Exhibit 1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
DATED AS OF FEBRUARY 2, 1999
BY AND BETWEEN
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
AND
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
NYFS08...:\60\33560\0019\2205\AGRD308V.39E
TABLE OF CONTENTS
Page
ARTICLE I.
PURCHASE OF SHARES........................... 1
1.1. Commitments to Purchase and Sell.......................... 1
1.2. Closing................................................... 1
ARTICLE II.
REPRESENTATIONS AND WARRANTIES..................... 2
2.1. Representations and Warranties of the Seller.............. 2
2.1.1. Organization and Good Standing................. 2
2.1.2. Authorization and Effect....................... 2
2.1.3. Capitalization................................. 3
2.1.4. Subsidiaries................................... 4
2.1.5. No Restrictions; Required Consents............. 5
2.1.6. SEC Documents.................................. 7
2.1.7. Unaudited Financial
Statements..................................... 8
2.1.8. Absence of Undisclosed Liabilities............. 8
2.1.9. Commissions or Finders Fees.................... 8
2.1.10. Disclosure..................................... 9
2.2. Representations and Warranties of the
Purchaser................................................. 9
2.2.1. Corporate Organization......................... 9
2.2.2. Authorization and Effect....................... 9
2.2.3. No Restrictions; Required Consents............. 10
2.2.4. Litigation; Decrees............................ 11
2.2.5. Purchase of Shares............................. 11
2.2.6. Commissions or Finders Fees.................... 12
2.2.7. Sufficient Funds............................... 12
ARTICLE III.
PRE-CLOSING COVENANTS......................... 12
3.1. Access to Information..................................... 12
3.2. Conduct of Business....................................... 12
3.3. Notification.............................................. 16
3.4. No Inconsistent Action.................................... 17
3.5. Injunctions............................................... 17
3.6. Filings................................................... 17
3.7. Confidentiality........................................... 17
3.8. Publicity................................................. 18
3.9. Delivery of Financial Statements.......................... 18
3.10. Efforts of the Seller....................................... 19
3.11. Efforts of the Purchaser.................................... 19
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Page
ARTICLE IV.
CONDITIONS TO CLOSING......................... 19
4.1. Conditions Precedent to Obligations of the
Purchaser................................................. 19
4.1.1. Representations, Warranties and
Covenants...................................... 19
4.1.2. Consents or Approvals.......................... 20
4.1.3. HSR Act........................................ 20
4.1.4. No Adverse Proceedings......................... 20
4.1.5. Trust Transactions............................. 20
4.1.6. UP&UP Stock Price.............................. 21
4.1.7. OTS Regulation................................. 21
4.1.8. No Material Adverse Effect..................... 21
4.2. Conditions Precedent to Obligations of the
Seller.................................................... 21
4.2.1. No Material Misrepresentation or
Breach......................................... 21
4.2.2. Consents or Approvals.......................... 22
4.2.3. HSR Act........................................ 22
4.2.4. No Adverse Proceedings......................... 22
4.2.5. Trust Transactions............................. 22
ARTICLE V.
DOCUMENTS TO BE DELIVERED AT THE CLOSING................ 22
5.1. Documents to be Delivered by the Sellers.................. 22
5.1.1. Transaction Agreements......................... 22
5.1.2. Certified Resolutions.......................... 23
5.1.3. Sellers' Certificate........................... 23
5.1.4. Good Standing Certificate...................... 23
5.1.5. Other Documents................................ 23
5.2. Documents to be Delivered by the Purchaser................ 24
5.2.1. Transaction Agreements......................... 24
5.2.2. Certified Resolutions.......................... 24
5.2.3. Purchaser's Certificate........................ 24
5.2.4. Good Standing Certificate...................... 24
5.2.5. Other Documents................................ 24
ARTICLE VI.
SURVIVAL AND INDEMNIFICATION...................... 25
6.1. Survival of Representations, Warranties and
Covenants................................................. 25
6.2. Definitions............................................... 25
6.3. Indemnification........................................... 25
6.4. Defense of Claims......................................... 26
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Page
ARTICLE VII.
TERMINATION.............................. 29
7.1. Termination............................................... 29
ARTICLE VIII.
MISCELLANEOUS PROVISIONS........................ 30
8.1. Specific Performance...................................... 30
8.2. Notices................................................... 30
8.3. Expenses.................................................. 31
8.4. Successors and Assigns.................................... 31
8.5. Waiver.................................................... 32
8.6. Entire Agreement.......................................... 32
8.7. Amendments and Supplements................................ 33
8.8. Rights of the Parties..................................... 33
8.9. Brokers................................................... 33
8.10. Further Assurances.......................................... 33
8.11. Governing Law............................................... 33
8.12. Severability................................................ 33
8.13. Execution in Counterparts................................... 34
8.14. Titles and Headings......................................... 34
8.15. Certain Interpretive Matters and
Definitions............................................... 34
8.16. No Recourse................................................. 34
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EXHIBITS
Exhibit A Form of Trust Stock Purchase Agreement
Exhibit B Form of Stockholders Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of ▇▇▇▇▇ Option Agreement
Exhibit E Form of Seller Registration Rights
Agreement
SCHEDULES
Schedule 2.1.1 Certificates of Incorporation and Bylaws
Schedule 2.1.3(a) Capitalization
Schedule 2.1.4(a) Subsidiaries
Schedule 2.1.5(a) Consents Required from Governmental
Entities (Sellers)
Schedule 2.1.5(b) Consents Required from Governmental
Entities (UP&UP)
Schedule 2.1.7 Unaudited Financial Information
Schedule 2.1.8(a) Absence of Undisclosed Liabilities
Schedule 2.1.8(b) Due Diligence Information
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DEFINED TERMS
Page
Agreement .................................................................1
▇▇▇▇▇ Option.................................................................1
▇▇▇▇▇ Option Agreement......................................................23
▇▇▇▇▇ Option Purchase Price..................................................1
▇▇▇▇▇ Option Shares..........................................................1
Closing .................................................................1
Closing Date.................................................................1
Common Stock.................................................................1
Direct Claim................................................................29
Divestment Agreement........................................................20
Exchange Act.................................................................7
GAAP .................................................................7
Governmental Entity..........................................................6
HSR Act .................................................................7
Indemnifiable Losses........................................................25
Indemnifying Party..........................................................25
Indemnitee ................................................................25
Indemnity Payment...........................................................25
Law .................................................................6
Liabilities .................................................................8
Material Adverse Effect......................................................9
Person ................................................................34
PHCI ................................................................20
Purchase Price...............................................................1
Purchaser .................................................................1
Registration Rights Agreement...............................................23
Responsible Party...........................................................27
Securities Act...............................................................7
Seller Registration Rights Agreement........................................23
Sellers .................................................................1
Shares .................................................................1
Stockholders Agreement......................................................22
Subsidiary ................................................................34
Third Party Claim...........................................................25
Third Party Claim Notice....................................................26
Third Party Claim Notice Period.............................................27
Trust ................................................................20
Trust Shares................................................................20
Trust Stock Purchase Agreement..............................................20
UP&UP .................................................................1
UP&UP SEC Documents..........................................................7
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 2nd day of February, 1999 by and between Capital Z Financial
Services Fund II, L.P., a Bermuda limited partnership and exempted partnership
(the "Purchaser"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, (the "Seller").
RECITALS:
WHEREAS, the Seller desires to sell to the Purchaser and the Purchaser
desires to purchase from the Seller an aggregate of 1,750,000 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
United Payors & United Providers, Inc., a Delaware corporation ("UP&UP") and an
option (the "▇▇▇▇▇ Option") to purchase an additional 2,250,000 shares of Common
Stock (the "▇▇▇▇▇ Option Shares").
