EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 2, 2002
AMONG
UNIVERSITY HEALTH PLANS, INC.,
UNIVERSITY OF MEDICINE AND DENTISTRY OF NEW JERSEY
AND
CENTENE CORPORATION
TABLE OF CONTENTS
PAGE
----
1. Purchase and Sale of the Shares...................................... 1
1.1. Purchase of the Shares from the Stockholder..................... 1
1.2. Purchase Price for the Shares................................... 1
1.3. Closing......................................................... 2
2. Representations of the Stockholder................................... 2
2.1. Organization.................................................... 3
2.2. Authorization................................................... 3
2.3. Non-Contravention............................................... 3
2.4. Title to Shares................................................. 3
2.5. Transfer of Shares.............................................. 3
3. Representations of the Stockholder and the Company................... 4
3.1. Organization.................................................... 4
3.2. Capitalization.................................................. 4
3.3. Subsidiaries.................................................... 4
3.4. Authorization................................................... 4
3.5. Non-Contravention............................................... 5
3.6. Financial Statements............................................ 5
3.7. Absence of Undisclosed Liabilities.............................. 6
3.8. Litigation...................................................... 7
3.9. Insurance....................................................... 7
3.10. Assets......................................................... 7
3.11. Intellectual Property.......................................... 8
3.12. Real Estate.................................................... 9
3.13. Tax Matters.................................................... 9
3.14. Books and Records.............................................. 10
3.15. Contracts and Commitments...................................... 10
3.16. Compliance with Agreements and Laws............................ 12
3.17. Employee Relations............................................. 13
3.18. Employee Benefit Plans......................................... 14
3.19. Absence of Certain Changes or Events........................... 15
3.20. Providers...................................................... 17
3.21. Members........................................................ 17
3.22. Commercial Business............................................ 17
3.23. Indebtedness to and from Officers, Directors and
the Stockholder ............................................. 17
3.24. Banking Facilities............................................. 18
3.25. Powers of Attorney and Suretyships............................. 18
3.26. Conflicts of Interest.......................................... 18
3.27. Brokers........................................................ 18
4. Representations of the Buyer......................................... 18
4.1. Organization and Authority...................................... 18
4.2. Authorization................................................... 19
4.3. Non-Contravention............................................... 19
4.4. Investment Representation....................................... 19
-i-
5. Pre-Closing Covenants................................................ 20
5.1. Access to Management, Properties and Records.................... 20
5.2. Confidentiality................................................. 20
5.3. Public Announcements............................................ 21
5.4. Communications with Members and Providers....................... 21
5.5. Conduct of Business............................................. 21
5.6. Absence of Material Changes..................................... 21
5.7. Delivery of Interim Financial Statements........................ 23
5.8. Compliance with Laws and Regulations............................ 24
5.9. Provider Agreements............................................. 25
5.10. Employees...................................................... 25
5.11. Disposition of Commercial Business............................. 25
5.12. Exclusivity.................................................... 26
5.13. Taxes.......................................................... 26
5.14. Notices of Breaches............................................ 26
5.15. Notices and Consents........................................... 26
5.16. Closing Efforts................................................ 27
5.17. Expenses....................................................... 27
6. Conditions to Obligations of the Buyer............................... 28
6.1. Representations, Warranties and Covenants....................... 28
6.2. Investor Rights Agreement....................................... 28
6.3. Escrow Agreement................................................ 28
6.4. Amended Organizational Documents................................ 28
6.5. Provider Agreements............................................. 28
6.6. Employment Arrangements......................................... 28
6.7. Disposition of Commercial Business.............................. 29
6.8. IBNR Certification.............................................. 29
6.9. Medicaid Contract............................................... 29
6.10. Consents....................................................... 29
6.11. Indebtedness................................................... 29
6.12. Adverse Proceedings............................................ 29
6.13. Opinions of Counsel............................................ 29
6.14. Management Contract............................................ 29
6.15. Closing Deliveries............................................. 30
7. Conditions to Obligations of the Stockholder and the Company......... 30
7.1. Representations, Warranties and Covenants....................... 30
7.2. Investor Rights Agreement....................................... 31
7.3. Escrow Agreement................................................ 31
7.4. Fairness Opinion................................................ 31
7.5. Consents........................................................ 31
7.6. Adverse Proceedings............................................. 31
7.7. Opinion of Counsel.............................................. 31
7.8. Closing Deliveries.............................................. 31
8. Price Reduction...................................................... 31
8.1. Damages......................................................... 32
8.2. Reduction Claims................................................ 33
8.3. Survival of Representations and Warranties...................... 36
8.4. Limitations..................................................... 36
-ii-
9. Post-Closing Agreements.............................................. 37
9.1. Proprietary Information......................................... 37
9.2. Further Assurances.............................................. 38
9.3. No Solicitation or Hiring of Former Employees................... 38
9.4. Non-Competition Agreement....................................... 38
10. Termination of Agreement............................................. 38
10.1. Termination by Lapse of Time................................... 38
10.2. Termination by Agreement of the Parties........................ 39
10.3. Termination by Reason of Breach................................ 39
10.4. Availability of Remedies at Law................................ 39
11. General.............................................................. 39
11.1. Notices........................................................ 39
11.2. Successors and Assigns......................................... 40
11.3. Entire Agreement; Amendments................................... 40
11.4. Severability................................................... 40
11.5. Investigation of the Parties................................... 40
11.6. Submission to Jurisdiction..................................... 40
11.7. Governing Law.................................................. 41
11.8. Construction................................................... 41
11.9. Counterparts................................................... 41
Signatures............................................................... 42
EXHIBIT A. Form of Investor Rights Agreement............................. A-1
EXHIBIT B. Form of Escrow Agreement...................................... B-1
EXHIBIT C. Form of Opinion of Counsel for the Stockholder................ C-1
EXHIBIT D. Form of Opinion of Counsel for the Company.................... D-1
EXHIBIT E. Form of Opinion of Counsel for the Buyer...................... E-1
-iii-
THIS STOCK PURCHASE AGREEMENT dated as of August 2, 2002 (this "Agreement")
is entered into among University Health Plans, Inc., a New Jersey corporation
with its principal office at 555 Broad Street, 17th Floor, Newark, New Jersey
07102 (the "Company"), University of Medicine and Dentistry of New Jersey, a
body corporate politic of the State of New Jersey created pursuant to N.J.S.A.
18A:64G-1, et seq. with its principal office at 65 Bergen Street, Newark, New
Jersey 07107 (the "Stockholder"), and Centene Corporation, a Delaware
corporation with its principal office at 7711 Carondelet Avenue, Suite 800, St.
Louis, Missouri 63105 (the "Buyer").
PRELIMINARY STATEMENT
A. The Stockholder owns 20 shares of the common stock, without par value
("Common Stock"), of the Company, which shares represent all of the issued and
outstanding shares of capital stock of the Company.
B. The Buyer desires to purchase, and the Stockholder desires to sell, 16
shares of Common Stock (the "Shares") for the consideration set forth below,
subject to the terms and conditions of this Agreement.
C. In connection with the purchase and sale of the Shares, the Buyer and the
Stockholder wish to enter into an Investor Rights Agreement providing for, among
other things, the exchange, on the third anniversary of the Closing Date (as
defined in Subsection 1.3), of the other four shares of Common Stock held by the
Stockholder for shares of common stock of Centene, all as contemplated by this
Agreement, including the Investor Rights Agreement to be entered into as of the
Closing Date in the form attached hereto as EXHIBIT A (the "Investor Rights
Agreement").
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of the Shares
1.1.Purchase of the Shares from the Stockholder. Subject to and upon the
terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), the Stockholder shall sell,
transfer, convey, assign and deliver the Shares to the Buyer, and the Buyer
shall purchase, acquire and accept the Shares from the Stockholder. At the
Closing the Stockholder shall deliver to the Buyer a certificate or
certificates evidencing the Shares, duly endorsed in blank or with a stock
power duly executed by the Stockholder.
1.2. Purchase Price for the Shares
(a) The aggregate purchase price to be paid by the Buyer for all of
the Shares (the "Purchase Price") shall be equal to 80% of the product
of (i) $250.00 and (ii) the number of enrolled risk members of the
Company as reflected in the final enrollment data provided by the New
Jersey Division of Medical Assistance and Health Services with respect
to the Closing Date, subject to adjustment pursuant to Subsections 6.1
and 6.8 (together, the "Closing Adjustments") and subject to reduction
after the Closing Date pursuant to Section 8.
(b) The Purchase Price shall be payable in cash, by wire transfers
of immediately available funds, as follows:
(i) on the Closing Date (or, if the Closing Date is not a
business day, then the next succeeding business day), the Buyer
shall deliver to Fleet Bank, N.A., as escrow agent (the "Escrow
Agent"), the sum of $5,500,000 to be held in an
interest-bearing escrow account (the "Escrow Account") pursuant to
the terms of an Escrow Agreement in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"), as a reserve to satisfy any and
all or part of any reduction in the Purchase Price pursuant to
Section 8; and
(ii) on the second business day following the date on which the
New Jersey Division of Medical Assistance and Health Services
provides the data referred to in paragraph (a) of this Subsection
1.2 (but no earlier than the date of the payment pursuant to the
preceding clause (i)), (A) the Buyer shall deliver to the
Stockholder an amount equal to the Purchase Price less (1)
$5,500,000 and (2) the amount of the Closing Adjustments or (B) in
the event the Closing Adjustments exceed an amount equal to the
Purchase Price less $5,500,000, then the Stockholder shall deliver
to the Buyer an amount equal to (1) the Closing Adjustments less (2)
the Purchase Price less $5,500,000.
(c) In the event of an adjustment in the Purchase Price as the
result of one or both Closing Adjustments, the parties agree that it is
in their mutual best interests for the Buyer to contribute to the
Company an amount in cash equal to the aggregate amount of the Closing
Adjustments. The Buyer hereby agrees that (i) to the extent a Closing
Adjustment results in the payment of an amount in cash to the Buyer by
the Stockholder, the Stockholder shall make such payment to the Company,
on behalf of the Buyer and in satisfaction of the Buyer's obligations
under this paragraph (c) with respect to such amount and (ii) to the
extent a Closing Adjustment results in a reduction in the Purchase Price
but not a payment of cash to the Buyer, the Buyer shall deliver to the
Company the amount of such Closing Adjustment in cash on the date of the
payment pursuant to paragraph (b) of this Subsection 1.2.
(d) As a condition to the Closing, the parties shall agree upon, for
purposes of calculating the amount of any Closing Adjustment pursuant to
Subsection 6.1 and for purposes of determining certain Damages under
Section 8, a procedure for the preparation, by no later than the date of
the payment pursuant to clause (b)(ii) of this Subsection 1.2, of a
mutually agreed upon balance sheet, including the amount of premium
receivable and other receivable (the "Closing Receivables"), and related
calculation of net worth of the Company as of the Closing. The balance
sheet referred to in the preceding sentence shall be prepared in
accordance with the actuarial and accounting practices prescribed or
permitted by the State of New Jersey Department of Banking and Insurance
and, for the purposes of preparing such balance sheet, no premium
receivable with respect to a state supplemental delivery payment shall
be booked until an outcome (i.e., a live birth, still birth or
miscarriage occurring at the thirteenth week or greater of gestation)
has occurred.
1.3.Closing. The Closing shall take place as of 12:01 a.m., Eastern
time, on the first calendar day of the calendar month that immediately
follows the calendar month in which the conditions set forth in Sections 6
and 7 (other than delivery of items to be delivered at the Closing and other
than satisfaction of those conditions that by their nature are to be
satisfied at the Closing, it being understood that the occurrence of the
Closing shall remain subject to the delivery of such items and the
satisfaction or waiver of such conditions at the Closing) are first
satisfied or waived, or on such later date as may be mutually agreed upon in
writing by the parties. The date of the Closing, as so determined, is
referred to herein as the "Closing Date."
2. Representations of the Stockholder. The Stockholder represents and
warrants to the Buyer that the statements contained in this Section 2 are true
and correct, except as expressly set forth in the disclosure schedule of the
Stockholder and the Company being delivered to the Buyer contemporaneously
-2-
with the execution and delivery of this Agreement (the "Disclosure Schedule").
The Stockholder confirms that the information in the Disclosure Schedule
relating to exceptions to the statements contained in this Section 2 is arranged
in sections corresponding to the numbered subsections and lettered paragraphs of
this Section 2, and that the disclosure in any section of the Disclosure
Schedule shall qualify only such specifically enumerated subsection or paragraph
of this Agreement and any other paragraph of this Agreement to which an explicit
and clear cross-reference has been made.
2.1.Organization. The Stockholder is a body corporate politic of the
State of New Jersey created pursuant to N.J.S.A. 18A:64G-1, et seq. duly
organized, validly existing and in good standing under the laws of the State
of New Jersey, and has all requisite power and authority (corporate and
other) to own its properties, to execute and deliver this Agreement and the
agreements contemplated herein, and to transfer, convey and sell the Shares
to the Buyer at the Closing. Certified copies of the charter documents of
the Stockholder, as amended to date, have been previously delivered to the
Buyer, are complete and correct, and no amendments have been made thereto or
have been authorized since the date thereof.
2.2.Authorization. The execution and delivery by the Stockholder of this
Agreement and the agreements provided for herein, and the consummation by
the Stockholder of all transactions contemplated hereunder and thereunder by
the Stockholder, have been duly authorized by all requisite corporate or
other action. This Agreement has been duly executed by the Stockholder. This
Agreement and all other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby to which
the Stockholder is a party constitute the valid and binding obligations of
the Stockholder, enforceable against the Stockholder in accordance with
their respective terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws relating to or affecting the rights of creditors
generally or by general equitable principles (the "Enforceability
Exception").
2.3. Non-Contravention. Subject to compliance with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities
Act") and any applicable state securities laws, neither the execution and
delivery by the Stockholder of this Agreement or the agreements provided for
herein, nor the consummation by the Stockholder of the transactions
contemplated hereby or thereby, will (a) conflict with or violate the
provisions of any law, rule or regulation applicable to the Stockholder or
any of its properties or assets, (b) conflict with or violate the provisions
of the charter documents of the Stockholder, (c) require on the part of the
Stockholder any notice to or filing with, or permit, authorization, consent
or approval of, any court, arbitrator, administrative agency or commission
or other governmental or regulatory authority, body, instrumentality or
agency, domestic or foreign (each, a "Governmental Entity"), (d) violate any
judgment, decree, order or award of any Governmental Entity by which the
Stockholder or any of its properties are bound, or (e) conflict with, result
in breach of, constitute (with or without due notice or lapse of time or
both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the
Stockholder is a party or by which it is bound or to which any of its assets
are subject.
2.4. Title to Shares. The Stockholder has good, valid and marketable
title to the Shares, free and clear of any and all covenants, conditions,
restrictions, voting trust arrangements, liens, charges, encumbrances,
options and adverse claims or rights whatsoever.
