SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) AUGUST 19, 1997
COASTAL PHYSICIAN GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 001-13460 56-1379244
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2828 CROASDAILE DRIVE, DURHAM, NC 27705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (919)383-0355
N/A
(Former name or former address, if changed since last report)
ITEM 2. - DISPOSITION OF ASSETS
Effective August 19, 1997, Coastal Physician Group, Inc. (the
"Company") sold certain assets of Better Health Plan, Inc.
("BHP"), the Company's wholly-owned New York-based Prepaid Health
Services Plan, to The New York State Catholic Health Plan, Inc.
(d/b/a Fidelis Care New York), for approximately 7.75 million in
cash proceeds. The Company received approximately 3.4 million of
the cash proceeds at closing, an additional 388,000 was placed in
escrow, approximately 3.4 million will be received by September
30, 1997 and the remaining proceeds, including amounts previously
placed in escrow, will be received by November 30, 1997. BHP
serves over 40,000 Medicaid recipients contracting with a network
of approximately 7,700 physicians and 109 hospitals. Net
proceeds to the Company will be used primarily for working
capital purposes.
ITEM 7. - FINANCIAL STATEMENTS AND EXHIBITS
The following financial information and exhibits are filed as
part of this report:
(b) PRO FORMA FINANCIAL INFORMATION:
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL
INFORMATION OF COASTAL PHYSICIAN GROUP, INC.
Unaudited Condensed Consolidated Pro Forma Balance Sheet as
of June 30, 1997
Unaudited Condensed Consolidated Pro Forma Statements of
Operations for the six months ended June 30, 1997 and the
year ended December 31, 1996
(c) EXHIBITS:
The exhibits which are filed with this Form 8-K are set
forth in the Exhibit Index, which immediately precedes the
exhibits to this report.
COASTAL PHYSICIAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION
The following unaudited condensed consolidated pro forma balance
sheet as of June 30, 1997, and the unaudited condensed
consolidated pro forma statements of operations for the six month
period ended June 30, 1997 and the year ended December 31, 1996
have been prepared to give effect to the sale of certain assets
of BHP. The adjustments to the unaudited condensed consolidated
pro forma balance sheet have been prepared as if the transaction
was consummated on June 30, 1997, while the adjustments to the
unaudited condensed consolidated pro forma statements of
operations have been prepared as if the transaction was
consummated as of the beginning of the respective periods
presented. The unaudited condensed consolidated pro forma
financial information has been adjusted to reflect the effect of
the pro forma adjustments described in the accompanying notes and
is not necessarily indicative of the consolidated financial
position or results of operations had the sale transaction
actually been effected as of the assumed dates. The unaudited
condensed consolidated pro forma financial information should be
read in conjunction with the Company's unaudited condensed
consolidated financial statements and notes thereto as of June
30, 1997 and for the six months then ended included in the
Company's Quarterly Report on Form 10-Q filed on August 22, 1997.
COASTAL PHYSICIAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
PRO FORMA
HISTORIC ADJUSTMEN PRO
AL TS FORMA
ASSETS
Current assets:
Cash and cash equivalents 16,913 3,412 (b) 20,325
Marketable securities 6,651 6,651
Trade accounts receivable, net 32,580 32,580
Accounts receivable, other 15,011 3,875 (d) 18,886
Other current assets 10,926 249 (a,c 11,175
)
Total current assets 82,081 7,536 89,617
Property and equipment, at
cost, 15,324 (1,107) (a) 14,217
less accumulated
depreciation
Excess of cost over fair value
of 14,734 (6,255) (a) 8,479
net assets acquired, net
Other assets 13,605 13,605
Total assets 125,744 174 125,918
LIABILITIES AND SHAREHOLDERS'
EQUITY
(DEFICIT)
Current liabilities:
Current maturities and other
short-term borrowings 2,452 2,452
Accounts payable 40,732 174 (e) 40,906
Deferred revenue 50,224 50,224
Accrued expenses 18,592 18,592
Accrued physician fees
and medical costs 23,755 23,755
Total current liabilities 135,755 174 135,929
Long-term debt, excluding
current maturities 3,904 3,904
Total liabilities 139,659 174 139,833
Shareholders' equity (deficit):
Preferred stock 12 12
Common stock 244 244
Additional paid-in capital 158,063 158,063
Common stock warrants 2,828 2,828
Accumulated deficit (175,124 (175,12
) 4)
Unrealized appreciation of
available-for-sale 62 62
securities
Total shareholders'
equity (13,915) (13,915
(deficit) )
Total liabilities and
share- 125,744 174 125,918
holders' equity
(deficit)
COASTAL PHYSICIAN GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA BALANCE SHEET
JUNE 30, 1997
DETAILS OF PRO FORMA ADJUSTMENTS
(a) To record the disposition of certain assets of BHP.
(b) To record the estimated net cash proceeds received at
closing.
(c) To record cash proceeds from the sale placed in escrow.
(d) To record a receivable for 3.875 million of the sale
proceeds, approximately 3.4 million of which is to be received
by September 30, 1997 and the balance by November 30, 1997,
per the asset purchase agreement.
(e) To record various estimated transaction-related liabilities.
COASTAL PHYSICIAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
HISTORICA ADJUSTMENT PRO
L S FORMA
Operating revenue, net 236,210 (28,150) (a) 208,060
Costs and expenses:
Physician and other provider 182,921 (23,220) (a) 159,701
services
Medical support services 24,154 (11) (a) 24,143
Selling, general and 53,450 (10,986) (a,c) 42,464
administrative
Total costs and expenses 260,525 (34,217) 226,308
Operating loss (24,315) 6,067 (18,248
)
Other income (expense):
Interest income (expense), net (9,292) 299 (b) (8,993)
Other, net 414 414
Total other expense (8,878) 299 (8,579)
Loss before income taxes (33,193) 6,366 (26,827
)
Income tax provision --- ---
Net loss (33,193) 6,366 (26,827
)
Net loss per share (1.37) (1.11)
Weighted average number of shares
outstanding 24,258 24,258
COASTAL PHYSICIAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
HISTORIC ADJUSTMEN PRO
AL TS FORMA
Operating revenue, net 552,109 (47,492) (a) 504,617
Costs and expenses:
Physician and other provider 450,526 (42,034) (a) 408,492
services
Medical support services 92,460 (72) (a) 92,388
Selling, general and administrative 171,903 (29,510) (a,c 142,393
)
Total costs and expenses 714,889 (71,616) 643,273
Gain on divested assets, net 37,751 37,751
Operating loss (125,029 24,124 (100,90
) 5)
Other income (expense):
Interest income (expense), net (12,274) 638 (b) (11,636
)
Other, net (5,982) 580 (a) (5,402)
Total other expense (18,256) 1,218 (17,038
)
Loss before income taxes and
extraordinary item (143,285 25,342 (117,94
) 3)
Income tax provision (4,136) (4,136)
Loss before extraordinary item (147,421 25,342 (122,07
) 9)
Extraordinary item - gain on
pooled
portion of south Florida 1,864 1,864
divestiture,
net of income taxes of 647
Net loss (145,557 25,342 (120,21
) 5)
Loss per common share:
Loss before extraordinary item (6.18) (5.12)
Extraordinary gain 0.08 0.08
Net loss (6.10) (5.04)
Weighted average number of shares
outstanding 23,844 23,844
COASTAL PHYSICIAN GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
DETAILS OF PRO FORMA ADJUSTMENTS
(a) To record the direct reduction in operating revenue, net,
costs and expenses and other income/expense directly related
to BHP for the periods presented. (See Note (c) below).
(b) To reduce interest expense based on the reduction of debt
outstanding with the net proceeds from the sale of BHP,
assuming the sale transaction was consummated at the beginning
of each period presented using effective interest rates of
11.16% and 9.34% for the six months ended June 30, 1997 and
the year ended December 31, 1996, respectively.
(c) As noted in the Company's 1997 second quarter Report on Form
10-Q, during the second quarter of 1997 the Company recognized
a goodwill impairment loss of 4.2 million related to BHP.
This amount is included in the pro forma reduction of
selling, general and administrative expenses for the six month
period ended June 30, 1997.
As noted in the Company's 1996 Annual Report on Form 10-K,
during 1996 the Company recognized a goodwill impairment loss
of 13.562 million related to BHP. This amount is included
in the pro forma reduction of selling, general and
administrative expenses for the year ended December 31, 1996.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Asset Purchase Agreement by and among New York State
Catholic Health Plan, Inc., d/b/a Fidelis Care New
York, a New York not-for-profit corporation, Coastal
Physician Group, Inc., a Delaware corporation, and
Better Health Plan, Inc., a New York corporation and a
wholly-owned subsidiary of Coastal Physician Group,
Inc.
Dated: August 8, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
COASTAL PHYSICIAN GROUP, INC.
(Registrant)
Date: September 3, 1997 By: /S/ STEVEN M. SCOTT, M.D.
Steven M. Scott, M.D.
President and Chief
Executive Officer
Date: September 3, 1997 By: /S/ W. RANDALL DICKERSON
W. Randall Dickerson
Executive Vice President
and Chief Financial
Officer
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and
entered into as of August 8, 1997 (the "Effective Date"), by and
among New York State Catholic Health Plan, Inc., d/b/a Fidelis
Care New York, a New York not-for-profit corporation ("FCNY"),
Coastal Physician Group, Inc., a Delaware corporation
("COASTAL"), and Better Health Plan, Inc., a New York corporation
and a wholly-owned subsidiary of COASTAL ("BHP" or "Seller").