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I. PURCHASE OF SHARES
1.1. Commitments to Purchase and Sell. Subject to the terms and conditions
set forth herein and in reliance on the representations and warranties contained
herein, the Purchaser agrees to purchase from the Seller, and the Seller agrees
to sell to the Purchaser, the Shares for an aggregate purchase price of
$35,000,000 (the "Share Purchase Price") and the ▇▇▇▇▇ Option for an aggregate
purchase price of $13,500,000 (the "▇▇▇▇▇ Option Purchase Price").
1.2. Closing.
1.2.1. The purchase and sale of the Shares and the ▇▇▇▇▇ Option
shall take place at a closing (the "Closing") at the offices of UP&UP on the
third business day after the conditions set forth in Article IV have been
satisfied or waived, or at such other time and place as is agreed upon by the
Purchaser and the Seller. The date on which the Closing is effected is referred
to in this Agreement as the "Closing Date."
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1.2.2. At the Closing, the Seller shall deliver to the Purchaser,
against payment to the Seller of the Share Purchase Price and the ▇▇▇▇▇ Option
Purchase Price, certificates representing the Shares, together with duly
executed stock powers, and the ▇▇▇▇▇ Option Agreement.
1.2.3. At the Closing, the Purchaser shall pay the Share Purchase
Price and the ▇▇▇▇▇ Option Purchase Price to the Seller by wire transfer of
immediately available funds to such bank account as the Seller may designate in
writing to the Purchaser not less than three days prior to Closing.
1.2.4. At the Closing, the parties shall also execute and deliver or
cause to be executed and delivered the documents referred to in Article V
hereof.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Seller. The Seller makes the
following representations and warranties to the Purchaser, each of which is true
and correct as of the date hereof and shall be true and correct as of the
Closing Date and shall be unaffected by any investigation heretofore or
hereafter made by the Purchaser.
2.1.1. Organization and Good Standing. Each of UP&UP and its
Subsidiaries is a corporation validly existing and in good standing under the
laws of its state of organization. Each of UP&UP and its Subsidiaries has the
requisite corporate power and authority to own, lease or otherwise hold the
assets owned, leased or otherwise held by it and to carry on its business as
presently conducted by it. Each of UP&UP and its Subsidiaries is in good
standing and duly qualified to conduct business as a foreign corporation in
every state of the United States in which its ownership or lease of property or
conduct of its business makes such qualification necessary. Attached hereto as
Schedule 2.1.1 are true, complete and correct copies of UP&UP's and its
Subsidiaries' certificates of incorporation and bylaws, each as currently in
effect.
2.1.2. Authorization and Effect. (a) This Agreement has been, and
the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement and the Seller
Registration Rights Agreement will be, duly executed and delivered by the Seller
and, assuming the due execution and delivery of this
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Agreement, the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement and the Seller
Registration Rights Agreement by the other parties hereto and thereto, this
Agreement constitutes, and the Stockholders Agreement, the ▇▇▇▇▇ Option
Agreement and the Seller Registration Rights Agreement will constitute, the
valid and binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(b) UP&UP has the requisite corporate power to execute and to
deliver the Stockholders Agreement, the Registration Rights Agreement and the
Seller Registration Rights Agreement and to perform the transactions
contemplated thereby to be performed by it. The execution and delivery by UP&UP
of the Stockholders Agreement, the Registration Rights Agreement and the Seller
Registration Rights Agreement and the performance by it of the transactions
contemplated thereby to be performed by it have been duly authorized by all
necessary corporate action. The Stockholders Agreement, the Registration Rights
Agreement and the Seller Registration Rights Agreement will be duly executed and
delivered by duly authorized officers of UP&UP and, assuming the due execution
and delivery thereof by the Purchaser and the Seller, as applicable, will
constitute the valid and binding obligations of UP&UP, enforceable against it in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
2.1.3. Capitalization. (a) Schedule 2.1.3(a) sets forth a true,
correct and complete description of all of the authorized, issued and
outstanding shares of capital stock of UP&UP. All of the outstanding shares of
capital stock of UP&UP have been duly authorized and validly issued, are fully
paid and non-assessable. None of the outstanding shares of UP&UP's capital stock
have been issued in violation of, and none of such outstanding shares are
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under
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any provisions of applicable law, the certificate of incorporation or bylaws of
UP&UP or any contract, agreement or instrument to which UP&UP is subject, bound
or a party.
(b) Except as set forth on Schedule 2.1.3(a), there are no options,
warrants, calls, subscriptions, conversion or other rights, agreements or
commitments (i) obligating UP&UP to issue, sell, purchase, return or redeem any
shares of capital stock of UP&UP or any other securities convertible into,
exchangeable or exercisable for or evidencing the right to subscribe for any
shares of capital stock of UP&UP or (ii) that give any person the right to
receive any benefits or rights similar to any rights enjoyed by or accruing to
the holders of capital stock of UP&UP. There are no outstanding bonds,
debentures, notes or other indebtedness having the right to vote on any matters
on which stockholders of UP&UP may vote.
(c) The Seller owns beneficially 3,311,900 shares of Common Stock.
The Seller is not a party to any voting trust, proxy or other agreement with
respect to the voting, ownership or transfer of any shares of UP&UP's capital
stock which will remain in force or effect after the Closing. At the Closing,
the Seller will transfer the Shares to the Purchaser free and clear of any and
all mortgages, liens, claims, charges, pledges, or other encumbrances of any
nature whatsoever, including, without limitation, licenses, leases, chattel or
other mortgages, collateral security arrangements, pledges, title imperfections,
defect or objection liens, security interests, conditional and installment sales
agreements, charges, easements, encroachments or restrictions, of any kind and
other title or interest retention arrangements, reservations or limitations of
any nature (collectively, "Liens").
2.1.4. Subsidiaries.
(a) Schedule 2.1.4(a) sets forth (i) the name of each Subsidiary of
UP&UP and (ii) with respect to each such Subsidiary, (A) its jurisdiction of
incorporation and (B) its capitalization and the percentage of outstanding
shares each class of voting stock owned by UP&UP and each of its Subsidiaries.
(b) All of the outstanding shares of capital stock of each
Subsidiary of UP&UP have been duly authorized and validly issued, are fully paid
and non-assessable, and are owned of record and beneficially, directly or
4
indirectly, by UP&UP or its Subsidiaries, as the case may be, free and clear of
any Liens. None of the outstanding shares of capital stock of any Subsidiary of
UP&UP have been issued in violation of, and none of such outstanding shares are
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provisions of applicable law, the
certificate of incorporation or bylaws of such Subsidiary or any contract,
agreement or instrument to which such Subsidiary is subject, bound or a party.
(c) There are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments (i) obligating any Subsidiary of
UP&UP to issue any additional shares of capital stock of such Subsidiary or any
other securities convertible into, exchangeable or exercisable for or evidencing
the right to subscribe for any shares of such Subsidiary's capital stock or (ii)
that gives any person the right to receive any benefits or rights similar to any
rights enjoyed by or accruing to the holders of capital stock of any Subsidiary
of UP&UP. There are no outstanding bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders of
any Subsidiary of UP&UP may vote. Neither UP&UP nor any of its Subsidiaries is a
party to any voting agreement, voting trust, proxy or other agreement with
respect to the voting, ownership or transfer of any shares of the capital stock
of any of UP&UP's Subsidiaries that will remain in effect after the Closing. The
stock certificate and transfer books of each Subsidiary of UP&UP are true,
correct and complete.