2.5. Transfer of Shares. Upon consummation of the purchase contemplated
hereby, the Buyer will acquire from the Stockholder good and marketable
title to the Shares, free and clear of all
-3-
covenants, conditions, restrictions, voting trust arrangements, liens,
charges, encumbrances, options and adverse claims or rights whatsoever,
subject to the provisions of the Investor Rights Agreement.
3. Representations of the Stockholder and the Company. The Stockholder and
the Company represent and warrant to the Buyer that the statements contained in
this Section 3 are true and correct, except as expressly set forth in the
Disclosure Schedule. As set forth in Section 3 of the Disclosure Schedule,
certain of the statements in this Section 3 are, to the extent made by the
Stockholder, made only to the knowledge of the Stockholder; those statements are
not so qualified with respect to the Company. The Stockholder and the Company
confirm that the information in the Disclosure Schedule relating to exceptions
to the statements contained in this Section 3 is arranged in sections
corresponding to the numbered subsections and lettered paragraphs of this
Section 3, and that the disclosure in any section of the Disclosure Schedule
shall qualify only such specifically enumerated subsection or paragraph of this
Agreement and any other paragraph of this Agreement to which an explicit and
clear cross-reference has been made. As used herein, "Company MAE" shall mean
any material adverse change, event, circumstance or development with respect to,
or material adverse effect on, (i) the business, assets, liabilities,
capitalization, prospects, condition (financial or other), or results of
operations of the Company or (ii) the ability of the Company to operate its
Medicaid business after the Closing.
3.1. Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, and
has all requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to
consummate the transactions contemplated hereby and thereby. The Company is
not required, based on its ownership of property or the character of its
business, to be qualified to do business in any jurisdiction other than the
State of New Jersey. Certified copies of the Certificate of Incorporation
and Bylaws of the Company, as amended to date, have been previously
delivered to the Buyer, are complete and correct, and no amendments have
been made thereto or have been authorized since the date thereof.
3.2. Capitalization. The Company's authorized capital stock consists of
100 shares of Common Stock, without par value, of which 20 shares are issued
and outstanding and held of record and beneficially by the Stockholder. All
such issued and outstanding shares of Common Stock have been duly and
validly issued and are fully paid and non-assessable. There are no
outstanding (a) options, warrants or other rights to purchase from the
Company any capital stock of the Company, (b) securities convertible into or
exchangeable for shares of such stock, or (c) other commitments of any kind
for the issuance of additional shares of capital stock or options, warrants
or other securities of the Company. No shares of Common Stock are held in
the treasury of the Company.
3.3. Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association
or other business entity. The Company is not a participant in any joint
venture, partnership or similar arrangement.
3.4. Authorization. Execution and delivery by the Company of this
Agreement and the agreements provided for herein, and the consummation by
the Company of all transactions contemplated hereunder and thereunder by the
Company, have been duly authorized by all requisite corporate action. This
Agreement has been duly executed by the Company. This Agreement and all
other agreements and obligations entered into and undertaken in connection
with the transactions contemplated hereby to which the Company is a party
constitute the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, subject to
the Enforceability Exception.
-4-
3.5. Non-Contravention. Neither the execution and delivery by the
Company of this Agreement or the agreements provided for herein, nor the
consummation by the Company of the transactions contemplated hereby and
thereby, will (a) conflict with or violate the provisions of any law, rule
or regulation applicable to the Company or any of its properties or assets,
except for any conflicts or violations that, in the aggregate, do not and
will not have a Company MAE, (b) conflict with or violate the provisions of
the Certificate of Incorporation or Bylaws of the Company, (c) require on
the part of the Company any notice to or filing with, or any permit,
authorization, consent or approval of, any Governmental Entity, (d) violate
any judgment, decree, order or award of any Governmental Entity by which the
Company or its properties are bound, or (e) conflict with, result in breach
of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in
any party any right to terminate, modify or cancel, or require any notice,
consent or waiver under, any contract or instrument to which the Company is
a party or by which it is bound or to which any of its assets are subject,
except for (i) any conflict, breach, default, acceleration, termination,
modification or cancellation which, individually or in the aggregate, would
not have a Company MAE and would not adversely affect the consummation of
the transactions contemplated hereby or (ii) any notice, consent or waiver
the absence of which, individually or in the aggregate, would not have a
Company MAE and would not adversely affect the consummation of the
transactions contemplated hereby.
3.6. Financial Statements
(a) The Stockholder or the Company has previously delivered to the
Buyer (i) the audited statutory statement of admitted assets,
liabilities and surplus of the Company as of, and the audited statutory
statements of income, changes in surplus, and cash flows of the Company
for the fiscal year ended, December 31, 2001 (collectively, the "Audited
Statutory Financial Statements") and (ii) the unaudited statutory
statement of admitted assets, liabilities and surplus of the Company as
of, and the unaudited statutory statements of income, changes in
surplus, and cash flows of the Company for the quarter ended, March 31,
2002 (collectively with the Audited Statutory Financial Statements, the
"Statutory Financial Statements"). The Audited Statutory Financial
Statements have been certified without qualification by
PricewaterhouseCoopers LLC, the Company's independent public
accountants. The Statutory Financial Statements have been prepared in
accordance with accounting practices prescribed or permitted by the
State of New Jersey Department of Banking and Insurance applied on a
basis consistent throughout the periods covered, fairly present, in all
material respects, the admitted assets, liabilities and surplus as of
the respective dates thereof and the results of operations and cash
flows of the Company for the periods referred to therein, on the basis
of the accounting described in the respective notes thereto, and are
consistent with the books and records of the Company.
(b) The Stockholder or the Company has also previously delivered to
the Buyer (i) the unaudited balance sheet of the Company as of, and the
unaudited statements of operations and cash flows of the Company for the
fiscal years ended, December 31, 2001 and 2000 and (ii) the unaudited
balance sheet of the Company as of May 30, 2002, the unaudited balance
sheet of the Company as of June 30, 2002 (the "Current Balance Sheet")
and the unaudited statements of operations and cash flows of the Company
for the five-month period ended May 30, 2002 and six-month period ended
June 30, 2002 (the financial statements in clauses (i) and (ii) of this
paragraph (b) collectively being referred to as the "Financial
Statements"). The Financial Statements have been prepared in accordance
with United States generally accepted accounting principles applied on a
basis consistent throughout the periods covered thereby, fairly present
the financial condition, results of operations and cash flows of the
Company as of the respective dates thereof and for the periods referred
to therein, and are consistent with
-5-
the books and records of the Company, provided that the Financial
Statements referred to in clause (ii) above are subject to normal
recurring year-end adjustments (which will not be material) and do not
include all footnotes required by such generally accepted accounting
principles.
(c) The Stockholder or the Company has also previously delivered to
the Buyer the unaudited Medicaid financial reports by rate cell grouping
of the Company and for the six-month period ended June 30, 2002 (the
"Medicaid Financial Reports"). The Medicaid Financial Reports have been
prepared on a basis consistent throughout the period covered thereby,
fairly present the results of operations of the Medicaid business of the
Company for the six-month period ended June 30, 2002, and are consistent
with the books and records of the Company.
(d) The reserves recorded in the accounting records of the Company
for medical benefits, losses, claims and expenses incurred in
connection with the Medicaid and commercial businesses of the Company
and any other reserves (i) were prepared in accordance with the
actuarial and accounting practices prescribed or permitted by the State
of New Jersey Department of Banking and Insurance, (ii) make good and
sufficient provisions for all insurance obligations of the Company,
(iii) to the best knowledge of the Company, meet the requirements of any
law, rule or regulation applicable to such reserves and the requirements
of the Permits (as defined in paragraph (a) of Subsection 3.16), and
(iv) are computed on the basis of assumptions consistent with those used
in computing the corresponding reserves in the prior fiscal year. All
payments to and/or settlements with providers of any medical services
have been accounted for in the appropriate medical expense reserve
account (by category of medical expense) and have been reflected as a
medical expense of the Company.
(e) The Company has provided to Buyer true and correct
documentation, electronic and otherwise, of data representing all
medical claims (including all medical payments and/or settlements) of
the Company's business as of June 30, 2002. The Company has also
provided documentation, electronic and otherwise, that supports the
medical claims data provided. The medical claims data provided to Buyer
reflect any changes to the Company's business since its inception that
would materially affect total medical costs. All paid medical claims and
settlements of the Company's Medicaid business since January 1, 2001
have been properly reflected as medical expenses. All unpaid medical
claims and settlements of the Company's Medicaid business since January
1, 2001 have been properly reflected as losses incurred but not reported
for purposes of computing the Company's claims payable and claims
adjustment expenses, except to the extent that any such unpaid medical
claims and settlements do not exceed $50,000 in amount, in the
aggregate, in either the year ended December 31, 2001 or the period
subsequent to January 1, 2002.
(f) The amounts shown as accrued for current and deferred income and
other taxes in the Current Balance Sheet are sufficient for the payment
of all accrued and unpaid federal, state and local income taxes,
interest, penalties, assessments or deficiencies applicable to the
Company, whether disputed or not, for the six months ended June 30, 2002
and all periods prior thereto.
3.7. Absence of Undisclosed Liabilities. The Company has no liability or
obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, that is material to the condition (financial or
otherwise) of the assets, properties, business or prospects of the Company,
except as and to the extent (a) any such liability or obligation is
reflected and reserved against in the Current Balance Sheet or (b) any such
liability or obligation, other than a liability or obligation
-6-
arising under a Provider Agreement (as defined in clause (a)(ii) of
Subsection 3.15), either (i) was incurred in the ordinary course of business
after June 30, 2002 or (ii) did not exceed $25,000 in amount, in the
aggregate, in either the year ended December 31, 2001 or the period
subsequent to January 1, 2002.
3.8. Litigation. There is no action, suit, proceeding or investigation
to which the Company is a party (either as a plaintiff or defendant)
pending. To the knowledge of the Stockholder and the Company, (a) no such
action, suit, proceeding or investigation is threatened before any
Governmental Entity and (b) there is no basis for any such action, suit or
proceeding. There is no action, suit, proceeding or investigation of which
the Stockholder or the Company is aware pending or threatened before any
Governmental Entity that challenges the validity or propriety of this
Agreement or any action to be taken by the Stockholder or the Company in
connection with this Agreement. Neither the Company nor any officer,
director or employee of the Company has been permanently or temporarily
enjoined by any order, judgment or decree of any Governmental Entity from
engaging in or continuing any conduct or practice in connection with the
business, assets or properties of the Company. There is not in existence on
the date hereof any order, judgment or decree of any Governmental Entity
that has been properly served or of which the Company or the Stockholder
otherwise is aware enjoining or requiring the Company or the Stockholder to
take any action of any kind with respect to the business, assets or
properties of the Company.
3.9. Insurance. Section 3.9 of the Disclosure Schedule sets forth a
true, correct and complete list of all fire, theft, casualty, general
liability, workers compensation, business interruption, environmental
impairment, product liability, automobile and other insurance policies
maintained by the Company and of all life insurance policies maintained on
the lives of any of its employees, specifying the type of coverage, the
amount of coverage, the premium, the insurer and the expiration date of each
such policy (collectively, the "Insurance Policies") and all claims made
under such Insurance Policies since January 1, 2001. The Stockholder and the
Company have previously delivered to the Buyer true, correct and complete
copies of all Insurance Policies. The Insurance Policies are in full force
and effect and are in amounts of a nature that are adequate and customary
for the Company's business. All premiums due on the Insurance Policies or
renewals thereof have been paid, and there is no default by the Company
under the Insurance Policies. The Company has not received any notice or
other communication from any issuer of the Insurance Policies since January
1, 2001 canceling or materially amending any of the Insurance Policies,
materially increasing any deductibles or retained amounts thereunder, or
materially increasing the annual or other premiums payable thereunder, and,
to the knowledge of the Stockholder and the Company, no such cancellation,
amendment or increase of deductibles, retainages or premiums is threatened.
The Company has no outstanding claims or disputes with any insurance carrier
regarding claims, settlements or premiums, and the Company has not failed to
give any notice or present any claim under any Insurance Policy in due and
timely fashion. There are no outstanding requirements or recommendations by
any issuer of the Insurance Policies or by any Board of Fire Underwriters or
other similar body exercising similar functions or by any governmental
authority exercising similar functions that require or recommend any changes
in the conduct of the business of, or any repairs or other work to be done
on or with respect to any of the properties or assets of, the Company.
3.10. Assets. The Company has good and marketable title to all of the
assets (tangible or intangible) purported to be owned by the Company and
relating to, or used in, its business, free and clear of all liens, leases,
encumbrances, claims under bailment and storage agreements, equities,
conditional sales contracts, security interests, charges and restrictions,
except for liens, if any, for personal property taxes not due. The Company
owns or leases all tangible assets sufficient for the conduct of its
business as presently conducted and as presently proposed to be conducted.
Each such tangible asset is free from material defects, has been maintained
in accordance with normal
-7-
industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it
presently is used. Each item of equipment and other asset that the Company
has possession of pursuant to a lease agreement or other contractual
arrangement and relating to, or used in, its business is in such condition
that, upon its return to its lessor or owner under the applicable lease or
contract, the obligations of the Company to such lessor owner will have been
discharged in full.
3.11. Intellectual Property
(a) Section 3.11 of the Disclosure Schedule sets forth: (i) a true,
correct and complete list and, where appropriate, a description of, all
items of Intellectual Property owned by, or used or useful in connection
with the Medicaid business of, the Company, including trade secrets,
know-how, any other confidential information of the Company, trade
names, trademarks, trade name and trademark registrations, copyrights
and copyright registrations, and applications for any of the foregoing
but excluding (A) rights under the Medicaid Contract and (B)
off-the-shelf software programs licensed by the Company pursuant shrink
wrap and similar licenses (the "Intellectual Property"); and (ii) a
true, correct and complete list of all licenses or similar agreements or
arrangements to which the Company is a party, either as licensee or
licensor, with respect to the Intellectual Property. The Company is the
sole and exclusive owner of all right, title and interest in and to the
Intellectual Property and all designs, permits, labels and packages used
on or in connection therewith, free and clear of all liens, security
interests, charges, encumbrances, equities or other adverse claims. The
Company has the right and authority to use, and to continue to use after
the Closing, the Intellectual Property in connection with the conduct of
its business in the manner presently conducted, and such use or
continuing use does not and will not conflict with, infringe upon or
violate any rights of any other person, corporation or entity.
(b) The Company has not received any notice of, nor has any
knowledge of any basis for, a pleading or threatened claim, interference
action or other judicial or adversarial proceeding against the Company
that any of the operations, activities, products, services or
publications of the Company infringes or will infringe any patent,
trademark, trade name, copyright, trade secret or other property right
of a third party, or that it is illegally or otherwise using the trade
secrets, formulae or property rights of others. There are no
outstanding, nor to the knowledge of the Stockholder or the Company, any
threatened, disputes or other disagreements with respect to any licenses
or similar agreements or arrangements described in Section 3.11 of the
Disclosure Schedule or with respect to infringement by a third party of
any of the Intellectual Property. Neither the Company nor the
Stockholder has any knowledge that any third party is infringing, or
will threaten to infringe, upon or otherwise violate any of the
Intellectual Property in which the Company has ownership rights.
