1
EXHIBIT 2
ASSET PURCHASE AGREEMENT
BETWEEN
COMPMANAGEMENT HEALTH SYSTEMS, INC.
AND
COMMUNITY INSURANCE COMPANY
MAY 12, 1999
2
TABLE OF CONTENTS
Page
----
BACKGROUND INFORMATION........................................................1
STATEMENT OF AGREEMENT........................................................1
ARTICLE I--DEFINITIONS........................................................1
1.1 Definitions..........................................................1
ARTICLE II--SALE AND PURCHASE OF ASSETS.......................................6
2.1 Sale and Purchase of Assets..........................................6
2.2 Purchase Price and Payment...........................................6
2.3 Assumption of Liabilities............................................7
2.4 Related Agreements...................................................7
2.5 Purchase Price Adjustments...........................................7
2.6 Allocation of Purchase Price.........................................9
2.7 Credits Against Deferred Payments....................................9
2.8 Transition Services Agreement.......................................10
2.9 Possession..........................................................10
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF SELLER........................10
3.1 Due Incorporation; No Subsidiaries..................................10
3.2 Due Authorization...................................................10
3.3 Consents and Approvals; Authority Relative to this Agreement........10
3.4 Capitalization......................................................11
3.5 Financial Statements; Undisclosed Liabilities; Other Documents......11
3.6 No Changes or Adverse Effects.......................................11
3.7 Title of Properties.................................................13
3.8 Condition and Sufficiency of Assets.................................13
3.9 Leased Real Property................................................13
3.10 Personal Property...................................................13
3.11 Inventories.........................................................13
3.12 Accounts Receivable and Advances....................................13
3.13 Intellectual Property...............................................13
3.14 Contracts...........................................................14
3.15 Permits and Licenses................................................15
3.16 Insurance...........................................................15
3.17 ERISA...............................................................16
3.18 Reserved............................................................17
3.19 Taxes...............................................................17
3.20 No Defaults or Violations...........................................18
3.21 Environmental Matters...............................................18
3.22 Litigation..........................................................19
3.23 No Conflict of Interest.............................................19
3.24 Bank Accounts.......................................................20
3.25 Customers, Suppliers, Etc...........................................20
3.26 Claims Against Officers and Directors...............................20
3.27 Due Diligence Materials.............................................20
3.28 Improper and Other Payments.........................................20
3.29 Business of Seller..................................................20
3
3.30 Complete Disclosure.................................................20
3.31 Brokers, Finders....................................................20
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF BUYER..........................21
4.1 Due Incorporation...................................................21
4.2 Due Authorization...................................................21
4.3 Consents and Approvals; Authority Relative to this Agreement........21
4.4 Brokers, Finders....................................................21
4.5 Complete Disclosure.................................................21
ARTICLE V--COVENANTS.........................................................21
5.1 Implementing Agreement..............................................21
5.2 Financial Statements................................................22
5.3 Access to Information and Facilities................................22
5.4 Preservation of Business............................................22
5.5 Consents and Approvals..............................................23
5.6 Maintenance of Insurance............................................24
5.7 Resignation of Officers and Directors...............................24
5.8 Supplemental Information............................................24
5.9 Use of Name.........................................................24
5.10 Tax Indemnity.......................................................24
5.11 Non-Compete.........................................................25
5.12 Employees of the Business...........................................26
ARTICLE VI--CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.....................27
6.1 Warranties True as of Both Present Date and Closing Date............27
6.2 Compliance with Agreements and Covenants............................27
6.3 Consents and Approvals..............................................27
6.4 Documents...........................................................27
6.5 Related Agreements..................................................27
6.6 Due Diligence Review................................................27
6.7 Delivery of Schedules and Exhibits..................................28
6.8 No Material Adverse Change..........................................28
6.9 Actions or Proceedings..............................................28
6.10 Financial Statements................................................28
6.11 Anthem Agreement....................................................28
ARTICLE VII--CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...................28
7.1 Warranties True as of Both Present Date and Closing Date............28
7.2 Compliance with Agreements and Covenants............................28
7.3 Documents...........................................................28
7.4 Related Agreements..................................................28
7.5 Actions or Proceedings..............................................28
7.6 Delivery of Schedules and Exhibits..................................28
7.7 Release of Obligations..............................................29
7.8 CMI Agreement.......................................................29
ARTICLE VIII--CLOSING........................................................29
8.1 Closing.............................................................29
8.2 Deliveries by Seller................................................29
8.3 Deliveries by Buyer.................................................30
ii
4
ARTICLE IX--TERMINATION......................................................31
9.1 Termination.........................................................31
9.2 Effect of Termination...............................................31
ARTICLE X--INDEMNIFICATION...................................................31
10.1 Survival............................................................31
10.2 Limits on Indemnification...........................................31
10.3 Indemnification by Seller...........................................31
10.4 Indemnification by Buyer............................................32
10.5 Claims..............................................................32
10.6 Notice of Third-Party Claims; Assumption of Defense.................33
10.7 Settlement or Compromise............................................33
10.8 Failure of Indemnifying Person to Act...............................33
10.9 Tax Character.......................................................34
ARTICLE XI--MISCELLANEOUS....................................................34
11.1 Expenses............................................................34
11.2 Amendment...........................................................34
11.3 Notices.............................................................34
11.4 Effect of Investigation.............................................35
11.5 Waivers.............................................................35
11.6 Counterparts........................................................35
11.7 Interpretation......................................................35
11.8 Applicable Law......................................................35
11.9 Assignment..........................................................35
11.10 No Third-Party Beneficiaries........................................36
11.11 Publicity...........................................................36
11.12 Further Assurances..................................................36
11.13 Severability........................................................36
11.14 Remedies Cumulative.................................................36
11.15 Entire Understanding................................................36
BACKGROUND INFORMATION........................................................1
STATEMENT OF AGREEMENT........................................................1
10.2 Limits on Indemnification...........................................31
10.3 Indemnification by Seller...........................................31
10.4 Indemnification by Buyer............................................32
LIST OF SCHEDULES (FOLLOWING SIGNATURE PAGE)
EXHIBIT A - AGREEMENT BETWEEN ANTHEM INSURANCE COMPANIES, INC. AND
COMPMANAGEMENT HEALTH SYSTEMS, INC.
EXHIBIT B - LIST OF CONTRACTS TO BE ASSIGNED TO BUYER
EXHIBIT C - ALLOCATION OF PURCHASE PRICE
EXHIBIT D - LIST OF SELLER'S EMPLOYEES TO BE OFFERED EMPLOYMENT BY BUYER
EXHIBIT E - AGREEMENT BETWEEN COMMUNITY INSURANCE COMPANY AND
COMPMANAGEMENT, INC.
EXHIBIT F - TRANSITION SERVICES AGREEMENT BETWEEN ANTHEM INSURANCE COMPANIES,
INC. AND COMPMANAGEMENT HEALTH SYSTEMS, INC.
iii
5
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of May 12,
1999, by and between CompManagement Health Systems, Inc., an Ohio corporation
("CHS") and Community Insurance Company, an Ohio corporation, ("CIC") and a
wholly owned subsidiary of Anthem Insurance Companies, Inc. ("Anthem").
BACKGROUND INFORMATION
A. CIC is engaged in, among other things, the business of
providing managed care workers' compensation administrative services to
employers and injured workers located in Ohio, Kentucky, and Indiana, including
without limitation providing provider relation, medical case management and
customer relation services. CIC desires to sell all of the Assets (as defined
below) used in connection with the operation of such business to CHS or an
entity to be formed by CHS, and CHS and such entity desire to purchase the
Assets, but only on the terms and subject to the conditions set forth in this
Agreement.
B. Under the terms of the MCO Contract (as defined below), the
purchase and sale of the Assets will trigger an Open Enrollment Period (as
defined below) for Ohio employers of the Business (as defined below), giving
such employers the right to choose an MCO (as defined below) to provide them
with managed care workers' compensation administrative services. CIC and CHS
wish to consummate the purchase and sale of the Assets prior to the commencement
of the Open Enrollment Period and the distribution of open enrollment materials
to the Ohio employers of the Business.
STATEMENT OF AGREEMENT
The parties to this Agreement hereby acknowledge the accuracy of the
foregoing Background Information and hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings for
the purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person: (i) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person;
(ii) any other Person who is a director, officer, member, manager or partner or
is, directly or indirectly, the beneficial owner of 10 percent or more of any
class of equity securities of the specified Person or a Person described in
clause (i) of this paragraph; or (iii) another Person of which the specified
Person is a director, officer, member, manager or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities.
"ANTHEM" means Anthem Insurance Companies, Inc., an Indiana
corporation.
"ANTHEM AGREEMENT" means the agreement between Anthem and Buyer in the
form attached hereto as Exhibit A, which agreement sets forth Anthem's
obligations to guaranty Seller's performance under this Agreement, Anthem's
noncompetition covenants, and Buyer's right to the use the name "Anthem Managed
Comp."
6
"ASSETS" means (i) all furniture, furnishings, fixtures, equipment
(office and computer), computer hardware, supplies and other tangible personal
property owned by Seller and used exclusively in connection with the operation
of the Business as of the date of this Agreement, together with replacements
thereof and additions thereto made between the date of this Agreement and the
Closing (the "Personal Property"); (ii) all rights, title, and interests of
Seller in and to the Selected Contracts; (iii) all rights, title, and interests
of Seller in and to the Business' Intellectual Property; (iv) all books,
records, and files of Seller (excluding corporate records of Seller) relating
exclusively to or used exclusively in connection with the operation of the
Business, including without limitation any and all claim files; and (v) all
rights, title, and interests of Seller in and to the MCO provider account
related to the Business, which account is a dedicated account for the funds
provided to Seller by OBWC to pay providers and is further described in the MCO
Contract (the "MCO Provider Account").
"BUSINESS" means CIC's business of providing managed care workers'
compensation administrative services to employers and injured workers located in
Ohio, Kentucky, and Indiana, including without limitation providing provider
relation, medical case management and customer relation services. The term
Business shall exclude any businesses conducted by ▇▇▇▇▇ and Associates, Inc.,
dba Anthem Comp Services.
"BUSINESS CONFIDENTIAL INFORMATION" means all confidential information
concerning the Business that: (i) is not and has not become ascertainable or
obtainable from public or published information; (ii) is not received from a
third party or is received from a third party pursuant to the authorization of
Seller in connection with Buyer's due diligence review of the Business; (iii)
was not in Buyer's possession prior to disclosure thereof to Buyer in connection
with the transactions contemplated herein; and (iv) was not independently
developed by Buyer.
"BUSINESS DAY" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in Columbus, Ohio
are generally closed for business.
"BUSINESS MATERIAL ADVERSE CHANGE" means a change in the business,
operations, assets, liabilities, results of operations, cash flows, condition
(financial or otherwise) or prospects of the Business and/or the Assets which is
materially adverse.
"BUSINESS MATERIAL ADVERSE EFFECT" means an effect on the business,
operations, assets, liabilities, results of operations, cash flows, condition
(financial or otherwise) or prospects of the Business and/or the Assets which is
materially adverse.
"BUYER" means CHS.
"BUYER CONFIDENTIAL INFORMATION" means all confidential information
concerning Buyer or its Affiliates that: (i) is not and has not become
ascertainable or obtainable from public or published information, (ii) is not
received from a third party or is received from a third party pursuant to the
authorization of Buyer, (iii) was not in Seller's possession prior to disclosure
thereof to Seller in connection with the transactions contemplated herein, or
(iv) was not independently developed by Seller.
"BUYER INDEMNIFIED PARTIES" means Buyer and each of its Affiliates and
their respective officers, directors, employees, agents and representatives.
"CASH PAYMENT" has the meaning set forth in Section 2.2.
"CHS" means CompManagement Health Systems, Inc., an Ohio corporation.
2
7
"CIC" means Community Insurance Company, an Ohio corporation and a
wholly owned subsidiary of Anthem.
"CLOSING" means the consummation of the transactions contemplated
herein.
"CLOSING DATE" means the date on which the Closing occurs.
"CMI" means CompManagement, Inc., an Ohio corporation.
"CMI AGREEMENT" means the agreement between CIC and CMI in the form
attached hereto as Exhibit E, which agreement sets forth CMI's obligations to
guaranty Buyer's performance under this Agreement.
"CODE" means the United States Internal Revenue Code of 1986, as
amended.
"CONTRACT" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
enforceable.
"DEFERRED PAYMENTS" shall have the meaning set forth in Section 2.2.
"DISENROLLING EMPLOYER" shall mean an Ohio employer of Business which
chooses an MCO other than Buyer during the Open Enrollment Period.
"ENVIRONMENTAL LAW" means any law which imposes liability or standards
of conduct concerning mining or reclamation of mined land, discharges,
emissions, releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, substances or materials into ambient
air, water, or land, or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of pollutants, contaminants, or hazardous or toxic wastes,
substances or materials, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and the Superfund Amendments and
Reauthorization Act of 1986 (together, as amended, "CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, and any other similar federal,
state or local Law.