(d) Neither UP&UP nor any of its Subsidiaries has any material
capital investment in or controls, directly or indirectly, any other
corporation, partnership, joint venture, association or other entity or business
concern other than (i) its ownership of the capital stock of a Subsidiary of
UP&UP as indicated on Schedule 2.1.4(a) and (ii) investments reflected on
UP&UP's unaudited consolidated condensed balance sheet dated December 31, 1998.
2.1.5. No Restrictions; Required Consents. (a) The execution and
delivery of this Agreement by the Seller does not, and the execution by the
Seller of the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement and the Seller
Registration Rights Agreement will not, and the performance by the Seller of the
transactions contemplated hereby and thereby to be performed by the Seller will
not,
5
(i) conflict with, or result in any violation of, or constitute a default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any debt or obligation or
constitute a breach of, create a loss of a material benefit under, any contract,
mortgage, indenture, lease, agreement or other instrument or any permit, order,
judgment or decree to which the Seller is a party or by which any is bound, or
(ii) constitute a violation of any domestic or foreign statute, law, ordinance,
rule or regulation (the "Law") applicable to the Seller. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
domestic or foreign court, government, governmental agency, authority, entity or
instrumentality (a "Governmental Entity") is required to be obtained or made by
or with respect to the Seller in connection with the Seller's execution and
delivery of this Agreement, the Stockholders Agreement, the ▇▇▇▇▇ Option
Agreement or the Seller Registration Rights Agreement or the consummation by the
Seller of the transactions contemplated hereby and thereby to be consummated by
the Seller, except for such of the foregoing as are listed or described on
Schedule 2.1.5(a).
(b) The execution and delivery of the Stockholders Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement by
UP&UP, and the performance by UP&UP of the transactions contemplated thereby to
be performed by it, will not (i) conflict with its or its Subsidiaries'
respective certificates of incorporation or bylaws, (ii) conflict with, or
result in any violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material debt or obligation or constitute a
breach of, create a loss of a material benefit under, any contract, mortgage,
indenture, lease, agreement or other instrument or any permit, order, judgment
or decree to which UP&UP or any of its Subsidiaries is a party or by which any
of their respective properties are bound, (iii) constitute a violation of any
Law ("Law") applicable to UP&UP or any of its Subsidiaries, or (iv) result in
the creation of any Lien upon any of their respective assets which is material
to the business of UP&UP and its Subsidiaries taken as a whole. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to UP&UP or any of its Subsidiaries in connection with the
6
execution and delivery of the Stockholders Agreement, the Registration Rights
Agreement or the Seller Registration Rights Agreement by UP&UP or the
performance by UP&UP of the transactions contemplated thereby to be performed by
it, except for such of the foregoing as are listed or described on Schedule
2.1.5(b) and any filings required with the Federal Trade Commission and
Department of Justice pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), in respect of the purchase of the
Shares and the ▇▇▇▇▇ Option by the Purchaser.
2.1.6. SEC Documents. The Seller has made available to the Purchaser
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by UP&UP with the United States Securities and
Exchange Commission (the "SEC") since April 19, 1996 and prior to the date of
this Agreement (the "UP&UP SEC Documents"), which are all the documents (other
than preliminary material) that UP&UP was required to file with the SEC since
such date. As of their respective dates, the UP&UP SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC thereunder applicable to such UP&UP SEC Documents, and none of the
UP&UP SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the UP&UP
SEC Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited financial
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of unaudited financial statements, to normal, recurring adjustments, which will
not be material, either individually or in the aggregate) the consolidated
financial position of UP&UP and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of UP&UP and its consolidated Subsidiaries for the periods presented
therein.
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2.1.7. Unaudited Financial Statements. Attached hereto as Schedule
2.1.7 are true, correct and complete copies of the unaudited consolidated
condensed balance sheet of UP&UP and its consolidated Subsidiaries dated as of
December 31, 1998 and the related statement of income for the fiscal year then
ended (collectively, the "Unaudited Financial Statements"), both of which have
been prepared in accordance with GAAP applied consistently with prior periods.
Such balance sheet fairly presents the financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise) of UP&UP and
its consolidated Subsidiaries at the date indicated and such statement of income
fairly presents the results of operations of UP&UP and its consolidated
Subsidiaries for the period indicated.
2.1.8. Absence of Undisclosed Liabilities. None of UP&UP and its
Subsidiaries has any material liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except those liabilities
reflected (i) on UP&UP's unaudited consolidated condensed balance sheet at
December 31, 1998; or (ii) on Schedule 2.1.8(a) hereto.
For purposes of this Agreement, the term "liabilities" shall
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense or obligation,
whether fixed or contingent, known or unknown, asserted or unasserted, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. For purposes of this
Section 2.1.8, the term "material" shall mean any liabilities which individually
or in the aggregate exceed $5,000,000.
The Purchaser hereby acknowledges that in connection with its due
diligence investigation of the transactions contemplated by this Agreement, the
Seller has made or caused to be made available to the Purchaser the documents,
materials and other information referenced on Schedule 2.1.8(b).
2.1.9. Commissions or Finders Fees. Except for a $750,000 fee to be
paid by the Seller to ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Inc., neither the Seller nor any
Person acting on behalf of the Seller has agreed to pay a commission, finder's
fee or similar payment in connection with this Agreement or any matter related
hereto to any Person.
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2.1.10. Disclosure. No representation or warranty by the Seller
contained in this Agreement, and no statement contained in any document
(including, without limitation, the financial statements included in the UP&UP
SEC Documents, the closing documents delivered pursuant to Article V and the
Schedules hereto), list, certificate or other instrument furnished or to be
furnished by or on behalf of the Seller to the Purchaser or any of its
representatives in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading or necessary in order fully and fairly to provide the
information required to be provided in any such document, list, certificate or
other instrument. The Seller has not failed to disclose to the Purchaser any
fact, circumstance or event which has had or could reasonably be expected to
have a Material Adverse Effect. For the purposes of this Agreement, "Material
Adverse Effect" shall mean any event, circumstance, condition, fact, effect, or
other matter which has had or could reasonably be expected to have a material
adverse effect on (i) the businesses, assets, financial condition, prospects, or
results of operations of UP&UP and its Subsidiaries taken as a whole or (ii) the
ability of any Seller to perform on a timely basis any material obligation under
this Agreement or to consummate the transactions contemplated hereby to be
consummated by such Seller.
2.2. Representations and Warranties of the Purchaser. The Purchaser makes
the following representations and warranties to the Seller, each of which is
true and correct as of the date hereof and shall be true and correct as of the
Closing Date and shall be unaffected by any investigation heretofore or
hereafter made by the Seller.
2.2.1. Corporate Organization. The Purchaser is validly existing and
in good standing under the laws of Bermuda and has the requisite partnership
power and authority to own, lease or otherwise hold its properties and assets
and to carry on its business as presently conducted. The Purchaser is in good
standing and duly qualified as a foreign limited partnership in the State of New
York.