FCNY, COASTAL and/or BHP may be referred to herein in the
aggregate as the Parties, and any of them individually may be
referred to as a Party.
R E C I T A L S
WHEREAS, FCNY is a New York not-for-profit corporation with
its principal place of business at 95-25 Queens Boulevard, Rego
Park, New York 11734, and
WHEREAS, COASTAL is a Delaware corporation with its
principal place of business at 2828 Crossdale Drive, Durham,
North Carolina 27705, and owns or controls 100% of the
outstanding stock of BHP, and
WHEREAS, BHP is a New York corporation with its principal
place of business at 120 Pineview Drive, Amherst, New York 14228,
and
WHEREAS, FCNY desires to purchase from Seller, and Seller
desires to sell to FCNY, pursuant to the terms and provisions set
forth in this Agreement, substantially all of the operating
assets of BHP.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall
have the following meanings:
SECTION 1.1 "ACQUIRED ASSETS" shall have the meaning set
forth in Section 2.1 hereof.
SECTION 1.2 "AFFILIATE" shall mean, as to any person, any
other person that directly or indirectly controls, or is under
common control with, or is controlled by, such person.
SECTION 1.3 "AGREEMENT" shall mean this Agreement,
including the Exhibits and Schedules attached hereto and
incorporated herein by this reference.
SECTION 1.4 "ANCILLARY DOCUMENTS" shall mean the
agreements, instruments and other documents to be executed and
delivered incident to the consummation of the transactions
contemplated by this Agreement.
SECTION 1.5 "ASSUMED LIABILITIES" shall have the meaning
set forth in Section 2.3 hereof.
SECTION 1.6 "AUDIT" shall mean any audit, assessment of
Taxes or other examination by any taxing authority or any
administrative or judicial proceedings or appeal of such
proceedings relating to Taxes.
SECTION 1.7 "CLOSING" shall have the meaning set forth in
Section 2.4 hereof.
SECTION 1.8 "CODE" shall mean the Internal Revenue Code of
1986, as amended.
SECTION 1.9 "CONTRACT" shall mean any contract, agreement,
commitment, indenture, lease, note, guarantee, bond, mortgage,
instrument, matter of suretyship, power of attorney, indemnity
arrangement, license, plan, arrangement or understanding, whether
written or oral.
SECTION 1.10 "DOH" shall mean the New York Department of
Health.
SECTION 1.11 "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.
SECTION 1.12 "ESCROW AGREEMENT" shall have the meaning set
forth in Section 2.8 hereof.
SECTION 1.13 "ESCROW DEPOSIT" shall have the meaning set
forth in Section 2.8 hereof.
SECTION 1.14 "EXCLUDED ASSETS" shall have the meaning set
forth in Section 2.2 hereof.
SECTION 1.15 "FTC" shall mean the United States Federal
Trade Commission.
SECTION 1.16 "HAZARDOUS SUBSTANCES" shall have the meaning
set forth in Section 3.17(c) hereof.
SECTION 1.17 "HCFA" shall mean the Health Care Financing
Administration of the United States Department of Health and
Human Services.
SECTION 1.18 "INTERIM FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 3.5 hereof.
SECTION 1.19 "JUSTICE DEPARTMENT" shall mean the Antitrust
Division of the United States Department of Justice.
SECTION 1.20 "LIABILITIES" shall mean liabilities and
obligations, secured or unsecured, whether absolute, contingent
or otherwise, and whether or not due.
SECTION 1.21 "LIEN" shall mean a lien, mortgage, deed of
trust, deed to secure debt, pledge, assessment, security
interest, charge, claim, levy, purchase option, call, right of
first refusal, preemptive or similar right of any third party or
other encumbrance of any kind.
SECTION 1.22 "MATERIAL ADVERSE EFFECT" shall mean a
material adverse effect (or any development which, insofar as
reasonably can be foreseen, in the future is reasonably likely to
have a material adverse effect) on the business, operations,
properties, assets, working capital, marketing agents and
brokers, financial or other condition, results of operations or
prospects of a person and its subsidiaries, if any, taken as a
whole.
SECTION 1.23 "MULTI-EMPLOYER PLAN" shall mean any
"multi-employer plan" as defined in Section 4001(a)(3) of ERISA.
SECTION 1.24 "PERSON" shall mean any individual,
corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or
other agency or political subdivision thereof, or any other
entity.
SECTION 1.25 "PLANS" shall mean any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA or any
employee pension benefit plan within the meaning of Section 3(2)
of ERISA.
SECTION 1.26 "PRPRIETARY RIGHTS" shall mean intellectual
property rights used in connection with BHP's business.
SECTION 1.27 "PURCHASE PRICE" shall have the meaning set
forth in Section 2.5 hereof.
SECTION 1.28 "REGULATORY ENTITIES" shall mean all federal,
state, local or other governmental, quasi-governmental or
regulatory entities, bodies, agencies and commissions.
SECTION 1.29 "TAX" OR "TAXES" shall mean all federal,
state, local, and foreign taxes, duties, fees, levies,
governmental charges or other assessments of any kind (whether
imposed directly or through withholding) including any interest,
additions to tax, or penalties applicable thereto.
SECTION 1.30 "TAX RETURNS" shall mean all federal, state,
local and foreign tax returns, declarations, statements, reports,
schedules, forms and information returns and any amended Tax
Return relating to Taxes.
ARTICLE II
PURCHASE OF ACQUIRED ASSETS
SECTION 2.1 SALE AND PURCHASE OF ACQUIRED ASSETS.
Subject to the terms and conditions set forth in this Agreement,
Seller hereby agrees to sell to FCNY, and FCNY hereby agrees to
purchase on the Closing Date all of the assets of BHP (the
"Acquired Assets") (other than the Excluded Assets) including,
without limitation:
(a) All Certificates of Authority, state and county
licenses and contracts owned or held by BHP, all of which are set
forth on Schedule 2.1(a) attached hereto and incorporated herein
by this reference.
(b) Provider contracts and related agreements, all of which
are set forth on Schedule 2.1(b) attached hereto and incorporated
herein by this reference.
(c) The lease relating to BHP's offices located at 120
Pineview Drive, Amherst, New York 14228 (the "Amherst Office
Lease").
(d) All books and records, files and off-site storage space
owned or held by BHP (set forth on Schedule 2.1(d) attached
hereto and incorporated herein by this reference).
(e) All computer and telecommunications hardware, software
and equipment owned or used in the conduct of BHP's business,
software licenses (including the user licenses for the Diamond
system), all computerized databases and technical documentation,
procedure manuals and training manuals owned by or in the
possession of BHP (a list of which, to include all contracts,
leases and licenses, is set forth on Schedule 2.1(e) attached
hereto and incorporated herein by this reference).
As to computer and telecommunications hardware,
software and other equipment leases and licenses which would not
be terminable by FCNY, without penalty, upon no greater than
ninety (90) days notice (the "Non-Terminable Contracts"), FCNY
shall have the right, until the earlier of five (5) days
following the furnishing of Schedule 2.1(e) to FCNY or the
Closing (as defined below), to identify those Non-Terminable
Contracts that it is not willing to accept as part of the
Acquired Assets (such Non-Terminable Contracts so identified and
not accepted constituting Excluded Assets as defined in Section
2.2 hereof). The exclusion by FCNY of one or more Non-Terminable
Contracts from the Acquired Assets shall not affect the Purchase
Price payable to BHP hereunder, nor shall FCNY look to BHP for
substitute assets, contracts or services. Notwithstanding the
foregoing sentence, however, BHP shall use reasonable commercial
efforts to arrange with the vendors of any Non-Terminable
Contracts that FCNY declines to accept as part of the Acquired
Assets, to cooperate with FCNY during any transition periods fol
lowing the Closing so as not to prejudice FCNY by the
discontinuation of services and goods until substitute assets,
contracts or services may be put in place by FCNY.
(f) All intangible assets, including, without limitation,
the right to the name "Better Health Plan" and any trademarks,
copyrights, patents and similar rights (a list of which is set
forth on Schedule 2.1(f) attached hereto and incorporated herein
by this reference).
(g) All other personal, real and intangible property used
by BHP in the conduct of its business in the ordinary course.
SECTION 2.2 EXCLUDED ASSETS
(a) The Acquired Assets to be acquired by FCNY pursu
ant to this Agreement shall not include those assets set forth in
Schedule 2.2 attached hereto and incorporated herein by this
reference.
(b) All Medicaid receivables relating to periods
ending on or prior to the Closing date, as the same may be
adjusted from time to time after the Closing, will be payable
directly to a lock-box established by BHP. BHP shall have access
to all books and records acquired by FCNY to the extent needed by
BHP in connection with any disputes concerning payables or
receivables relating to periods ending on or prior to the Closing
date.
(c) In the event that, at any time subsequent to the
Closing, pursuant to an audit or other review of Medicaid billing
and payments, a determination is made by "DOH", the New York
State Department of Social Services ("DSS") or any other
regulatory agency or body, that an overpayment has been made to
BHP covering any time period prior to the Closing, repayment or
satisfaction of such overpayment shall be the sole responsibility
of BHP; conversely, if, upon such an audit, it is determined by
DOH, DSS or other applicable regulatory body that an underpayment
was made for any period prior to the Closing and that monies are
due to BHP, then BHP shall be solely entitled to retain such
monies and, if any such monies are paid to FCNY, FCNY shall
forthwith remit the same to BHP.