"ENVIRONMENTAL PERMIT" means any permit, license, approval, consent or
other authorization required by or pursuant to any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXISTING BORROWINGS" means all borrowings from lending institutions,
vendors or agencies of federal, state or local governments or their political
subdivisions, as set forth on the Financial Statements or in the books and
records of the Business.
"FINANCIAL STATEMENTS" means the financial statements prepared by
Seller (and delivered to Buyer) and related solely to the operation of the
Business, which financial statements shall consist of balance sheets as of
December 31, 1998 and 1997, and the related statements of income and expenses
and cash flows for the years then ended (including all notes and schedules
thereto) with respect to the
3
8
Business and the balance sheet of the Business as of a date within 30 days of
the Closing Date and the related statements of income and expenses for the
interim period then ended.
"GAAP" means U.S. generally accepted accounting principles at the time
in effect.
"GOVERNMENTAL AUTHORITY" means the government of the United States or
any foreign country or any state or political subdivision thereof and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"HAZARDOUS MATERIAL" means: (i) any "hazardous substance," as defined
by CERCLA; (ii) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act of 1977, as amended; (iii) any petroleum product or fractions
thereof; or (iv) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other applicable
federal, state or local Law relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as now or at any time hereafter in effect.
"IMMEDIATELY AVAILABLE FUNDS" shall have the meaning set forth in
Section 2.2.
"INDEMNIFIED PERSON" means the Person or Persons entitled to, or
claiming a right to, indemnification.
"INDEMNIFYING PERSON" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification.
"INTELLECTUAL PROPERTY" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations, applications,
licenses or rights relating to any of the foregoing), technology, trade secrets,
inventions, know-how, designs, computer programs, software, technology, and
processes, and all other intangible assets, properties and rights. The
"Business' Intellectual Property" means any and all Intellectual Property used
by Seller exclusively in the conduct of the Business, but excludes the name
"Anthem Managed Comp" (which is otherwise addressed in this Agreement and the
Anthem Agreement).
"LAW" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"LEASED REAL PROPERTY" shall have the meaning set forth in Section 3.9.
"LIEN" means any mortgage, lien (except for any lien for Taxes not yet
due and payable), charge, restriction, pledge, security interest, option, claim,
right of any third party, easement, encroachment or encumbrance.
"LOSS" or "LOSSES" means any and all liabilities, losses, costs,
damages, penalties and expenses (including reasonable legal fees and expenses
and costs of investigation and litigation). In the event any of the foregoing
are indemnifiable hereunder, the terms "Loss" and Losses" shall include any and
all reasonable legal fees and expenses and costs of investigation and litigation
incurred by the Indemnified Person in enforcing such indemnity. Indemnifiable
Losses shall be reduced by reason of actual tax benefits enjoyed as a result of
such Loss by an Indemnified Person.
"MCO" means a managed care organization.
4
9
"MCO CONTRACT" means the Contract between CIC and the Ohio Bureau of
Workers' Compensation ("OBWC") dated November 10, 1998, pursuant to which CIC
provides managed care workers' compensation administrative services as an MCO to
Ohio employers and injured workers (the "MCO Contract").
"NATIONAL ACCOUNTS" means an employer with employees in multiple states
to whom healthcare coverage or administration is provided by Anthem or an
Affiliate as a "Control Plan," a "Participating Plan," a "Servicing Plan" or
pursuant the "Blue Card program" (as those terms are defined by the Blue Cross
Blue Shield Association).
"NETWORK ACCESS FEE AGREEMENT" shall have the meaning set forth in
Section 2.4.
"OPEN ENROLLMENT PERIOD" means the 30-day open enrollment period,
triggered by the closing of the transactions contemplated by this Agreement,
during which Ohio employers of the Business have the right to choose an MCO to
provide them with managed care workers' compensation administrative services.
"PERSON" means any individual, corporation, proprietorship, firm,
partnership, limited liability company, limited liability partnership, trust,
association or other entity, including a government or government department,
agency or instrumentality.
"POST-CLOSING CASH PAYMENT" shall have the meaning set forth in Section
2.2.
"PRIME RATE" means the prime lending rate as from time to time
announced by National City Bank in Columbus, Ohio.
"REAL PROPERTY LEASE" shall have the meaning set forth in Section 3.9
"RELATED AGREEMENTS" collectively means: (i) the Network Access Fee
Agreement; (ii) the Sublease; and (iii) the Transition Agreement.
"SELECTED CONTRACTS" shall mean those Contracts of Seller which are set
forth on Exhibit B to this Agreement, including without limitation the MCO
Contract. The only Contracts of Seller to be assigned to Buyer at the Closing
are the Selected Contracts, and after the Closing Date Buyer shall assume
Seller's obligations only under the Selected Contracts.
"SELLER" means CIC.
"SPECIFIED EMPLOYEES" shall have the meaning set forth in Section
5.12(a).
"STRATEGIC ALLIANCE AGREEMENT" means the Strategic Alliance Agreement
between Seller and Century Business Services, Inc. dated as of July 1, 1997.
"SUBLEASE" shall mean that certain sublease to be entered into between
Buyer and CIC for approximately 32,197 square feet (Suite 400 only) of office
space located on the fourth floor of the building located at ▇▇▇▇ ▇▇▇▇▇▇▇▇'▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. The Sublease shall be entered
into at the Closing and shall be in form and content mutually acceptable to
Buyer and Seller.
"SUBSIDIARIES" means any Person more than 50% of the voting power of
which is controlled by another Person.
5
10
"TAXES" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Authority, and such
term shall include any interest, penalties or additions to tax attributable
thereto.
"TAX RETURN" means any report, return or other information required to
be supplied to a Governmental Authority in connection with any Taxes.
"TAX STATUTE OF LIMITATIONS DATE" means the close of business on the
90th day after expiration of the applicable statute of limitations with respect
to Taxes, including any extensions thereof (or if such date is not a Business
Day, the next Business Day).
"TAX WARRANTY" means a representation or warranty in Sections 3.17 or
3.19.
"TITLE AND AUTHORIZATION WARRANTY" means a representation or warranty
in Sections 3.1, 3.2, 3.3, 3.4.
"TRANSFERRING EMPLOYEES" shall have the meaning set forth in Section
5.12(a).
"TRANSITION AGREEMENT" shall have the meaning set forth in Section 2.8.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1. Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, Seller shall sell, assign, transfer, and convey to
Buyer all of Seller's rights, titles, and interests in and to the Assets free
and clear of any and all Liens (except as set forth on Schedule 3.7), and Buyer
shall purchase the Assets from Seller.
2.2. Purchase Price and Payment. The purchase price for the Assets
shall be $5,750,000 (the "Purchase Price"). The Purchase Price shall be payable
as follows: (a) $1,000,000 payable at the Closing to Seller (the "Cash Payment")
by certified or bank cashier's check, wire transfer, or other means reasonably
acceptable to Seller ("Immediately Available Funds"); (b) $1,000,000 payable on
the first anniversary of the Closing Date to Seller in Immediately Available
Funds (the "Post-Closing Cash Payment"); and (c) $3,750,000 payable in
Immediately Available Funds as follows (the "Deferred Payments"):
(i) $437,500 for the period from the Closing through December
31, 1999, which amount shall be paid to Seller on or before February 1,
2000;
(ii) $750,000 for the period January 1, 2000 through December
31, 2000, which amount shall be paid to Seller on or before February 1,
2001;
(iii) $750,000 for the period January 1, 2001 through December
31, 2001, which amount shall be paid to Seller on or before February 1,
2002;
6
11
(iv) $750,000 for the period January 1, 2002 through December
31, 2002, which amount shall be paid to Seller on or before February 1,
2003;
(v) $750,000 for the period January 1, 2003 through December
31, 2003, which amount shall be paid to Seller on or before February 1,
2004; and
(vi) $312,500 for the period January 1, 2004 through May 31,
2004, which amount shall be paid to Seller on or before July, 2004.
The Purchase Price shall be subject to the adjustments described in
Section 2.5, below. The Deferred Payments shall be subject to the credits
described in Section 2.7, below.
2.3. Assumption of Liabilities. At the Closing, Buyer shall assume
only the following liabilities of Seller (collectively, the "Assumed
Liabilities"):
(a) The obligations of Seller under the Selected Contracts
arising after the Closing Date; and
(b) Obligations applicable to the MCO Provider Account with
respect to overpayments or improper payments made or occurring on or
prior to the Closing, but only to the extent such payments are equal to
or less than $50,000. Prior to the Closing, Buyer and Seller shall
jointly conduct a review of the MCO Provider Account to determine, to
the extent possible, the amount of the obligations applicable to the
MCO Provider Account at such time.
Except as specifically provided in this Section 2.3, Buyer shall not
shall assume, or in any way be liable or responsible for, any claims,
liabilities, obligations, or debts of Seller, including without limitation any
liabilities of Seller relating to: (i) taxes payable, including without
limitation income taxes, real estate taxes, or employment taxes; (ii) any
Employee Plans or Benefit Arrangements as defined under Section 3.17 covering
any of the employees of Seller for any period on or prior to the Closing Date;
(iii) express or implied warranties; (iv) any acts or omissions of Seller or its
employees on or prior to the Closing Date; (v) claims for breach of contract;
and (vi) other claims of any kind whatsoever, or any other liabilities of
Seller, direct or contingent.
2.4. Related Agreements. At the Closing: (a) Buyer and Seller
shall enter into a Network Access Fee Agreement in a form and content mutually
acceptable to the parties (the "Network Access Fee Agreement"); and (b) Seller
and Buyer shall enter into the Sublease.
At the Closing, Anthem and Buyer shall enter into the Anthem Agreement
and CMI and Seller shall enter into the CMI Agreement.
2.5. Purchase Price Adjustments. The Purchase Price shall be
subject to the following adjustments:
(a) Closing Date Adjustment. The Purchase Price shall be
adjusted at the Closing as follows: (a) if the net tangible book value
of the Assets minus the amount of the Assumed Liabilities under Section
2.3(b) is less than zero, then the Purchase Price shall be reduced
dollar-for-dollar by the shortfall amount, which shortfall amount shall
reduce the Cash Payment due at the Closing; or (b) if the net tangible
book value of the Assets minus the amount of the Assumed Liabilities
under Section 2.3(b) is greater than zero, then the Purchase Price
shall be increased dollar-for-dollar by the excess amount, which
increase shall be paid at the Closing in Immediately Available Funds.
7
12
(b) Post-Closing Adjustment. Within 30 days after the OBWC
notice of change (i.e., Form 816) is sent to Ohio employers of the
Business, Buyer shall cause to be prepared a schedule setting forth the
following: (i) each Disenrolling Employer and the annual workers'
compensation premiums associated with such Disenrolling Employer (the
"Lost Annual Premiums"); (ii) the lost revenue of CIC caused by the
Open Enrollment Period, which amount shall be determined by multiplying
the total amount of the Lost Annual Premiums by 6.2% (the "Lost
Revenue"); and (iii) and the total amount of the adjustment to the
Purchase Price, which amount shall be determined by multiplying the
Lost Revenue by a fraction, the numerator of which shall be $5,750,000
and the denominator of which shall be $14,068,500 (the "Post-Closing
Purchase Price Adjustment").
The Post-Closing Purchase Price Adjustment shall be applied to
reduce the six Deferred Payments dollar-for-dollar. An amount equal to
one-sixth of the Post-Closing Purchase Price Adjustment shall be
applied to reduce each Deferred Payment. In all cases, the Post-Closing
Purchase Price Adjustment shall be applied to reduce a Deferred Payment
after the application of the credit against such Deferred Payment
described in Section 2.7, below. If for any year the amount of the
Post-Closing Purchase Price Adjustment to be applied for that year is
not so applied (for example, because the credit against such Deferred
Payment for that year plus the Post-Closing Purchase Price Adjustment
applied for that year exceeds the Deferred Payment due for that year),
then any unapplied amount shall be carried-over and applied in the
following year, with the intention of the parties that the entire
amount of the Post-Closing Purchase Price Adjustment be applied to the
Deferred Payments.
Notwithstanding the foregoing, if one of the Disenrolling
Employers is the Ohio Department of Administrative Services ("ODAS"),
and the reason for ODAS's disenrollment is due to CMI's affiliation
with Buyer, then ODAS shall not be considered a Disenrolling Employer
and shall not be part of the calculations for the Post-Closing Purchase
Price Adjustment. However, if ODAS disenrolls for any other reason,
then ODAS shall remain a Disenrolling Employer and shall be part of the
calculations for the Post-Closing Purchase Price Adjustment. If ODAS
disenrolls, but the parties are unable to determine its reason for
disenrollment, then 50% of the ODAS projected revenues included in the
Business' 1999 annual budget shall be part of the calculations for the
Post-Closing Purchase Price Adjustment.
(c) Resolution of Disputes Regarding Adjustments. Buyer and
Seller shall resolve all disputes regarding the Post-Closing Purchase
Price Adjustment pursuant to the provisions of this subsection.