(c) The Intellectual Property owned or licensed by the Company is
sufficient to conduct the Company's business as presently conducted. The
Company has taken all steps reasonably necessary to protect its right,
title and interest in and to the Intellectual Property and the continued
use of the Intellectual Property.
(d) No officer, director, stockholder or employee of the Company or
the Stockholder, nor any spouse, child or other relative or affiliate
thereof, owns directly or indirectly, in whole or in part, any of the
Intellectual Property.
-8-
3.12. Real Estate
(a) Section 3.12 of the Disclosure Schedule sets forth the identity of
the sole lease of real property to which the Company is a party (the
"Lease"). The Stockholder and the Company have previously delivered to the
Buyer a true, correct and complete copy of the Lease and all amendments,
modifications and supplemental agreements thereto. The Lease is in full
force and effect, is valid, binding and enforceable against the Company in
accordance with its terms (subject to the Enforceability Exception), and has
not been modified or amended since the date of delivery to the Buyer.
Neither the Company nor the landlord has delivered written notice to the
other claiming that such party is in default thereunder and that such
default remains uncured. To the knowledge of the Stockholder and the
Company, no event has occurred that would constitute a breach of or default
in the performance of any covenant, agreement or condition contained in the
Lease, nor has any event occurred that with the passage of time or the
giving of notice or both would constitute such a breach or material default.
The Company is not obligated to pay any leasing or brokerage commission
relating to the Lease and, will not have any obligation to pay any leasing
or brokerage commission upon the renewal of the Lease. No construction,
alteration or other leasehold improvement work with respect to the Lease
remains to be paid for or to be performed by the Company.
(b) The Company does not own any real property.
3.13. Tax Matters
(a) Within the times and in the manner prescribed by law, the Company
has filed all federal, state and local tax returns and all tax returns for
foreign countries, provinces and other governing bodies having jurisdiction
to levy taxes upon it that are required to be filed. The Company has paid
all taxes, interest, penalties, assessments and deficiencies that have
become due or that have been claimed to be due, including income, franchise,
real estate, sales and withholding taxes. All tax returns filed by the
Company for the taxable years ending December 31, 1995 through December 31,
2001 constitute complete and accurate representations of the tax liabilities
of the Company for such years and accurately set forth all items (to the
extent required to be included or reflected in such returns) relevant to its
future tax liabilities, including the tax bases of its properties and
assets. The Company has not waived or extended any applicable statute of
limitations relating to the assessment of federal, state, local or foreign
taxes. No examinations of the federal, state, local or foreign tax returns
of the Company is currently in progress nor threatened, and no deficiencies
have been asserted or assessed against the Company as a result of any audit
by the Internal Revenue Service or any state or local taxing authority, and
no such deficiency has been proposed or threatened. The Company has never
been (i) a member of any consolidated group for federal or state income tax
purposes or (ii) a party to any tax sharing agreement or other similar
arrangements.
(b) The Company has not filed a consent pursuant to Section 341(f) of
the Internal Revenue Code of 1954, as amended (the "Code") relating to
collapsible corporations nor has any such corporation agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code). The Company has
never participated in or cooperated with an international boycott, within
the meaning of Section 999 of the Code, nor has any such corporation had
operations that are or may hereafter become reportable under Section 999 of
the Code. The Company does not have any transaction subject to Treasury
Regulation 1.1502-13 in connection with deferred intercompany transactions.
There are no plans, arrangements, contracts or other agreements covering any
current or former employees of the Company that, considered collectively,
will,
-9-
or could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
or Section 162(m) of the Code.
(c) Section 3.13 of the Disclosure Schedule sets forth those taxable
years for which the tax returns of the Company have been reviewed or audited
by applicable federal, state, local and foreign taxing authorities and those
tax years for which said tax returns have received clearances or other
indications of approval from applicable federal, state, local and foreign
taxing authorities. No issue or issues have been raised in connection with
any prior or pending review or audit of said federal, state, local or
foreign tax returns that the Stockholder reasonably believes may be expected
to be raised in the future by such taxing authorities in connection with the
audit or review of the tax returns of the Company.
3.14. Books and Records. The general ledgers and books of account of the
Company are in all material respects complete and correct and have been
maintained in accordance with good business practice and in accordance with all
applicable procedures required by laws and regulations.
3.15. Contracts and Commitments
(a) Section 3.15 of the Disclosure Schedule contains a true, complete
and correct list and description of the following contracts and agreements,
whether written or oral:
(i) the agreement between the Company and the New Jersey Department
of Human Services, Division of Medical Assistance and Health Services,
including all amendments, modifications and supplements thereto (as so
amended, modified and supplemented, the "Medicaid Contract");
(ii) all loan agreements, indentures, mortgages and guaranties to
which the Company is a party or by which the Company or any of its
property is bound;
(iii) all pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, personal property leases and
lease purchase agreements to which the Company is a party or by which
the Company or any of its property is bound;
(iv) all contracts, agreements, commitments or other understandings
or arrangements to which the Company is a party or by which the Company
or any of its property is bound that (A) involve payments or receipts by
the Company of more than $50,000 in the case of any single contract,
agreement, commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all parties
thereto or (B) may materially adversely affect the condition (financial
or otherwise) or the properties, assets, business or prospects of the
Company;
(v) all collective bargaining agreements, employment and consulting
agreements, offer letters, executive compensation plans, bonus plans,
deferred compensation agreements, pension plans, retirement plans,
severance agreements or policies, change in control agreements, employee
stock option or stock purchase plans and group life, health and accident
insurance and other employee benefit plans, agreements, arrangements or
commitments to which the Company is a party or by which the Company or
any of its property is bound;
-10-
(vi) all contracts, agreements or other understandings or
arrangements between the Company and the Stockholder or their respective
affiliates;
(vii) all leases, whether operating, capital or otherwise, under
which the Company is lessor or lessee;
(viii) all contracts, agreements or other arrangements imposing a
non-competition or non-solicitation obligation on the Company or any of
its employees; and
(ix) any other material agreements or contracts entered into by the
Company.
As used herein, the term "Contracts" refers collectively to the contracts
and agreements described in the preceding clauses (i) through (ix), and also
includes all contracts and agreements (collectively, the "Provider
Agreements") with physicians, hospitals and other providers of health care
services that have contracted directly or indirectly with the Company
(collectively, "Providers") to provide covered health care services to
Medicaid beneficiaries (collectively, the "Members") enrolled under the
Medicaid Contract;
(b) Each Contract is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (subject to the
Enforceability Exception), and the Company has no knowledge that any
Contract is not a valid and binding agreement of the other parties thereto.
(c) Each of the Provider Agreements and, subject to receipt of the
approval of the transactions contemplated hereby by the New Jersey
Department of Human Services, Division of Medical Assistance and Health
Services, the Medicaid Contract will continue to be a valid and binding
obligation of each party thereto, enforceable against each such party in
accordance with its terms, subject in each case to the Enforceability
Exception.
(d) The Company has fulfilled all material obligations required pursuant
to the Contracts to have been performed by the Company, as the case may be,
on its part prior to the date hereof, and the Company, as the case may be,
has no reason to believe that it will not be able to fulfill, when due, all
of its obligations under the Contracts that remain to be performed after the
date hereof.
(e) The Company is not in breach of or default under any Contract, and
no event has occurred that with the passage of time or giving of notice or
both would constitute such a default, result in a loss of rights or result
in the creation of any lien, charge or encumbrance, thereunder or pursuant
thereto.
(f) There is no existing breach or default by any other party to any
Contract, and no event has occurred that with the passage of time or giving
of notice or both would constitute a default by such other party, result in
a loss of rights or result in the creation of any lien, charge or
encumbrance thereunder or pursuant thereto.
(g) There are not, and since January 1, 2000 have not been, any claims
of a non-routine nature relating to the Company by the Providers in excess
of (i) $5,000 individually or (ii) $100,000 in the aggregate in the year
ended December 31, 2000, the year ended December 31, 2001 or the period
subsequent to January 1, 2002.
(h) The Company has no written or oral contracts to perform services
that are expected to be performed at, or to result in, a loss.
-11-
(i) The Company and the Stockholder have previously delivered to the
Buyer true, correct and complete copies of all Contracts.
3.16. Compliance with Agreements and Laws
(a) The Company has all requisite certificates of authority, licenses,
permits, consents, orders, approvals and certificates from all Governmental
Entities necessary to conduct its Medicaid business and own and operate the
assets relating to its Medicaid business (collectively, the "Medicaid
Permits"). Section 3.16 of the Disclosure Schedule sets forth a true,
correct and complete list of all such Medicaid Permits, copies of which have
previously been delivered by the Company or the Stockholder to the Buyer.
The Company is not in violation of any federal law, rule, license, decree,
regulation or ordinance (including laws, rules, licenses, decrees,
regulations or ordinances of applicable Governmental Entities) relating to
its Medicaid business or the properties relating to its Medicaid business.
The Company is not in violation of any state, local or foreign law, rule,
license, decree, regulation or ordinance (including laws, rules, licenses,
decrees, regulations or ordinances of applicable Governmental Entities)
relating to its Medicaid business or the properties relating to its Medicaid
business, except for any violation which, individually or in the aggregate,
would not have a Company MAE and would not adversely affect the consummation
of the transactions contemplated hereby.
(b) The business of the Company as conducted since its inception has not
violated, and on the date hereof does not violate, in any material respect,
any federal, state, local or foreign laws, regulations or orders (including
any of the foregoing relating to insurance, employment discrimination,
occupational safety, environmental protection, hazardous waste,
conservation, or corrupt practices, the enforcement of which would have a
material adverse effect on the results of operations, condition (financial
or otherwise), assets, properties business or prospects of the Company. The
Company has not had notice or communication from any federal, state or local
governmental or regulatory authority or otherwise since its inception of any
such violation or noncompliance. The Company has filed all statements and
reports, including any required plan of corrective action in connection with
a failure to maintain the minimum required statutory surplus, with insurance
regulatory authority required by the law, regulations, licensing
requirements and orders administered or issued by such regulatory
authorities. No event has occurred with respect to any of the Medicaid
Permits that would have or has had a material adverse effect on the Medicaid
Contract. The Company has not, and none of its executive officers, directors
or employees (in their respective capacities as such) has, engaged in any
activity constituting fraud or abuse under the laws relating to health care
or insurance. Section 3.16 of the Disclosure Schedule sets forth all
examinations of the Company related to its business conducted by any
governmental entity and identifies by date any correspondence between such a
governmental entity and regarding sanctions, conclusions made and/or
corrective action required or suggested based on such examination.
(c) The Company maintains the minimum statutory surplus required in
accordance with the written regulations of the State of New Jersey
Department of Banking and Insurance and under the terms of the Medicaid
Contract. The Company has no unfunded balance with respect to the minimum
insolvency deposits required in accordance with the written regulations of
the State of New Jersey Department of Banking and Insurance and under the
terms of the Medicaid Contract. The Company has no unfunded balance with
respect to the minimum administrative deposits required in accordance with
the written regulations of the State of New Jersey Department of Banking and
Insurance and under the terms of the Medicaid Contract.
-12-
(d) The Company is not in violation of any federal, state, county or
municipal authority law, ruling, order, decree, regulation, permit, or other
environmental or hazardous waste requirement applicable to the Company
relating to health, safety, pollution, hazardous waste, environmental or
other similar matters, that has not been entirely corrected and that has or
will have a material adverse impact on the transactions contemplated herein.
The Company has not received notice from any federal, state, county or
municipal authority alleging any such violation.
(e) For purposes of this Subsection 3.16, "hazardous waste" means
"hazardous waste" as defined in the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. Section 6921 et seq., and the regulations adopted
pursuant thereto.
3.17. Employee Relations
(a) The Company is in compliance with all federal, state and municipal
laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor
practice, and there are no arrears in the payment of wages or social
security taxes.
(b) None of the employees of the Company is represented by any labor
union, and the Company is not a party to any collective bargaining
agreement. There is no unfair labor practice complaint against the Company
pending before the National Labor Relations Board or any state or local
agency. There is no pending labor strike or other material labor trouble
affecting the Company (including any organizational drive). There is no
labor grievance pending against the Company. There is no pending
representation question respecting the employees of the Company.
(c) The Company has no continuing obligation for health, life, medical
insurance or other similar fringe benefits to any former employee of the
Company.
(d) Section 3.17 of the Disclosure Schedule sets forth a true, correct
and complete list of all employees of the Company, including the job
descriptions and salary or wage rates of each employee, showing separately
for each such person the maximum amounts paid or payable as salary and bonus
payments for the fiscal years ending December 31, 2001 and December 31,
2002, as well as the amount of any accrued and unused vacation and other
accrued and unpaid benefits earned by such person. Section 3.17 of the
Disclosure Schedule also sets forth a true and complete listing of the names
of all employees to whom the Company has made severance or similar payments
since January 1, 2001 with respect to the termination of the employment of
those individuals, together with the amount of such payments and a statement
as to whether such payments were made pursuant to a pre-existing contract,
an agreement entered into in connection with such termination, a corporate
policy, or otherwise. The Company has fewer than 100 employees, and neither
the Stockholder nor any other entity may be deemed an employer of any of the
Company's employees.
(e) There have been no complaints made by any Company employee to any
Governmental Entity of any violation of any law by the Company any officer,
director, employee or agent of the Company, and neither the Stockholder nor
the Company is aware of any basis for such a complaint. There have been no
complaints of harassment or discrimination made by or against any employee
of the Company, and neither the Stockholder nor the Company is aware of any
basis for such a complaint.
-13-
3.18. Employee Benefit Plans
(a) Section 3.18 of the Disclosure Schedule contains a true, correct and
complete list of all pension, benefit, profit sharing, retirement, deferred
compensation, welfare, insurance, disability, bonus, vacation pay, severance
pay and other similar plans, programs and agreements, whether reduced to
writing or not, other than any "multiemployer plan" as such term is defined
in Section 4001(a)(3) of ERISA, relating to the Company's employees, or
maintained at any time since June 30, 1999 by the Company or by any other
member (as used in this Subsection 3.18, a "Plan Affiliate") of any
controlled group of corporations, group of trades or businesses under common
control, or affiliated service group (as defined for purposes of Section
414(b), (c) and (m), respectively, of the Internal Revenue Code of 1986, as
amended (the "Code")) (the "Employee Plans"), and the Company has no
obligations, contingent or otherwise, past or present, under applicable law
or the terms of any Employee Plan.
(b) With respect to all Employee Plans, the Company and its Plan
Affiliates are in compliance with the requirements prescribed by any and all
statutes, orders or governmental rules or regulations currently in effect,
including ERISA and the Code, applicable to such Employee Plans, including
all reporting, notice and disclosure requirements. The Company and its Plan
Affiliates have in all respects performed all obligations required to be
performed by them under, and is not in violation in any respect of, and
there has been no default or violation by any other party with respect to,
any of the Employee Plans. Neither the Company nor any Plan Affiliate has
failed to pay any amounts due and owing as required by the terms of any
Employee Plan.