SECTION 2.3 ASSUMPTION OF LIABILITIES
(a) FCNY shall assume only those liabilities and
obligations (the "Assumed Liabilities") arising out of or
relating to the operation of the business represented by the
Acquired Assets from and after the Closing, including:
(i) All liabilities related to any healthcare
services provided by FCNY after the Closing, other than
liabilities for family planning services during the month of
August, 1997 (the sole responsibility for which is being retained
by BHP).
(ii) The rent and all other obligations due on a
going-forward basis following the Closing for the Amherst Office
Lease.
(iii) All liabilities arising under the future
performance of FCNY of all contracts included within the Acquired
Assets.
(iv) Ordinary severance obligations, in accordance
with BHP's usual and customary employment policies, for those
personnel employed by BHP whom FCNY does not accept under the
Transition Services Agreement described in Section 8.7 hereof,
other than those employees set forth on Schedule 2.3(a)(iv)
attached hereto, and ordinary severance obligations, in
accordance with BHP's usual and customary employment policies,
for those personnel who become subject to the Transition Services
Agreement, as and to the extent provided therein; provided,
however, that in no event shall FCNY be responsible for any "pay
to stay" bonuses that may have been promised to employees by BHP,
or payments under the divestiture bonus plan established by BHP.
(b) In no event shall FCNY assume, or be deemed to
have assumed, any liabilities other than the Assumed Liabilities.
In no event shall FCNY be deemed to assume liabilities of BHP
relating to:
(i) Any healthcare services provided prior to the
Closing.
(ii) Leases for BHP's offices in Syracuse, Albany,
Melville, White Plains and New York City, New York, except to the
extent that FCNY elects to assume any obligations with respect
thereto pursuant to Section 11.1 hereof.
(iii) Liabilities or obligations owed to
shareholders or former shareholders of BHP or COASTAL.
(iv) Inter-company indebtedness of any kind or
nature owed by BHP to COASTAL.
(v) Taxes, interest or penalties due to any
taxing authority or Regulatory Entities with respect to periods
ending on or before the Closing Date, other than transfer or
similar taxes imposed as a result of consummation of the
transaction contemplated hereby, the Responsibility for which
shall be shared as provided in Section 2.6 hereof.
(vi) Obligations to make payments under the
divestiture bonus plan established by BHP.
(vii) Any other liabilities whatsoever
relating to the operation of BHP or BHP's health plan through the
time of the Closing, including claims or litigation arising, or
based upon acts or omissions occurring or failing to occur, prior
to the Closing (irrespective of whether such claims were
threatened or asserted prior to, or subsequent to the Closing).
SECTION 2.4 CLOSING
(a) Subject to the conditions set forth in
Articles VI, VII and VIII of this Agreement, the consummation of
the transactions contemplated under this Agreement (referred to
herein as the "Closing") shall take place at the offices of
McDermott, Will & Emery, 50 Rockefeller Plaza, New York, New
York, on or about August 15, 1997 (the "Closing Date"), or at
such other time and place as shall be determined by mutual
consent of the parties hereto; provided, however, that the
Closing shall not take place unless all of the conditions set
forth in this Agreement have been either satisfied or waived by
the appropriate party hereto.
(b) Seller shall assign, transfer and convey to FCNY
at the Closing, good and marketable title to the Acquired Assets,
free and clear of all liens and encumbrances, restrictions or
rights of any kind (except for those set forth on Schedule 2.4(b)
attached).
SECTION 2.5 PURCHASE PRICE
(a) The purchase price for the Acquired Assets (the
"Purchase Price") shall be $7,750,000, subject to adjustment as
set forth herein, payable in immediately available funds at
Closing, if Closing occurs on or after September 30, 1997. If
Closing occurs prior to September 30, 1997, then fifty percent
(50%) of the Purchase Price shall be paid at Closing, and the
remaining fifty percent (50%) shall be paid on September 30,
1997, as evidenced by a promissory note to be issued by FCNY to
BHP at Closing in the form of Exhibit A hereto (the "Acquisition
Note"). FCNY represents that it shall have such funds available
in cash or cash equivalents.
(b) At Closing, FCNY shall pay to BHP, in addition to
the Purchase Price, an amount equal to all expenses that have
been prepaid by BHP in connection with the Acquired Assets and
that relate or are allocable to periods after the Closing Date
("Prepaid Expenses"), including, without limitation, rent,
utilities, reinsurance premiums, capitation payments to primary
care physicians in BHP's provider networks and salaries, benefits
and other payments owed to BHP employees for periods after such
date, as set forth in Schedule 2.5(b), to be attached hereto at
Closing. If the actual amount of any one or more items of
Prepaid Expenses is unavailable as of the Closing Date, then such
payment at Closing shall be made on the basis of an amount
reasonably estimated by the parties at Closing and the parties
shall thereafter recalculate and adjust (as among FCNY on the one
hand, and BHP and/or Coastal on the other hand) such items at
such times as the exact amounts for such items become available.
(c) If Closing occurs in August, 1997, then the
following shall apply:
(i) With respect to the August, 1997 capitation
payment expected to be received by BHP on or about August 23,
1997 from the State of New York (the "August Capitation
Payment"), BHP shall be entitled to retain unconditionally such
portion of the August Capitation Payment as is equal to a
fraction, the numerator of which shall be the number of days
elapsed in August, 1997 through and including the Closing Date
and the denominator of which shall be 31 (subject to adjustment
as provided below -- the "BHP Portion of the August Capitation
Payment"). FCNY shall be entitled to the remaining portion of
the August Capitation Payment (the "FCNY Portion of the August
Capitation Payment") which shall be treated as follows: the FCNY
Portion of the August Capitation Payment shall be divided into
two equal shares. The first share shall be retained by BHP and
credited against the portion of the Purchase Price due from FCNY
on September 30, 1997. As to the second share of the FCNY
Portion of the August Capitation Payment, (x) BHP shall be
permitted to withhold a sum equal to all Employment Costs as
defined in and payable under the Transition Services Agreement
for the period from the day after the Closing through September
6, 1997, which sum shall be applied as a payment under the
Transition Services Agreement and shall not be a credit against
the Purchase Price, and (y) the remainder shall be remitted
forthwith to FCNY by wire transfer of immediately available
funds. It is acknowledged that the amount of the August
Capitation Payment actually paid by the State of New York may
represent 90% of the amount that would otherwise be payable, by
reason of a withhold against the August Capitation Payment for
prior period adjustments. If such withhold is imposed, BHP shall
bear the responsibility therefor (and FCNY shall have no
responsibility in connection therewith). Accordingly, in such
event, the BHP Portion of the August Capitation Payment shall be
calculated as (I) the product of (x) the actual amount of the
August Capitation Payment and (y) 10/9ths (such product, the
"Gross Amount"), multiplied by (II) a fraction, the numerator of
which shall be the number of days elapsed in August, 1997 through
and including the Closing Date and the denominator of which shall
be 31, less (III) 10% of the Gross Amount. Notwithstanding
anything to the contrary contained herein, (i) all "birth kick"
payments for births to Enrollees occurring on or prior to the
Closing Date shall belong and be paid over to BHP, and all "birth
kick" payments for births occurring after the Closing Date shall
belong and be paid over to FCNY, and (ii) the Portion of the
August Capitation Payment representing payment for family
planning services (calculated by reference to the per member per
month amount, by actuarial class, for planning services) shall
belong solely to and be retained by BHP.
(ii) In the event that FCNY shall fail to pay the
remainder of the Purchase Price due on September 30, 1997 (less
any amounts credited against such portion of the Purchase Price),
and the Purchase Price is not paid in full by 5:00 pm on October
1, 1997 then such monies as may have been deposited into Escrow
by Seller pursuant to Section 2.8 hereof shall thereupon be
released to COASTAL or BHP, as they may direct, and Seller shall
be relieved of its obligation to place into escrow the portion of
the Escrow Deposit that would otherwise be due on October 1, 1997
in accordance with Section 2.8 hereof.
SECTION 2.6 TRANSFER TAXES. Each of FCNY, on the one
hand, COASTAL and BHP, on the other hand, shall equally share in
the payment of all transfer or similar taxes imposed as a result
of the consummation of the Transaction.
SECTION 2.7 POST-CLOSING PURCHASE PRICE ADJUSTMENT. The
Purchase Price shall be adjusted to reflect increases or
decreases in BHP enrollment through the date of Closing (the
"Purchase Price Adjuster"), in accordance with the following
formulae:
(a) In the event that the number of Acquired Enrollees
(as defined in and determined in accordance with subsection (b)
below) is less than 40,000, the Purchase Price shall be decreased
by the product of (x) $195 and (y) the amount by which 40,000
exceeds the number of Acquired Enrollees; in the event that the
number of Acquired Enrollees is greater than 41,000, the Purchase
Price shall be increased by the product of (x) $195 and (y) the
number of Acquired Enrollees over 41,000. If the foregoing shall
result in a downward adjustment to the Purchase Price, the amount
thereof (the "Downward Adjustment") shall be paid to FCNY as
follows: (i) the Downward Adjustment shall be released to FCNY
from the Escrow Deposit (as defined in Section 2.8) upon the
determination of the number of Acquired Enrollees; and (ii) if
the Downward Adjustment shall be greater than the Escrow Deposit,
the excess shall be paid to FCNY by COASTAL or BHP within thirty
(30) days following the determination of the number of Acquired
Enrollees. If the foregoing shall result in an upward adjustment
to the Purchase Price, the amount thereof (the "Upward
Adjustment") shall be paid to COASTAL or BHP, as they may direct,
by FCNY within thirty (30) days following the determination of
the number of Acquired Enrollees.