8
13
Seller shall deliver its written objections (if any) to the
Post-Closing Purchase Price Adjustment to Buyer within 10 days after
the receipt of the schedule described in subsection (b), above. Such
written objections shall set forth in reasonable detail the basis of
Seller's objections to the Post-Closing Purchase Price Adjustment. In
the event that Seller fails to deliver its written objections within
such 10-day period, the Post-Closing Purchase Price Adjustment shall be
deemed final. Buyer and Seller shall use reasonable efforts to resolve
any disputes concerning the Post-Closing Purchase Price Adjustment, but
if they are unable to resolve any such disputes within 10 days after
the receipt of Seller's written objections, Buyer and Seller shall
submit the dispute to Deloitte & Touche LLP (the "Arbitrator"), for
review, analysis, and final determination. The determination of the
Arbitrator shall be rendered within 30 days of submission to the
Arbitrator, which determination shall be rendered in writing and shall
be final and binding upon all parties. All fees and expenses of the
Arbitrator shall be paid by the losing party. If the determination of
the Arbitrator s different from the determination of both Buyer and
Seller, then such fees and expenses shall be shared equally.
2.6 Allocation of Purchase Price. On or prior to the Closing, the
parties shall agree on a written allocation of the Purchase Price among the
Assets, which allocation shall thereafter be set forth on Exhibit C. The parties
shall thereafter file all federal, state, and local tax returns in accordance
with such allocation.
2.7 Credits Against Deferred Payments. Buyer shall receive a credit
against the Deferred Payments for amounts paid to Seller under the Network
Access Fee Agreement. For each dollar paid by Buyer to Seller under the terms of
the Network Access Fee Agreement during the period from:
(a) The Closing through December 31, 1999, Buyer shall receive
a credit of one dollar, which credits in the aggregate shall not exceed
$437,500, against the Deferred Payment due Seller from Buyer on or
before February 1, 2000;
(b) January 1, 2000 through December 31, 2000, Buyer shall
receive a credit of one dollar, which credits in the aggregate shall
not exceed $750,000, against the Deferred Payment due Seller on or
before February 1, 2001;
(c) January 1, 2001 through December 31, 2001, Buyer shall
receive a credit of one dollar, which credits in the aggregate shall
not exceed $750,000, against the Deferred Payment due Seller on or
before February 1, 2002;
(d) January 1, 2002 through December 31, 2002, Buyer shall
receive a credit of one dollar, which credits in the aggregate shall
not exceed $750,000, against the Deferred Payment due Seller on or
before February 1, 2003;
(e) January 1, 2003 through December 31, 2003, Buyer shall
receive a credit of one dollar, which credits in the aggregate shall
not exceed $750,000, against the Deferred Payment due Seller on or
before February 1, 2004; and
(f) January 1, 2004 through May 31, 2004, Buyer shall receive
a credit of one dollar, which credits in the aggregate shall not exceed
$312,500, against the Deferred Payment due Seller on or before July 31,
2004.
9
14
2.8 Transition Services Agreement. At the Closing, Buyer and Anthem
shall enter into a Transition Services Agreement substantially in the form
attached hereto as Exhibit F (the "Transition Agreement").
2.9 Possession. Buyer shall be entitled to exclusive possession of the
Assets as of and after the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of the Closing Date (as if such representation and warranties
were remade on the Closing Date), as follows:
3.1 Due Incorporation; No Subsidiaries. CIC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio, with all requisite corporate power and authority to own, lease, and
operate the Business and its properties used in connection therewith as they are
now being owned, leased, operated and conducted, including without limitation
the Business and the Assets. Anthem is a corporation duly organized, validly
existing and in good standing under the laws of the State of Indiana. CIC is
licensed or qualified to do business and is in good standing as a foreign
corporation in Kentucky and Indiana. Except as set forth on Schedule 3.1, CIC
has no direct or indirect Subsidiaries, either wholly or partially owned,
related to or engaged in the Business and, except as may be held by it in its
passive investment portfolio, does not hold any direct or indirect economic,
voting or management interest in any Person or directly or indirectly own any
security issued by any Person which is engaged in or competes with the Business.
3.2 Due Authorization. Seller has full power and authority to
enter into this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. Seller has duly and validly
executed and delivered this Agreement and at the Closing will duly and validly
execute and deliver the Related Agreements. This Agreement constitutes the
legal, valid and binding obligations of Seller, and the Related Agreements, upon
execution and delivery by Seller, will constitute the legal, valid and binding
obligations of Seller, enforceable in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
fraudulent transfer, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies.
3.3 Consents and Approvals; Authority Relative to this Agreement.
(a) Except as set forth on Schedule 3.3, no consent,
authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution,
delivery or performance of this Agreement by Seller or the Related
Agreements or the consummation of the transactions contemplated hereby
or thereby.
(b) Except as set forth on Schedule 3.3, the execution,
delivery and performance by Seller of this Agreement and the Related
Agreements do not and will not, and the consummation of the
transactions contemplated hereby and thereby do not and will not, (i)
violate any Law; (ii) violate or conflict with, result in a breach or
termination of, constitute a default or give any third party any
additional right (including a termination right) under, permit
cancellation of, result in the creation of any Lien upon any of the
Assets under, or result in or constitute a circumstance which, with or
without notice or lapse of time or both, would constitute any of the
foregoing
10
15
under, any Selected Contract to which Seller is a party or by which
Seller or any of its respective assets or properties are bound; (iii)
permit the acceleration of the maturity of any indebtedness of Seller
or indebtedness secured by the Assets; or (iv) violate or conflict with
any provision of any of the articles of incorporation, charter, code of
regulations or similar organizational instruments of Seller.
3.4 Capitalization. Reserved.
3.5 Financial Statements; Undisclosed Liabilities; Other
Documents.
(a) The Financial Statements have been prepared in accordance
with GAAP consistently applied and present fairly the financial
position, assets, liabilities and retained earnings related to the
Business and the Assets as of the dates thereof and the revenues,
expenses, results of operations, changes in financial position and cash
flows related to the Business and the Assets for the periods covered
thereby. The Financial Statements are in accordance with the books and
records of Seller, do not reflect any transactions which are not bona
fide transactions and do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which
they were made, not misleading.
(b) Except as set forth on Schedule 3.5 or reflected in the
Financial Statements, Seller has no liabilities, debts, claims or
obligations, whether accrued, absolute, contingent or otherwise, with
respect to the Business or the Assets.
3.6 No Changes or Adverse Effects. Except as set forth on
Schedule 3.6, since December 31, 1998, Seller has not:
(a) Suffered any Business Material Adverse Effect;
(b) Suffered any material damage, destruction or Loss (whether
or not covered by insurance) with respect to the Business or the
Assets;
(c) Incurred any continuing obligation or entered into any
continuing Contract with respect to the Business which required a
payment by any party in excess of, or a series of payments which as to
any such obligation or Contract exceeds, $10,000 or provides for the
delivery of goods or performance of services, or any combination
thereof, having a value in excess of $10,000;
(d) Taken any action, or entered into or authorized any
Contract or transaction with respect to the Business, other than in the
ordinary course of business and consistent with past practices;
(e) Sold, transferred, conveyed, assigned or otherwise
disposed of any of the Assets;
(f) Waived, released or canceled any claims against third
parties or debts owing to Seller, or any rights which have any material
value, with respect to the Business;
(g) Made any changes in its accounting systems, policies,
principles or practices with respect to the Business;
11
16
(h) Entered into, authorized, or permitted any material
transaction with respect to the Business with any Affiliate of Seller;
(i) Except for Existing Borrowings, made any borrowings,
incurred any debt (other than trade payables in the ordinary course of
business and consistent with past practices), or assumed, guaranteed,
endorsed (except for the negotiation or collection of negotiable
instruments in transactions in the ordinary course of business and
consistent with past practices) or otherwise become liable (whether
directly, contingently or otherwise) for the obligations of any other
Person with respect to the Business, or made any payment or repayment
in respect of any indebtedness (other than trade payables and accrued
expenses in the ordinary course of business and consistent with past
practices) with respect to the Business, in each case, in excess of
$10,000;
(j) Made any loans, advances or capital contributions to, or
investments in, any other Person with respect to the Business;
(k) Entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer or employee of the
Business, or increased in any manner the compensation or fringe
benefits of any director or officer of the Business, or increased by
five percent or more the compensation or fringe benefits of any
employee of the Business, or paid any benefit not required by any
existing plan and arrangement of the Business or entered into any
contract, agreement, commitment or arrangement to do any of the
foregoing;
(l) Except for capital expenditures contemplated by (m) below,
acquired, leased or encumbered any assets outside the ordinary course
of business or any assets which are material to the operation of the
Business;
(m) Authorized or made any capital expenditure with respect to
the Business which individually is in excess of $10,000;
(n) Made any Tax election or settled or compromised any
federal, state, local or foreign Tax liability with respect to the
Business, or waived or extended the statute of limitations in respect
of any such Taxes;
(o) Paid any amount, performed any obligation or agreed to pay
any amount or perform any obligation, in settlement or compromise of
any suits against Seller or any of its directors, officers, employees
or agents related to the Business or the Assets;
(p) Paid in excess of $10,000, performed any obligation or
agreed to pay in excess of $10,000 in settlement or compromise of any
claims of liability against Seller or any of its directors, officers,
employees or agents related to the Business or the Assets; or
(q) Terminated, modified, amended or otherwise altered or
changed any of the terms or provisions of any Selected Contract, or
paid any amount not required by law or by any Contract, other than in
the ordinary course of business and consistent with past practices.
12
17
3.7 Title of Properties. Except as previously described on
Schedule 3.6 or as set forth on Schedule 3.7, on the Closing Date, Seller will
have all rights, titles and interests in and to the Assets free and clear of any
and all Liens.
3.8 Condition and Sufficiency of Assets. Except as set forth on
Schedule 3.8, all of the Assets, whether real or personal, owned or leased, have
been well maintained and are in good operating condition and repair (with the
exception of normal wear and tear), and are free from defects other than such
minor defects as do not interfere with the intended use thereof in the conduct
of normal operations or adversely affect the resale value thereof. Immediately
after the Closing Date, except as set forth on Schedule 3.8, Buyer shall own or
have a right to use, not limited by time (except for leased or licensed Assets),
all the assets, properties, know-how, and processes which are required for or
currently used in connection with the operation of the Business as it is
presently conducted. Except as set forth on Schedule 3.8, such assets and
properties were sufficient to produce the income for the fiscal year ended
December 31, 1998, as shown on the Financial Statements.
3.9 Leased Real Property. Seller leases the real property (the
"Leased Real Property") located at ▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, pursuant to a real property lease dated as of December 31, 1998 with
Governor's Hill Properties (the "Real Property Lease"). A true and complete copy
of the Real Property Lease has been provided to Buyer. Except as set forth on
Schedule 3.9, and to the best of Seller's knowledge, no asbestos,
asbestos-containing materials, or PCB compounds have been used in the
construction or repair of, or any alterations or additions to, or are otherwise
located on, any portion of the Leased Real Property. The Real Property Lease is
in full force and effect, valid and enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
fraudulent transfer, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditor's rights generally and by
equitable limitations on the availability of specific remedies. The Real
Property Lease has not been amended or modified except as set forth on Schedule
3.9, and there are no agreements, written or oral, between Seller and the owner
of the Leased Real Property other than the Real Property Lease. Seller has not
received any notice of any, and, to the best of Seller's knowledge, there exists
no, dispute, claim, event of default or event which constitutes or would
constitute (with notice or lapse of time or both) a default under the Real
Property Lease. All rent and other amounts due and payable with respect to the
Real Property Lease have been paid through the date of this Agreement and all
rent and other amounts due and payable with respect to the Real Property Lease
on or prior to the Closing Date will have been paid prior to the Closing Date.
3.10 Personal Property. Schedule 3.10 sets forth a true and
complete list of each item of tangible personal property used by Seller in the
Business having an original acquisition cost of $500 or more. Schedule 3.10 also
sets forth all leases of personal property binding upon Seller, or any of its
assets or properties, and all items of personal property covered thereby. All of
such tangible personal property is presently utilized by Seller in the ordinary
course of its business. Seller has delivered to Buyer true and complete copies
of all such personal property leases.
3.11 Inventories. Reserved.
3.12 Accounts Receivable and Advances. Reserved.
3.13 Intellectual Property. Schedule 3.13 is a true and complete
list of all of the Business' Intellectual Property. Except as disclosed on
Schedule 3.13:
(a) All of the Business' Intellectual Property is owned by
Seller free and clear of all Liens, and is not subject to any license,
royalty or other agreement, and Seller has not granted any license or
agreed to pay or receive any royalty in respect of any Business'
Intellectual Property;
13
18
(b) None of the Business' Intellectual Property has been or is
the subject of any pending or, to the best knowledge of Seller,
threatened litigation or claim of infringement;
(c) No license or royalty agreement relating to the Business'
Intellectual Property and to which Seller is a party will, as of the
Closing, be in breach or default by any party thereto or the subject of
any notice of termination given or, to the best knowledge of Seller,
threatened;
(d) The products used by Seller and the services provided by
Seller and any process, method, part, design, material or other
Business' Intellectual Property it employs and, the marketing and use
by Seller of any such product, service, or other Business' Intellectual
Property, do not, to the best knowledge of Seller, infringe any
Intellectual Property or confidential or proprietary rights of another,
and Seller has not received any notice contesting its right to use any
Business' Intellectual Property; and
(e) Seller owns or possesses adequate rights in and to all
Intellectual Property necessary to conduct the Business as presently
conducted.