(c) There is no multiemployer plan to which the Company or its Plan
Affiliates contribute, are required to contribute, or have ever been
required to contribute, or to which any of the employees are beneficiaries
as a result of their employment with the Company.
(d) No Employee Plan provides health or life insurance benefits for
retirees.
(e) The Company has previously delivered to the Buyer true, correct and
complete copies of all Employee Plans and all agreements, including trust
agreements and insurance contracts, related to such Employee Plans.
(f) Each Employee Plan intended to qualify under Section 401(a) of the
Code has been determined by the Internal Revenue Service to so qualify, and
the trusts created thereunder have been determined to be exempt from tax
under the provisions of Section 501(a).
(g) Neither the Company nor any corporation or trade or business
(whether or not incorporated) that would be treated as a member of the
controlled group of the Company under Section 4001(a)(14) of ERISA would be
liable for any amount pursuant to Section 4062, 4063, 4064, 4068 or 4069 of
ERISA if any of the Employee Plans that are subject to Title IV of ERISA
were to terminate. All premiums or other payments required by the terms of
any group or individual insurance policies and programs maintained by the
Company and covering any present or former employees of the Company with
respect to all periods up to and including the Closing Date have been fully
paid for the length of the obligation. To the extent not heretofore
satisfied or accrued on the Current Balance Sheet, the Stockholder shall be
responsible for, and shall cause to be paid without using any of the
Company's assets, any welfare benefits not fully covered by third-party
insurance policies or programs relating to claims incurred by present or
former employees of the Company on or before the Closing Date.
-14-
(h) There are no threatened or pending claims, suits or other
proceedings by present or former employees of the Company or its affiliates,
plan participants, beneficiaries or spouses of any of the above, the
Internal Revenue Service, the PBGC, or any other person or entity involving
any Employee Plan including claims against the assets of any trust,
involving any Employee Plan, or any rights or benefits thereunder, other
than ordinary and usual claims for benefits by participants or beneficiaries
including claims pursuant to domestic relations orders.
(i) Section 3.18 of the Disclosure Schedule specifies those Employee
Plans that are to be continued by the Company following the Closing Date and
those that are to be terminated. At the Buyer's election, the Company shall
take any actions as may be necessary or appropriate under all applicable
laws and the terms of the Employee Plans to establish the Buyer, or an
affiliate of the Buyer, as having all rights and obligations with respect to
any of the Employee Plans that are to be continued including rights with
respect to all annuity or insurance contracts that form a part of any of
such Employee Plans, together with all other Employee Plan assets. The
Company shall obtain as of the Closing Date any and all consents from
trustees required to effect any transfer of any trust(s) related to such
assumed Employee Plans to such trustee(s) as may be appointed by the Buyer.
(j) Except as heretofore accrued on the Current Financial Statements,
there are no liabilities with respect to any Employee Plan that relate to
any period prior to the Closing Date, including any taxes, accrued vacation
or sick pay (whether or not vested), accrued vacation, sick and personal
leaves, employee policies, employee benefit claims or liability to the
Pension Benefit Guaranty Corporation. Without limiting the foregoing and
except as contemplated hereby, no employees of the Company will be entitled
to any severance pay by reason of the consummation of the transactions
contemplated by this Agreement, and no severance pay will have accrued prior
to the Closing Date and will be payable to any employees upon any subsequent
termination of their employment after the Closing Date.
3.19. Absence of Certain Changes or Events
(a) Since June 30, 2002, the Company has not entered into any
transaction that is not in the usual and ordinary course of business and,
without limiting the generality of the foregoing, has not:
(i) authorized any declaration or payment of dividends by the
Company, or paid any such dividends, or authorized any transfer of
assets of any kind whatsoever by the Company to the Stockholder with
respect to any shares of capital stock;
(ii) failed to pay any medical claim liability or indebtedness when
due, and all such claim liabilities have been properly recorded in the
accounts of the Company, except for (A) any such failure attributable to
a claim contested by the Company in good faith in the ordinary course of
business and (B) up to an aggregate of $25,000 assessed with respect to
the period ending as of the date hereof as penalties or interest
attributable to late payments by The TriZetto Group, Inc., as third
party administrator for the Company;
(iii) incurred any material obligation or liability for borrowed
money;
(iv) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than current liabilities reflected in the
Current Balance Sheet;
-15-
(v) mortgaged, pledged or subjected to lien, charge or other
encumbrance any of their respective properties or assets;
(vi) sold or purchased, assigned or transferred any of its tangible
assets or cancelled any debts or claims, except for (A) inventory sold
and raw materials purchased in the ordinary course of business and (B)
debts and claims settled with Providers in the ordinary course of
business and consistent with clause (ii) above;
(vii) made any material amendment to or termination of any Contract
or done any act or omitted to do any act that would cause the breach of
any Contract;
(viii) suffered any losses of personal property, whether insured or
uninsured, and whether or not in the control of the Company in excess of
$50,000 in the aggregate, or waived any rights of any value;
(ix) instituted, settled or agreed to settle, or received notice of
any, pending or threatened litigation, action or proceeding before any
Governmental Entity;
(x) made any material change in the terms, status or funding
condition of any Employee Plan, as defined in Subsection 3.18;
(xi) engaged any new employee;
(xii) made, or committed to make, any changes in the compensation
payable to any officer, director, employee or agent of the Company, or
any bonus payment or similar arrangements made to or with any of such
officers, directors, employees or agents, except to the extent of any
such changes that are made in the ordinary course of business and are
(A) in an amount less than six percent of the compensation payable to
such individual and (B) in an amount less than $25,000 in the aggregate;
(xiii) incurred any capital expenditure in excess of $15,000 in any
instance or $100,000 in the aggregate;
(xiv) made any material alteration in the manner of keeping the
books, accounts or records of the Company, or in the accounting
practices therein reflected, except as may be required by statutory
accounting principles, in which case the Company or the Stockholder has
promptly notified the Buyer in writing of the nature of and reason for
the change; or
(xv) suffered any material adverse change in the consolidated
statutory results of operations, condition (financial or otherwise),
assets, liabilities (whether absolute, accrued, contingent or
otherwise), business or prospects of the Company.
(b) The Company has no knowledge of any existing or threatened
occurrence, event or development that, as far as can be reasonably foreseen,
could have a material adverse effect on the business, properties, assets,
condition (financial or otherwise) or prospects of the Company.
(c) The Company has conducted its Medicaid business in a commercially
prudent manner, as a going concern and in the ordinary course.
-16-
3.20. Providers. Section 3.20 of the Disclosure Schedule sets forth a
true, correct and complete list of (a) the names and addresses of each of
the Providers and (b) each monetary settlement or pending settlement that
exceeds $1,000 with a provider, including a Provider, and that is not
reflected in the claims incurred but not reported set forth in the data
referred to in the first sentence of paragraph (e) of Subsection 3.6. No
Provider Agreement may be terminated pursuant to its terms upon less than 90
days' notice. The Company uses good and reasonable efforts to maintain good
relations with all of its Providers, and the Company uses reasonable
business efforts to cause its accounts payable and other payments owing to
any Provider to be not more than 30 days in arrears. The Stockholder and the
Company have provided to the Buyer a true, correct and complete copy of the
standard weekly claims inventory report for the Company, prepared by The
TriZetto Group, Inc.
3.21. Members. Section 3.21 of the Disclosure Schedule describes each
written, pending and unresolved complaint received by the Company from a
Member and generally describes the nature and disposition of such complaint.
3.22. Commercial Business. Notwithstanding anything herein to the
contrary:
(a) The Company has all requisite certificates of authority,
licenses, permits, consents, orders, approvals and certificates from all
Governmental Entities necessary to conduct its Commercial Business (as
defined in Subsection 5.11) and own and operate the assets relating to
its Commercial Business (collectively, the "Commercial Permits").
Section 3.22 of the Disclosure Schedule sets forth a true, correct and
complete list of all such Commercial Permits, copies of which have
previously be delivered by the Company or the Stockholder to the Buyer.
The Company is not in violation of any federal law, rule, license,
decree, regulation or ordinance (including laws, rules licenses,
decrees, regulations or ordinances of applicable Governmental Entities)
relating to its Commercial Business or the properties relating to its
Commercial Business. The Company is not in violation of any state, local
or foreign law, rule license, decree, regulation or ordinance (including
laws, rules, licenses, decrees, regulations or ordinances of applicable
Governmental Entities) relating to its Commercial Business or the
properties relating to its Commercial Business, except for any violation
which, individually or in the aggregate, would not have a Company MAE
and would not adversely affect the consummation of the transactions
contemplated hereby.
(b) All unpaid medical claims and settlements of the Commercial
Business since January 1, 2001 have been properly reflected as losses
incurred but not reported for purposes of computing the Company's claims
payable and claims adjustment expenses, except to the extent that any
such unpaid medical claims and settlements do not exceed $50,000 in
amount, in the aggregate, in either the year ended December 31, 2001 or
the period subsequent to January 1, 2002.
3.23. Indebtedness to and from Officers, Directors and the Stockholder
(a) The Company is not indebted, directly or indirectly, to any of
its officers or directors, to the Stockholder or to any officers or
directors of the Stockholder, or any affiliate of any such person, in
any amount whatsoever other than for salaries for services rendered to
the Company or reimbursable business expenses, which salaries and
expenses are reflected in the Current Financial Statements or were
incurred by the Company in the ordinary course of business after June
30, 2002.
(b) Neither the Stockholder nor any such officer, director or
affiliate is indebted to the Company (including any amount payable by
the Stockholder with respect to a capital
-17-
contribution) except for advances made to employees of the Company in
the ordinary course of business to meet reimbursable business expenses
anticipated to be incurred by such obligor.
3.24. Banking Facilities. Section 3.23 of the Disclosure Schedule sets
forth a true, correct and complete list of:
(a) each bank, savings and loan or similar financial institution in
which the Company has an account or safety deposit box and the numbers
of the accounts or safety deposit boxes maintained by the Company
thereat; and
(b) the names of all persons authorized to draw on each such account
or to have access to any such safety deposit box facility, together with
a description of the authority (and conditions thereof, if any) of each
such person with respect thereto.
3.25. Powers of Attorney and Suretyships. The Company has no general or
special powers of attorney outstanding (whether as grantor or grantee
thereof) or any obligation or liability (whether actual, accrued, accruing,
continent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor or otherwise in respect of the obligation of any person,
corporation, partnership, joint venture, association, organization or other
entity, except as endorser or maker of checks or letters of credit,
respectively, endorsed or made in the ordinary course of business.
3.26. Conflicts of Interest. Neither the Stockholder, any officer or
director of the Company or the Stockholder, nor any affiliate of any of the
foregoing, now has or within the last three years had, either directly or
indirectly:
(a) an equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person or entity that
furnishes or during such period furnished services to the Company, or
otherwise does or during such period did business with the Company; or
(b) a beneficial interest in any contract, commitment or agreement
to which the Company is or was a party or under which it is or was
obligated or bound or to which any of its properties may be or may have
been subject, other than contracts, commitments or agreements between
the Company and such persons in their capacities as employees, officers
or directors of the Company.
3.27. Brokers. No person, firm or corporation has acted in the capacity
of broker or finder on behalf of the Company or the Stockholder to bring
about the negotiation of this Agreement. Thomas Weisel Partners LLC may
provide a fairness opinion to the Board of Directors of the Company pursuant
to Subsection 7.4, but has not undertaken any other activities on behalf of
the Company or the Stockholder in connection with the negotiation of this
Agreement.
4. Representations of the Buyer. The Buyer represents and warrants to the
Stockholder as follows:
4.1.Organization and Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite power and authority (corporate and other)
to own its properties and to carry on its business as now being conducted.
The Buyer has full power to execute and deliver this Agreement and the
agreements contemplated herein, and to consummate the transactions
contemplated hereby and thereby. Certified copies of the Certificate of
Incorporation and the Bylaws of the Buyer, as amended to date,
-18-
have been previously delivered to the Stockholder, are complete and correct,
and no amendments have been made thereto or have been authorized since the
date thereof.
4.2. Authorization. The execution and delivery of this Agreement by the
Buyer, and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action. This Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the valid
and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms, subject in each case to the
Enforceability Exception.
4.3. Non-Contravention. Neither the execution and delivery of this
Agreement or the agreements provided for herein, nor the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not (a)
conflict with or violate the provisions of any law, rule or regulation
applicable to the Buyer; (b) conflict with or violate the provisions of the
Buyer's Certificate of Incorporation or Bylaws; (c) require on the part of
the Buyer any notice to or filing with, or permit, authorization, consent or
approval of, any Governmental Entity, (d) violate any judgment, decree,
order or award of any Governmental Entity by which the Buyer or its
properties are bound, or (e) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under,
result in the acceleration of obligations under, create in any party any
right to terminate, modify or cancel, or require any notice, consent or
waiver under, any contract or instrument to which the Buyer is a party or by
which it is bound or to which any of its assets are subject, except in any
such case for (i) compliance with applicable requirements of the Securities
Act, any applicable state securities laws and the Exchange Act, (ii)
approval of the State of New Jersey Department of Banking and Insurance and
the New Jersey Department of Human Services, Division of Medical Assistance
and Health Services of the transactions contemplated hereby, and (iii)
consent of LaSalle Bank National Association, as lender under the bank
credit facility of the Buyer.
4.4. Investment Representation. The Buyer is acquiring the Shares from
the Stockholder for the Buyer's own account for investment only and not with
a view to, or for sale in connection with, any distribution of the Shares in
violation of the Securities Act or any rule or regulation thereunder. The
Buyer has no present intention of distributing or selling the Shares, and
the Buyer has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
disposition of the Shares. The Buyer is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act. The Buyer has had adequate
opportunity to obtain from representatives of the Company such information
about the Company as is necessary for the Buyer to evaluate the merits and
risks of the Buyer's acquisition of the Shares pursuant to this Agreement.
The Buyer acknowledges that it has received certain forward-looking
information from the Stockholder or the Company in connection with this
Agreement and the transactions contemplated hereby. The Buyer understands
that neither the Company nor the Stockholder can guarantee that the Company
actually will achieve the plans, intentions or expectations disclosed in
such forward-looking statements and that the Company's actual results could
differ materially from the plans, intentions and expectations disclosed in
the forward-looking statements. The Buyer has sufficient expertise in
business and financial matters to be able to evaluate the risks involved in
the acquisition of the Shares pursuant to the Agreement and to make an
informed investment decision with respect to such acquisition. The Buyer
understands that (a) the Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule
144 under the Securities Act and (b) the Shares cannot be sold, transferred
or otherwise disposed of unless they are subsequently registered under the
Securities Act or an
-19-
exemption from registration is then available. A legend substantially in the
following form will be placed on the certificate or certificates
representing the Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration is
not required."