(b) As used herein, the term "Acquired Enrollees"
shall be equal to the sum of (i) the number of enrollees in the
prepaid health services plan comprised of the Acquired Assets, as
of the first day of the month following the month in which the
Closing occurs, and (ii) the number of persons who become
enrolled in FCNY's prepaid health services plan on or prior to
the first day of the fourth month following the month in which
the Closing occurs (the "Final Measurement Date"), pursuant to
membership applications dated before the Closing Date that were
procured by or on behalf of BHP, less the number of enrollees who
are disenrolled from FCNY's prepaid health services plan on or
prior to the Final Measurement Date, pursuant to notices of
disenrollment given to BHP prior to the Closing Date. For
purposes hereof, all determinations of enrollees as of a given
date shall be based on DOH's final certification of the number of
enrollees as of such date. The Parties agree that they shall use
all reasonable efforts to cause DOH enrollment audits and
enrollment certifications to be completed as expeditiously as
possible.
(c) Notwithstanding the foregoing, if at any time
prior to Closing the number of BHP enrollees shall fall below
35,000, then FCNY shall have the right (but not the obligation)
to terminate this Agreement upon notice to BHP not more than
fourteen (14) days after FCNY learns of such enrollment decrease.
SECTION 2.8 PURCHASE PRICE ADJUSTMENT DEPOSIT. The sum
of $775,000 shall be deposited (the "Escrow Deposit") by Seller
into escrow with Kalkines, Arky, Zall & Bernstein, LLP to cover a
downward price adjustment, if any. Payment of the Escrow Deposit
shall be as follows: $387,500 at Closing, and (provided that the
Purchase Price is paid in full by the time specified in Section
2.5(a) hereof) $387,500 on October 1, 1997. Such portion of the
Escrow Deposit as is equal to the Downward Adjustment, if any,
shall be released to FCNY upon determination of the number of
Acquired Enrollees, and any portion of the Escrow Deposit as may
exceed the Downward Adjustment shall be released to COASTAL or
BHP, as they may direct, upon such determination. Such Escrow
Deposit shall be made in accordance with the form of Escrow
Agreement attached hereto as Exhibit B and incorporated herein by
this reference (the "Escrow Agreement"). FCNY and Seller shall
execute the Escrow Agreement at Closing. Seller and FCNY shall
equally share any escrow costs incurred in connection with the
Escrow Deposit.
Section 2.9 Allocation of Purchase Price. The Purchase
Price shall be allocated among the Acquired Assets in such
reasonable manner as may be determined by FCNY in consultation
with BHP, and set forth on Schedule 2.9 to be attached hereto at
or prior to Closing. FCNY and BHP agree to be bound by such
allocation for purposes of Section 1060 of the Code and to report
the transaction contemplated herein for tax purposes in
accordance with such allocation. In furtherance of the
foregoing, FCNY and BHP agree that, to the extent required, they
will each execute and timely file Form 8594 reflecting such
allocation.
SECTION 2.10 ACTIONS TO BE TAKEN AT CLOSING. The
following actions shall occur at the Closing:
(a) Seller shall deliver to FCNY such bills of sale
and assignments (including, without limitation, assignments of
all assumed Contracts) in the form attached as Exhibit 2.10, and
such other deeds, consents, permits, certificates of occupancy,
releases, third-party estoppel certificates under leases or
subleases and all other instruments as may be reasonably
necessary to assign and transfer title to, and benefits of
ownership of, the Acquired Assets to FCNY.
(b) Seller shall deliver, or cause any appropriate
third party to deliver, such further certificates, consents and
other documents as FCNY and Seller mutually agree to be necessary
or desirable to carry out the terms of this Agreement;
(c) FCNY and BHP shall execute and deliver the Escrow
Agreement and BHP shall deliver the portion of the Escrow Deposit
due at Closing into escrow pursuant to Section 2.8 hereof, the
Escrow Agreement, and in accordance with the instructions of
FCNY.
(d) Seller shall deliver to FCNY the opinion of
Seller's Counsel described in Section 7.5 hereof.
(e) Seller shall deliver to FCNY the officer's
certificates described in Section 7.6 hereof.
(f) FCNY will cause the Purchase Price (or such
portion thereof as is required under Section 2.5 hereof) and the
Prepaid Expenses to be issued and paid to Seller on the Closing
Date by wire transfer of immediately available funds.
(g) FCNY shall execute and deliver to BHP the
Acquisition Note, with blanks appropriately filled in.
(h) FCNY shall deliver to BHP the opinion of FCNY's
counsel described in Section 8.5 hereof.
(i) FCNY shall deliver to BHP the Officer's
Certificate described in Section 8.6 hereof.
SECTION 2.11 INCOME AND OTHER TAXES
(a) All federal, state, or local income (including,
but not limited to, unrelated business income) or other tax,
assessment or penalty imposed or accrued for periods ending on or
prior to the Closing Date with respect to the Acquired Assets
shall be the responsibility of, and shall be borne and paid by,
Seller. In addition, Seller shall be solely responsible for and
shall pay all federal, state and local income taxes (including
without limitation unrelated business income taxes or other
similar taxes) imposed or accruing for periods ending on or prior
to the Closing Date with respect to Seller's business.
(b) The Parties will work together to structure the
Transaction in the most tax-efficient manner for BHP and COASTAL
(so long as FCNY is not materially disadvantaged thereby),
including mutual exploration of whether BHP may make a charitable
contribution of all or any portion of the Acquired Assets to an
affiliate of FCNY that has 501(c)(3) status, if any. Any tax
efficiencies that may be achieved for BHP in such manner shall
not affect the purchase price payable to BHP, and shall require
the approval of FCNY. BHP shall determine the manner in which
the purchase price shall be allocated among the Acquired Assets.
SECTION 2.12 PLAN REVENUE. Except as otherwise
specifically provided in Section 2.5 or elsewhere herein, all
plan revenue in respect of healthcare services rendered on or
prior to the closing date shall belong and be paid over to BHP,
and all plan revenue in respect of healthcare services rendered
after the Closing Date shall belong and be paid over to FCNY.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of COASTAL and BHP represent and warrant to FCNY that
the following representations and warranties are true as of the
date hereof and will be true as of the Closing:
SECTION 3.1 ORGANIZATION AND STANDING. Each of COASTAL
and BHP is a corporation duly organized, validly existing and in
good standing, under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority
to own, lease and operate its properties and assets, and to carry
on its business as presently conducted and as presently proposed
to be conducted in the future, and BHP possesses all licenses,
certificates, permits and other evidences of authority necessary
for the conduct of BHP's business ("BHP Business") in compliance
with applicable federal, state and local laws, rules, regulations
and ordinances, in the manner and locations currently operated by
BHP. Attached as Schedule 3.1 is a true, complete and correct
list of all material licenses, certificates, permits or other
evidences of authority of BHP. BHP is duly qualified to do
business and is in good standing in each jurisdiction where
either the ownership of its properties or the nature of its
business so requires. Seller has delivered to FCNY copies of the
certificate or articles of incorporation and bylaws of BHP,
copies of which are attached hereto as Exhibits 3.1(a) and
3.1(b). Such copies are true, correct and complete and contain
all amendments through the date of this Agreement.
SECTION 3.2 CORPORATE POWER; VALIDITY OF AGREEMENT.
COASTAL and BHP each have all requisite legal and corporate power
and authority to execute and deliver this Agreement and all
Ancillary Documents to which it is a party and to carry out and
perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and such Ancillary
Documents have been duly authorized by the Boards of Directors of
COASTAL and BHP. No other corporate proceedings on the part of
COASTAL or BHP are necessary to authorize this Agreement and such
Ancillary Documents and the transactions contemplated hereby and
thereby. This Agreement and such Ancillary Documents have been
or, in the case of such Ancillary Documents, will be at the Clos
ing Date, duly executed and delivered by COASTAL and/or BHP, as
applicable and constitute or, in the case of such Ancillary
Documents, will constitute at the Closing Date, legal, valid and
binding obligations of COASTAL and/or BHP, as applicable,
enforceable against COASTAL and/or BHP, as applicable in
accordance with their terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally.
SECTION 3.3 NO VIOLATION; CONSENTS AND APPROVALS.
Neither the execution and delivery of this Agreement and the
Ancillary Documents to which COASTAL or BHP is a party, nor the
consummation by COASTAL or BHP of the transactions contemplated
hereby, nor compliance by COASTAL or BHP with any of the
provisions hereof will (a) conflict with or result in a breach of
any provision of the respective articles or certificate of
incorporation or bylaws of COASTAL or BHP; (b) violate or
conflict with any order, writ, injunction, decree, statute, rule
or regulation of any court or Regulatory Entity applicable to
COASTAL or BHP; (c) result in a default (or an event which with
notice or lapse of time or both would become a default) or give
to any third party any right of termination, cancellation,
amendment or acceleration under, or result in the creation of a
lien on any of the assets of BHP pursuant to any Contract to
which COASTAL or BHP is a party or by which COASTAL or BHP or any
of their respective assets may be bound or affected; or (d) re
quire any consent, approval, authorization or permit of, or
filing with or notification to, any regulatory entity, except (i)
the approval of DOH, (ii) such filing or approval as may be re
quired by or with HCFA, and (iii) counties or political
subdivisions, and/or the Departments of Social Services thereof
as to which BHP has been issued a Certificate of Authority.