2.2.2. Authorization and Effect. The Purchaser has the requisite
partnership power to execute and deliver this Agreement, the Stockholders
Agreement, the ▇▇▇▇▇ Option
9
Agreement, the Registration Rights Agreement and the Seller Registration Rights
Agreement and to consummate the transactions contemplated hereby and thereby to
be consummated by it. The execution and delivery by the Purchaser of this
Agreement, the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement and
the consummation by it of the transactions contemplated hereby and thereby to be
consummated by it have been duly authorized by all necessary exempt company
action on the part of the ultimate general partner of the Purchaser. This
Agreement has been, and the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement,
the Registration Rights Agreement and the Seller Registration Rights Agreement
will be, duly executed and delivered by the Purchaser and, assuming the due
execution and delivery of this Agreement, the Stockholders Agreement, the ▇▇▇▇▇
Option Agreement, the Registration Rights Agreement and the Seller Registration
Rights Agreement by the other parties hereto and thereto, this Agreement
constitutes, and the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement will
constitute, the valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.2.3. No Restrictions; Required Consents. The execution and
delivery of this Agreement by the Purchaser does not, and the execution and
delivery of the Stockholders Agreement, the ▇▇▇▇▇ Option Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement by
the Purchaser will not, and the performance by the Purchaser of the transactions
contemplated hereby and thereby to be performed by it will not, (a) conflict
with the Purchaser's limited partnership agreement, (b) conflict with, or result
in any violation of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any debt or obligation or constitute a breach of, create a loss
of a material benefit under, any contract, mortgage, indenture, lease, agreement
or other instrument or any permit, order, judgment or decree to which the
Purchaser is a party or by which it is bound, or
10
(c) constitute a violation of any Law applicable to the Purchaser. Except for
any applicable requirements of the HSR Act, no consent, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity is required to be obtained or made by or with respect to the Purchaser in
connection with the execution and delivery of this Agreement, the Stockholders
Agreement, the ▇▇▇▇▇ Option Agreement, the Registration Rights Agreement or the
Seller Registration Rights Agreement by the Purchaser or the consummation by the
Purchaser of the transactions contemplated hereby and thereby to be consummated
by the Purchaser.
2.2.4. Litigation; Decrees. There are no judicial or administrative
actions, proceedings or investigations pending or, to the Purchaser's knowledge,
threatened that question the validity or enforceability of this Agreement, the
Stockholders Agreement, the ▇▇▇▇▇ Option Agreement, the Registration Rights
Agreement or the Seller Registration Rights Agreement or any action taken or to
be taken by the Purchaser in connection herewith or therewith. There are no
lawsuits, claims, administrative or other proceedings or investigations pending
or, to the Purchaser's knowledge, threatened by, against or affecting the
Purchaser in connection with this Agreement, the Stockholders Agreement, the
▇▇▇▇▇ Option Agreement, the Registration Rights Agreement or the Seller
Registration Rights or the Seller Registration Rights Agreement.
2.2.5. Purchase of Shares. (a) The Shares are being acquired for the
Purchaser's own account, not as a nominee or agent for any other Person, and
without a view to the distribution of such securities or any interest therein in
violation of the Securities Act.
(b) The Purchaser (i) is an "accredited investor" within the meaning
of Rule 501(a) under Regulation D promulgated under the Securities Act, (ii) has
such knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of its investment in the Shares, and
(iii) is capable of bearing the economic risks of such investment (including the
risk of the complete loss of its investment in the Shares); and
(c) The Purchaser acknowledges that the Shares have not been
registered under the Securities Act and understands that the Shares must be held
indefinitely unless
11
they are subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration requirement.
2.2.6. Commissions or Finders Fees. Neither the Purchaser nor any
Person acting on its behalf has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any Person.
2.2.7. Sufficient Funds. The Purchaser has sufficient capital
commitments to enable it to fund the Share Purchase Price and the ▇▇▇▇▇ Option
Purchase Price at the Closing.
ARTICLE III. PRE-CLOSING COVENANTS
3.1. Access to Information. Prior to the Closing, upon reasonable notice,
the Seller will cause UP&UP to afford to the officers, attorneys, employees,
directors, accountants, financing sources or other authorized representatives of
the Purchaser reasonable access during normal business hours to UP&UP's
employees, assets, facilities and books and records so as to afford the
Purchaser full opportunity to make such review, examination and investigation of
UP&UP's business as the Purchaser may desire to make, including, without
limitation, an environmental evaluation of UP&UP's properties and facilities.
The Purchaser will be permitted to make extracts from or to make copies of such
books and records as may be reasonably necessary in connection therewith. Prior
to the Closing, the Seller will cause UP&UP to promptly furnish or cause to be
furnished to the Purchaser such financial and operating data and other
information as the Purchaser may reasonably request.
3.2. Conduct of Business. At the Closing, the Seller shall certify to the
Purchaser in writing that during the period from the date of this Agreement to
the Closing Date, UP&UP and each of its Subsidiaries has:
(a) (i) carried on its business in the usual, regular and ordinary
course as presently conducted and consistent with past practice, (ii) kept
its business materially intact, (iii) kept available the services of its
key employees, and (iv) maintained in all material respects the goodwill
associated with its business, including but not limited to preserving its
12
relationships with its top twenty payor clients (according to revenues
during the fiscal year ended December 31, 1998);
(b) maintained its assets in good condition, and except for sales in
the ordinary course of business, not moved any material asset to any
location other than real property owned or leased by UP&UP or any of its
Subsidiaries;
(c) not sold, leased or disposed of, or made any contract for the
sale, lease or disposition of, any material portion of its assets or
subjected any material portion of its assets to any Liens, other than
Liens for taxes, assessments and other governmental charges which are not
due and payable or which may thereafter be paid without penalty;
(d) not incurred any material indebtedness, liability or other
obligation (absolute, accrued, contingent or otherwise) or assumed,
guaranteed, endorsed or otherwise as an accommodation become responsible
for the obligations of any other Person (which obligations are material
with respect to UP&UP and its Subsidiaries taken as a whole), other than
bank indebtedness (provided that the aggregate amount of bank indebtedness
shall at no time exceed $25,000,000);
(e) not amended or terminated any material contract or agreement or
any license, permit, authorization, franchise or approval (each a
"Permit"), other than in the ordinary course of business consistent with
past practices;
(f) not made any change in the accounting, tax or financial
reporting principles or practices followed by it or the methods of
applying such principles unless required by GAAP or applicable law;
(g) not extended credit in the sale of products and services, the
collection of receivables or otherwise or made any loan to any Person,
other than in the ordinary course of business consistent with past
practices;
(h) maintained its books, accounts and records in the usual, regular
and ordinary manner on a basis consistent with prior years;
13
(i) made any change to, or amended in any way, the contracts,
salaries, wages, or other compensation of any officer, director, employee,
agent, or other similar representative of UP&UP or any of its
Subsidiaries, except salary increases granted to their existing employees
in the ordinary course of business consistent with past practice in an
aggregate amount not exceeding five percent (5%) of such employees'
aggregate salaries as of the date of this Agreement;
(j) not adopted, entered into, amended, altered, or terminated
(partially or completely) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), for which UP&UP or any of its Subsidiaries has any
obligation or liability, contingent or otherwise (collectively, "Employee
Plans"), or any employment or consulting agreements, bonus or other
incentive compensation, deferred compensation, salary continuation during
any absence from active employment for disability or other reasons,
severance, sick days, stock award, stock option, stock purchase, tuition
assistance, club membership, employee discount, employee loan, or vacation
pay agreements, policies or arrangements which UP&UP or any of its
Subsidiaries maintains or has any obligation or liability (contingent or
otherwise) with respect to any current or former officer, director or
employee of UP&UP or any of its Subsidiaries (collectively, "Employee
Arrangements"), except to the extent required by applicable Law;
(k) not entered into any contract with an officer, director,
employee, agent, or other similar representative of UP&UP or any of its
Subsidiaries that is not terminable, without penalty or other liability,
upon not more than 60 calendar days' notice.