3.14 Contracts. Schedule 3.14 lists all the contracts and
arrangements of the following types to which Seller is a party or by which it is
bound, and which are necessary for the operation of the Business:
(a) Any collective bargaining agreement and a summary of the
collective bargaining unit's position with respect to any such
agreement currently the subject of negotiations;
(b) Any Contract or arrangement of any kind (including
employment contracts) with any employee, officer or director of Seller
or any of the respective Affiliates of such individuals, or any
Contract or other arrangement of any kind with Seller or any Affiliates
of Seller other than any such Contract or arrangement described in
Section 3.17(a);
(c) Any Contract or arrangement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales
agency, advertising agency or other Person engaged in sales,
distribution or promotional activities, or any Contract to act as one
of the foregoing on behalf of any Person;
(d) Any Contract or arrangement of any nature which involves
the payment or receipt of cash or other property, an unperformed
commitment, or goods or services, having a value in excess of $1,000;
(e) Any Contract or arrangement pursuant to which Seller has
made or will make loans or advances, or has or will have incurred debts
or become a guarantor or surety or pledged its credit on or otherwise
become responsible with respect to any undertaking of another (except
for the negotiation or collection of negotiable instruments in
transactions in the ordinary course of business);
(f) Any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of real property or personal
property, loan commitment or other Contract or arrangement relating to
the borrowing of funds, an extension of credit or financing directly
to, or for the direct benefit of, the Business;
14
19
(g) Any Contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(h) Any Contract or arrangement involving any restrictions
with respect to the geographical area of operations or scope or type of
the Business;
(i) Any power of attorney or agency agreement or arrangement
with any Person pursuant to which such Person is granted the authority
to act for or on behalf of Seller in connection with the Business, or
Seller is granted the authority to act for or on behalf of any Person
in connection with the Business;
(j) Any Contract related to the Business for which the full
performance thereof may extend beyond 30 days from the Closing Date;
(k) Any Contract related to the Business not made in the
ordinary course of the business and which is to be performed in whole
or in part at or after the date of this Agreement;
(l) Any Contract, whether or not fully performed, relating to
any acquisition or disposition of the Business or any acquisition or
disposition of any subsidiary, division, line of business, or real
property related to the operation of the Business; and
(m) Any Contract not specified above that is material to the
Business.
Seller has delivered to Buyer true and complete copies of each document
listed on Schedule 3.14, and a written description of each oral arrangement so
listed.
3.15 Permits and Licenses. Schedule 3.15 is a true and accurate
list of all licenses, certificates, permits, and franchises (collectively,
"Permits") held by Seller and necessary for the lawful operation of the
Business. Except for the Permits set forth on Schedule 3.15, there are no other
Permits, whether federal, state, local or foreign, which are necessary for the
lawful operation of the Business.
3.16 Insurance.
(a) Schedule 3.16 contains an accurate and complete list of
coverage limits for all policies of fire, liability, workers'
compensation, title and other forms of insurance owned, held by Seller
and applicable to the operation of the Business or ownership of the
Assets. All such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. As
applied to the Business, such policies are sufficient for compliance
with all requirements of Law and are valid, outstanding and enforceable
policies. Seller has not been refused any insurance with respect to
Assets or the Business and such coverage has not been limited by any
insurance carrier to which it has applied for any such insurance or
with which it has carried insurance.
(b) Seller has furnished to Buyer a list of all claims, which,
since December 31, 1997, have been made by Seller under any workers'
compensation, general liability, property or other insurance policy
applicable to the Business or the Assets. Except as set forth on said
list, there are no pending or, to the best knowledge of Seller,
threatened claims under any insurance policy. Such claim information
includes the following information with respect to each accident, loss,
or other event: (i) the identity of the claimant; (ii) the nature of
the claim; (iii) the date of the occurrence; (iv) the status as of the
report date; and (v) the amounts paid or expected to be paid or
recovered.
15
20
3.17 ERISA.
(a) In accordance with Section 2.3 of this Agreement, Seller
acknowledges that Buyer is not assuming any of the assets, liabilities,
or obligations of Seller's Employee Plans (as defined in (i) below) or
Benefit Arrangements (as defined in (iii) below), including, but not
limited to:
(i) any "employee benefit plan," as defined in
Section 3(3) of ERISA which (A) is subject to any provision of
ERISA and (B) is or was at any time during the last five years
maintained, administered or contributed to by Seller or any
affiliate (as defined below) and covers any employee or former
employee of Seller or any affiliate employed in the operation
of the Business or under which Seller or any affiliate has any
liability with respect to the Business (referred to
collectively herein as the "Employee Plans"). For purposes of
this Section 3.17, "affiliate" of any person or entity means
any other person or entity which, together with such person or
entity, would be treated as a single employer under Section
414 of the Code, or is an "affiliate," whether or not
incorporated, as defined in Section 407(d)(7) of ERISA, of
such person or entity;
(ii) any "multiemployer plan," as defined in Section
3(37) of ERISA; or
(iii) any employment, severance or other similar
contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including
any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits,
vacation benefits, deferred compensation, profit-sharing,
bonus, stock option, stock ownership, stock appreciation,
stock purchase, phantom stock or other forms of incentive
compensation or post-retirement insurance, compensation or
benefits which (A) is not an Employee Plan, (B) is entered
into, maintained or contributed to, as the case may be, by
Seller or any of its affiliates, and (C) covers any employee
or former employee employed in the operation of the Business,
any shareholder or former shareholder of Seller or any of its
affiliates (referred to collectively herein as the "Benefit
Arrangements").
(b) Neither Seller nor any of its affiliates has incurred any
material liability under Title IV of ERISA arising in connection with
the termination of, or complete or partial withdrawal from, any plan
covered or previously covered by Title IV of ERISA.
(c) With respect to each Employee Plan and Benefit
Arrangement, neither Seller nor any of its affiliates has engaged in
prohibited transactions (as defined in ERISA Section 406 or Code
Section 4975) which would result in any liability to Buyer, no penalty,
fine, tax, action, suit, grievance, audit, examination, arbitration or
other manner of litigation, or claim (other than routine claims for
benefits made in the ordinary course of plan administration for which
plan administrative review procedures have not been exhausted) are
pending, threatened or imminent against or with respect to such plans,
Seller or any fiduciary (as defined in ERISA Section 3(21)) of such
plans (including any action, suit, grievance, audit, examination,
arbitration or other manner of litigation, or claim regarding conduct
which allegedly interferes with the attainment of rights under such
plans which would result in any liability to Buyer), neither Seller nor
any fiduciary with respect to such plans has any knowledge of any facts
which would give rise to or could give rise to any material liability
for any penalty, fine, tax, action, suit, grievance,
16
21
arbitration or other manner of litigation, or claim, and Seller has not
incurred any lien under Section 401(a)(29) of the Code or any material
liability for any tax or civil penalty imposed by Section 4971 or 4976
of the Code or Section 502 of ERISA, and no condition or set of
circumstances exists that presents a material risk to Seller of
incurring any such lien or liability.
(d) Each Employee Plan and Benefit Arrangement has been
maintained, from the time of the inception of such plan or arrangement
up to and including the performance of any or all transactions
contemplated in this Agreement, in substantial compliance with its
terms and the requirements and fiduciary standards prescribed by any
and all statutes, orders, rules and regulations, including, but not
limited to, ERISA and the Code, which are applicable to such Employee
Plan or Benefit Arrangement.
(e) There is no matter in respect of post-retirement health
and medical benefits for retired employees of Seller or any of its
affiliates which would result in any liability to Buyer, determined
using assumptions that are reasonable in the aggregate, over the fair
market value of any fund, reserve or other assets segregated for the
purpose of satisfying such liability (including for such purposes any
fund established pursuant to Section 401(h) of the Code).
(f) Seller is not a party or subject to any union contract or
any employment contract or arrangement providing for annual future
compensation to any employee, shareholder, or independent contractor of
Seller employed or engaged in the operation of the Business.
(g) The execution and consummation of the transactions
contemplated by this Agreement will not constitute a triggering event
under any Employee Plan or Benefit Arrangement, whether or not legally
enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any obligation by
Buyer for any payment (of severance pay or otherwise), acceleration,
increase in vesting, or increase in benefits to any current or former
participant, employee or director of Seller.
(h) Any reference to ERISA or the Code or any section thereof
shall be construed to include all amendments thereto and applicable
regulations and administrative rulings issued thereunder.
3.18 Reserved.
3.19 Taxes.
(a) All federal, state, local and foreign income, corporation
and other Tax Returns (or extensions with respect thereto) have been
filed for Seller, and all other filings in respect to Taxes have been
made for Seller, for all periods through and including the Closing Date
as required by applicable Law. All Taxes shown as due on all such Tax
Returns and other filings have been paid. No separate Tax Return is
required to be filed by Seller, and no separate Taxes are required to
be paid by Seller, with respect to the Business or the Assets. No
material issues have been raised in any examination by an Governmental
Authority with respect to the Business which, by application of similar
principles, reasonably could be expected to result in a proposed
adjustment to the liability for Taxes for any other period not so
examined. All Taxes which Seller is required by Law to withhold or
collect with respect to the Business, including without limitation,
sales and use taxes, and amounts required to be withheld for Taxes of
employees of the Business and other withholding taxes with respect to
the Business, have been duly withheld or collected and, to the extent
required, have been paid over to the proper Governmental Authorities
17
22
or are held in separate bank accounts for such purpose. All information
returns required to be filed by Seller prior to the Closing Date with
respect to the Business have been filed and all statements required to
be furnished to payees with respect to the Business by Seller prior to
the Closing Date have been furnished to such payees, and the
information set forth on such information returns and statement is
true, complete and correct.
(b) Seller is not a "foreign person" as defined in Section
1445(f)(3) of the Code.
(c) Except as set forth on Schedule 3.19, none of the Assets
constitute tax-exempt bond financed property or tax-exempt use property
within the meaning of Section 168 of the Code, and none of the assets
reflected on the Financial Statements is subject to a lease, safe
harbor lease or other arrangement as a result of which Seller is not
treated as the owner for federal income tax purposes.
(d) Seller has not made or become obligated to make, and will
not as a result of any event connected with any transaction
contemplated herein become obligated to make, any "excess parachute
payment" as defined in Section 280G of the Code (without regard to
subsection (b)(4) thereof).
3.20 No Defaults or Violations. Except as set forth on Schedule
3.20:
(a) Seller is not in breach of any provision of, nor is in
default under the terms of, any Selected Contract and, to the best
knowledge of Seller, no other party to any such Selected Contract is in
breach of such Contract or in default thereunder.
(b) Seller is in compliance in all material respects with, and
no violation exists under, any and all Laws applicable to Seller in
connection with the Business.
(c) No notice from any Governmental Authority has been
received by Seller claiming any violation of any Law (including any
building, zoning or other ordinance) or requiring any work,
construction or expenditure, or asserting any Tax, assessment or
penalty in connection with the Business.
3.21 Environmental Matters. Except as set forth on Schedule 3.21:
(a) The Business and all existing uses of the Assets are in
material compliance with all Environmental Laws in effect as of the
date hereof, and to the best knowledge of Seller there exists no
condition or event which, with or without notice or the passage of time
or both, would constitute a violation of or give rise to any Lien under
any Environmental Law;
(b) There are no Environmental Permits necessary for the
conduct or operation of the Business (or any part thereof), and Seller
is in material compliance with all of the requirements, conditions and
limitations included in such Environmental Permits;
(c) There is no, and Seller has not used or stored any,
Hazardous Material in, on, or at the Leased Real Property except for
supplies of substances listed on Schedule 3.21 which are used or are to
be used in the ordinary course of business (which inventories have been
stored, used and disposed of in accordance with all applicable
Environmental Laws and Environmental Permits);
18
23
(d) Seller has not received any notice from Governmental
Authority or any other Person that any past or present aspect of the
Business, the Assets or the Leased Real Property is in violation of any
Environmental Law or Environmental Permit, or that Seller is
responsible or liable (or potentially responsible or liable) for the
investigation, cleanup or remediation of any Hazardous Materials at the
Leased Real Property;
(e) Seller has not at any time deposited or incorporated any
Hazardous Material into, on, beneath, or adjacent to the Leased Real
Property;
(f) Neither the Business, the Assets nor the Leased Real
Property is the subject of any litigation or proceeding in any forum,
judicial or administrative, involving a demand for damages, injunctive
relief, penalties, or other potential liability with respect to
violations of or liability under any Environmental Law;
(g) Seller has not been required to file reports and
notifications with respect to the Business, the Assets or the Leased
Real Property or to maintain records and data under Environmental Laws;
(h) To the best knowledge of Seller, neither Seller nor any
predecessor thereof has transported or arranged for the transportation
of any Hazardous Material to any location which is listed or proposed
in the Federal Register for listing on the National Priorities List
pursuant to CERCLA or on any similar state list; and
(i) No condition exists or has existed or event has occurred
with respect to the Business, the Assets, or the Leased Real Property
which, with or without notice, passage of time or both, could give rise
to any present or future liability of Seller pursuant to any
Environmental Law.