SECTION 3.4 MINUTE BOOKS. The minute books of BHP contain
a complete and accurate summary in all material respects of all
meetings of or actions by directors and stockholders of BHP since
the time of incorporation of BHP and reflect all transactions
referred to in such minutes accurately in all material respects.
SECTION 3.5 FINANCIAL STATEMENTS. BHP has delivered to
FCNY true and correct copies of the following: (a) the balance
sheet of BHP as of December 31, 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows
for the fiscal year then ended, all of which have been audited by
a firm of independent certified public accountants, and including
any and all related notes, supplementary information and exhibits
thereto, (b) the unaudited balance sheet of BHP as of March 31,
1997 and June 30, 1997 (the "Interim Financial Statements") and
the related unaudited consolidated statements of operations,
stockholders' equity and cash flows for the periods then ended,
including any and all related notes, supplementary information
and exhibits thereto, and (c) either (i) copies of any management
comment letters prepared by a firm of independent certified pub
lic accountants for BHP since its formation, and BHP's responses
thereto, or (ii) a certificate signed by the Chief Financial
Officer of BHP stating that no such comments have been received
since such date. The financial statements provided pursuant to
this Section 3.5 are sometimes referred to herein as the "BHP
Financial Statements." The BHP Financial Statements and the
Interim Financial Statements of Seller (provided to FCNY pursuant
to Section 3.5(b) hereof) (A) are complete and correct in all
respects and fairly present the information purported to be shown
therein, (B) are as applicable, in accordance with, and have been
derived from the books and records of BHP, (C) have been prepared
in conformity with generally accepted accounting principles
consistently applied throughout the periods indicated, except as
indicated therein, (D) reflect adequate reserves for claims
incurred but not yet reported, (E) fairly present the results of
operations and changes in stockholders' equity of BHP, for the
periods indicated, (F) fairly present the financial condition,
assets and liabilities of BHP, as of the dates thereof, (G) make
full and adequate provision for all liabilities of BHP, as of the
dates thereof, (H) reflect all accrued and unpaid benefits of
employees of BHP, including, without limitation, vacation and
holiday pay, sick leave and pension Liability and (I) do not
contain any statement that is false or misleading with respect to
any material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein not misleading.
SECTION 3.6 UNDISCLOSED LIABILITIES. Except as disclosed
on Schedule 3.6 and as and to the extent set forth on the audited
balance sheet of BHP as at December 31, 1996 (and including any
notes thereto), BHP has no Liabilities, other than Liabilities
(a) incurred since December 31, 1996 in the ordinary course of
business consistent with past practices or (b) not required to be
reflected on such balance sheets.
SECTION 3.7 ABSENSE OF CERTAIN CHANGES OF EVENTS
(a) Since December 31, 1996, BHP has conducted its
business in the ordinary and usual course, consistent with past
practice and so as to maintain and preserve intact its business
and assets, including, without limitation, its licenses,
contracts, the goodwill of customers, health care providers,
Regulatory Entities and others having relations with BHP.
(b) Except as set forth on Schedule 3.7(b), since
December 31, 1996, there has not occurred any event, condition,
circumstance, change or development (whether or not in the
ordinary course of business) that, individually or in the
aggregate, has had or, insofar as reasonably can be foreseen, in
the future would have a Material Adverse Effect on BHP taken as a
whole.
(c) Since December 31, 1996, BHP did not have any
material debts, liabilities or obligations, whether accrued,
absolute, contingent or otherwise and whether due or to become
due, including without limitation, any liabilities resulting from
failure to comply with any law applicable to BHP, or to the
conduct of its business, except (i) as set forth in or fully
provided for in the unaudited balance sheet of BHP as of June 30,
1997; (ii) for obligations and liabilities which are not required
to be set forth or provided for in such unaudited balance sheet
under generally accepted accounting principles, and which do not
materially or adversely affect the ability of Seller to
consummate the transactions contemplated by this Agreement or the
financial condition or results of operations of BHP; or (iii)
those disclosed in Schedule 3.7 (c).
SECTION 3.8 INSURANCE. Schedule 3.8(a) lists and provides
a summary description of all policies of property, theft, fire,
liability, workers' compensation, title, professional liability,
reinsurance, fidelity or any other insurance owned or maintained
by BHP or in which BHP is a named insured or with respect to
which BHP is paying or has paid any premiums, including a
description of any plan of self insurance maintained by BHP. All
such policies are of a type customary in businesses such as those
engaged in by BHP, and are and shall remain in full force and
effect at all times through and including the Closing Date, and
each of the insured parties thereunder is not in default with
respect to any provision contained in any such insurance policy,
nor in the payment of premiums, nor has it failed to give any
notice or present any claim thereunder in due and timely fashion.
Except as set forth on Schedule 3.8(b), there are no material
claims outstanding under any such policies. All insurance
policies of BHP shall provide protection for claims arising from
occurrences which took place prior to the Closing, irrespective
of when any claim for any such occurrence may be asserted. If
any BHP insurance policy is a "claims made" policy, BHP shall
procure "tail" coverage, at its sole cost and expense, and
provide evidence thereof to FCNY.
SECTION 3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC.
(a) Except as set forth on Schedule 3.9(a), and except
for personal property as to which BHP is a lessee, all the
personal property used in connection with the businesses of BHP
is owned by BHP, free and clear of all Liens other than Liens
imposed by operation of law for current taxes not yet due and
payable in the ordinary course of business which, in the
aggregate, and insofar as can be reasonably foreseen, will not in
the future have a Material Adverse Effect on BHP, taken as a
whole. All such personal property, and all personal property to
which BHP has any rights under capital leases, are under physical
custody of BHP.
(b) BHP owns no real property.
(c) Schedule 3.9(c) is a true, complete and correct
list and copy of each lease pursuant to which BHP leases real
property. Neither BHP or COASTAL has received any notice from
the other party to any such lease of the termination thereof and
BHP has good and valid title to the leasehold estates in all such
property, free and clear of any lien.
(d) None of the Liens set forth on Schedule 3.9(a) or
the leases set forth on Schedule 3.9(c) impairs or interferes
with the present or contemplated use or value of any of the
properties subject thereto or affected thereby or otherwise
impairs the business operations conducted by BHP.
(e) Except for defects or conditions which do not and
will not have a Material Adverse Effect on BHP, and except as
otherwise disclosed on Schedule 3.9(e), all property, machinery
and equipment owned or leased by BHP and used in the ordinary
course of its business are in good repair, well maintained and in
good and satisfactory operating condition. All such property,
machinery and equipment are in conformity with all applicable
laws, ordinances, regulations, orders and other requirements
currently in effect or scheduled to come into effect relating to
its ownership, use and operation.
SECTION 3.10 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS.
Except as set forth on Schedule 3.10, BHP is in compliance with
all laws, ordinances, rules, regulations and orders of all
Regulatory Entities which are applicable to the operation of its
business and for which the failure to comply would have a
Material Adverse Effect on BHP. Except as set forth on Schedule
3.10, BHP has all licenses, certificates, permits, and other
evidences of authority required in connection with the operation
of its business, and is in compliance with all undertakings,
terms, conditions, and provisions of such licenses, certificates,
permits, and other evidences of authority. Except as set forth
on Schedule 3.10, no notice has been issued and no investigation
or review is pending or, to the best knowledge of Seller, threat
ened by any Regulatory Entity (a) with respect to any alleged
violation by BHP of any law, ordinance, rule, regulation, order,
policy or guideline of any Regulatory Entity, or (b) with respect
to any alleged failure to have all licenses, certificates,
permits, and other evidences of authority required in connection
with the operation of the business of BHP. No proceeding is pend
ing or, to the best knowledge of BHP, threatened which would
result in a revocation or denial to renew any license,
certificate, permit, or other evidence of authority required in
connection with the operation of the business of BHP. There is
no existing law, rule, regulation or order and, to the best
knowledge of BHP, there is no proposed law, rule, regulation or
order, whether federal, state, local or professional, which would
prohibit or restrict BHP from, or otherwise adversely affect BHP
in, conducting its business in any jurisdiction in which it is
now conducting its business or in which it proposes to conduct
its business in the future. BHP is not in violation of any
provision of its articles or certificate of incorporation or
bylaws, nor is it in violation of any judgment, decree, order,
statute, rule or regulation applicable to it, and no event or
failure of performance has occurred which, with the passage of
time or the giving of notice or both, would constitute a
violation of such a provision. There is no provision in any of
the foregoing that is reasonably likely to have a Material
Adverse Effect.