(l) not entered into any agreement, including an agreement to
purchase or lease assets, which includes an aggregate payment or
commitment on the part of either party of more than $1,000,000 in the
aggregate, other than with respect to contractual prepayments to providers
in the ordinary course of business;
(m) not adopted or amended any Employee Plan or collective
bargaining agreements, except as required by Law;
14
(n) maintained in full force and effect all of its insurance
policies in effect as of the date hereof;
(o) not declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital stock
or redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or acquire any of its capital stock or any option, warrant or other
similar right or any security convertible into or exchangeable or
exercisable for any of its capital stock;
(p) not taken or omitted to take any action as a result of which any
representation or warranty of the Seller in Article II has been rendered
untrue or incorrect;
(q) not amended its certificate of incorporation
or bylaws (except as contemplated by the Stockholders
Agreement);
(r) not issued or agreed to issue any capital stock or any option,
warrant, call, subscription, conversion or other right obligating it to
issue any capital stock or any other securities convertible into or
exchangeable or exercisable for its capital stock (except for (i) grants
under UP&UP's existing stock option plan of options to purchase not more
than 100,000 shares of Common Stock and the issuance of shares of Common
Stock upon the exercise of such options and (ii) the issuance of shares of
Common Stock upon the exercise of the options and warrants described on
Schedule 2.1.3(a));
(s) not split, combined or reclassified any of its capital stock or
issued or authorized or proposed the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock;
(t) not acquired any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
other than acquisitions the aggregate cost of which, together with the
costs of any acquisitions permitted under Section 3.2(l), does not exceed
$1,000,000, other than proposed acquisitions for not more than $2,450,000
in the
15
aggregate of which the Seller has been notified in writing on the date
hereof;
(u) not paid, discharged, settled or satisfied any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction thereof in the ordinary course of business consistent with
past practice or in accordance with their respective terms;
(v) not merged, amalgamated or consolidated with any other entity in
any transaction in which it is not the surviving corporation or sold all
or substantially all of its business or assets;
(w) not waived any claims or rights having a value in excess of
$100,000 in the aggregate;
(x) not entered into any agreement, understanding or commitment that
restrains, limits or impedes in any material respect its ability to
compete with or conduct any business or line of business; and
(y) not authorized any of, or committed or agreed to take any of,
the foregoing actions.
3.3. Notification. (a) The Seller shall notify the Purchaser, and the
Purchaser shall notify the Seller, of any litigation, arbitration or
administrative proceeding pending or, to such party's knowledge, threatened
against the Seller or the Purchaser, as the case may be, which challenges the
transactions contemplated hereby.
(b) The Seller will provide prompt written notice to the Purchaser
of any change in any of the information contained in his representations and
warranties made in Article II hereof or any Exhibits or Schedules referred to
herein or attached hereto and shall promptly furnish or cause to be furnished
any information which the Purchaser may reasonably request in relation to such
change; provided, however, that such notice shall not operate to cure any breach
of the representations and warranties made in Article II hereof or any Exhibits
or Schedules referred to herein or attached hereto.
(c) The Purchaser will provide prompt written notice to the Seller
of any change in any of the information
16
contained in its representations and warranties made in Article II hereof or any
Exhibits or Schedules referred to herein or attached hereto and shall promptly
furnish any information which the Seller may reasonably request in relation to
such change; provided, however, that such notice shall not operate to cure any
breach of the representations and warranties made in Article II hereof or any
Exhibits or Schedules referred to herein or attached hereto.
3.4. No Inconsistent Action. No party hereto shall take any action which
is materially inconsistent with its obligations under this Agreement.
3.5. Injunctions. Without limiting the generality or effect of any
provision of Article IV, if any United States federal, state or foreign court
having jurisdiction over any party hereto or UP&UP issues or otherwise
promulgates any injunction, decree or similar order prior to the Closing which
prohibits the consummation of the transactions contemplated hereby, the parties
hereto will use their respective commercially reasonable efforts to have such
injunction dissolved or otherwise eliminated as promptly as possible and, prior
to or after the Closing, to pursue the underlying litigation diligently and in
good faith.
3.6. Filings. As promptly as practicable after the execution of this
Agreement, each party hereto shall use its reasonable efforts to obtain, and to
cooperate with the other parties hereto in obtaining, all authorizations,
consents, orders and approvals of any Governmental Entity that may be or become
necessary in connection with the consummation of the transactions contemplated
by this Agreement, and to take all reasonable actions to avoid the entry of any
order or decree by any Governmental Entity prohibiting the consummation of the
transactions contemplated hereby, including, without limitation, any reports or
notifications that may be required to be filed by it under the HSR Act, and
shall furnish to the other all such information in its possession as may be
necessary for the completion of the reports or notifications to be filed by the
other parties.
3.7. Confidentiality. Each party hereto shall keep confidential all
information obtained by it from or with respect to the other in connection with
this Agreement and the negotiations preceding this Agreement, and will use such
information solely in connection with the transactions contemplated by this
Agreement, and if the transactions
17
contemplated hereby are not consummated, each party shall return to the other
party, without retaining a copy thereof, or destroy (and deliver to the other
party a certificate as to such destruction), any schedules, documents or other
written information obtained from the other party in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, no party hereto shall be required to keep confidential or return any
information which (a) is publicly known or available through other lawful
sources, which sources are not bound by a confidentiality agreement with the
disclosing party, (b) is or becomes publicly known through no fault of the
receiving party or its agents, (c) is required to be disclosed pursuant to an
order or request of a judicial authority or Governmental Entity (provided that
to the extent practicable under the circumstances, the disclosing party is given
reasonable prior notice), or (d) is developed by the receiving party
independently of the disclosure by the disclosing party. The Purchaser shall
comply with its obligations under that certain Confidentiality Agreement, dated
as of November 3, 1998, by and between the Purchaser and UP&UP.
3.8. Publicity. Prior to the Closing, neither party hereto shall issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that nothing herein shall prohibit either party
from issuing or causing publication of any such press release or public
announcement to the extent that such party determines such action to be required
by Law, in which event the party making such determination shall, if practicable
in the circumstances, use commercially reasonable efforts to allow the other
party reasonable time to comment on such release or announcement in advance of
its issuance.
3.9. Delivery of Financial Statements. The Seller shall deliver to
Purchaser promptly upon their becoming available, and in no event later than 20
days from the end of such month, copies of monthly financial statements for each
of the months ended after the date hereof and prior to the Closing. Each of such
monthly financial statements shall be prepared in accordance with GAAP applied
consistently throughout the periods involved and present fairly the financial
condition of UP&UP and its Subsidiaries
18
at the dates and for the periods indicated (subject to normal year end
adjustments).
3.10. Efforts of the Seller. Upon the terms and subject to the conditions
and other agreements set forth in this Agreement, the Seller agrees to use his
best efforts to take, or to cause to be taken, all actions, and to do, or to
cause to be done, and to assist and cooperate with the Purchaser in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement, including, without limitation, the satisfaction of the respective
conditions set forth in Article IV.
3.11. Efforts of the Purchaser. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, the Purchaser
agrees to use its best efforts to take, or to cause to be taken, all actions,
and to do, or to cause to be done, and to assist and cooperate with the Seller
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, without limitation, the satisfaction
of the respective conditions set forth in Article IV.
ARTICLE IV. CONDITIONS TO CLOSING
4.1. Conditions Precedent to Obligations of the Purchaser. The obligations
of the Purchaser under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to Closing,
of all of the following conditions, any one or more of which may be waived at
the option of the Purchaser:
4.1.1. Representations, Warranties and
Covenants.
(a) All representations and warranties of the Seller made in this
Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true, correct and complete in all material respects as of
the date hereof (without regard to any schedule updates furnished by any
of them after the date hereof) and on and as of the Closing Date as if
made on and as of that date.