3.22 Litigation.
(a) Except as set forth on Schedule 3.22, there are no actions,
suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to the best
knowledge of Seller, threatened against or affecting the Business or
the Assets and Seller is not aware of any facts or circumstances which
may give rise to any of the foregoing. Except as set forth on Schedule
3.22, Seller is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental
Authority related to the Business or the Assets. Seller has not entered
into any agreement to settle or compromise any proceeding pending or
threatened against it which has involved any obligation other than the
payment of money or for which Seller has any continuing obligation
related to the Business or the Assets.
(b) There are no claims, actions, suits, proceedings or
investigations pending or, to the best knowledge of Seller threatened
by or against Anthem or Seller with respect to this Agreement or the
Related Agreements, or in connection with the transactions contemplated
hereby or thereby, and to the best knowledge of Seller there is no
reason to believe there is a valid basis for any such claim, action,
suit, proceeding or investigation.
3.23 No Conflict of Interest. Except as set forth on Schedule 3.23,
neither Seller nor any of its Affiliates have or claim to have any direct or
indirect interest in the Assets, except as directly results from the ownership
thereof. Except as set forth on Schedule 3.23, neither Seller nor any of its
Affiliates have any direct or indirect interest in any other Person which
conducts a business materially the same as the
19
24
Business, except for the ownership of any class of securities of any publicly
held corporation held in passive investment portfolios. Schedule 3.23 contains a
complete and accurate description of all such Persons, interests, arrangements
and other matters.
3.24 Bank Accounts. Schedule 3.24 sets forth the names and
locations of each bank or other financial institution at which Seller has an
account (giving the account numbers) or safe deposit box for the Business and
the names of all Persons authorized to draw thereon or have access thereto.
3.25 Customers, Suppliers, Etc.
(a) Schedule 3.25 sets forth a list of the ten largest
customers of the Business in terms of revenue during each of (i) the
calendar year ended December 31, 1997, and (ii) the calendar year ended
December 31, 1998 (collectively, the "Major Customers"), showing the
total revenue received in each such period from each such customer;
(b) Except to the extent set forth on Schedule 3.25, since
December 31, 1998, there has not been any adverse change in the
business relationship, and there has been no material dispute between
Seller and any Major Customer or major supplier, agent or sales
representative, and there is no indications that any Major Customer
intends to reduce its purchases from Seller.
3.26 Claims Against Officers and Directors. There are no pending
or, to the best knowledge of Seller, threatened claims against any director,
officer, employee or agent of Seller or any other Person related to the Business
or the Assets which could give rise to any claim for indemnification against
Seller.
3.27 Due Diligence Materials. Except as set forth on Schedule 3.27,
Seller shall have provided or made available to Buyer or its representatives, in
accordance with the terms of Section 5.2, all documents of the character and
type reasonably requested by Buyer in connection with its "due diligence"
investigation of the Business and the Assets, and there are no material
documents in the possession of Seller or, to the best knowledge of Seller, any
of its agents or representatives of a character or type described in such
requests which have not been so provided to Buyer or its representatives.
3.28 Improper and Other Payments. Except as set forth on Schedule
3.28, neither Seller, any director, officer, employee, agent or representative
of Seller, nor any Person acting on behalf of any of them, has made, paid or
received in connection with the operation of the Business (a) any bribes,
kickbacks or other similar payments to or from any Person, whether lawful or
unlawful, (b) any contributions, directly or indirectly, to a domestic or
foreign political party or candidate, or (c) any improper foreign payment (as
defined in the Foreign Corrupt Practices Act).
3.29 Business of Seller. Reserved.
3.30 Complete Disclosure. No representation or warranty by Seller in
this Agreement or the schedules referenced in this Article III contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein not misleading.
3.31 Brokers, Finders. The transactions contemplated by this Agreement
were not submitted to Seller by any broker or other person entitled to a
commission, finder's fee or like payment thereon, and were not, with the consent
of Seller, submitted to Buyer by any broker or other person. No action on the
part of Seller has given rise to any valid claim by any person for a commission,
finder's fee or like payment against any of the parties to this Agreement.
20
25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of the Closing Date (as if such representations and warranties
are remade on the Closing Date), as follows:
4.1 Due Incorporation. CHS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio. As of
Closing, CHS will be in good standing as a foreign corporation in States of
Kentucky and Indiana, with all requisite corporate power to own, lease, and
operate the Business and its properties to be used in connection therewith.
4.2 Due Authorization. Buyer has full power and authority to
enter into this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. Buyer has duly and validly
executed and delivered this Agreement and at the Closing will duly and validly
execute and deliver the Related Agreements. This Agreement constitutes the
legal, valid and binding obligations of Buyer, and the Related Agreements, upon
execution and delivery by Buyer, will constitute the legal, valid and binding
obligations of Buyer, enforceable in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
fraudulent transfer, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies.
4.3 Consents and Approvals; Authority Relative to this Agreement.
(a) Except as set forth on Schedule 4.3, no consent,
authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution,
delivery and performance of this Agreement by Buyer or the Related
Agreements or the consummation of the transactions contemplated hereby
or thereby.
(b) Except as set forth on Schedule 4.3, the execution,
delivery and performance by Buyer of this Agreement and the Related
Agreements do not and will not, and the consummation of the
transactions contemplated hereby and thereby does not and will not, (i)
violate any Law; or (ii) violate or conflict with any provision of the
articles of incorporation, charter, code of regulations, or similar
organizational instruments of Buyer.
4.4 Brokers, Finders. Except as set forth below, the transactions
contemplated by this Agreement were not submitted to Buyer by any broker or
other person entitled to a commission, finder's fee or like payment thereon.
Except for a finder's fee or like payment which may be payable to the North
American Employers Council, Inc. and/or Century Business Services, Inc. by
Buyer, no action on the part of Buyer has given rise to any valid claim by any
person for a commission, finder's fee or like payment against any of the parties
to this Agreement.
4.5 Complete Disclosure. No representation or warranty by Buyer
in this Agreement or the schedules referenced in this Article IV contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE V
COVENANTS
5.1 Implementing Agreement. Subject to the terms and conditions hereof,
each party hereto shall use its best efforts to take all action required of it
to fulfill its obligations under the terms of this Agreement and to facilitate
the consummation of the transactions contemplated hereby. Seller agrees
21
26
that, unless this Agreement is terminated in accordance with the provisions of
Section 9.1, Seller will not encumber the Assets, will not sell the Assets to
any Person other than Buyer (or an Affiliate of Buyer), will not initiate or
continue discussion with any Person other than Buyer concerning any sale of the
Assets or any other similar transaction involving the sale of the Business, and
will not take any other action which would have the effect of preventing or
disabling Seller's performance of its obligations under this Agreement. Buyer
agrees that, unless this Agreement is terminated in accordance with the
provisions of Section 9.1, Buyer will not initiate or continue discussions with
any Person other than Seller concerning any merger or purchase of the assets or
capital stock or any similar transaction involving a competitor of the Business
and will not take any other action which would have the effect of preventing or
disabling Buyer's performance of its obligations under this Agreement.
5.2 Financial Statements. Seller shall provide reasonable
assistance to Buyer and/or any Affiliate of Buyer (or their agents) in the
preparation of (a) audited balance sheets of the Business as of December 31,
1997 and December 31, 1998 and the related audited statements of income,
retained earnings and cash flows for the three fiscal years ended December 31,
1998 and (b) an unaudited balance sheet of the Business for any interim period
ending on or prior to the Closing Date and unaudited statements of income,
retained earnings and cash flows for any interim period ending on or prior to
the Closing Date, in each case to the extent required to enable Buyer to satisfy
its Form 8-K filing requirement under the Securities Exchange Act of 1934, as
amended, provided that Seller shall not be required to incur any out-of-pocket
expenses in connection therewith.
5.3 Access to Information and Facilities.
(a) From and after the date of this Agreement (or such earlier
time as Buyer and Seller shall have mutually agreed), Seller shall give
Buyer and Buyer's representatives, upon reasonable notice and without
disruption to the Business, reasonable access, in the presence of a
designated agent of Seller and during normal business hours, to all of
the facilities, properties, books, Contracts, commitments and records
of Seller related to the Business or the Assets and shall make the
officers and employees of Seller available to Buyer and its
representatives and will furnish any and all information concerning the
Business and the Assets which Buyer or its representatives reasonably
request. A designated agent of Seller shall have the right to be
present at all discussions Buyer or its representatives may have with
officers or employees of Seller.
(b) Except as may be reasonably necessary to carry out this
Agreement and the transactions contemplated hereby, Buyer will not, and
will instruct its Affiliates, employees, and agents not to, disclose
Business Confidential Information to any Person other than Buyer's
employees and agents on a "need to know" basis without the prior
consent of Seller, unless compelled to disclose any such Business
Confidential Information by judicial or administrative process or, in
the opinion of Buyer's counsel, by other requirements of Law.
(c) Except as may be reasonably necessary to carry out this
Agreement and the transactions contemplated hereby, Seller will not,
and will instruct its Affiliates, employees, and agents not to,
disclose any Buyer Confidential Information to any Person other than
Seller's employees and agents on a "need to know" basis without the
prior consent of Buyer, unless compelled to disclose any such Buyer
Confidential Information by judicial or administrative process or, in
the opinion of Seller's counsel, by other requirements of Law.
5.4 Preservation of Business. From the date of this Agreement
until the Closing Date, and except for the proposed transactions described in
Schedule 5.4, Seller shall operate the Business only in the ordinary and usual
course of business and consistent with past practices and shall use its best
efforts to: (a) maintain the Assets in substantially their current state,
excepting normal wear and tear, and
22
27
preserve intact the present business organization and personnel of the Business;
(b) preserve the goodwill and advantageous relationships of the Business with
customers, suppliers, independent contractors, employees and other Persons
material to the operation of the Business; and (c) not take any action or omit
to take any action which would cause any of the representations or warranties of
Seller contained herein to become inaccurate or any of the covenants of Seller
to be breached. Without limiting the generality of the foregoing, except as set
forth in Schedule 5.4, Seller will not, without the prior written consent of
Buyer:
(i) Incur any obligation or enter into any Contract with
respect to the Business which requires a payment by Seller in excess
of, or a series of payments which in the aggregate exceed, $10,000 or
provides for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of $10,000;
(ii) Take any action, or enter into or authorize any Contract
or transaction with respect to the Business, other than in the ordinary
course of business and consistent with past practices;
(iii) Sell, transfer, convey, assign or otherwise dispose of
any of the Assets;
(iv) Waive, release or cancel any claims against third parties
or debts owing to Seller, or any rights which have any value, with
respect to the Business;
(v) Make any changes in its accounting system, policies,
principles or practices with respect to the Business;
(vi) Enter into, authorize, or permit any transaction with
respect to the Business with any Affiliate of Seller except in the
ordinary course, consistent with past practices;
(vii) Make any loans, advances or capital contributions to, or
investments in, any other Person with respect to the Business;
(viii) Except for capital expenditures contemplated by (xiii),
below, acquire, lease or encumber any assets outside the ordinary
course of business or any assets which are material to the Business;
(vix) Authorize or make any capital expenditure with respect
to the Business which individually is in excess of $10,000; or
(x) Terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any Selected Contract, or pay any amount
not required by Law or by any Contract, other than in the ordinary
course of business and consistent with past practices.
5.5 Consents and Approvals. Except as set forth in Schedule 5.5,
Buyer shall be responsible to obtain all consents, approvals, certificates and
other documents required in connection with the performance of its obligation
under this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby. In addition, Buyer shall be
responsible to attempt to obtain all third party consents related to the
assignment of the Selected Contracts from CIC to Buyer. Buyer shall be
responsible to make all filings, applications, statements and reports to all
Governmental Authorities which are required to be made pursuant to any
applicable Law in order to obtain all consents and approvals necessary for the
consummation of the transactions contemplated by this Agreement and to expedite
submission of all materials required by any Governmental Authority in connection
with such filings.
23
28
5.6 Maintenance of Insurance. Seller shall continue to carry its
existing insurance on the Business and the Assets through the Closing Date, and
Seller shall not allow any breach, default, termination or cancellation of such
insurance policies or agreements to occur or exist. Seller's obligations under
this Section 5.6 shall cease as of 11:59 p.m. (Eastern Standard Time) on the
Closing Date.
5.7 Resignation of Officers and Directors. Reserved.
5.8 Supplemental Information.
(a) From time to time prior to the Closing, Seller will
promptly disclose in writing to Buyer any matter hereafter arising
which, if existing, occurring or known on the date of this Agreement
would have been required to be disclosed to Buyer or which would render
materially inaccurate any of the representations, warranties or
statements set forth herein. No information provided to a party
pursuant to this Section 5.8(a) shall be deemed to cure any breach of
any representation, warranty or covenant made in this Agreement.