5. Pre-Closing Covenants. From and after the date hereof and until the
Closing Date:
5.1. Access to Management, Properties and Records
(a) The Stockholder and the Company shall afford the officers,
attorneys, accountants and other authorized representatives of the Buyer
free and full access upon reasonable notice and during normal business
hours to all management personnel, offices, properties, books and
records of the Company, so that the Buyer may have full opportunity to
make such investigation as it shall desire to make of the management,
business, properties and affairs of the Company, and the Buyer shall be
permitted to make abstracts from, or copies of, all such books and
records. The Stockholder and the Company shall furnish to the Buyer such
financial and operating data and other information as to the business of
the Company as the Buyer shall reasonably request. Without limiting the
foregoing, the Stockholder and the Company shall furnish the Buyer with
copies of drafts and executed documents relating to the Company's
proposed sale of the Commercial Business as defined in Subsection 5.11.
(b) The Stockholder and the Company shall authorize the release to
the Buyer of all files pertaining to the business or operations of the
Company held by any federal, state, county or local authorities,
agencies or instrumentalities. The authorizations of the Stockholder and
the Company shall specifically waive all previous claims of privilege or
other restrictions, and in any case where a release by a present or
former employee of the Company is necessary, the Stockholder and the
Company shall exercise their best efforts to obtain such a release.
5.2. Confidentiality
(a) The Company and the Stockholder have furnished and will continue
to furnish the Buyer with certain information that is either non-public,
confidential or proprietary in nature and that (i) is identified in
writing as being proprietary and confidential, (ii) is not already known
to persons other than the Company, the Stockholder, their
representatives and third parties that have entered into written
non-disclosure agreements with the Company and (iii) has not been
independently developed by the Buyer. All such information furnished to
the Buyer, its directors, officers, employees, agents or
representatives, including attorneys, accountants, consultants,
potential lenders, investors and financial advisors (collectively
"representatives"), by the Company, the Stockholder, or any of their
respective representatives, and all analyses, compilations, data,
studies or other documents prepared by the Buyer or its representatives
containing or based in whole or in part on any such furnished
information or reflecting the Buyer's review of, or interest in, the
Company is hereinafter referred to as "Information."
(b) Subject to the requirements of applicable law, the Buyer hereby
agrees to use the Information solely in connection with the consummation
of the transactions contemplated by this Agreement and to transmit the
Information only to those representatives of the Buyer who need to know
the Information.
-20-
5.3. Public Announcements. No disclosures shall be made to third
parties, nor shall there be any general public pronouncements or other
general public communications, concerning this Agreement and the purchase of
the Shares by the Buyer without the consent of the Buyer, on one hand, and
the Company and the Stockholder on the other, except as may be required by
law, in which event the non-disclosing party shall be given an opportunity
to review in advance the proposed disclosure.
5.4. Communications with Members and Providers
(a) Unless instructed otherwise by the Buyer in writing, the Company
shall continue to provide managed healthcare services to Members
throughout the service areas covered by the Medicaid Contract consistent
with past practice.
(b) The Company shall be responsible for all communications with
Members and Providers, provided that the Buyer will provide the Company
with such assistance as may be reasonably requested by the Company in
connection with such communications.
5.5. Conduct of Business. The Company shall operate its Medicaid
business diligently, in a commercially prudent manner and substantially in
the same manner as heretofore and shall not engage in any transaction in
respect to its Medicaid business that is either not in the ordinary course
or not consistent with past practice, or make or institute any unusual or
new methods of accounting or operation, except as agreed to in writing by
the Buyer. In connection with their obligations under Subsections 6.14 and
7.8, the Company and the Buyer shall use their Reasonable Best Efforts to
negotiate and agree upon the form of a management agreement (the "Management
Agreement") by no later than August 16, 2002 pursuant to which the Buyer
shall provide certain administrative and financial services to the Company
(such services, however, not to include actuarial, auditing, legal or
marketing services) in exchange for the fees provided for therein. The fees
under the Management Agreement shall consist of (a) a fee, payable in
monthly installments, of 12 percent of the gross revenues of the Company per
annum, (b) a fee of $1.50 per Member per month for provision of the Buyer's
NurseWise nurse triage services and (c) the Buyer's customary fees for
reinsurance provided by Bankers Reserve Life Insurance Company of Wisconsin,
a wholly owned subsidiary of the Buyer. All of the property of the Company
relating to, or used in, its Medicaid business shall be used, operated,
repaired and maintained in a normal business manner consistent with past
practice.
5.6. Absence of Material Changes. Except for transactions contemplated
or necessitated by this Agreement, the Company shall not, without the prior
written consent of the Buyer:
(a) amend or modify the terms upon which any of the Providers are
compensated or reimbursed;
(b) terminate any Provider Agreement, except for any terminations in
the ordinary course of business that do not, in the aggregate, affect
more than one percent of the Members;
(c) terminate or amend any Medicaid Contract;
(d) fail to pay any medical claim liability or indebtedness relating
to the Company's Medicaid business when due or improperly record such
claim liabilities in the accounts of the Company, except for (i) any
such failure attributable to a claim contested by the Company in good
faith in the ordinary course of business and (ii) up to an aggregate of
$25,000 per calendar month (or a portion thereof) assessed as
-21-
penalties or interest attributable to late payments by The TriZetto
Group, Inc., as third party administrator for the Company;
(e) take any action to amend its Certificate of Incorporation or
Bylaws;
(f) issue any stock, bonds or other corporate securities or grant
any option or issue any warrant to purchase or subscribe for any of such
securities or issue any securities convertible into such securities;
(g) incur any obligation or liability (absolute or contingent),
except current liabilities incurred, obligations under any Provider
Agreement and obligations under the Contracts, or otherwise incurred in
the ordinary course of business up to $30,000 in the aggregate;
(h) declare or make any payment or distribution to the Stockholder
with respect to its stock, or purchase or redeem any shares of its
capital stock;
(i) mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of their respective assets or properties;
(j) sell, assign, or transfer any of its assets, except in the
ordinary course of business;
(k) cancel any debts or claims, except in the ordinary course of
business;
(l) merge or consolidate with or into any corporation or other
entity;
(m) make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to
any of its officers, directors or employees, other than increases in the
ordinary course of business consistent with past practice;
(n) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
(o) waive any rights of material value;
(p) modify, amend, alter or terminate any of its executory contracts
of a material value or that are material in amount;
(q) take or permit any act or omission constituting a breach or
default under any contract, indenture or agreement by which it or its
properties are bound, except for any acts or omissions that, in the
aggregate, do not and will not have a Company MAE;
(r) fail to (i) preserve the possession and control of its assets
and business, (ii) use its best efforts, to the extent commercially
reasonable ("Reasonable Best Efforts"), to keep in faithful service its
present officers and key employees, except as agreed with the Buyer,
(iii) preserve the goodwill of its relationships with Providers,
Members, regulatory bodies, agents, brokers and others having business
relations with it, and (iv) keep and preserve its Medicaid business
existing on the date hereof until the Closing Date;
-22-
(s) fail to operate its business and maintain its books, accounts
and records in the customary manner and in the ordinary and regular
course of business and maintain in good repair its business premises,
fixtures, furniture and equipment;
(t) enter into any lease, contract, agreement or understanding,
other than (i) those entered into in the ordinary course of business
calling for payments that in the aggregate do not exceed $25,000 for
each such lease, contract, agreement or understanding or (ii) any
Provider Agreement;
(u) incur any capital expenditure in excess of $15,000 in an
instance or $100,000 in the aggregate;
(v) engage any new employee;
(w) materially alter the terms, status or funding condition of any
Employee Plan; or
(x) commit or agree to do any of the foregoing in the future.
5.7. Delivery of Interim Financial Statements
(a) As promptly as practicable following the last day of each
calendar month after the date hereof until the Closing Date, and in any
event within 20 days after the end of each such month, the Stockholder
or the Company shall deliver to the Buyer (i) an unaudited balance sheet
as of the end of such month, (ii) unaudited statements of operations and
cash flows for such month and for the period from January 1, 2002
through the end of such month, and (iii) a calculation of statutory net
worth requirement for the period from January 1, 2002 through the end of
such month. Each set of unaudited financial statements delivered
pursuant to clauses (i) and (ii) above shall be prepared in accordance
with United States generally accepted accounting principles applied on a
basis consistent with the periods covered by the Financial Statements,
shall fairly present the financial condition, results of operations and
cash flows of the Company as of the respective dates thereof and for the
periods referred to therein, shall be consistent in scope and format
with the Financial Statements as of, and for the period ended, May 31,
2002 and shall be consistent with the books and records of the Company,
provided that such unaudited financial statements may be subject to
normal recurring year-end adjustments (which shall not be material) and
need include only footnotes equivalent to those contained in the
Financial Statements. Each calculation of statutory net worth
requirement delivered pursuant to clause (iii) above shall be certified
by the chief financial officer of the Company to the effect that such
calculation has been prepared in conformity with accounting practices
prescribed or permitted by the State of New Jersey Department of Banking
and Insurance. No later than August 16, 2002, the Stockholder or the
Company may provide to the Buyer an unaudited balance sheet of the
Company as of June 30, 2002, which balance sheet, unless consented to in
writing by the Buyer (which consent shall not be unreasonably withheld),
shall not be filed with the State of New Jersey Division of Medical
Assistance and Health Services or any other Governmental Entity and
shall not be used as the basis for the calculation of the statutory net
worth requirement applicable to the Company as of such date. In the
event the Buyer so consents to such balance sheet, then, beginning as of
the date of such consent, such balance sheet shall constitute the
"Current Balance Sheet" for purposes of this Agreement.
(b) As promptly as practicable following the last day of each
calendar month after the date hereof until the Closing Date, and in any
event at least two business days before any filing thereof with the
State of New Jersey Department of Banking and Insurance, the Stockholder
or
-23-
the Company shall deliver to the Buyer a copy of any regulatory filing
to be made with the State of New Jersey Department of Banking and
Insurance, an unaudited statutory statement of admitted assets,
liabilities and surplus of the Company as of the end of such month and
unaudited statutory statements of income, changes in surplus and cash
flows for the period from January 1, 2002 through the end of such month.
Any such statutory financial statements shall be prepared in accordance
with accounting practices prescribed or permitted by the State of New
Jersey Department of Banking and Insurance applied on a basis consistent
with the periods covered by the Statutory Financial Statements, fairly
present, in all material respects, the admitted assets, liabilities and
surplus as of the respective dates thereof and the results of operations
and cash flows of the Company for the periods referred to therein, on
the basis of the accounting described in the respective notes thereto,
and are consistent with the books and records of the Company.
(c) As promptly as practicable following the last day of each
calendar month after the date hereof until the Closing Date, and in any
event at least two business days before any filing thereof with the
State of New Jersey Division of Medical Assistance and Health Services,
the Stockholder or the Company shall deliver to the Buyer a copy of the
Medicaid Financial Reports and comparable financial reports for the
Commercial Business as of the end of such month and for the period from
July 1, 2002 through the end of such month. Any such financial reports
shall be prepared in accordance with accounting practices prescribed or
permitted by the State of New Jersey Division of Medical Assistance and
Health Services applied on a basis consistent with the periods covered
by the Medicaid Financial Reports, fairly present the financial
condition and results of operations of the Medicaid business of the
Company as of the end of such month and for the period from July 1, 2002
through the end of such month, and are consistent with the books and
records of the Company.
(d) As promptly as practicable following the last day of each
calendar week after the date hereof until the Closing Date, the
Stockholder or the Company shall deliver to the Buyer a true, correct
and complete copy of the standard weekly claims inventory report for the
Company, prepared by The TriZetto Group, Inc., summarizing those
accounts payable and other payments owing by the Company to any Provider
that were more than 30 days in arrears as of the last day of such
calendar week, which report shall be consistent in form and detail with
the schedule described in the last sentence of Subsection 3.20.
5.8.Compliance with Laws and Regulations. The Company will comply with
all federal, state, local and foreign laws and regulations that are
applicable to it or to the conduct of its Medicaid business, except for any
non-compliance with state, local and foreign laws and regulations which,
individually or in the aggregate, would not have a Company MAE and would not
adversely affect the consummation of the transactions contemplated hereby.
The Company will perform and comply with all contracts, commitments and
obligations by which it is bound. The Company shall maintain at all times
from August 15, 2002 at least the minimum (a) statutory surplus, (b)
insolvency deposits and (c) administrative deposits, each as required in
accordance with the written regulations of the State of New Jersey
Department of Banking and Insurance and under the terms of the Medicaid
Contract. Each of the Buyer, the Company and the Stockholder shall have the
right to contact and confer with the Centers for Medicare and Medicaid
Services, the New Jersey Department of Human Services, Division of Medical
Assistance and Health Services, or any other regulatory authorities having
jurisdiction over the transactions contemplated hereby, and the parties
agree to use their Reasonable Best Efforts to comply with any laws or
regulations applicable to the transactions contemplated hereby and to obtain
any waivers, permits, consents, approvals or other authorizations from any
party, including Governmental Entities, required for the transactions
contemplated hereby.
-24-
5.9. Provider Agreements. The Stockholder and the Company shall use
their Reasonable Best Efforts to assist the Buyer in re-negotiating Provider
Agreements with any and all Providers identified by the Buyer from time to
time prior to the Closing Date.
5.10. Employees. The Stockholder and the Company shall use their
Reasonable Best Efforts to assist the Buyer in obtaining affirmations from
those individuals identified under the heading "Specified Employees" in a
letter to be delivered by the Buyer to the Stockholder and the Company, by
no later than the earlier of August 16, 2002 and the second business day
before the Closing Date (the "Supplemental Letter"), that such individuals
intend to continue their employment with the Company for an indefinite
period following the Closing Date. The Stockholder and the Company shall
take such steps as are necessary in order to ensure that, as of the time
immediately before the Closing, individuals identified under the heading
"Specified Employees" in the Supplemental Letter constitute the only
employees of the Company. To the extent any severance or other payments
(other than for salaries earned in the ordinary course for services rendered
prior to the Closing Date) are, under applicable statutes or rules, existing
contracts, corporate policy or otherwise, necessary or are, in the opinion
of the Stockholder or the Company, desirable in connection with the
termination of the employment of one or more individuals, those payments
shall be made prior to the Closing by (a) the Company up to the amount of
$450,000 in the aggregate and (b) the Stockholder (or made by the Company
and reimbursed by the Stockholder) to the extent those payments exceed
$450,000 in the aggregate.