19
(b) All of the terms, covenants and conditions to be complied with
and performed by the Seller on or prior to the Closing Date (including,
without limitation, the delivery of documents in accordance with Sections
3.2 and 5.1) shall have been complied with or performed.
(c) The Purchaser shall have received a certificate, dated as of the
Closing Date, executed by the Seller, certifying in such detail as the
Purchaser may reasonably request that the conditions specified in Sections
4.1.1(a) and (b) hereof have been fulfilled.
4.1.2. Consents or Approvals. Each of the approvals, consents or
waivers listed or which was required to be listed on Schedule 2.1.5(a) or
2.1.5(b) or which is otherwise necessary or advisable in connection with the
consummation by the Seller of the transactions contemplated by this Agreement,
the Stockholders' Agreement, the ▇▇▇▇▇ Option Agreement, the Registration Rights
Agreement or the Seller Registration Rights Agreement, shall have been obtained.
4.1.3. HSR Act. If applicable, the waiting period under the HSR Act
shall have expired or terminated.
4.1.4. No Adverse Proceedings. No order, decree or judgment of any
court, agency or Governmental Entity shall have been rendered against, any party
hereto which would render it unlawful, as of the Closing Date, to effect the
transactions contemplated by this Agreement in accordance with its terms.
4.1.5. Trust Transactions. Principal Health Care, Inc. ("PHCI")
shall have transferred at least 4,500,000 shares of Common Stock (the "Trust
Shares") to the Independent Divestment Trust, a Delaware business trust (the
"Trust"), in accordance with the terms of that certain Divestment and Common
Stock Sale Agreement, dated on or about the date hereof, between PHCI and the
Trust (the "Divestment Agreement"), and the Seller and the Trust shall have
entered into a stock purchase agreement with respect to the sale of the Trust
Shares to the Purchaser, which Stock Purchase Agreement shall be in
substantially the form attached hereto as Exhibit A (the "Trust Stock Purchase
Agreement").
20
4.1.6. UP&UP Stock Price. The average of the last quoted bid and
offer price per share of Common Stock on the Nasdaq Stock Market on the Nasdaq
Stock Market trading day immediately preceding the Closing Date shall be not
less than $22.00.
4.1.7. OTS Regulation. After the date of this Agreement, there shall
not have occurred any change of Law, nor shall the Seller or UP&UP have taken
any action, as a result of which the Purchaser has reasonably determined that it
or any of its Affiliates will, as a result of the consummation of the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Stockholders Agreement, the ▇▇▇▇▇ Option or the Seller Registration Rights
Agreement become a "savings and loan holding company" (as defined in 12 C.F.R.
ss.574.2(q)) or otherwise become subject to regulation by the United States
Office of Thrift Supervision or any other federal or state financial regulatory
authority.
4.1.8. No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect or any material disruption of or material adverse change
in financial, banking or capital market conditions.
4.2. Conditions Precedent to Obligations of the Seller. The obligations of
the Seller under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
the following conditions, any one or more of which may be waived at the option
of the Seller:
4.2.1. No Material Misrepresentation or Breach.
(a) All representations and warranties of the Purchaser made in this
Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true and complete in all material respects as of the date
hereof (without regard to any schedule updates furnished by the Purchaser
after the date hereof) and on and as of the Closing Date as if made on and
as of that date.
(b) All of the terms, covenants and conditions to be complied with
and performed by the Purchaser on or prior to the Closing Date (including,
without limitation, the delivery of documents in accordance
21
with Section 5.2) shall have been complied with or performed.
(c) The Seller shall have received a certificate, dated as of the
Closing Date, executed on behalf of the Purchaser by an authorized officer
of its ultimate general partner, certifying in such detail as the Seller
may reasonably request that the conditions specified in Sections 4.2.1(a)
and (b) have been fulfilled.
4.2.2. Consents or Approvals. Each of the approvals, consents or
waivers necessary or advisable in connection with the consummation by the
Purchaser of the transactions contemplated hereby, shall have been obtained.
4.2.3. HSR Act. If applicable, the waiting period under the HSR Act
shall have expired or terminated.
4.2.4. No Adverse Proceedings. No order, decree or judgment of any
court, agency or other Governmental Entity shall have been rendered against, any
party hereto which would render it unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
4.2.5. Trust Transactions. The Trust Shares shall have been duly
transferred to the Trust and the Trust shall have executed and delivered to the
Seller a counterpart to the Trust Stock Purchase Agreement.
ARTICLE V. DOCUMENTS TO BE DELIVERED AT THE CLOSING
5.1. Documents to be Delivered by the Seller. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser the following, at the
expense of the Seller, and in proper form for recording when appropriate:
5.1.1. Transaction Agreements. The following:
(a) a counterpart, duly executed by the Seller,
of this Agreement
(b) counterparts, duly executed by the Seller and UP&UP, of a
stockholders agreement in substantially the form attached hereto as Exhibit B
(the "Stockholders Agreement");
22
(c) a counterpart, duly executed by UP&UP, of a registration rights
agreement in substantially the form attached hereto as Exhibit C (the
"Registration Rights Agreement");
(d) a counterpart, duly executed by ▇▇▇▇▇, of an option agreement in
substantially the form attached hereto as Exhibit D (the "▇▇▇▇▇ Option
Agreement");
(e) a true, correct and complete copy of a registration rights
agreement, duly executed by UP&UP and the Seller, in substantially the form
attached hereto as Exhibit E (the "Seller Registration Rights Agreement"); and
(f) true, correct and complete copies of the Trust's trust agreement
(which shall include a provision obligating the trustee of the Trust to vote all
Trust Shares in favor of the amendments to UP&UP's certificate of incorporation
described in Section 5.5 of the Stockholders Agreement) and the Trust Stock
Purchase Agreement, duly executed by each of the parties thereto.
5.1.2. Certified Resolutions. Certified resolutions of the Board of
Directors of UP&UP approving the execution and delivery of the Stockholders
Agreement, the Registration Rights Agreement and the Seller Registration Rights
Agreement and the consummation by UP&UP of the transactions contemplated hereby
and thereby to be performed by it and expressly waiving application of Section
203 of the Delaware General Corporation Law to all transactions contemplated
hereby and thereby.
5.1.3. Sellers' Certificate. A certificate dated the Closing Date,
executed by each Seller, in the form described in Section 4.1.1(c).
5.1.4. Good Standing Certificate. A governmental certificate showing
that UP&UP is duly incorporated and in good standing in the State of Delaware,
certified as of a date not more than five (5) business days prior to the Closing
Date.
5.1.5. Other Documents. Such additional information and materials as
the Purchaser may reasonably request.
23
5.2. Documents to be Delivered by the Purchaser. At the Closing, the
Purchaser will deliver to the Seller, at the expense of the Purchaser:
5.2.1. Transaction Agreements. Counterparts, duly executed by the
Purchaser, of the following agreements:
(a) this Agreement
(b) the Stockholders Agreement;
(c) the Registration Rights Agreement;
(d) the ▇▇▇▇▇ Option Agreement; and
(e) the Seller Registration Rights Agreement.
5.2.2. Certified Resolutions. Certified resolutions of the board of
directors of the Purchaser's ultimate general partner approving the execution
and delivery of this Agreement, the Stockholders Agreement, the ▇▇▇▇▇ Option
Agreement, the Registration Rights Agreement, and the Seller Registration Rights
Agreement and each of the other documents delivered by the Purchaser pursuant
hereto and thereto and authorizing the consummation of the transactions
contemplated hereby and thereby.