(b) From time to time prior to the Closing, Buyer will
promptly disclose in writing to Seller any matter hereafter arising
which, if existing, occurring or known on the date of this Agreement
would have been required to be disclosed to Seller or which would
render materially inaccurate any of the representations, warranties or
statements set forth in Article IV hereof. No information provided to a
party pursuant to this Section 5.8(b) shall be deemed to cure any
breach of any representation, warranty or covenant made in this
Agreement.
(c) After the Closing, Buyer shall give Seller and Seller's
representatives, upon reasonable notice setting forth a reasonable
business purpose of the request and without disruption of the Business,
reasonable access, in the presence of a designated agent of Buyer and
during normal business hours, to Buyer's books and records related to
the operation of the Business prior to the Closing for any reasonable
business purpose of Seller.
5.9 Use of Name. Seller agrees that Buyer shall have the right to
use the name "Anthem Managed Comp" in Buyer's operation of the Business during
the Open Enrollment Period.
5.10 Tax Indemnity.
(a) For purposes of this Agreement, "Tax Indemnification
Period" means the period (including all prior taxable years) ending on
and including the Closing Date. For any taxable year of Seller that
does not end on, and would otherwise extend beyond, the Closing Date,
there shall be a deemed short taxable year ending on and including the
Closing Date and a second deemed short taxable year beginning on and
including the day after the Closing Date. For purposes of allocating
gross income and deductions between deemed short taxable years, the
books of Seller with respect to the Business shall be closed as of the
close of business on the Closing Date, and all amounts of income, gain,
loss and deduction shall be reflected in the period in which such items
accrued under Seller's normal tax accounting methods.
(b) Seller agrees to indemnify Buyer against, and agrees to
hold it harmless from, any Losses incurred or suffered by Buyer
relating to or arising out of or in connection with any and all Taxes
that have become due and payable during, or which have accrued with
respect to the Business and/or the Assets for, any period included in
the Tax Indemnification Period and that
24
29
have not been paid prior to the Closing Date. Any Taxes attributable to
the operations of the Business and/or the Assets payable as a result of
an audit of any Tax Return shall be deemed to have accrued in the
period to which such Taxes are attributable.
5.11 Non-Compete.
(a) Seller shall not, within Ohio, Kentucky or Indiana (the
"Restricted Area"), directly or indirectly, for a period commencing on
the Closing Date and terminating on the fifth anniversary thereof (the
"Restricted Period"): (i) engage in or otherwise participate in any
business which competes with the Business; or (ii) own or hold an
ownership or other interest in a Person as a partner, shareholder,
principal, agent, trustee, member, consultant, creditor, or other
similar relationship or capacity, which Person engages in or otherwise
participates in any business which competes with the Business, except
that Seller may own or hold an ownership interest in any class of
securities of any publicly held corporation held in passive investment
portfolios. During the Restricted Period, Seller shall not, directly or
indirectly, permit any Person which engages in or otherwise
participates in any business which competes with Buyer (a "Competitor")
to use the same provider networks utilized by Buyer in the operation of
the Business in Kentucky and Indiana in a manner which allows such
Competitor to compete with the Business in such states. During the
Restricted Period, Seller shall keep secret and retain in strictest
confidence, and shall not use for the benefit of itself or its
Affiliates, all Business Confidential Information, and shall not
disclose such information to anyone outside of Buyer without the
express written consent of Buyer and except for such Business
Confidential Information which (A) is at the time of receipt or
thereafter becomes publicly known through no wrongful act of Seller or
(B) is received from a third party not under an obligation to keep such
information confidential or (C) is required to be disclosed by the
order of any Governmental Authority.
Notwithstanding the foregoing, this Section 5.11(a) shall not
prohibit or prevent Seller from utilizing with Century Workers'
Compensation or with any National Accounts the same provider networks
utilized by Buyer in the operation of the Business in Kentucky or
Indiana.
(b) In the event that Seller acquires a business which
includes an activity that competes with the Business in the Restricted
Area, Seller shall not be in violation of Section 5.11(a) if Seller
ceases to operate such competitive activity within 120 days of the date
of such acquisition. In the event that Seller acquires a business which
includes an activity that competes with the Business in the Restricted
Area, Buyer shall have a right of first refusal with respect to the
purchase of such business.
(c) During the Restricted Period, Seller shall not, directly
or indirectly, knowingly solicit or encourage to leave the employment
of Buyer any Transferring Employee employed by Buyer or, within six
months of the date such Transferring Employee ceases to be employed by
Buyer, hire any Transferring Employee previously employed by Buyer. The
six-month period shall not apply, however, to any Transferring Employee
discharged by Buyer.
(d) If Seller breaches, or threatens to commit a breach of,
any of the provisions contained in this Section 5.11 (the "Restrictive
Covenants"), Buyer shall have the following rights and remedies, each
of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies
available to Buyer under law or in equity:
(i) The right and remedy to have the Restrictive
Covenants specifically enforced (without posting any bond) by
any court having equity jurisdiction, including,
25
30
without limitation, the right to an entry against Seller of
restraining orders and injunctions (preliminary, mandatory,
temporary, and permanent) against violations, threatened or
actual, and whether or not then continuing, of such covenants,
it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable harm to Buyer and
that money damages will not provide adequate remedy to Buyer.
(ii) With respect to a breach of Section 5.11(a), the
right and remedy to require Seller to account for and pay over
to Buyer all compensation, profits, monies, accruals,
increments of other benefits derived or received by Seller as
the result of any transaction constituting a breach of Section
5.11(a).
(e) On and after the second anniversary of the Closing Date,
Seller shall have the option, exercisable at any time on and after such
date, to terminate all of its obligations under this Section 5.11 (the
"Termination Option"). In order to exercise the Termination Option,
Seller shall give written notice to Buyer stating that it is thereby
exercising the Termination Option (the "Termination Notice"). The
Termination Notice shall specify the effective date of the Termination
Option (the "Effective Date"), which date shall not be sooner then the
date the Termination Notice is delivered to Buyer. On and after the
Effective Date, Seller shall have no further obligations under this
Section 5.11. If Seller exercises the Termination Option, then, on and
after the Effective Date, the amount of the Deferred Payments
thereafter becoming due and payable by Buyer shall be reduced to equal
the following amount: (i) one-half of the amount of the applicable
Deferred Payment set forth in Section 2.2(c)(iii) - (vi), minus (ii)
the amount of the applicable credit under Section 2.7, above, plus the
amount of the applicable Post-Closing Purchase Price Adjustment under
Section 2.5, above. Under no circumstances shall the amount of any
Deferred Payment due and payable by Buyer to Seller be less than zero.
An example of this calculation is set forth on Schedule 5.11(e).
5.12 Employees of the Business.
(a) Buyer shall offer employment to those employees of Seller
set forth on Exhibit D (the "Specified Employees") on such terms and
conditions as may be acceptable to Buyer; provided, however, that Buyer
shall provide benefits comparable to those benefits provided to Buyer's
other employees and shall give the Specified Employees credit for
service with Seller. The Specified Employees who accept the offer of
employment by Buyer are hereinafter referred to as the "Transferring
Employees." For all periods up to and including the Closing Date,
Seller shall pay all salary and benefits due the Transferring
Employees, including, but not limited to, benefits payable under
Section 4980B of the Code and Sections 601-607 of ERISA and the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), and
Section 9801 of the Code and Section 701 of the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"). The employment
period of the Transferring Employees shall commence on the day after
the Closing Date.
(b) Seller shall promptly pay or cause to be paid to each of
the Transferring Employees not later than 30 days following the Closing
Date all amounts which are due and payable to the Transferring
Employees with respect to their employment by Seller, including, but
not limited to, all paid time off to which they are entitled. Buyer
shall be responsible for post-employment obligations that arise out of
the employment relationship with Buyer after the Closing, including
COBRA, for all Transferring Employees. Buyer's obligations hereunder
are intended to create a situation which will not constitute or cause
any "mass layoff", "plant closing" or any other "employment loss" in
the facilities of Seller or its Affiliates as those terms are defined
by the Worker Adjustment and Retraining Notification Act, 29 USA
Sections 2101-2109.
26
31
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under Article II of this Agreement are subject
to the satisfaction or waiver by Buyer of the following conditions precedent on
or before the Closing Date:
6.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Seller contained herein shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct on and as of the Closing Date with the same
force and effect as though made by Seller on and as of the Closing Date.
6.2 Compliance with Agreements and Covenants. Seller shall have
performed and complied with all of its respective covenants, obligations and
agreements contained in this Agreement to be performed and complied with by
Seller on or prior to the Closing Date.
6.3 Consents and Approvals. Buyer shall have received written
evidence satisfactory to Buyer that all consents and approvals necessary for the
consummation of the transactions contemplated by this Agreement or the operation
of the Business by Buyer after the Closing in substantially the same manner as
operated by CIC prior to the Closing have been obtained, including without
limitation the following:
(a) The consent and/or approval from OBWC for the assignment
of the MCO Contract from CIC to Buyer, and any other consents or
approvals required from OBWC or any other Ohio Governmental Authority
for the change in control of the Business or to otherwise permit Buyer
to operate the Business in substantially the same manner as operated by
CIC in Ohio;
(b) The consent and/or approval from all necessary Kentucky
Governmental Authorities to permit Buyer to operate a managed care
organization in Kentucky on and after the Closing and any other
consents or approvals required by such Governmental Authorities for the
change in control of the Business or to otherwise permit Buyer to
operate the Business in substantially the same manner as operated by
CIC in Kentucky;
(c) Any other consents or approvals from any other
Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement or to permit Buyer to operate the
Business in substantially the same manner as operated by CIC; and
(d) The consents from all third parties relating to the
assignment of the Selected Contracts from CIC to Buyer.
6.4 Documents. Buyer shall have received all of the agreements,
documents and items specified in Section 8.2.
6.5 Related Agreements. The form and content of the Related
Agreements shall each be acceptable to Buyer.
6.6 Due Diligence Review. Buyer shall have been satisfied, in its
sole discretion: (a) with the results of its investigation and review of the
business, operations, assets, liabilities, results of operations, cash flows,
condition (financial and otherwise) and prospects of, and other matters relating
to, the
27
32
Business as of a date two Business Days prior to the Closing; and (b) that there
is no material adverse misstatement with respect to Seller's representations set
forth herein.
6.7 Delivery of Schedules and Exhibits. Buyer shall have received
all of Seller's schedules and exhibits in final form at least two Business Days
prior to the Closing Date (not counting the Closing Date as one of such days),
and no such schedule or exhibit contains or reflects a Business Material Adverse
Change from the last previous schedule or exhibit received by Buyer.
6.8 No Material Adverse Change. No Business Material Adverse
Change shall have occurred and no event shall have occurred which, in the sole
judgment of Buyer, is reasonably likely to have a Business Material Adverse
Effect.
6.9 Actions or Proceedings. No action or proceeding by any
Governmental Authority or other Person shall have been instituted or threatened
which: (a) likely will have a Business Material Adverse Effect; or (b) likely
could enjoin, restrain or prohibit, or could result in substantial damages in
respect of, any provision of this Agreement or any of the Related Agreements or
the consummation of the transactions contemplated hereby or thereby.
6.10 Financial Statements. Buyer shall have received from Seller
the Financial Statements.
6.11 Anthem Agreement. Buyer shall have received from Anthem an
executed counterpart of the Anthem Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
subject to the satisfaction or waiver by Seller of the following conditions
precedent on or before the Closing Date:
7.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Buyer contained herein shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct on and as of the Closing Date with the same
force and effect as though made by Buyer on and as of the Closing Date.
7.2 Compliance with Agreements and Covenants. Buyer shall have
performed and complied with all of its respective covenants, obligations and
agreements contained in this Agreement to be performed and complied with by
Buyer on or prior to the Closing Date.
7.3 Documents. Seller shall have received all of the agreements,
documents and items specified in Section 8.3.
7.4 Related Agreements. The form and content of the Related
Agreements shall each be acceptable to Seller.
7.5 Actions or Proceedings. No action or proceeding by any
Governmental Authority or other Person shall have been instituted or threatened
which could likely enjoin, restrain or prohibit, or could result in substantial
damages in respect of, any provision of the Agreement or any of the Related
Agreements or the consummation of the transactions contemplated hereby or
thereby.
7.6 Delivery of Schedules and Exhibits. Seller shall have
received all of Buyer's schedules and exhibits in final form at least two
Business Days prior to the Closing Date (not counting the Closing
28
33
Date as one of such days), and no such schedule or exhibit contains or reflects
a Business Material Adverse Change from the last previous schedule or exhibit
received by Seller.
7.7 Release of Obligation. Seller shall have been released from
all of its obligations under the Strategic Alliance Agreement.
7.8 CMI Agreement. Seller shall have received from CMI an executed
counterpart of the CMI Agreement.
ARTICLE VIII
CLOSING
8.1 Closing. The Closing shall be scheduled to occur at the
offices of ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. local time, on June 15, 1999, or such other date as
the parties hereto shall mutually agree (the "Closing Date"). The Closing and
all transactions to occur at the Closing shall be deemed to have taken place at,
and shall be effective as of, the close of business on the Closing Date.