5.11. Disposition of Commercial Business. The Company shall use its
Reasonable Best Efforts to transfer and dispose of the assets and
liabilities of the commercial line of business currently conducted by the
Company (the "Commercial Business"), a complete list of the assets and
liabilities of which is set forth in Section 5.11 of the Disclosure
Schedule, prior to the Closing Date. The Company shall not, without the
prior written consent of the Buyer, sell, convey, transfer or otherwise
dispose of any assets other than those listed in Section 5.11 of the
Disclosure Schedule in connection with the sale of the Commercial Business,
except for (a) a sale of the Commercial Business in accordance with the
terms of the letter of intent related thereto dated July 9, 2002, a true,
complete and copy of which has been provided by the Stockholder to the
Buyer, and (b) a sale or sales of a portion of the assets of the Commercial
Business in the ordinary course of business. The Company or the Stockholder
shall provide to the Buyer a copy of any agreement that the Company or the
Stockholder proposes to enter into in connection with the sale of the
Commercial Business, together with an estimated, pro forma balance sheet
with respect to the Commercial Business giving effect to such proposed sale
as of the proposed sale date, not less than five business days prior to the
execution of any such agreement. The Company and the Stockholder shall
provide to the Buyer such assurances as the Buyer shall, in its sole
discretion, deem sufficient that the Company and the Stockholder have made
provision, acceptable to the Buyer, (a) for all of the obligations and
liabilities of the Commercial Business, including a guarantee (the
"Guarantee") by the Stockholder of all medical claims for services rendered
in connection with the Commercial Business prior to such sale, (b) against
any diminution of the assets, or increase in the liabilities, of the
Commercial Business, as such assets and liabilities are reflected in the
unaudited balance sheet with respect to the Commercial Business as of June
30, 2002 previously delivered by the Stockholder or the Company to the
Buyer, provided that no Guarantee shall be required pursuant to this clause
(b) unless the aggregate amount of any such diminutions in assets and
increases in liabilities exceeds $50,000, or (c) against any impairment of
the ability of the Company to continue to conduct its Medicaid business
consistent in all material respects with the conduct of such business as of
the date hereof. Not less than five business days following the execution of
the agreement for the sale of the Commercial Business, the Company or the
Stockholder shall deliver to the Buyer a final balance sheet with respect to
the Commercial Business as of the date of such closing. In connection with
such transfer and disposition of the Commercial Business, the Company shall
terminate its
-25-
arrangements for the provision of commercial insurance to students of the
Stockholder. In addition, the parties shall use their Reasonable Best
Efforts to negotiate and agree upon the form of the Guarantee by no later
than the fifth business day following the execution of the agreement for the
sale of the Commercial Business. The Stockholder shall reimburse the Company
for any expenses incurred by the Company after the date hereof in connection
with the transfer and disposition of the Commercial Business, including the
termination of such arrangements with students of the Stockholder, in excess
of $100,000 in the aggregate.
5.12. Exclusivity. Except in connection with the disposition of the
Commercial Business, none of the Company, the Stockholder or their
respective officers, directors, employees, representatives and agents shall,
directly or indirectly, (a) initiate, solicit, encourage or otherwise
facilitate any inquiry, proposal, offer or discussion with any party (other
than the Buyer) concerning any merger, reorganization, consolidation,
recapitalization, business combination, liquidation, dissolution, share
exchange, sale of stock, sale of material assets or similar business
transaction involving the Company, (b) furnish any non-public information
concerning the business, properties or assets of the Company to any party
(other than the Buyer) or (c) engage in discussions or negotiations with any
party (other than the Buyer) concerning any such transaction. If the Company
or the Stockholder receives any inquiry, proposal or offer of the nature
described in the preceding sentence, the Company shall, within one business
day after such receipt, notify the Buyer of such inquiry, proposal or offer,
including the identity of the other party and the terms of such inquiry,
proposal or offer.
5.13. Taxes. The Company will duly and timely file all reports or
returns required to be filed with federal, state, local and foreign
authorities and will promptly pay or make adequate provision for all
federal, state, local and foreign taxes, assessments and governmental
charges levied or assessed upon it or any of its properties (unless
contesting such in good faith and adequate provision has been made
therefor), including any taxes, assessments and governmental charges
relating to the period from January 1, 2002 to the Closing Date.
5.14. Notices of Breaches
(a) From the date of this Agreement until the Closing, the Company
shall promptly deliver to the Buyer supplemental information concerning
events or circumstances occurring subsequent to the date hereof which
would ender any representation, warranty or statement in this Agreement
or the Disclosure Schedule inaccurate or incomplete at any time after
the date of this Agreement until the Closing. No such supplemental
information shall be deemed to avoid or cure any misrepresentation or
breach of warranty or constitute an amendment of any representation,
warranty or statement in this Agreement or the Disclosure Schedule.
(b) From the date of this Agreement until the Closing, the Buyer
shall promptly deliver to the Company in a manner satisfactory in form
and substance supplemental information concerning events or
circumstances occurring subsequent to the date hereof which would render
any representation or warranty in this Agreement inaccurate or
incomplete at any time after the date of this Agreement until the
Closing. No such supplemental information shall be deemed to avoid or
cure any misrepresentation or breach of warranty or constitute an
amendment of any representation or warranty in this Agreement.
5.15. Notices and Consents
(a) The Company and the Stockholder shall use their Reasonable Best
Efforts to obtain, at their expense, all waivers, permits, consents,
approvals or other authorizations from Governmental Entities, and to
effect all registrations, filings and notices with or to
-26-
Governmental Entities, as may be required for such parties to consummate
the transactions contemplated by this Agreement and to otherwise comply
with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement, as are
required to be listed in the Disclosure Schedule. The Company and the
Stockholder shall use their reasonable best efforts to obtain, at their
expense, all such waivers, consents or approvals from third parties
other than Governmental Entities, and to give all such notices to third
parties, as are required to be listed in the Disclosure Schedule.
(b) The Buyer shall use its Reasonable Best Efforts to obtain, at
its expense, all waivers, permits, consents, approvals or other
authorizations from Governmental Entities, and to effect all
registrations, filings and notices with or to Governmental Entities, as
may be required for it to consummate the transactions contemplated by
this Agreement and to otherwise comply with all applicable laws and
regulations in connection with the consummation of the transactions
contemplated by this Agreement, as are required by Subsection 4.3. The
Buyer shall use its Reasonable Best Efforts to obtain, at its expense,
all such waivers, consents or approvals from third parties other than
Governmental Entities, and to give all such notices to third parties, as
are required pursuant to Subsection 4.3.
5.16. Closing Efforts. Each of the parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement,
including using its reasonable best efforts to ensure that (i) its
representations and warranties remain true and correct in all material
respects through the Closing Date and (ii) the conditions to the obligations
of the other parties to consummate the sale of the Shares to the Buyer are
satisfied.
5.17. Expenses
(a) Except as otherwise expressly provided herein, the Buyer will
pay all fees and expenses (including legal, accounting and broker's fees
and other costs and expenses) incurred by it in connection with the
transactions contemplated hereby.
(b) Except as otherwise expressly provided herein, the Stockholder
will pay all fees and expenses (including legal, accounting and broker's
fees and other costs and expenses) incurred by it or the Company in
connection with the transactions contemplated hereby. The Stockholder
shall be responsible for payment of all sales or transfer taxes arising
out of the conveyance of the Shares. The fees and expenses of Epstein
Becker & Green, P.C., special counsel to the Company, in connection with
this transaction shall be paid at the Closing by (i) the Company up to
the amount of $50,000 and (ii) the Stockholder (or paid by the Company
and reimbursed by the Stockholder) to the extent those payments exceed
$50,000. Any transfer taxes and fees payable to any Governmental Entity
to obtain any necessary authorizations, consents and approvals shall be
borne equally by the Buyer and the Stockholder.
(c) In the event that legal proceedings are commenced by the Buyer
against the Stockholder (or the Company, if the transactions
contemplated hereby are not consummated), or by the Stockholder against
the Buyer, in connection with this Agreement or the transactions
contemplated hereby, the party or parties that do not prevail in such
proceedings shall pay the reasonable attorneys' fees and other costs and
expenses, including investigation costs, incurred by the prevailing
party in such proceedings.
-27-
6. Conditions to Obligations of the Buyer. The obligations of the Buyer
under this Agreement are subject to the fulfillment, at the Closing Date, of the
following conditions precedent, each of which may be waived in writing in the
sole discretion of the Buyer:
6.1. Representations, Warranties and Covenants
(a) Except for any changes permitted by the terms hereof or
consented to in writing by the Buyer, the representations and warranties
of the Stockholder and the Company (including paragraph (e) of
Subsection 3.6 and paragraph (c) of Subsection 3.16) shall be true on
and as of the Closing Date as though such representations and warranties
were made on and as of such date, except to the extent such
representations and warranties are specifically made as of a particular
date, (in which case such representations and warranties shall be true
and correct as of such date), provided that if paragraph (c) of
Subsection 3.16 shall not be true on and as of the Closing Date as
though such representation was made on and as of such date (giving
effect to the statutory and contractual requirements in effect as of
such date, including any binding written determination by a Governmental
Entity to decrease the minimum balances and deposits referenced
therein), the Purchase Price shall be reduced by the lesser of (i)
$3,700,000 or (ii) the total amount that the Company would be required
to fund in order to comply with such paragraph (c) of Subsection 3.16.
In the event that the total amount contemplated by clause (ii) of the
immediately preceding sentence exceeds $4,700,000, the Buyer, in its
discretion, may determine not to proceed with the Closing. The
Stockholder and the Company shall have performed and complied with all
terms, conditions, covenants, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by each of
them prior to or at the Closing Date.
(b) At the Closing, the Stockholder shall have delivered to the
Buyer a certificate signed by the Senior Vice President, Administration
and Finance of the Stockholder as to the Stockholder's compliance with
paragraph (a) of this Subsection 6.1. At the Closing, the Company shall
have delivered to the Buyer a certificate signed by the President and
Chief Executive Officer of the Company as to the Company's compliance
with paragraph (a) of this Subsection 6.1.
6.2. Investor Rights Agreement. The Stockholder and the Company shall
have entered into the Investor Rights Agreement with the Buyer.
6.3. Escrow Agreement. The Stockholder and the Escrow Agent shall have
entered into the Escrow Agreement.
6.4. Amended Organizational Documents. The Bylaws of the Company shall
have been amended and restated, effective immediately upon or immediately
after the Closing and in a form reasonably acceptable to the Buyer, to the
effect set forth under the heading "Amended and Restated Bylaws" in the
Supplemental Letter.
6.5. Provider Agreements. The Company and each of the Providers
identified under the heading "Providers" in the Supplemental Letter shall
have entered into agreements amending or replacing their existing Provider
Agreements, which new agreements shall be satisfactory in form and substance
to the Buyer.
6.6. Employment Arrangements. On or prior to the Closing Date, (a) each
individual listed in the Supplemental Letter under the heading "Employment
Agreements" shall have entered into an employment agreement with the Company
in the form agreed upon by such individual and the Buyer prior to the date
hereof and (b) at least 70% of the individuals listed in the Supplemental
-28-
Letter under the heading "Specified Employees" shall have advised the Buyer
of their intention to continue their employment with the Company for an
indefinite period following the Closing Date.
6.7. Disposition of Commercial Business. The Company shall have disposed
of the Commercial Business and shall have delivered the Guarantee to the
Buyer; which Guarantee shall be satisfactory to the Buyer in form and
substance. Such disposition shall not, in the reasonable judgment of the
Buyer, have impaired the ability of the Company to continue to conduct its
Medicaid business consistent in all material respects with the conduct of
such business as of the date hereof.
6.8. IBNR Certification. On the Closing Date, the Buyer shall have
received a certification of the National Healthcare Office of
PricewaterhouseCoopers LLP confirming that all medical claims of the
Company's Medicaid business and Commercial Business have been properly
reflected as losses incurred but not reported for the purposes of computing
the Company's claims payable and claims adjustment expenses, provided that
if such Office is unable to deliver such certification, the Buyer, in its
discretion, may determine to waive the preceding condition and, as
consideration therefor, the Purchase Price shall be reduced by the amount
that such Office certifies the Company has failed to properly reflect in
claims payable and claims adjustment expenses with respect to its Medicaid
business.
6.9. Medicaid Contract. The Buyer shall have received such assurances,
as the Buyer shall, in its sole discretion, deem sufficient that neither the
sale of the Shares as contemplated hereby nor any other actions contemplated
hereby will materially affect any of the Company's rights under the Medicaid
Contract.
6.10. Consents. The Stockholder and the Company shall have obtained at
their own expense (and shall have provided copies to the Buyer of) all of
the waivers, permits, consents, approvals or other authorizations referred
to in paragraph (a) Subsection 5.15 that are required on the part of the
Company or the Stockholder, consents and approvals of all lenders, lessors,
Governmental Entities and other third parties whose authorization, consent
or approval is required in order for the Stockholder and the Company to
consummate the transactions contemplated hereby, and for the Buyer to
operate the Company's Medicaid business, including those set forth in
Section 3.5 of the Disclosure Schedule.
6.11. Indebtedness. Any indebtedness described in paragraph (b) of
Subsection 3.23 shall have been paid to the Company.
6.12. Adverse Proceedings. No action or proceeding by or before any
Governmental Entity shall have been instituted or threatened by any
governmental body or person whatsoever that shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or that might
affect the right of the Buyer to own the Shares or to own or operate the
business of the Company after the Closing.
6.13. Opinions of Counsel. The Buyer shall have received (a) an opinion
of counsel to the Stockholder, which counsel shall be reasonably acceptable
to the Buyer, dated as of the Closing Date, substantially in the form
attached hereto as EXHIBIT C and (b) an opinion of Epstein Becker & Green,
P.C., special counsel to the Company, dated as of the Closing Date, in
substantially the form attached hereto as EXHIBIT D.
6.14. Management Agreement. The Company shall have entered into the
Management Agreement, satisfactory to the Buyer in form and substance.
-29-
6.15. Closing Deliveries. The Buyer shall have received at or prior to
the Closing such additional documents, instruments or certificates as the
Buyer may reasonably request including:
(a) the stock certificate representing the Shares, duly endorsed in
accordance with Subsection 1.1 of this Agreement;
(b) such certificates of the Company's officers and of the
Stockholder's officers and such other documents evidencing satisfaction
of the conditions specified in this Section 6 as the Buyer shall
reasonably request;
(c) a certificate of the Secretary of State of the State of New
Jersey as to the legal existence and good standing (including tax) of
the Company in New Jersey;
(d) certificates of the Secretary of the Company and of the
Stockholder attesting to the incumbency of the Company's officers, the
authenticity of the resolutions authorizing the transactions
contemplated by this Agreement, and the authenticity and continuing
validity of the charter documents delivered pursuant to Subsection 3.1;
(e) where required by the applicable Lease, estoppel certificates
from each Lessor from whom the Company leases real or personal property
consenting to the acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there are no
outstanding claims against the Company under such Lease;
(f) where required by the applicable Lease, estoppel certificates
from each tenant to whom the Company leases real property consenting to
the acquisition of the Shares by the Buyer and the other transactions
contemplated hereby, and representing that there are no outstanding
claims against the Company under such Lease;
(g) certificates of appropriate governmental officials in each state
in which the Company is required to qualify to do business as a foreign
corporation as to the due qualification and good standing (including
tax) of the Company in each such jurisdiction;
(h) written resignations of all directors and officers of the
Company, other than as set forth in under the heading "Continuing
Directors and Officers" in the Supplemental Letter; and
(i) the original corporate minute books of the Company and all
corporate seals.