SECTION 3.11 REGULATORY FILINGS
(a) Schedule 3.11(a) contains a true, correct and
complete list of all material filings and submissions since
January 1, 1996 made to, and all inspection, audit or compliance
survey reports received from, all Regulatory Entities having
jurisdiction over BHP, and neither Seller failed to make or was
late or delinquent in making a filing or submission required to
be made by it to or at the request of any Regulatory Entities
having jurisdiction over BHP. Except as set forth on Schedule
3.11(a), (i) each of the filings and submissions listed on
Schedule 3.11(a) was in substantial compliance with all
applicable laws, rules and regulations when made; (ii) none of
the filings or submissions listed on Schedule 3.11(a) when made
contained an untrue statement of a fact or omitted to state a
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 or necessary in order to provide
the applicable Regulatory Entity with adequate information as to
BHP; (iii) BHP has not received notice of, and, to the best
knowledge of BHP, no applicable Regulatory Entity has threatened
to issue notice of, any deficiencies (A) with respect to any
filings or submissions listed on Schedule 3.11(a) or (B) with
respect to the financial condition or conduct of business of BHP
under applicable regulatory standards; and (iv) BHP has not
submitted or is presently preparing or planning to prepare any
written response to any inspection, audit or compliance survey
report or to any notice of deficiency relating to the ownership,
operations or other activities of BHP.
(b) Schedule 3.11(b) contains a list of all filings
with and approvals of Regulatory Entities which Seller must make
or obtain prior to consummation of the transactions contemplated
by this Agreement.
(c) BHP shall cooperate with FCNY in connection with
the preparation of any filings or submissions for, and any
responses to inspection, audit or compliance survey reports
received from, any Regulatory Entities having jurisdiction over
BHP which may be due after Closing, but which relate to pre-
Closing time periods.
SECTION 3.12 CONTRACTS. All Contracts to which BHP is a
party, or by which any of its assets is bound, constitute legal,
valid and binding obligations of BHP and, to the best knowledge
of BHP, of the other parties thereto, are in full force and
effect on the date hereof, and neither Seller has violated any
provision of, or committed or failed to perform any act which,
with notice, lapse of time or both, would constitute a material
default under, any provision of any such Contract. To the best
knowledge of BHP, no other party to any such Contract is in
material default thereof except as set forth in Schedule 3.12.
Except as set forth in Schedule 3.12, BHP has performed its
obligations under all such Contracts and, to the best knowledge
of Seller, no party to any such Contract has grounds to terminate
such Contract for cause. Except as set forth on Schedule 3.12,
each such Contract was entered into with an unrelated third party
on an arm's-length basis in the ordinary course of business and
all such Contracts will continue to be binding in accordance with
their terms after consummation of the transactions contemplated
hereby. Except as set forth on Schedule 3.12, none of the
transactions contemplated by this Agreement or any Ancillary
Document creates in any party to any such Contract the right to
revise the terms of, to demand a penalty or premium, to terminate
or to accelerate any obligations of BHP or to otherwise declare
that such Contract has been breached. Except as set forth on
Schedule 3.12, each Contract between BHP and any agency or
political subdivision, any of its providers, members or other
group participants, is in substantial compliance with and does
not violate any provision of any applicable law, rule or
regulation.
SECTION 3.13 LITIGATION. Except as set forth on Schedule
3.13, there is no (a) action, suit, claim, proceeding or
investigation pending or, to the best knowledge of Seller, threat
ened, against BHP or relating to, involving or otherwise
affecting its business before any court, arbitrator, governmental
agency, commission or administrative or regulatory authority, or,
to the best knowledge of Seller, any such action, suit, claim,
proceeding or investigation pending or threatened against any
person who performs professional services for the Seller pur
suant to any Contract and which was brought or threatened by a
member or subscriber in any health benefit plan offered by BHP;
or (b) governmental, regulatory or professional inquiry pending
or, to the best knowledge of BHP, threatened against BHP (in
cluding, without limitation, any inquiry as to the qualification
of BHP to hold or receive any license, certificate, permit or
other evidence of authority), and there is no basis for any of
the foregoing as to BHP or as to any of its employees, officers,
directors, properties or assets or as to any person who performs
professional services for Seller pursuant to a Contract, which
would have a Material Adverse Effect on the financial condition
or operations of BHP. Except as set forth on Schedule 3.13,
neither Seller is subject to any continuing injunction, judgment,
or other order of any court, arbitrator or Regulatory Entity.
Except as set forth on Schedule 3.13, neither Seller is in
default under any order, writ, injunction, decree or demand of
any court, arbitrator or Regulatory Entity.
SECTION 3.14 INTERESTED PARTY TRANSACTIONS. Except as set
forth in Schedule 3.14 and except with respect to COASTAL's
status as the sole shareholder of BHP, no officer or director, no
shareholder holding in excess of five percent (5%) of the equity
of BHP and no Affiliate of any such person or entity, has, either
directly or indirectly, (a) an interest in any person or entity
which (i) furnishes or sells services or products that are
furnished or sold or are proposed to be furnished or sold by BHP,
or furnishes or sells products or services that compete with
products or services that are furnished or sold by or proposed to
be furnished or sold by BHP, or (ii) purchases from or sells or
furnishes to BHP, any goods or services, or (b) has a beneficial
interest in or is a party to any Contract to which BHP is a
party, or by which any of its assets is bound, or has any direct
or indirect interest in any property, real or personal, tangible
or intangible of BHP.
SECTION 3.15 TAXES. Except as set forth on Schedule 3.15,
each of COASTAL and BHP has accurately prepared and timely filed
with the appropriate taxing authorities all Tax Returns with
respect to BHP and reports required to be filed by it with
respect to BHP under all applicable laws or regulations,
including, but not limited to, payroll and other employee taxes
which are required to be filed, and has paid, or made provision
for the payment of, all Taxes with respect to BHP which have or
may have become due pursuant to such returns or reports or
pursuant to any assessment which has been received by it or which
are otherwise due from it. Except as set forth on Schedule 3.15,
the provisions for Taxes reflected in the Seller Financial
Statements are, or will be, adequate for all Taxes with respect
to BHP for the relevant period and all years and periods prior
thereto and for which COASTAL or BHP may have been liable on such
date. Except as set forth on Schedule 3.15, BHP is not a party
to any pending Audit, nor, to the best knowledge of BHP, is any
such Audit threatened by any governmental authority for any
assessment or collection of Taxes, and there is no basis for any
assessment or collection of Taxes, or for any deficiency notice,
thirty (30) day letter or similar notice with respect to Taxes.
There are no Tax Liens on any of the properties or assets of BHP,
other than Liens for Taxes not yet due. Neither COASTAL nor BHP
has waived any law or regulation fixing, or consented to the
extension of, any period of time for assessment of any Taxes with
respect to BHP which waiver or consent is currently in effect.
SECTION 3.16 EMPLOYEES
(a) Except as disclosed on Schedule 3.16(a) or as
required hereunder or under any Ancillary Document and as
approved by Seller, neither BHP, nor any ERISA Affiliate, which
together with BHP would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, has any Plans with or for the
benefit of any officer, director, employee, agent or other
person, contract with any officer or employee or any other con
sultant or person which is not terminable by BHP at will without
liability. A copy of each Plan as currently in effect and, if
applicable, the most recent annual report, actuarial report,
summary plan description, trust agreement and determination
letter for each Plan will be delivered to FCNY within ten (10)
days after execution of this Agreement, or five (5) days prior to
Closing, whichever shall first occur.
(b) None of the Plans is a multi-employer Plan. Each
of the Plans that is subject to ERISA is in substantial
compliance with ERISA; each of the Plans intended to be "quali
fied" within the meaning of Section 401(a) of the Code is so
qualified; no Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code; neither
Seller, nor an ERISA Affiliate has incurred, directly or
indirectly, any liability (including any contingent liability) to
or on account of a Plan pursuant to Title IV of ERISA; no
proceedings have been instituted to terminate any Plan that is
subject to Title IV of ERISA; no "reportable event," as such term
is defined in Section 4043(b) of ERISA, has occurred with respect
to any Plan; and no condition exists that presents a material
risk to Seller, or an ERISA Affiliate of incurring a liability to
or on account of a Plan pursuant to Title IV of ERISA.
(c) The current value of the assets of each of the
Plans that is subject to Title IV of ERISA exceeds the present
value of the accrued benefits under each such Plan, taking into
account projected salary increases and based upon the actuarial
assumptions used for funding purposes in the most recent
actuarial report prepared for such Plans; and all contributions
or other amounts payable by BHP as of the Closing Date with
respect to each Plan in respect of current or prior plan years
have been or will be (prior to the Closing Date) either paid or
accrued on the Seller Financial Statements. There are no pending
or, to the best knowledge of BHP, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of
or against any of the Plans or any trust related thereto.
(d) Except for employment, consulting and severance
agreements set forth on Schedule 3.16(d), no Plan provides
benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former
employees for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits under
any "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of Seller, or the ERISA
Affiliates or (iv) benefits the full cost of which is borne by
the current or former employee (or his beneficiary).
(e) Neither Seller, nor any of their respective
agents, representatives or employees, in connection with its
business, has committed any unfair labor practice as defined in
the National Labor Relations Act of 1947, as amended, and there
is not now pending nor, to the best knowledge of Seller,
threatened any unfair labor practice charge, complaint, labor
disturbance or other controversy, administrative action or
litigation respecting employment against BHP. BHP has complied
with all applicable federal, state and local equal employment
opportunity and other laws related to employment, including but
not limited to any and all federal, state and local rules,
regulations and laws respecting employment and employment
practices, terms and conditions of employment, the sponsorship,
maintenance, administration and operation of (or the partici
pation of its employees in) employee benefit plans and
arrangements, and occupational safety and health, and neither
Seller is engaged in any violation of any law, rule or regulation
related to employment, including any unfair labor practice or act
of employment discrimination. Except as set forth on Schedule
3.16(e), neither Seller is a party to any collective bargaining
agreement with any labor union or organization representing or
claiming to represent any of its employees, nor are any of the
employees of COASTAL or BHP represented by any labor union or
organization, nor are any union organizing or election activities
involving any employees of COASTAL or BHP in progress or, to the
best knowledge of Seller, threatened.