5.2.3. Purchaser's Certificate. A certificate dated the Closing
Date, executed by the Purchaser, in the form described in Section 4.2.1(c).
5.2.4. Good Standing Certificate. A governmental certificate showing
that the Purchaser is duly organized and in good standing in Bermuda, certified
as of a date not more than five (5) business days before the Closing Date.
5.2.5. Other Documents. Such additional information and materials as
the Seller may reasonably request.
24
ARTICLE VI. SURVIVAL AND INDEMNIFICATION
6.1. Survival of Representations, Warranties and Covenants. (a) Except for
the representations and warranties contained in Section 2.1.3(c) (and the
corresponding representations of the Seller's assignees), which shall survive
indefinitely, the representations and warranties of the Seller (which for
purposes hereof shall be deemed to include all representations and warranties of
the Seller's assignees) and of the Purchaser contained in this Agreement shall
survive the Closing until May 15, 2000. Any claim for indemnification with
respect to any of such matters which is not asserted by notice given as herein
provided relating thereto within such specified period of survival may not be
pursued and is hereby irrevocably waived after such time. Any claim for an
Indemnifiable Loss (as defined in Section 6.2) asserted within such period of
survival as herein provided will be timely made for purposes hereof.
(b) Section 3.7 and Article VIII hereof will survive the Closing and
remain in effect indefinitely.
6.2. Definitions. For purposes of this Agreement, (i) "Indemnity Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, (iv)
"Indemnifiable Losses" means any and all damages, losses, liabilities,
obligations, costs and expenses, and any and all claims, demands or suits (by
any person or entity, including without limitation any Governmental Entity),
including without limitation the costs and expenses of any and all actions,
suits, proceedings, demands, assessments, judgments, settlements and compromises
relating thereto and including reasonable attorneys' fees and expenses in
connection therewith, and (v) "Third Party Claim" means any claim, action or
proceeding made or brought by any person or entity who or which is not a party
to this Agreement or an Affiliate of a party to this Agreement.
6.3. Indemnification. (a) Subject to Section 6.1, the
Seller agrees to indemnify, defend and hold harmless the
Purchaser and its Affiliates and their respective directors,
officers, partners, employees, agents and representatives
25
from and against any and all Indemnifiable Losses to the extent relating to,
resulting from or arising out of:
(i) any breach of representation or warranty of the Seller
(which for purposes hereof shall be deemed to include all representations
and warranties of the Seller's assignees) under the terms of this
Agreement and any certificate or other document delivered pursuant hereto;
or
(ii) any breach or nonfulfillment of any agreement or covenant of
the Seller under the terms of this Agreement.
(b) The Purchaser agrees to indemnify, defend and hold harmless the
Seller from and against any and all Indemnifiable Losses to the extent relating
to, resulting from or arising out of:
(i) any breach of representation or warranty of the Purchaser
under the terms of this Agreement and any certificate or other document
delivered pursuant hereto; or
(ii) any breach or nonfulfillment of any agreement or covenant of
the Purchaser under the terms of this Agreement.
(c) An Indemnitee under this Section 6.3 shall be entitled to
indemnification for its Indemnifiable Losses hereunder notwithstanding such
Indemnifiable Losses resulted from its negligence to the extent such
Indemnifiable Losses have not resulted from the gross negligence or wilful
misconduct of such Indemnitee.
6.4. Defense of Claims. (a) If any Indemnitee receives notice of assertion
or commencement of any Third Party Claim against such Indemnitee with respect to
which an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than 30 calendar days after
receipt of such notice of such Third Party Claim. Such notice (the "Third Party
Claim Notice") will describe the Third Party Claim in reasonable detail, will
include copies of all material written evidence thereof and will indicate the
estimated amount, if reasonably practicable, of the Indemnifiable Loss that has
been or may be sustained by the
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Indemnitee. The Indemnifying Party shall have 20 days from its receipt of a
Third Party Claim Notice (the "Third Party Claim Notice Period") to notify
Indemnitee (i) whether the Indemnifying Party disputes the Indemnitee's right of
indemnification with respect to such Third Party Claim, and (ii) if the
Indemnifying Party does not dispute such right of indemnification, whether or
not it desires to defend the Indemnitee against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnitee within the
Third Party Claim Notice Period that (i) the Indemnifying Party does not dispute
the Indemnitee's right of indemnification and (ii) the Indemnifying Party
desires to defend against such Third Party Claim, then the Indemnifying Party
shall have the right to assume and control the defense of such Third Party Claim
by appropriate proceedings with counsel reasonably acceptable to Indemnitee at
the Indemnifying Party's sole cost and expense. The Indemnitee may participate
in, but not control, any such defense or settlement at its sole cost and
expense.
(c) If the Indemnifying Party (i) disputes the Indemnitee's right of
indemnification with respect to a Third Party Claim, (ii) does not dispute such
right of indemnification but fails to promptly assume and prosecute the defense
of such Third Party Claim, (iii) does not dispute such right of indemnification
but a conflict or potential conflict exists between the Indemnifying Party and
the Indemnitee or (iv) is not entitled to assume defense of such Third Party
Claim under Section 6.4(b), then the Indemnitee shall be entitled to assume and
control the defense of such Third Party Claim with counsel reasonably acceptable
to the Indemnifying Party. If the Indemnifying Party does not assume the defense
of a Third Party Claim for any reason, it may still participate in, but not
control, the defense of such Third Party Claim at the Indemnifying Party's sole
cost and expense.
(d) The party responsible for the defense of any Third Party Claim
(the "Responsible Party") shall, to the extent reasonably requested by the other
party, keep such other party informed as to the status of any Third Party Claim
for which such party is not the Responsible Party, including, without
limitation, all settlement negotiations and offers. With respect to a Third
Party Claim for which the Indemnifying Party is the Responsible Party, the
Indemnitee shall make available to the Indemnifying Party and its
representatives all books and records of the
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Indemnitees relating to such Third Party Claim and shall render to the
Indemnifying Party such assistance and access to records and the representatives
of the Indemnitee as the Indemnifying Party and its representatives may
reasonably request, except that the Indemnitee shall not be required to make
available to the Indemnifying Party and its representatives any books, records,
documents or other information that the Indemnitee reasonably determines to be
confidential or subject to attorney-client privilege unless and until the
Indemnifying Party shall have entered into such agreements as the Indemnitee
reasonably deem to be necessary in light of all surrounding circumstances
(including, without limitation, the Indemnifying Party's need for information in
connection with the investigation or defense of a Third Party Claim) to protect
such confidentiality or privilege.
(e) Neither the Indemnifying Party, on the one hand, nor the
Indemnitee, on the other hand, shall enter into any settlement of any Third
Party Claim without the prior written consent of the other party, which consent
shall not be unreasonably withheld. The Responsible Party shall promptly notify
the other party of each settlement offer (including whether or not the
Responsible Party is willing to accept the proposed settlement offer) with
respect to a Third Party Claim. Such other party agrees to notify the
Responsible Party with reasonable promptness whether or not such party is
willing to accept the proposed settlement offer. If an Indemnitee fails to
consent to any settlement offer of a Third Party Claim (whether or not the
Indemnitee is the Responsible Party with respect to such Third Party Claim), the
Indemnitee may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party with respect to such
Third Party Claim (including the reasonable costs and expenses of contesting or
defending such Third Party Claim incurred after the Indemnitee fails to consent
to such settlement offer) shall not exceed the full amount of such settlement
offer. If the Indemnifying Party fails to consent to any settlement offer of a
Third Party Claim (whether or not the Indemnifying Party is the Responsible
Party with respect to such Third Party Claim), the Indemnifying Party may
continue to contest or defend such Third Party Claim and, in such event, the
Indemnifying Party shall be liable to the Indemnitee for the amount of the
Indemnification Loss ultimately recovered against Indemnitee as a result of such
Third Party Claim.