7. Conditions to Obligations of the Stockholder and the Company. The
obligations of the Stockholder and the Company under this Agreement are subject
to the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Stockholder:
7.1. Representations, Warranties and Covenants
(a) The representations and warranties of the Buyer in this
Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Stockholder. The Buyer
shall have performed and complied with all terms, conditions, covenants,
obligations,
-30-
agreements and restrictions required by this Agreement to be performed
or complied with by it prior to or at the Closing Date.
(b) At the Closing, the Buyer shall have delivered to the
Stockholder a certificate signed by the President and Chief Executive
Officer of the Buyer as to the Buyer's compliance with paragraph (a) of
this Subsection 7.1.
7.2. Investor Rights Agreement. The Buyer shall have entered into the
Investor Rights Agreement with the Stockholder and the Company.
7.3. Escrow Agreement. The Buyer and the Escrow Agent shall have entered
into the Escrow Agreement with the Stockholder.
7.4. Fairness Opinion. The Board of Directors of the Company shall have
received, by no later than the earlier of the Closing Date and August 15,
2002, an opinion of Thomas Weisel Partners LLC to the effect that the
consideration to be received by the Stockholder in connection with the sale
of the Shares is fair to the Stockholder from a financial point of view.
7.5. Consents. The Buyer shall have obtained at its own expense (and
shall have provided copies thereof to the Company or the Stockholder) all of
the waivers, permits, consents, approvals or other authorizations, and
effected all of the registrations, filings and notices, referred to in
paragraph (b) of Subsection 5.15 that are required on the part of the Buyer.
7.6. Adverse Proceedings. No action or proceeding by or before any
Governmental Entity shall have been instituted or threatened by any
governmental body or person whatsoever that shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or that might
affect the right of the Stockholder to transfer the Shares.
7.7. Opinion of Counsel. The Stockholder shall have received an opinion
of Hale and Dorr LLP, counsel to the Buyer, dated as of the Closing Date, in
substantially the form attached hereto as EXHIBIT E.
7.8. Management Agreement. The Buyer shall have entered into the
Management Agreement, satisfactory to the Stockholder and the Company in
form and substance.
7.9. Closing Deliveries. The Stockholder shall have received at or prior
to the Closing such additional documents, instruments or certificates as the
Buyer may reasonably request, including:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified in this
Section 7 as the Stockholder shall reasonably request;
(b) a certificate of the Secretary of State of the State of Delaware
as to the legal existence and good standing (including tax) of the Buyer
in Delaware; and
(c) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and validity of charter documents.
8. Price Reduction
-31-
8.1. Damages. After the Closing, the Stockholder shall repay or cause to
be repaid to the Buyer, in the manner and subject to the terms and
limitations set forth in this Section 8, a portion of the Purchase Price (a
"Price Reduction") in the event the Buyer or the Company incurs, suffers or
is subject to any claims, damages, losses, liabilities, costs and expenses
(including settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions) (collectively,
the "Damages") in connection with each and all of the following:
(a) all obligations or liabilities of the Company arising or
accruing under the Medicaid Contract or any contract relating to or
involving the Commercial Business to the extent such obligations or
liabilities arise or accrue as of or prior to the time of the Closing
and have not been reflected as losses incurred but not reported for
purposes of computing the Company's claims payable and claims adjustment
expenses (as adjusted to give effect to any reduction in the Purchase
Price pursuant to Subsection 6.8), including (i) any medical claims
incurred under any Provider Agreement for services rendered to Members
as of or prior to the time of the Closing, (ii) any medical claims
incurred under any contract or agreement with a physician, hospital or
other healthcare service provider for services rendered to members or
customers of the Commercial Business as of or prior to the time of the
Closing, (iii) any claims of Members who are hospitalized as of or prior
to the time of the Closing through the date of discharge of such Members
and (iv) any claims of members or customers of the Commercial Business
who are hospitalized as of or prior to the time of the Closing through
the date of discharge of such members or customers;
(b) any (i) breach, as of the date of this Agreement or as of the
Closing Date, of any representation or warranty of the Stockholder or
the Company contained in this Agreement or any other agreement or
instrument furnished by the Stockholder or the Company to the Buyer
pursuant to this Agreement, (ii) write-off by the Company, prior to the
date that is six months after the Closing Date, of any portion of the
Closing Receivables in accordance with the normal practice of the Buyer
and its subsidiaries and with generally accepted accounting principles,
provided that Damages shall be deemed to accrue under this clause (ii)
only after the date that is three months after the Closing Date, or
(iii) failure to collect, prior to the date that is five business days
before the first anniversary of the Closing Date, any of the Closing
Receivables, other than those written-off as contemplated by the
preceding clause (ii);
(c) any failure to perform any covenant or agreement of the
Stockholder or the Company contained in this Agreement (including
Subsections 5.10 and 5.11) or any agreement or instrument furnished by
the Stockholder or the Company to the Buyer pursuant to this Agreement;
(d) any failure of the Stockholder to have good, valid and
marketable title to the Shares, free and clear of any and all covenants,
conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever; or
(e) any claim by a former stockholder of the Company, or any other
person or entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of the Company; (ii) any
rights of a stockholder, including preemptive rights; (iii) any rights
under the Certificate of Incorporation or Bylaws of the
-32-
Company; or (iv) any claim that his, her or its shares were wrongfully
repurchased by the Company.
8.2. Reduction Claims
(a) If the Buyer is entitled, or seeks to assert rights, to a Price
Reduction pursuant to this Section 8, it shall give written notification
to the Stockholder of the commencement of any suit or proceeding by a
person or entity other than a party hereto for which a reduction is
sought (a "Third Party Action"). Such notification shall be given within
20 days after receipt by the Buyer of notice of such Third Party Action,
and shall describe in reasonable detail (to the extent known by the
Buyer) the facts constituting the basis for such Third Party Action and
the amount of the claimed damages; provided, however, that no delay or
failure on the part of the Buyer in so notifying the Stockholder shall
relieve the Stockholder of any obligation to reduce the Purchase Price
hereunder except to the extent of any damage or liability caused by or
arising out of such failure. Within 20 days after delivery of such
notification, the Stockholder may, upon written notice thereof to the
Buyer, assume control of the defense of such Third Party Action with
counsel reasonably satisfactory to the Buyer; provided that (i) the
Stockholder may only assume control of such defense if (A) it
acknowledges in writing to the Buyer that any damages, fines, costs or
other liabilities that may be assessed against the Buyer in connection
with such Third Party Action constitute Damages for which the Buyer
shall be entitled to a Price Reduction pursuant to this Section 8 and
(B) the ad damnum is less than or equal to the amount of Damages for
which the Purchase Price is to be reduced pursuant to this Section 8 and
(ii) the Stockholder may not assume control of the defense of a Third
Party Action involving criminal liability or in which equitable relief
is sought against the Buyer. If the Stockholder does not, or is not
permitted under the terms hereof to, so assume control of the defense of
a Third Party Action, the Buyer shall control such defense. The party
not controlling the defense of the Third Party Action (the
"Non-controlling Party") may participate in such defense at its own
expense. The party controlling such defense (the "Controlling Party")
shall keep the Non-controlling Party advised of the status of such Third
Party Action and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto.
The Non-controlling Party shall furnish the Controlling Party with such
information as it may have with respect to such Third Party Action
(including copies of any summons, complaint or other pleading which may
have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense
of such Third Party Action. The fees and expenses of counsel to the
Buyer with respect to a Third Party Action shall be considered Damages
for purposes of this Agreement if (i) the Buyer controls the defense of
such Third Party Action pursuant to the terms of this paragraph (a) of
Subsection 8.2 or (ii) the Stockholder assumes control of such defense
and the Buyer reasonably concludes that the Stockholder and the Buyer
have conflicting interests or different defenses available with respect
to such Third Party Action. The Stockholder shall not agree to any
settlement of, or the entry of any judgment arising from, any Third
Party Action without the prior written consent of the Buyer, which shall
not be unreasonably withheld, conditioned or delayed; provided that the
consent of the Buyer shall not be required if the Stockholder agrees in
writing to pay any amounts payable pursuant to such settlement or
judgment and such settlement or judgment includes a complete release of
the Buyer from further liability and has no other adverse effect on the
Buyer. The Buyer shall not agree to any settlement of, or the entry of
any judgment arising from, any such Third Party Action without the prior
written consent of the Stockholder, which shall not be unreasonably
withheld, conditioned or delayed.
-33-
(b) In order to seek a Price Reduction pursuant to this Section 8,
the Buyer shall deliver to the Stockholder and the Escrow Agent written
notification (a "Claim Notice") that contains (i) a description of the
Damages incurred or reasonably expected to be incurred by the Buyer or
the Company and the amount of such Damages (the "Claimed Amount"), to
the extent then known, (ii) a statement that the Buyer is entitled to a
Price Reduction pursuant to this Section 8 for such Damages and a
reasonable explanation of the basis therefor, and (iii) a demand for
payment in the amount of such Damages.
(c) Within 20 days after delivery of a Claim Notice (unless such
Claim Notice is delivered pursuant to paragraph (a) of Subsection 8.1,
in which case within two business days after delivery of such Claim
Notice), the Stockholder shall deliver to the Buyer a written response
(the "Response") in which the Stockholder shall: (i) agree that the
Buyer is entitled to receive a Price Reduction equal to the Claimed
Amount, in which case the Stockholder and the Buyer shall deliver to the
Escrow Agent, within three days following the delivery of the Response,
a written notice executed by both parties instructing the Escrow Agent
to distribute the Claimed Amount from the Escrow Account to the Buyer or
the Company, as contemplated by paragraph (g) of this Subsection 8.2;
(ii) agree that the Buyer is entitled to receive a Price Reduction equal
to a part (the "Agreed Amount"), but not all, of the Claimed Amount, in
which case the Stockholder and the Buyer shall deliver to the Escrow
Agent, within three days following the delivery of the Response, a
written notice executed by both parties instructing the Escrow Agent to
distribute the Agreed Amount from the Escrow Account to the Buyer or the
Company, as contemplated by paragraph (g) of this Subsection 8.2; or
(iii) dispute that the Buyer is entitled to receive a Price Reduction
for any of the Claimed Amount.
(d) During the 30-day period following the delivery of a Response
that reflects a dispute by the Stockholder of its liability for a Price
Reduction for all or a part of the Claimed Amount (a "Dispute"), the
Stockholder and the Buyer shall use good faith efforts to resolve the
Dispute. If the Dispute is not resolved within such 30-day period, the
Stockholder and the Buyer shall discuss in good faith the submission of
the Dispute to binding arbitration, and if the Stockholder and the Buyer
agree in writing to submit the Dispute to such arbitration, then the
provisions of paragraph (e) of this Subsection 8.2 shall become
effective with respect to such Dispute. The provisions of this paragraph
(d) shall not obligate the Stockholder and the Buyer to submit to
arbitration or any other alternative dispute resolution procedure with
respect to any Dispute, and in the absence of an agreement by the
Stockholder and the Buyer to arbitrate a Dispute, such Dispute shall be
resolved in a state or federal court sitting in the State of New Jersey,
in accordance with Subsection 11.6. The Stockholder and the Buyer shall
deliver to the Escrow Agent, promptly following the resolution of the
Dispute (whether by mutual agreement, arbitration, judicial decision or
otherwise), a written notice executed by both parties instructing the
Escrow Agent as to the amount that shall be distributed to the Buyer or
the Company, as contemplated by paragraph (g) of this Subsection 8.2
(which notice shall be consistent with the terms of the resolution of
the Dispute).
(e) If, as set forth in paragraph (d) of this Subsection 8.2, the
Buyer and the Stockholder agree to submit any Dispute to binding
arbitration, the arbitration shall be conducted by a single arbitrator
(the "Arbitrator") in accordance with the Commercial Rules in effect
from time to time and the following provisions:
(i) In the event of any conflict between the Commercial Rules in
effect from time to time and the provisions of this Agreement, the
provisions of this Agreement shall prevail and be controlling.
-34-
(ii) The parties shall commence the arbitration by jointly
filing a written submission with the Newark, New Jersey office of
the American Arbitration Association in accordance with Commercial
Rule 5 (or any successor provision).
(iii) No depositions or other discovery shall be conducted in
connection with the arbitration.
(iv) Not later than 30 days after the conclusion of the
arbitration hearing, the Arbitrator shall prepare and distribute to
the parties a writing setting forth the arbitral award and the
Arbitrator's reasons therefor. Any award rendered by the Arbitrator
shall be final, conclusive and binding upon the parties, and
judgment thereon may be entered and enforced in any court of
competent jurisdiction (subject to Subsection 11.6), provided that
the Arbitrator shall have no power or authority to (x) award damages
in excess of the portion of the Claimed Amount that is subject to
such Dispute, (y) award multiple, consequential, punitive or
exemplary damages, or (z) grant injunctive relief, specific
performance or other equitable relief.
(v) The Arbitrator shall have no power or authority, under the
Commercial Rules or otherwise, to (x) modify or disregard any
provision of this Agreement, including the provisions of paragraph
(e) of this Subsection 8.3, or (y) address or resolve any issue not
submitted by the parties.
(vi) In connection with any arbitration proceeding pursuant to
this Agreement, each party shall bear its own costs and expenses,
except that the fees and costs of the American Arbitration
Association and the Arbitrator, the costs and expenses of obtaining
the facility where the arbitration hearing is held, and such other
costs and expenses as the Arbitrator may determine to be directly
related to the conduct of the arbitration and appropriately borne
jointly by the parties (which shall not include any party's
attorneys' fees or costs, witness fees (if any), costs of
investigation and similar expenses) shall be shared equally by the
Buyer and the Stockholder.
(f) Notwithstanding the other provisions of this Subsection 8.2, if
a third party asserts (other than by means of a lawsuit) that the Buyer
is liable to such third party for a monetary or other obligation that
may constitute or result in Damages for which the Buyer may be entitled
to a Price Reduction pursuant to this Section 8, and the Buyer
reasonably determines that it has a valid business reason to fulfill
such obligation, then (i) the Buyer shall be entitled to satisfy such
obligation, without prior notice to or consent from the Stockholder,
(ii) the Buyer may subsequently make a claim for a Price Reduction in
accordance with the provisions of this Section 8, and (iii) the Buyer
shall be reimbursed, in accordance with the provisions of this Section
8, for any such Damages for which it is entitled to a Price Reduction
pursuant to this Section 8 (subject to the right of the Stockholder to
dispute the Buyer's entitlement to a Price Reduction, or the amount for
which the Buyer is entitled to a Price Reduction, under the terms of
this Section 8).
(g) It is understood that, pursuant to the provisions of Subsection
8.1, a Price Reduction may result from Damages that are incurred by or
attributable to the Company and that result in economic harm to the
Buyer solely as the result of its status as a stockholder of the
Company. In such an event, the parties agree that it is in their mutual
best interests for the repayment of any such Price Reduction to be made
to the Company, rather than the Buyer. In no event shall any reduction
in the amount of any Damages or any Price Reduction and Damages be made
to reflect the fact that the Buyer owns less than all of the outstanding
capital stock of the Company.