SECTION 3.17 ENVIRONMENTAL MATTERS
(a) Except as set forth on Schedule 3.17(a), BHP is in
substantial compliance with all applicable environmental and
health and safety laws, regulations, ordinances and requirements.
(b) Schedules 3.17(b) includes all environmental,
health and safety licenses, permits, approvals or other evidences
of authority or other entitlements necessary for, and all
submissions, filings and reports regarding, BHP and their
respective operations. Except as set forth on Schedule 3.17(b),
all such permits, licenses, authorizations or other entitlements
are in good standing and BHP is in substantial compliance with
all terms and conditions of such permits, licenses, etc.
(c) Except as set forth on Schedule 3.17(c), there has
been no past or present release, spill, emission, leaking,
disposal, discharge, leaching or migration into the indoor or
outdoor environment, or any report, notice or filing regarding
the same, of a waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, extremely hazardous
waste, medical waste, restricted waste, special waste, petroleum
or petroleum-derived substance or waste, asbestos or any
substance or waste (together, "Hazardous Substances"), the
presence of which has required or will require remedial action on
the part of BHP. Except as set forth on Schedule 3.17(c), there
is no claim, action, cause of action, investigation or notice
(written or oral) by any person or entity alleging potential lia
bility (including, without limitation, potential liability for
investigatory costs, cleanup costs, response costs, damages,
injuries or penalties) pending or, to the best knowledge of BHP,
threatened against BHP, or any person or entity for whom BHP is
or may be liable, regarding the presence or release of any
Hazardous Substances.
SECTION 3.18 BOOKS AND RECORDS. The books and records of
BHP contain a complete and accurate summary in all material
respects of the business and operations of BHP, have been
maintained in accordance with good business practices and are
accurately reflected in the Seller Financial Statements. Neither
Seller has engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank
accounts and funds which have been and are reflected in its books
and records in the ordinary course.
SECTION 3.19 PROPRIETARY RIGHTS. Except as set forth on
Schedule 3.19, BHP owns or possesses adequate licenses or other
rights to use all Proprietary Rights and has made all applica
tions and licenses necessary therefor. All Proprietary Rights
are listed and described on Schedule 3.19. Neither the validity
of the Proprietary Rights nor the title thereto or use thereof by
BHP is being questioned in any pending or, to the best knowledge
of BHP, threatened litigation and the conduct of the business of
Seller as now or heretofore conducted, does not conflict with
licenses, copyrights, uncopyrighted works, trademarks, service
marks, trade names, trade name rights, patents, patent rights,
unpatented inventions or trade secrets of others. To the best
knowledge of Seller, and except as set forth on Schedule 3.19
there is no infringement by others of any of the Proprietary
Rights.
SECTION 3.20 FRAUD AND ABUSE. BHP has not engaged in any
activities which are prohibited under Federal Medicare and
Medicaid statutes, 42 U.S.C. 1320a-7b, or the regulations
promulgated pursuant to such statutes or related state or local
statutes or regulations or which are prohibited by rules of
professional conduct or which otherwise could constitute fraud,
including but not limited to the following: (a) making or causing
to be made a false statement or representation of a material fact
in any application for any benefit or payment, or any other
document, including, but not limited to, BHP enrollment
applications; (b) making or causing to be made any false
statement or representation of a material fact for use in deter
mining rights to any benefit or payment; (c) failing to disclose
knowledge by a claimant of the occurrence of any event affecting
the initial or continued right to any benefit or payment on its
behalf or on behalf of another, with intent to secure such
benefit or payment fraudulently; (d) soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or
offering to pay such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made
in whole or in part by Medicare or Medicaid, or (ii) in return
for purchasing, leasing, or ordering or arranging for or
recommending purchasing, leasing, or ordering any good, facility,
service, or item for which payment may be made in whole or in
part by Medicare or Medicaid.
SECTION 3.21 RESERVES
(a) The reserves for claims incurred but not reported
and the reserves for claims reported but not paid with respect to
BHP and contained in the Seller Financial Statements make
sufficient provision for such Liabilities, taking into account
any relevant changes in claim backlogs or claim aging due to
systems changes or to cash flow considerations.
(b) In order to facilitate the payment by BHP of
provider claims related to healthcare services rendered prior to
Closing but not yet paid by BHP, including those claims which may
not be submitted to BHP until after Closing ("BHP Unpaid
Claims"), FCNY will make its claims processing system available
to BHP for a period of up to 180 days following the Closing, and
will also designate an FCNY employee who will assist BHP in the
claims payment process during such period, at a cost of $3,000
per month. In connection with the BHP Unpaid Claims, COASTAL
and/or BHP shall establish a segregated fund with a financial
institution located in New York State, in an amount equal to the
greater of (x) the amount of the BHP Unpaid Claims as reflected
on BHP's Closing date balance sheet, and (y) the amount required
by any federal or New York State regulatory authority to be set
aside for the purpose of satisfying BHP Unpaid Claims. Such
segregated fund shall be used only for the purpose of paying BHP
Unpaid Claims that COASTAL/BHP have reviewed and determined to be
valid. Monies remaining in such segregated fund, if any, shall
be released to COASTAL/BHP only upon FCNY's acknowledgment that
all valid BHP Unpaid Claims submitted within 180 days of the
Closing have been satisfied, as evidenced by a provider release
given to BHP, or such other documentation as may be considered
acceptable by FCNY in its reasonable judgment. If there shall
arise any significant dispute with a provider or other obligee of
a BHP Unpaid Claim regarding the settlement of such claim, BHP
shall give FCNY prompt written notice of such dispute, and shall
involve FCNY in the settlement process of such dispute, with the
ultimate resolution thereof to require the approval of FCNY,
which approval shall not be unreasonably withheld. FCNY agrees
that it shall not make any entries to BHP files affecting pre-
closing information in the BHP claims processing system without
the prior approval of BHP, which approval shall not be
unreasonably withheld.
SECTION 3.22 ACTIVITIES OF PROVIDERS. Except as set forth
on Schedule 3.22, to the best knowledge of Seller:
(a) No contracting provider of medical services to BHP
has expressed an intent in writing (whether or not legally
binding) to disenroll as a provider to Seller.
(b) No physicians or Independent Practice Associations
which contract with BHP have expressed an intent in writing
(whether or not legally binding) to terminate their respective
Contracts with BHP.
(c) No providers of hospital or ancillary services to
Seller have expressed an intent in writing (whether or not
legally binding) to terminate their respective Contracts with
BHP.
SECTION 3.23 CONTRACTS ENTERED INTO IN ORDINARY COURSE OF
BUSINESS. All Contracts to which BHP is a party were entered
into by BHP in the ordinary course of business; if the execution
of any Contract was not in the ordinary course of BHP's business,
then such Contract was properly approved by resolution of the
Board of Directors of BHP.
SECTION 3.24 COMPLAINTS AND GRIEVANCES. Except as listed
on Schedule 3.24, there are no claims pending against BHP for
utilization review, member complaints made through Regulatory
Entities, contractual disputes with providers, claims by
providers or patients regarding payment, or claims by expelled or
disciplined providers.
SECTION 3.25 DISCLOSURE. No representation or warranty by
Seller contained in this Agreement, including but not limited to
all Schedules attached hereto, the Ancillary Documents and each
certificate or other document furnished or to be furnished by
Seller to FCNY or its representatives in connection herewith or
therewith or pursuant hereto or thereto, 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
to fully and fairly provide the information required to be
provided herein or therein. At or prior to ten (10) days after
the execution of this Agreement or five (5) days prior to
Closing, whichever shall first occur, Seller shall have disclosed
to FCNY in writing all material adverse facts with respect to BHP
known to it relating to the same.
SECTION 3.26 BROKERS AND FINDERS. All negotiations on
behalf of Seller with respect to this Agreement and the
transactions contemplated hereby have been transacted directly be
tween Seller and FCNY without the intervention of any broker,
finder or other financial advisor on behalf of Seller, except
that COASTAL and BHP have retained Advest, Inc. as their
financial advisor. COASTAL and BHP have the sole responsibility
and liability to pay the fees and expenses of their financial
advisor. Neither Seller nor any officer thereof knows of any
other broker or finder acting on behalf of Seller having any con
nection with this Agreement and the transactions contemplated
hereby nor has Seller engaged, consented to or authorized any
broker, investment banker or third party other than Advest, Inc.
to act on its behalf, directly or indirectly, as a broker or
finder in connection with the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FCNY
FCNY represents and warrants to Seller that the following is
true as of the date hereof and will be true as of Closing:
SECTION 4.1 ORGANIZATION AND STANDING. FCNY is a New York
not-for-profit corporation duly organized, validly existing and
in good standing under the laws of the State of New York.