8.2 Deliveries by Seller. At the Closing, in addition to any other
documents or agreements required under this Agreement, Seller shall deliver to
Buyer the following:
(a) An executed ▇▇▇▇ of sale for all Assets constituting
Personal Property in form and content acceptable to Buyer;
(b) An executed assignment of all Assets constituting
Intellectual Property in form and content acceptable to Buyer;
(c) An executed counterpart of an assignment and assumption of
the Selected Contracts in form and content mutually acceptable to Buyer
and Seller (the "Assignment and Assumption of Contracts");
(d) Executed counterparts of such other assignment or
conveyance documents as may be reasonably requested by Buyer, all of
which shall be in form and content reasonably acceptable to Buyer;
(e) An executed counterpart of the Sublease;
(f) An executed counterpart of the Transition Agreement;
(g) An executed counterpart of the Network Access Fee
Agreement;
(h) An executed counterpart of the Anthem Agreement;
(i) An executed counterpart of the CMI Agreement;
(j) A written statement from each Person holding a Lien upon
any of the Assets confirming the repayment of the indebtedness secured
thereby and the release as of the Closing Date of such Lien and all
obligations under any and all Contracts relating thereto;
29
34
(k) A certificate dated as of the Closing Date from Seller
certifying as to the compliance by Seller with Sections 6.1 and 6.2 of
this Agreement;
(l) A certificate of CIC's Secretary certifying the approval
of this Agreement, the Related Agreements, and the transactions
contemplated hereby and thereby (together with an incumbency and
signature certificate regarding the officer(s) signing on behalf of
CIC);
(m) A certificate of Anthem's Secretary certifying the
approval of the Anthem Agreement and the transactions contemplated
thereby (together with an incumbency and signature certificate
regarding the officer(s) signing on behalf of Anthem); and
(n) A legal opinion dated as of the Closing Date from the firm
of ▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP in form and content reasonably acceptable
to Buyer.
8.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller the following:
(a) The Cash Payment;
(b) An executed counterpart of the Assignment and Assumption
of Contracts;
(c) An executed counterpart of the Sublease;
(d) An executed counterpart of the Transition Agreement;
(e) an executed counterpart of the Network Access Fee
Agreement;
(f) An executed counterpart of the Anthem Agreement;
(g) An executed counterpart of the CMI Agreement;
(h) Documentation satisfactory to Seller evidencing Seller's
full and complete release from all of its obligations under the
Strategic Alliance Agreement;
(i) A certificate dated as of the Closing Date from Buyer
certifying as to compliance by Buyer with Sections 7.1 and 7.2 of this
Agreement;
(j) A certificate of CHS's Secretary certifying the
resolutions of the Board of Directors of CHS approving this Agreement,
the Related Agreements, and the transactions contemplated hereby and
thereby (together with an incumbency and signature certificate
regarding the officer(s) signing on behalf of CHS;
(k) A certificate of CMI's Secretary certifying the approval
of the CMI Agreement and the transactions contemplated thereby
(together with an incumbency and signature certificate regarding the
officer(s) signing on behalf of CMI); and
(l) A legal opinion dated as of the Closing Date from the firm
of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP in form and content reasonably acceptable to
Seller.
30
35
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time on
or prior to the Closing Date:
(a) By the mutual consent of Seller and Buyer;
(b) By Seller or Buyer, if the Closing shall not have taken
place on or before June 30, 1999; provided, however, that the right to
terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose willful failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of the Closing to occur on or before such date;
(c) By Buyer: (i) if there shall have been a material breach
of any covenant, representation or warranty or other agreement of
Seller hereunder, and such breach shall not have been remedied within
ten Business Days after receipt by Seller of a notice in writing from
Buyer specifying the breach and requesting such be remedied; or (ii) if
Buyer is unable to obtain any consent of the Governmental Authority to
the transactions contemplated by this Agreement; or
(d) By Seller, if there shall have been a material breach of
any covenant, representation or warranty or other agreement of Buyer
hereunder, and such breach shall not have been remedied within ten
Business Days after receipt by Buyer of notice in writing from Seller
specifying the breach and requesting such be remedied.
9.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 5.3(b), 5.3(c),
11.1, and 11.11, which shall survive the termination of this Agreement, and
except that no such termination shall relieve any party from liability for any
prior willful breach of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 Survival. Except as otherwise specified, the representations
and warranties of Seller contained herein shall survive the Closing for a period
expiring at the close of business on the third anniversary of the Closing Date
(the "Survival Date") except that: (a) Tax Warranties shall survive until the
Tax Statute of Limitations Date; and (b) Title and Authorization Warranties
shall survive forever. The representations and warranties of Buyer contained
herein shall survive the Closing for a period expiring at the close of business
on the Survival Date except that the representations and warranties set forth in
Sections 4.1, 4.2 and 4.3 hereof shall survive forever.
10.2 Limits on Indemnification. The parties hereto agree that any
indemnification payments to be made pursuant to this Agreement by Seller on the
one hand or Buyer on the other hand shall be subject to the requirement that no
claim may be made: (a) until the aggregate amount of indemnifiable Losses
incurred by Seller on the one hand or Buyer on the other hand exceeds $30,000,
at which time such claim for indemnification may be made for the aggregate
amount of all indemnifiable losses including the first $30,000; or (b) which,
together with all other indemnifiable losses incurred by Seller on the one hand
or Buyer on the other hand, exceeds an aggregate amount equal to the Purchase
Price.
10.3 Indemnification by Seller. Subject to the limitations set
forth in this Article X, Seller agrees to indemnify Buyer against, and agrees to
defend and hold Buyer harmless from, any and all Losses incurred or suffered by
Buyer relating to or arising out of or in connection with any of the following:
31
36
(a) Any breach of or inaccuracy in any representation or
warranty made by Seller in this Agreement or any document delivered at
the Closing; provided, however, that: (A) except for breaches of or
inaccuracies in Tax Warranties or Title and Authorization Warranties, a
notice of Buyer's claim shall have been given to Seller not later than
the close of business on the Survival Date; and (B) in the case of a
Tax Warranty, a notice of Buyer's claim shall have been given to Seller
not later than the Tax Statute of Limitations Date;
(b) Any breach of or failure by Seller to perform any covenant
or obligation of such party set out or contemplated in this Agreement
or any document delivered at the Closing; or
(c) Any obligations applicable to the MCO Provider Account
with respect to overpayments or improper payments made or occurring on
or prior to the Closing in excess of the amount set forth in Section
2.3(b). Buyer shall follow its normal operating procedures, if any,
with respect to offsetting provider overpayments against subsequent
payments due such provider and shall take reasonable steps to recover
provider overpayments before seeking indemnification under this
subsection. However, reasonable steps shall not require Buyer to
institute any legal action to recover provider overpayments.
Indemnification under this Section 10.3(c) shall not be subject to any
of the limitations set forth in this Article X.
10.4 Indemnification by Buyer. Subject to the limitations set
forth in this Article X, Buyer agrees to indemnify Seller against, and agrees to
defend and hold Seller harmless from, any and all Losses incurred or suffered by
Seller relating to or arising out of or in connection with any of the following:
(a) Any breach of or any inaccuracy in any representation or
warranty made by Buyer in Article IV in this Agreement or any document
delivered at the Closing;
(b) Any breach of or failure by Buyer to perform any covenant
or obligation set out or contemplated in this Agreement or any document
delivered at the Closing; or
(c) Buyer's use of the name "Anthem Managed Comp."
Indemnification under this Section 10.4(c) shall not be subject to any
of the limitations set forth in this Article X.
10.5 Claims. The provisions of this Section shall be subject to
Section 10.6. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement, the indemnified person
("Indemnified Person") shall promptly give notice to the indemnifying person
("Indemnifying Person") of such claim and the amount the Indemnified Person will
be entitled to receive hereunder from the Indemnifying Person; provided that the
failure of the Indemnified Person to promptly give notice shall not relieve the
Indemnifying Person of its obligations except to the extent, if any, that the
Indemnifying Person shall have been prejudiced thereby. If the Indemnifying
Person does not object in writing to such indemnification claim within 30 days
of receiving notice thereof, the Indemnified Person shall be entitled to
recover, on the thirty-fifth day after such notice was given, from the
Indemnifying Person the amount of such claim; if the Indemnifying Person agrees
that it has an indemnification obligation but objects that it is obligated to
pay only a lesser amount, the Indemnified Person shall nevertheless be entitled
to recover, on the thirty-fifth day after such notice was given, from the
Indemnifying Person the lesser amount, without prejudice to the Indemnified
Person's claim for the difference. If the Indemnifying Person objects in writing
to such indemnification claim within 30 days of receiving notice thereof, the
validity of the indemnification claim and the extent of the Indemnifying
Person's liability therefor, shall be determined by a court of appropriate
jurisdiction. Buyer shall be entitled, but not required, to set off the amount
of any claim or claims in respect of which Buyer is determined to be entitled to
indemnification or payment by Seller against any amount due from Buyer to Seller
under the Post-Closing Cash Payment of the Deferred Payments. In addition to the
amounts
32
37
recoverable by the Indemnified Person from the Indemnifying Person pursuant to
the foregoing provisions, the Indemnified Person shall also be entitled to
recover from the Indemnifying Person interest on such amounts at the rate of the
Prime Rate from, and including, the thirty-fifth day after such notice of an
indemnification claim is given to, but not including, the date such recovery is
actually made by the Indemnified Person.
10.6 Notice of Third-Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person of the assertion of any claim, or the commencement of
any suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided that the failure of
the Indemnified Person to promptly given notice shall not relieve the
Indemnifying Person of its obligations except to the extent, if any, that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person
may, at its own expense, (a) participate in the defense of any claim, suit,
action or proceeding and (b) upon notice to the Indemnified Person and the
Indemnifying Person's delivering to the Indemnified Person a written agreement
that the Indemnified Person is entitled to indemnification for all Losses
arising out of such claim, suit, action or proceeding and that the Indemnifying
Person shall be liable for the entire amount of any Loss, at any time during the
course of any such claim, suit, action or proceeding, assume the defense
thereof; provided, however, that (i) the Indemnifying Person's counsel is
reasonably satisfactory to the Indemnified Person, and (ii) the Indemnifying
Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right, but not the duty, to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the Indemnifying Person shall pay
the fees and disbursements of such separate counsel. Whether or not the
Indemnifying Person chooses to defend or prosecute any such claim, suit, action
or proceeding, all of the parties hereto shall cooperate in the defense or
prosecution thereof.
10.7 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any claim, suit, action or proceeding shall also be binding upon
the Indemnifying Person or the Indemnified Person, as the case may be, in the
same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of such settlement or compromise; provided,
however, that no obligation, restriction or Loss shall be imposed on the
Indemnified Person as a result of such settlement without its prior written
consent and provided further that no settlement or compromise shall be made by
an Indemnified Person, if the Indemnifying Person assumes the defense as
provided in Section 10.6. The Indemnified Person will give the Indemnifying
Person at least 30 days' notice of any proposed settlement or compromise of any
claim, suit, action or proceeding it is defending, during which time the
Indemnifying Person may reject such proposed settlement or compromise; provided,
however, that from and after such rejection, the Indemnifying Person shall be
obligated to assume the defense of and full and complete liability and
responsibility for such claim, suit, action or proceeding and any and all Losses
in connection therewith in excess of the amount of unindemnifiable Losses which
the Indemnified Person would have been obligated to pay under the proposed
settlement or compromise.
10.8 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
33
38
10.9 Tax Character. Seller and Buyer agree that any payments
pursuant to this Article X will be treated for federal and state income tax
purposes as adjustments to the purchase price of the Assets, and that they will
report such payments on all Tax Returns consistently with such characterization.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Seller shall pay all expenses of Seller (including
attorneys' fees and expenses) and Buyer shall pay all expense of Buyer
(including attorneys' fees and expenses), in each case incurred in connection
with this Agreement and the transactions contemplated hereby. Seller shall pay
all sales, use, stamp, transfer, service, recording, real estate and like taxes
or fees, if any, imposed by any Governmental Authority in connection with the
transfer and assignment of the Assets.
11.2 Amendment. This Agreement may be amended, modified or
supplemented but only in writing signed by each of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document
to be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given as follows: (a) when received if given in person or by
courier or a courier service; (b) on the date of transmission as evidenced by
receipt of electronic confirmation if sent by telex, facsimile or other wire
transmission; or (c) two Business Days after being deposited in the U.S. or
Canadian mail, certified or registered mail, postage prepaid:
(a) If to Buyer:
CompManagement Health Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
With Copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Seller:
Anthem Insurance Companies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
With Copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
34
39
11.4 Effect of Investigation.
(a) Any due diligence review, audit or other investigation or inquiry
undertaken or performed by or on behalf of Buyer shall not limit, qualify,
modify or amend the representations, warranties or covenants of, or indemnities
by, Seller made or undertaken pursuant to this Agreement, irrespective of the
knowledge and information received (or which should have been received)
therefrom by Buyer.