-35-
8.3.Survival of Representations and Warranties. All representations and
warranties that are covered by agreements in paragraphs (a) and (b) of
Subsection 8.1 shall (a) survive the Closing and (b) shall expire one year
after the Closing Date. If the Buyer delivers to the Stockholder, before
expiration of a representation or warranty, either a Claim Notice based upon
a breach of such representation or warranty, or a notice that, as a result
of a legal proceeding instituted by or written claim made by a third party,
the Buyer reasonably expects to incur Damages for which it is entitled to a
Price Reduction under this Section 8 based upon a breach of such
representation or warranty (an "Expected Claim Notice"), then the applicable
representation or warranty shall survive until, but only for purposes of,
the resolution of the matter covered by such notice. If the legal proceeding
or written claim with respect to which an Expected Claim Notice has been
given is definitively withdrawn or resolved in favor of the Buyer, the Buyer
shall promptly so notify the Stockholder; and if the Buyer has delivered a
copy of the Expected Claim Notice to the Escrow Agent and funds have been
retained in the Escrow Account after the Termination Date (as defined in the
Escrow Agreement) with respect to such Expected Claim Notice, the
Stockholder and the Buyer shall promptly deliver to the Escrow Agent a
written notice executed by both parties instructing the Escrow Agent to
distribute such retained funds to the Stockholder in accordance with the
terms of the Escrow Agreement. The rights to a Price Reduction set forth in
this Section 8 shall not be affected by (i) any investigation conducted by
or on behalf of the Buyer or any knowledge acquired (or capable of being
acquired) by the Buyer, whether before or after the date of this Agreement
or the Closing Date, with respect to the inaccuracy or noncompliance with
any representation, warranty, covenant or obligation which is the subject of
a Price Reduction hereunder or (ii) any waiver by the Buyer of any closing
condition relating to the accuracy of representations and warranties or the
performance of or compliance with agreements and covenants.
8.4. Limitations
(a) Notwithstanding anything to the contrary herein:
(i) the aggregate Price Reduction for Damages under this Section
8 shall not exceed the amount of funds contained in the Escrow
Account;
(ii) no Price Reduction shall be made under this Section 8 with
respect to a claim pursuant to clause (i) of paragraph (b) of
Subsection 8.1 (other than a claim relating to a breach of the
representations and warranties set forth in Subsections 2.4, 2.5 and
3.2) unless and until the aggregate Damages with respect to claims
pursuant to clause (i) of paragraph (b) of Subsection 8.1 (other
than as aforesaid) exceed $1,000,000;
(iii) the Price Reduction for Damages under clause (iii) of
paragraph (b) of Subsection 8.1 shall be reduced to the extent that
any Closing Receivables that were the subject of a Price Reduction
under clause (ii) of such paragraph (b) are subsequently collected
prior to the fifth business day preceding the first anniversary of
the Closing Date; and
(iv) the aggregate Price Reduction for Damages under clauses
(ii) and (iii) of paragraph (b) of Subsection 8.1 (as adjusted
pursuant to the preceding clause (iii)) shall not exceed an amount
equal to 25 percent of the total Closing Receivables.
For purposes solely of determining the amount of Damages pursuant to this
Section 8 (and not for purposes of determining the existence of a breach of
a representation or warranty), all representations and warranties of the
Stockholder and the Company in Sections 2 and 3 shall be
-36-
construed as if the terms "Company MAE," "material" and variations thereof
were omitted from such representations and warranties.
(b) The Escrow Agreement shall be the exclusive means for the Buyer
to collect any Damages for which it is entitled to a Price Reduction
under this Section 8.
(c) Except with respect to claims based on fraud, after the Closing,
the rights of the Buyer under this Section 8 and the Escrow Agreement
shall be the exclusive remedy of the Buyer with respect to claims
against the Stockholder or the Company resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant
or agreement contained in this Agreement.
(d) The Stockholder shall not have any right of contribution against
the Company with respect to any breach by the Company of any of its
representations, warranties, covenants or agreements. The amount of the
Price Reduction recoverable by the Buyer under this Section 8 with
respect to a Price Reduction shall be reduced by (i) any proceeds
received by the Buyer or the Company, with respect to the Damages to
which the Price Reduction relates, from an insurance carrier and (ii)
the amount of any tax savings actually realized by the Buyer or the
Company, for the tax year in which Damages were incurred, which are
clearly attributable to the Damages to which such Price Reduction
relates (net of any increased tax liability that may result from the
receipt of the indemnity payment or any insurance proceeds relating to
such Damages).
9. Post-Closing Agreements. The Stockholder agrees that from and after the
Closing Date:
9.1. Proprietary Information
(a) The Stockholder and each of its affiliates (as such term is
defined in the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder) (individually, an "Affiliate" and
collectively "Affiliates") shall hold in confidence and shall use their
Reasonable Best Efforts to have all officers, directors and personnel
who continue after the Closing to be employed by such Stockholder or any
Affiliate thereof to hold in confidence all knowledge and information of
a secret or confidential nature with respect to the business of the
Company and not to disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that such information shall
have become public knowledge other than by breach of this Agreement by
the Stockholder.
(b) If (i) the employment of an officer, director or other employee
of the Stockholder or any Affiliate thereof, to whom secret or
confidential knowledge or information concerning the business of the
Company has been disclosed, is terminated and (ii) such individual is
subject to an obligation to maintain such knowledge or information in
confidence after such termination, the Stockholder shall, upon request
by the Buyer, take all reasonable steps at its expense to enforce such
confidentiality obligation in the event of an actual or threatened
breach thereof. Any legal counsel retained by the Stockholder in
connection with any such enforcement or attempted enforcement shall be
selected by the Stockholder, but shall be subject to the approval of the
Buyer, which approval shall not be unreasonably withheld.
(c) The Stockholder agrees that the remedy at law for any breach of
this Subsection 9.1 would be inadequate and that the Buyer shall be
entitled to injunctive relief in addition to any other remedy it may
have upon breach of any provision of this Subsection 9.1.
-37-
9.2. Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, the
Stockholder shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take all such other
action as the Buyer may reasonably request, more effectively to transfer,
convey and assign to the Buyer, and to confirm the Buyer's title to, the
Shares, to assist the Buyer in exercising all rights with respect thereto
and to carry out the purpose and intent of this Agreement.
9.3. No Solicitation or Hiring of Former Employees. Except as provided
by law, for a period of one year after the Closing Date, neither the
Stockholder nor any Affiliate thereof shall (a) solicit or otherwise induce
any individual identified under the heading "Specified Employees" in the
Supplemental Letter to terminate his or her employment or with the Buyer (or
the Company) or to become an employee of the Stockholder or and Affiliate
thereof or (b) hire any individual identified under the heading "Specified
Employees" in the Supplemental Letter.
9.4. Non-Competition Agreement
(a) For a period of five years after the Closing Date, the
Stockholder shall not engage directly or indirectly in the ownership,
management or operation of any health insurance or health benefit
program, including any health maintenance organization, health care
preferred provider organization or traditional indemnity program,
offered to Medicaid beneficiaries through the State of New Jersey
Medicaid managed care program or to beneficiaries through the Children's
Health Insurance Program authorized under Title XXI of the Social
Security Act, as amended, in the State of New Jersey (a "Competing
Business"). Notwithstanding the foregoing, during such period the
Stockholder shall be permitted to acquire, or make investments in,
entities that constitute a Competing Business, provided that (i) the
gross revenues of such entities' Competing Businesses are not material
in the aggregate to Buyer, as Buyer's business is then conducted, and
(ii) the Medicaid memberships of those entities' Competing Businesses in
the Service Areas are not material in the aggregate to Buyer, as Buyer's
business is then conducted.
(b) The parties hereto agree that the duration and geographic scope
of the non-competition provision set forth in this Subsection 9.4 are
reasonable. In the event that any court of competent jurisdiction
determines that the duration or the geographic scope, or both, are
unreasonable and that such provision is to that extent unenforceable,
the parties hereto agree that the provision shall remain in full force
and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of
each and every country outside the United States of America where this
provision is intended to be effective. The Stockholder agrees that
damages are an inadequate remedy for any breach of this provision and
that the Buyer shall, whether or not it is pursuing any potential
remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
10. Termination of Agreement
10.1. Termination by Lapse of Time. This Agreement shall terminate at
5:00 p.m., Eastern Time, on January 1, 2003, if the transactions
contemplated hereby have not been consummated, unless such date is extended
by the written consent of the Company, the Buyer and the Stockholder.
-38-
10.2. Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In the
event of such termination by agreement, the Buyer shall have no further
obligation or liability to the Stockholder or the Company under this
Agreement, and the Stockholder shall have no further obligation or liability
to the Buyer under this Agreement.
10.3. Termination by Reason of Breach. This Agreement may be terminated
by the Stockholder, if at any time prior to the Closing there shall occur a
breach of any of the representations, warranties or covenants of the Buyer
or the failure by the Buyer to perform any condition or obligation
hereunder, and may be terminated by the Buyer, if at any time prior to the
Closing there shall occur a breach of any of the representations, warranties
or covenants of the Stockholder or the Company or the failure of the
Stockholder or the Company to perform any condition or obligation hereunder.
In addition, the Stockholder may terminate this Agreement on or before
August 16, 2002, in the event that Thomas Weisel Partners LLC advises the
Company that it will be unable to deliver the opinion contemplated by
Subsection 7.4.
10.4. Availability of Remedies at Law. In the event this Agreement is
terminated by the Buyer or the Stockholder pursuant to the provisions of
this Section 10, the parties hereto shall have available to them all
remedies afforded to them by applicable law.
11. General
11.1. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly delivered four
business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, or one business day after it is sent for
next business day delivery via a reputable nationwide overnight courier
service, in each case to the intended recipient as set forth below:
To the Company: University Health Plans, Inc.
555 Broad Street, 17th Floor
Newark, New Jersey 07102
Attention: President
To the Buyer: Centene Corporation
7711 Carondelet Avenue, Suite 800
St. Louis, Missouri 63801
Attention: President and Chief Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Mark L. Johnson
To the Stockholder: University of Medicine and Dentistry of New Jersey
65 Bergen Street
Newark, New Jersey 07107
Attention: Senior Vice President, Administration and Finance
With a copy to: Epstein Becker & Green, P.C.
1227 25th Street, NW, Suite 700
-39-
Washington, DC 20037-1175
Attention: Robert D. Reif
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the party for whom it is intended. Any party may change the
address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
11.2. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Buyer, on the one hand, and the Stockholder and
the Company, on the other hand, may not assign their respective obligations
hereunder without the prior written consent of the other party; provided,
however, that the Buyer may assign this Agreement, and its rights and
obligations hereunder, to a wholly owned subsidiary of the Buyer. Any
assignment in contravention of this provision shall be void. No assignment
shall release the Buyer, the Stockholder or the Company from any obligation
or liability under this Agreement.
11.3. Entire Agreement; Amendments
(a) This Agreement, the Disclosure Schedules, all Exhibits hereto,
and all agreements and instruments to be delivered by the parties
pursuant hereto represent the entire understanding and agreement between
the parties hereto (including the Supplemental Letter) with respect to
the subject matter hereof and supersede all prior oral and written and
all contemporaneous oral negotiations, commitments and understandings
between such parties. The Disclosure Schedule and the Exhibits attached
hereto are hereby incorporated as integral parts of this Agreement.
(b) This Agreement may be amended only with the written consent of
each of the parties. No waiver of any right or remedy hereunder shall be
valid unless the same shall be in writing and signed by the party giving
such waiver. No waiver by any party with respect to any condition,
default or breach of covenant hereunder shall be deemed to extend to any
prior or subsequent condition, default or breach of covenant hereunder
or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
11.4. Severability. Any provision of this Agreement that is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other jurisdiction.
11.5. Investigation of the Parties. All representations and warranties
contained herein that are made to the best knowledge of a party shall
require that such party make reasonable investigation and inquiry with
respect thereto to ascertain the correctness and validity thereof.
11.6. Submission to Jurisdiction. Each party (a) submits to the
jurisdiction of any state or federal court sitting in Essex County, New
Jersey in any action or proceeding arising out of or relating to this
Agreement (including any action or proceeding for the enforcement of any
arbitral award made in connection with any arbitration of a Dispute
hereunder), (b) agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court, (c) waives any
-40-
claim of inconvenient forum or other challenge to venue in such court, (d)
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court and (e) waives any right it may have to a
trial by jury with respect to any action or proceeding arising out of or
relating to this Agreement; provided in each case that, solely with respect
to any arbitration of a Dispute, the Arbitrator shall resolve all threshold
issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity applicability of statutes of
limitations and issue preclusion, and such threshold issues shall not be
heard or determined by such court.
11.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
11.8. Construction
(a) The language used in this Agreement shall be deemed to be the
language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party.
(b) The headings of the Sections and Subsections of this Agreement
are included only for convenience and shall not affect the meaning or
interpretation of this Agreement.
(c) References herein to Sections and Subsections shall mean such
Sections and Subsections of this Agreement, except as otherwise
specified. The words "herein" and "hereof" and other words of similar
import refer to this Agreement as a whole and not to any particular part
of this Agreement. The word "including" as used herein shall not be
construed so as to exclude any other thing not referred to or described.
(d) In computing any period of time under this Agreement, the day
from which the designated period of time begins to run shall not be
included; the last day of the period so computed shall be included,
unless it is not a business day, in which event the period shall run
until the end of the next day that is a business day. For purposes of
this Agreement, the term "business day" shall mean the day that is not a
Saturday, a Sunday or a statutory or civic holiday in either the State
of Missouri or the State of New Jersey.
(e) If the provisions of any Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of
this Agreement shall prevail.
11.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same document.
-41-
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
UNIVERSITY HEALTH PLANS, INC.
By: /s/ Alexander H. McLean
------------------------------------
Name: Alexander H. McLean
Title: President and Chief Executive
Officer
UNIVERSITY OF MEDICINE AND DENTISTRY
OF NEW JERSEY
By: /s/ James A. Archibald
------------------------------------
Name: James A. Archibald
Title: Senior Vice President
CENTENE CORPORATION
By: /s/ Michael F. Neidorff
------------------------------------
Name: Michael F. Neidorff
Title: President and
Chief Executive Officer
-42-
STOCK PURCHASE AGREEMENT DATED AS OF AUGUST 2, 2002 AMONG
UNIVERSITY HEALTH PLANS, INC., UNIVERSITY OF MEDICINE AND DENTISTRY OF
NEW JERSEY AND CENTENE CORPORATION
--------------------------------------------------------------------------
Disclosure schedule of University Health Plans, Inc. and University of Medicine
and Dentistry of New Jersey is omitted in accordance with Item 601(b)(2) of
Regulation S-K. Centene Corporation will furnish supplementally a copy of the
omitted disclosure schedule to the Securities and Exchange Commission upon
request, provided, however, that Centene Corporation may request confidential
treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended, for certain portions of such disclosure schedule.