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(f) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 6.4(a) or 6.4(b) will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(g) The Indemnifying Party will have a period of 30 calendar days
within which to respond in writing to any claim by an Indemnitee on account of
an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct
Claim"). If the Indemnifying Party does not so respond within such 30 calendar
day period, the Indemnifying Party will be deemed to have rejected such claim,
in which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article VI.
ARTICLE VII. TERMINATION
7.1. Termination. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated at any time prior to the Closing:
(a) By the mutual written consent of the
Purchaser and the Seller;
(b) By either the Purchaser or the Seller if the Closing shall not
have occurred on or before March 15, 1999; provided, however, that the
terminating party shall not then be in material breach of this Agreement
and that the failure of the Closing to have occurred by such date shall
not have been caused by or resulted from such terminating party's failure
to fulfill any obligation under this Agreement;
(c) By either the Purchaser or the Seller if there shall have been
entered a final, nonappealable order or injunction of any Governmental
Entity restraining or prohibiting the consummation of the transactions
contemplated hereby or any material part thereof; or
(d) By either the Purchaser or the Seller if, prior to the Closing
Date, the other party is in
29
material breach of any representation, warranty, covenant or agreement
contained herein and such breach shall not be cured within fifteen (15)
days of the date of notice of default served by the party claiming such
material default, provided that such terminating party shall not also be
in material breach of this Agreement at the time notice of termination is
delivered.
Upon the termination of this Agreement in accordance with this Section 7.1, the
obligations of the parties to effect the transactions contemplated hereby will
terminate, except that the provisions of this Section 7.1 and of Article VIII
shall continue to apply and no party shall be relieved of any liability for any
breach of this Agreement prior to the date of termination.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1. Specific Performance. The parties hereto agree that irreparable
damage would occur if any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
therefore agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or in equity.
8.2. Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile transfer or one business day after having
been dispatched by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to the Seller, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
United Payors & United Providers, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
30
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(b) If to the Purchaser, to:
Capital Z Financial Services Fund II, L.P.
c/o Capital Z Partners, Ltd.
One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
8.3. Expenses. Except as otherwise expressly provided herein, the Seller
agrees to pay or cause to be paid, promptly upon receipt of any request therefor
(together with reasonably satisfactory supporting documentation), all reasonable
accounting, legal, banking and other out-of-pocket expenses of the Purchaser
relating to the transactions contemplated hereby, up to a maximum of $250,000;
provided, however, that such payment shall be required only if the sale of the
Shares and the ▇▇▇▇▇ Option is consummated or if the sale of the Shares and the
▇▇▇▇▇ Option is not consummated on account of a breach by the Seller of this
Agreement.
8.4. Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that
31
a party, upon notice to the other party, may assign or delegate any or all of
its rights or obligations under this Agreement to any Affiliate, in the case of
the Purchaser, or to any other UP&UP stockholder designated in writing by the
Seller at least five business days prior to the Closing Date (which stockholder
must be reasonably acceptable to the Purchaser), in the case of the Seller. Each
party agrees to execute acknowledgements of such assignment(s) and collateral
assignments in such forms as the other party may from time to time reasonably
request. In the event of such a proposed assignment by a party, the provisions
of this Agreement shall inure to the benefit of and be binding upon such party's
assigns. In the event of such a proposed assignment by the Seller, the Seller's
assign shall be required to make representations and warranties to the Purchaser
only as to matters described in Sections 2.1.3(c) (only as to the shares of
Common Stock to be transferred by such assign), 2.1.5 and 2.1.9 and the Seller
shall not be relieved of any of its obligations or liabilities hereunder.
8.5. Waiver. Each party hereto by written notice to the other party may
(a) extend the time for performance of any of the obligations of the other party
under this Agreement, (b) waive any inaccuracies in the representations or
warranties of the other party contained in this Agreement or in any document
delivered in connection herewith, (c) waive compliance with any of the
conditions or covenants of the other party contained in this Agreement, or (d)
waive or modify performance of any of the obligations of the other party under
this Agreement; provided, however, that no such party may, without the prior
written consent of the other party, make or grant such extension of time, waiver
of inaccuracies or compliance or waiver or modification of performance with
respect to its (or any of its Affiliates) representations, warranties,
conditions or covenants hereunder. Except as provided in the immediately
preceding sentence, no action taken pursuant to this Agreement will be deemed to
constitute a waiver of compliance with any representations, warranties,
conditions or covenants contained in this Agreement and will not operate or be
construed as a waiver of any subsequent breach, whether of a similar or
dissimilar nature.
8.6. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative
32
thereof) relating to the matters contemplated hereby. This Agreement (together
with the Exhibits and Schedules hereto) constitutes the entire agreement by and
among the parties hereto and there are no agreements or commitments by or among
such parties or their Affiliates except as expressly set forth herein.
8.7. Amendments and Supplements. This Agreement may be amended or
supplemented at any time by additional written agreements signed by the parties
hereto.
8.8. Rights of the Parties. Except as provided in Article VI or in Section
8.4, nothing expressed or implied in this Agreement is intended or will be
construed to confer upon or give any person or entity other than the parties
hereto and their respective Affiliates any rights or remedies under or by reason
of this Agreement or any transaction contemplated hereby.
8.9. Brokers. The Purchaser hereby agrees to indemnify and hold harmless
the Seller, and the Seller hereby agrees to indemnify and hold harmless the
Purchaser, against any liability, claim, loss, damage or expense incurred by the
Purchaser or by the Seller, respectively, relating to any fees or commissions
owed to any broker, finder, or financial advisor as a result of actions taken by
the Purchaser or by the Seller, respectively.
8.10. Further Assurances. From time to time, as and when requested by
either party, the other party shall execute and deliver, or cause to be executed
and delivered, all such documents and instruments as may be reasonably necessary
to consummate the transactions contemplated by this Agreement.
8.11. Governing Law. This Agreement, including, without limitation, the
interpretation, construction and validity hereof, shall be governed by the Laws
of the State of New York without regard to the conflicts of laws principles
thereof.
8.12. Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable Law, then this Agreement shall
be construed with the invalid, illegal or unenforceable provision deleted, and
the validity, legality and
33
enforceability of the remaining provisions contained herein shall not be
affected or impaired thereby.
8.13. Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
8.14. Titles and Headings. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
8.15. Certain Interpretive Matters and Definitions. (a) Unless the context
otherwise requires, (i) all references to Sections, Articles or Schedules are to
Sections, Articles or Schedules of or to this Agreement, (ii) each term defined
in this Agreement has the meaning assigned to it, (iii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in
the singular include the plural and vice versa, (vi) the terms "Subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934 Act, as amended, and (vii)
"Person" or "person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof. All references to
"$" or dollar amounts will be to lawful currency of the United States of
America.
(b) No provision of this Agreement will be interpreted in favor of,
or against, either of the parties hereto by reason of the extent to which either
such party or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
8.16. No Recourse. Notwithstanding any of the terms or provisions of this
Agreement, each of the Purchaser and the Seller agrees that neither it nor any
person acting on its behalf may assert any claims or cause of action against any
officer, director, partner or stockholder of the other party in connection with
or arising out of this Agreement or the transactions contemplated hereby.
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE PURCHASER:
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P.,
its general partner
By: Capital Z Partners, Ltd.,
its general partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
THE SELLER:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
35
