE DATED OCTOBER 11, 1994
BY AND AMONG
BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN,
UNITED WISCONSIN SERVICES, INC.,
UWS ACQUISITION CORPORATION,
HMO-W, INCORPORATED
AND
HMO OF WISCONSIN INSURANCE CORPORATION
This First Amendment to the Agreement of Merger and Joint
Venture is dated as of October 31, 1994 (the "Amendment") and is by and among
Blue Cross & Blue Shield United of Wisconsin, a Wisconsin insurance corporation
("Blue Cross"), United Wisconsin Services, Inc., a Wisconsin business
corporation ("UWS"), UWS Acquisition Corporation, a Wisconsin business
corporation, HMO-W, Incorporated, a Wisconsin business corporation ("Holding
Company") and HMO of Wisconsin Insurance Corporation, a Wisconsin health
maintenance organization organized under Chapter 611 of the Wisconsin Statutes
("HMOW"). All capitalized terms used herein and not otherwise defined have the
same meaning as in the Agreement of Merger and Joint Venture dated as of October
11, 1994 by and among the Parties hereto.
W I T N E S S E T H:
WHEREAS, the Parties executed an Agreement of Merger and Joint Venture
dated October 11, 1994 (the "Agreement") in connection with the acquisition by
UWS of the capital stock of HMO-W, Incorporated and a Joint Venture involving
certain of the Parties thereto; and
WHEREAS, the Parties now desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth below
and in the Agreement, the parties hereto do agree as follows:
1. The following sentence shall be added at the end of Section
1.8.C:
"Said interest shall accrue only until such date as the
Accountant has determined the actual Net Worth of the Holding
Company as of September 30, 1994."
2. Section 8.1 of the Agreement shall be amended by deleting the period at
the end of the paragraph and thereafter inserting the following:
"; provided, that if any party to the Amended and
Restated Joint Venture Agreement (the "U-Care Joint
Venture Agreement") by and between Blue Cross, UWS, U- Care,
UHC, Health Professionals, Inc. ("HPI") and certain affiliated
entities (collectively, the "University Affiliated Entities")
has given written notice of termination of said U-Care Joint
Venture Agreement, then the parties hereto must give written
notice of termination no later than five (5) months prior to
the end of the then current term."
3. Section 8.3.D(iii)(B) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(B) income does not include investment income
attributable to funds of UWS not withdrawn from the Joint
Venture or attributable to additional capital contributions
from UWS or one its affiliates to HMOW;"
4. The reference to "October 1, 1999" in Section 8.3.C(iii) of the
Agreement shall be deleted and replaced by "January 1, 2000" and the
reference to "September 30, 2004" in said paragraph shall be deleted
and replaced by "December 31, 2004".
5. Section 8.3.D(iii)(D) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(D) no expense, loss or liability attributable to
that approximate $4.4 million debt assumed and owed by U- Care
to University of Wisconsin Hospitals and Clinics referenced in
Section 13.4 of the U-Care Joint Venture Agreement shall be
taken into account; and"
6. Section 8.3.D(iii)(E) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(E) Income (loss) before income taxes shall be
computed without regard to: (A) administrative service
payments by UWS affiliates to UWS pursuant to any
administrative service agreement between UWS and its
affiliates in connection with the payments to (1) LLC under
the Service Agreement, (2) U-Care or any successor thereto
under a License Agreement, dated as of November 1, 1994,
between UWS and U-Care (the "License Agreement"), or (3) HPI
under a service agreement, dated as of November 1, 1994,
between UWS and HPI, (B) any payment to HPI under that service
agreement with UWS, (C) any payment to LLC under the Service
Agreement, or (D) any payment to U-Care or any successor
thereto under the License Agreement."
7. As relevant, conforming amendments to the Service Agreement by and
between UWS and Community Health Systems, L.L.C. shall be made which
are consistent with the terms of the amendments contained herein.
This Amendment may be executed in two or more counterparts each of
which shall be an original, but all of which together shall constitute one and
the same document.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
BLUE CROSS & BLUE SHIELD UNITED OF
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WISCONSIN
By:
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Title:
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UNITED WISCONSIN SERVICES, INC.
By:
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Title:
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UWS ACQUISITION CORPORATION
By:
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Title:
----------------------------
HMO-W, INCORPORATED
By:
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Title:
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