(b) Any due diligence review, audit or other investigation or inquiry
undertaken or performed by or on behalf of Seller shall not limit, qualify,
modify or amend the representations, warranties and covenants of, or indemnities
by, Buyer made or undertaken pursuant to this Agreement, irrespective of the
knowledge and information received (or which should have been received)
therefrom by Seller.
11.5 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original, but all of which together
shall constitute one and the same instrument.
11.7 Interpretation. The headings preceding the text of Articles
and Sections included in this Agreement and the headings to Exhibits attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neutral gender herein shall not limit any provision of
this Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. References to Articles, Sections, Subsections, Schedules or
Exhibits shall refer to those portions of this Agreement. Consummation of the
transactions contemplated herein shall not be deemed a waiver of a breach of or
inaccuracy in any representation, warranty or covenant or of any party's rights
and remedies with regard thereto. No specific representation, warranty or
covenant contained herein shall limit the generality or applicability of a more
general representation, warranty or covenant contained herein. A breach of or
inaccuracy in any representation, warranty or covenant shall not be affected by
the fact that any more general or less general representation, warranty or
covenant was not also breached or inaccurate.
11.8 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of Ohio
without giving effect to the principles of conflicts of law thereof.
11.9 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective estates, heirs, legal
representative, successors and assigns; provided, however, that no assignment of
any rights or obligations shall be made by any party hereto without the written
consent of each other party hereto.
35
40
11.10 No Third-Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective successors and assigns, and
no provision of this Agreement shall be deemed to confer upon other third
parties any remedy, claim, liability, reimbursement, cause of action or other
right.
11.11 Publicity. Prior to the Closing Date, except as required by
Law or the rules of any stock exchange or the National Association of Securities
Dealers, Inc., no public announcement or other publicity regarding the
transactions referred to herein shall be made by Buyer, Seller, or any of their
respective Affiliates, officers, directors, employees, representatives or
agents, without the prior written agreement of Buyer and Seller, in any case, as
to form, content, timing and manner of distribution or publication; provided,
however, that nothing in this Section shall prevent such parties from discussing
such transactions with those Persons whose approval, agreement or opinion, as
the case may be, is required for consummation of such particular transaction or
transactions. All public disclosures relating to the transaction herein
contemplated shall be through mutually agreed releases.
11.12 Further Assurances. Upon the reasonable request of Buyer,
Seller will on and after the Closing Date execute and deliver to Buyer such
other documents, releases, assignments and other instruments as may be required
to effectuate completely the transfer and assignment to Buyer of, and to vest
fully in Buyer title to, the Assets and to otherwise carry out the purposes of
this Agreement.
11.13 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
11.14 Remedies Cumulative. Unless otherwise specified, the remedies
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
11.15 Entire Understanding. This Agreement and the Related
Agreements set forth the entire agreement and understanding of the parties
hereto and supersede any and all prior agreements, arrangements and
understandings among the parties.
COMPMANAGEMENT HEALTH COMMUNITY INSURANCE COMPANY
SYSTEMS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------- ----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Title:
Executive Officer
36
41
LIST OF SCHEDULES
TO
ASSET PURCHASE AGREEMENT
BETWEEN
COMPMANAGEMENT HEALTH SYSTEMS, INC.
AND
COMMUNITY INSURANCE COMPANY
MAY 12, 1999
All schedules to be received in their final form at least two Business Days
prior to the Closing Date (not counting the Closing Date as one of such days),
except for Schedule 5.11(e), which is included in this Agreement.
Schedule 2.8--Transition Services Agreement
Schedule 3.1--Due Incorporation; No Subsidiaries
Schedule 3.3--Consents and Approvals; Authority Relative to this Agreement
Schedule 3.5--Financial Statements; Undisclosed Liabilities; Other Documents
Schedule 3.6--No Changes or Adverse Effects
Schedule 3.7--Title of Properties
Schedule 3.8--Condition and Sufficiency of Assets
Schedule 3.9--Leased Real Property
Schedule 3.10--Personal Property
Schedule 3.13--Intellectual Property
Schedule 3.14--Contracts
Schedule 3.15--Permits and Licenses
Schedule 3.16--Insurance
Schedule 3.19--Taxes
Schedule 3.20--No Defaults or Violations
Schedule 3.21--Environmental Matters
Schedule 3.22--Litigation
Schedule 3.23--No Conflict of Interest
Schedule 3.24--Bank Accounts
Schedule 3.25--Customers, Suppliers, Etc.
Schedule 3.27--Due Diligence Materials
Schedule 3.28--Improper and Other Payments
Schedule 4.3--Consents and Approvals Authority Relative to this Agreement
Schedule 5.4--Preservation of Business
Schedule 5.5--Consents and Approvals
Schedule 5.11(e)--Deferred Payment Adjustment
42
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (this "Amendment") is
made as of June 30, 1999, by and between CompManagement Health Systems, Inc., an
Ohio corporation ("CHS"), and Community Insurance Company, an Ohio corporation
("CIC").
BACKGROUND INFORMATION
CHS and CIC have entered into an Asset Purchase Agreement dated as of
May 12, 1999 (the "Asset Purchase Agreement"). CHS and CIC desire to amend the
Asset Purchase Agreement in accordance with this Amendment. The Asset Purchase
Agreement, as amended by this Amendment, is hereinafter collectively referred to
as the "Agreement." Capitalized terms used in this Amendment but not otherwise
defined in this Amendment shall have the respective meanings given those terms
in the Asset Purchase Agreement.
STATEMENT OF AGREEMENT
The parties to this Amendment hereby acknowledge the accuracy of the
foregoing Background Information and hereby agree as follows:
Section 1. Sections 10.2, 10.3, and 10.4 of the Asset Purchase
Agreement are hereby amended in their entirety to read as follows:
10.2 Limits on Indemnification. The parties hereto agree that
any indemnification payments to be made pursuant to this Agreement by
Seller on the one hand or Buyer on the other hand shall be subject to
the requirement that no claim may be made: (a) until the aggregate
amount of indemnifiable Losses incurred by Seller on the one hand or
Buyer on the other hand exceeds $30,000, at which time such claim for
indemnification may be made for the aggregate amount of all
indemnifiable Losses including the first $30,000; or (b) which,
together with all other indemnifiable Losses incurred by Seller on the
one hand or Buyer on the other hand, exceeds an aggregate amount equal
to the Purchase Price. With respect to subsection (a), until the
aggregate amount of indemnifiable Losses incurred by Seller on the one
hand or Buyer on the other hand exceeds $30,000, the payment of such
indemnifiable Losses shall be the responsibility of Seller or Buyer, as
the case may be. With respect to subsection (b), if indemnifiable
Losses incurred by Seller on the one hand or Buyer on the other hand
exceed an aggregate amount equal to the Purchase Price, then the
payment of such indemnifiable Losses in excess of the Purchase Price
shall be the responsibility of Seller or Buyer, as the case may be.
10.3 Indemnification by Seller. Subject to the limitations set
forth in this Article X, Seller agrees to indemnify Buyer against, and
agrees to defend and hold Buyer harmless from, any and all Losses
incurred or suffered by Buyer relating to or arising out of or in
connection with any of the following:
(a) Except for the Assumed Liabilities, any claims,
liabilities, obligations, or debts relating to Seller's
conduct of the Business on or prior to the Closing Date;
(b) Any breach of or inaccuracy in any representation
or warranty made by Seller in this Agreement or any document
delivered at the Closing; provided, however,
43
that: (A) except for breaches of or inaccuracies in Tax
Warranties or Title and Authorization Warranties, a notice of
Buyer's claim shall have been given to Seller not later than
the close of business on the Survival Date; and (B) in the
case of a Tax Warranty, a notice of Buyer's claim shall have
been given to Seller not later than the Tax Statute of
Limitations Date;
(c) Any breach of or failure by Seller to perform any
covenant or obligation of such party set out or contemplated
in this Agreement or any document delivered at the Closing; or
(d) Any obligations applicable to the MCO Provider
Account with respect to overpayments or improper payments made
or occurring on or prior to the Closing in excess of the
amount set forth in Section 2.3(b). Buyer shall follow its
normal operating procedures, if any, with respect to
offsetting provider overpayments against subsequent payments
due such provider and shall take reasonable steps to recover
provider overpayments before seeking indemnification under
this subsection. However, reasonable steps shall not require
Buyer to institute any legal action to recover provider
overpayments. Indemnification under this Section 10.3(d) shall
not be subject to any of the limitations set forth in this
Article X.
10.4 Indemnification by Buyer. Subject to the limitations set
forth in this Article X, Buyer agrees to indemnify Seller against, and
agrees to defend and hold Seller harmless from, any and all Losses
incurred or suffered by Seller relating to or arising out of or in
connection with any of the following:
(a) Any claims, liabilities, obligations, or debts
relating to Buyer's conduct of the Business after the Closing
Date;
(b) Any breach of or any inaccuracy in any
representation or warranty made by Buyer in Article IV in this
Agreement or any document delivered at the Closing;
(c) Any breach of or failure by Buyer to perform any
covenant or obligation set out or contemplated in this
Agreement or any document delivered at the Closing; or
(d) Buyer's use of the name "Anthem Managed Comp."
Indemnification under this Section 10.4(d) shall not be
subject to any of the limitations set forth in this Article X.
Section 2. The term "Closing Date," as used in the Agreement, shall
mean July 16, 1999. The June 30, 1999 date referenced in 9.1(b) of the Asset
Purchase Agreement is hereby amended to read "July 16, 1999."
Section 3. This document is an amendment to the Asset Purchase
Agreement. In the event of any inconsistencies between the provisions of the
Asset Purchase Agreement and this Amendment, the provisions of this Amendment
shall control. Except as modified by this Amendment, the Asset Purchase
Agreement shall continue in full force and effect without change.
COMPMANAGEMENT HEALTH COMMUNITY INSURANCE COMPANY
SYSTEMS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- ----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Authorized Representative
Title: President and Chief
Executive Officer
44
SECOND AMENDMENT TO
ASSET PURCHASE AGREEMENT
This Second Amendment to Asset Purchase Agreement (this "Amendment") is
made as of July 16, 1999, by and between CompManagement Health Systems, Inc., an
Ohio corporation ("CHS"), and Community Insurance Company, an Ohio corporation
("CIC").
BACKGROUND INFORMATION
CHS and CIC have entered into an Asset Purchase Agreement dated as of
May 12, 1999 as amended on June 30, 1999 by the First Amendment to the Asset
Purchase Agreement (the Asset Purchase Agreement and the First Amendment to the
Asset Purchase Agreement are hereinafter referred to as the ?Asset Purchase
Agreement?). CHS and CIC desire to amend the Asset Purchase Agreement in
accordance with this Amendment. The Asset Purchase Agreement, as amended by this
Amendment, is hereinafter collectively referred to as the "Agreement".
Capitalized terms used in this Amendment but not otherwise defined in this
Amendment shall have the respective meanings given those terms in the Asset
Purchase Agreement.
STATEMENT OF AGREEMENT
The parties to this Amendment hereby acknowledge the accuracy of the
foregoing background information and hereby agree as follows:
1. The definition of "Assets" as provided in Section 1.1 of the
Asset Purchase Agreement is hereby amended in its entirety to
read as follows:
"ASSETS" means (i) all furniture, furnishings, fixtures,
equipment (office and computer), computer hardware, supplies
and other tangible personal property as provided on Exhibit A
to the ▇▇▇▇ of Sale as referenced in Section 8.2(a) of the
Agreement (the "Personal Property"); (ii) all rights, title,
and interests of Seller in and to the Selected Contracts;
(iii) all rights, title, and interests of Seller in and to the
Business? Intellectual Property; (iv) all books, records, and
files of Seller (excluding corporate records of Seller)
relating exclusively to or used exclusively in connection with
the operation of the Business, including without limitation
any and all claim files; and (v) all rights, title, and
interests of Seller in and to the MCO provider account related
to the Business, which account is a dedicated account for the
funds provided to Seller by OBWC to pay providers and is
further described in the MCO Contract (the ?MCO Provider
Account?).
2. A new Section 2.10 shall be added to the Asset Purchase
Agreement to read as follows:
2.10. Accounts Receivable. CIC is retaining all rights and
interests in and to any amounts due it in connection with its
operation of the Business on or before the Closing Date with
respect thereto, including but not limited to all amounts due
it under the MCO Contract. Any amounts that become due and
payable in connection with operation of the Business by CHS
after the Closing Date, including but not limited to amounts
with respect to the MCO Contract, shall be the sole and
exclusive property of CHS. To the extent that either party
receives funds to which the other party is entitled under the
terms hereof, it shall promptly remit the funds to such other
party.
45
3. This document is an amendment to the Asset Purchase Agreement.
In the event of any inconsistencies between the provisions of
the Asset Purchase Agreement and this Amendment, the
provisions of this Amendment shall control. Except as modified
by this Amendment, the Asset Purchase Agreement shall continue
in full force and effect without change.
COMPMANAGEMENT HEALTH COMMUNITY INSURANCE COMPANY
SYSTEMS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- ----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Authorized Representative
Title: President and Chief
Executive Officer