SECTION 4.2 CORPORATE POWER; VALIDITY OF AGREEMENT. FCNY
has all requisite legal and corporate power and authority to
execute and deliver this Agreement and all Ancillary Documents to
which it is a party and to carry out and perform its obligations
hereunder and thereunder. The execution, delivery and
performance of this Agreement and such Ancillary Documents have
been duly authorized by the Board of Directors of FCNY. No other
corporate proceedings on the part of FCNY are necessary to
authorize this Agreement and such Ancillary Documents and the
transactions contemplated hereby and thereby. This Agreement and
such Ancillary Documents have been or, in the case of such
Ancillary Documents, will be at the Closing Date, duly executed
and delivered by FCNY and constitute or, in the case of such
Ancillary Documents, will constitute at the Closing Date legal,
valid and binding obligations of FCNY, enforceable against FCNY
in accordance with their terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally.
SECTION 4.3 BROKERS. Other than any brokers used in
connection with FCNY's arrangement of financing in connection
with this Agreement, if any, FCNY has not entered into any
agreement or incurred any obligation, directly or indirectly, for
the payment of any broker's or finder's fees or commission.
SECTION 4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL
AUTHORITIES. To the best knowledge of FCNY, no consent, order,
approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority is
required in connection with the execution, delivery of this
Agreement by FCNY or the consummation by FCNY of the transactions
contemplated hereby, except (i) the approval of DOH, and (ii)
such filing or approval as may be required by or with HCFA.
SECTION 4.5 NO VIOLATION; CONSENTS AND APPROVALS.
Neither the execution and delivery of this Agreement and the
Ancillary Documents to which FCNY is a party, nor the
consummation by FCNY of the transactions contemplated hereby, nor
compliance by FCNY with any of the provisions hereof will (a)
conflict with or result in a breach of any provision of the
certificate of incorporation or Bylaws of FCNY; (b) violate or
conflict with any order, writ, injunction, decree, statute, rule
or regulation of any court or Regulatory Entity applicable to
FCNY; or (c) result in a default (or an event which with notice
or lapse of time or both would become a default) or give to any
third party any right of termination, cancellation, amendment or
acceleration under, or result in the creation of a lien on any of
the assets of FCNY pursuant to any Contract to which FCNY is a
party or by which it or its assets may be bound or affected.
SECTION 4.6 FINANCIAL STATEMENTS. To the best knowledge
of FCNY, all financial information furnished to Seller, or to be
furnished to Seller, by FCNY in accordance with this Agreement,
is true and accurate in all material respects.
SECTION 4.7 SOLVENCY. FCNY is not in the hands of a
receiver, nor has it committed an act of bankruptcy, nor has an
order for relief been entered with respect to FCNY. FCNY is not
insolvent and will not be rendered insolvent after giving effect
to the transactions contemplated hereby.
SECTION 4.8 COMPLIANCE WITH LAW. FCNY has no actual
knowledge that FCNY's conduct has been or is out of conformity
with (a) any material federal, state or local governmental laws,
regulations or orders applicable to FCNY, (b) any requirements
set forth in necessary licenses, permits, provider contracts and
other agreements or authorizations necessary to conduct FCNY's
business or (c) any applicable federal, state and local laws,
regulations, rules, orders or other requirements respecting
employment and wages and hours, except for any FCNY practice or
event of non-compliance under this Section 4.8 that would not
have a Material Adverse Effect on the condition (financial or
otherwise), business or operation of FCNY.
SECTION 4.9 DISCLOSURE. No representation or warranty
by FCNY set forth in this Agreement or in connection with this
Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact
required to make the statements herein or therein not misleading.
ARTICLE V
CONDUCT OF BHP'S BUSINESS PENDING CLOSING
SECTION 5.1 ORDINARY COURSE OF BUSINESS. During the
period from the date of this Agreement to the Closing Date, BHP
shall conduct its business only in the ordinary and usual course,
consistent with past practices. Without limiting the generality
of the foregoing, BHP shall preserve the composition of its
provider network organization, keep available the services of its
officers and employees (subject to such terminations for cause as
BHP may deem necessary in its sole discretion), and maintain
satisfactory relationships with Regulatory Entities, providers,
payors, members, licensors, suppliers, distributors, customers,
employees, contractors and others having business relationships
with it.
SECTION 5.2 INTERIM OPERATIONS OF BHP. Without limiting
the generality of Section 5.1, prior to the earlier of the
Closing Date or the termination of this Agreement, and except as
otherwise required by this Agreement or any of the Ancillary
Documents, BHP shall not, without the prior written consent of
FCNY:
(a) Amend its articles or certificate of incorporation
or bylaws;
(b) Prepay its expenses or obligations except in
accordance with the terms of applicable Contracts and in the
ordinary course of business.
(c) Increase the compensation or benefits for any of
its employees, consultants or agents.
(d) Offer employment to or employ any person not
currently employed by it other than on the basis of
employment-at-will in the ordinary course of business and
consistent with past practice, or enter into any written
employment contract or any collective bargaining agreement.
(e) Sell, dispose of or encumber any amount of its
capital assets, or enter into, renew or extend any lease of
capital equipment or real estate.
(f) Create, amend, extend, renew, assume, incur or
guarantee any indebtedness.
(g) Enter into any Contract or engage in any
transaction which is not in the usual and ordinary course of its
business or which is inconsistent with its past practices.
(h) Amend or terminate any Contract listed on any of
the Schedules annexed hereto pursuant to Sections 2.1 and 2.3
hereof, to which it is a party or by which its assets are bound,
or enter into any Contract of a type that would be listed thereon
had it existed on the date hereof.
(i) Amend, supplement or otherwise alter, in any
material respect, any Contracts or relationships with providers,
except as required hereunder or pursuant to any of the Ancillary
Documents.
(j) Commence, compromise, settle, waive, approve or
permit the settlement of, any litigation, proceeding, hearing,
arbitration or other dispute or claim involving amounts in
controversy of more than $25,000 in the aggregate, other than for
fair consideration in the ordinary course of business consistent
with past practice.
(k) Enter into any Contract or engage in any
transaction with any of its Affiliates, shareholders, directors,
officers or employees.
(l) Make any change in its accounting practices.
(m) Fail to keep in full force and effect insurance
covering it and its properties and assets, comparable in amount
and scope of coverage to that which is now maintained.
(n) Enter into any Contract that would cause any of
the representations and warranties contained in Article III to be
untrue in any material respect.
(o) Enter into any Contract or commitment to do any of
the things described in subsections (a) through (o) of this
Section 5.2.
SECTION 5.3 BHP WORKFORCE. It is the intention of FCNY
to retain as much of the BHP workforce as, in FCNY's sole
judgment, is practicable. BHP, therefore, shall take no action
to diminish its workforce by means of layoffs or other non-cause
related employee terminations.
ARTICLE VI
PRE-CLOSING COVENANTS
SECTION 6.1 FULL ACCESS BY FCNY
(a) From and after the date of this Agreement, Seller
shall afford FCNY and its accountants, counsel and other
representatives full access during normal business hours to such
of the properties, books, Contracts, records and employees of BHP
as FCNY may determine to be material to its evaluation of the
transaction contemplated hereby, provided that same does not
unreasonably interfere with the conduct of BHP's business and,
during such period, shall furnish to FCNY all information
concerning the business, properties and personnel of BHP as FCNY
may reasonably request.
(b) Seller shall use its best efforts to cause the
independent auditors of each of COASTAL and BHP to make available
copies of all such documents and information with respect to the
business and properties of BHP as representatives of FCNY may
from time to time reasonably request, including, without
limitation, the working papers used to prepare the Seller
Financial Statements and all Tax Returns filed with respect to
BHP. During the period from the execution of this Agreement to
the Closing Date, Seller shall confer on a regular and frequent
basis with one or more representatives of FCNY to report material
operational matters and to report the general status of ongoing
operations.
(c) From the date hereof to the Closing Date, Seller
shall deliver to FCNY Interim Financial Statements of Seller as
soon as they are available but in any event within twenty-five
(25) days of the end of each month. Seller shall allow FCNY, its
affiliates and their representatives to contact and communicate
with physicians who are parties to any Contract with the Seller
(either individually or as members of an Independent Practice
Association), members, regulators, hospitals, physicians and
other professionals, it being understood that any such contacts
and communications shall be conducted in a manner so as not to
unreasonably interfere with the business of operations of the
Seller, and BHP shall have the right to give its prior approval
to the nature of each such contact or communication, which
approval shall not be unreasonably withheld.
SECTION 6.2 NOTICE OF CHANGES. Between the date hereof
and the Closing Date, each Party hereto, as the case may be,
shall promptly supply, supplement or amend the Schedules attached
hereto with respect to any matter arising after the date hereof
that, if existing or occurring at the date hereof, would have
been required to be set forth or described in such Schedules.
If, between the date hereof and the Closing Date, any Regulatory
Entity shall commence any examination, review, investigation,
action, suit or proceeding against any party with respect to this
Agreement, each Party shall give prompt notice thereof to the
others and shall keep the other Parties informed as to the status
thereof.
SECTION 6.3 CERTAIN DEFAULTS. Each Party hereto shall
give prompt notice to the other Party of any written notice of
default received by it subsequent to the date of this Agreement
and prior to the Closing Date under any Contract to which it is a
party or by which any of its assets is bound.
SECTION 6.4 CONSENTS. Seller shall obtain before the
Closing Date all licenses, certificates, permits, consents,
evidences of authority and other approvals required to be
obtained from any Regulatory Entity, political subdivision or
other person in connection with consummation of the transactions
contemplated by this Agreement, including, without limitation,
all consents necessary from Regulatory Entities (such as, but not
limited to, DOH or HCFA) or under Contracts (including Contracts
with the Department of Social Services in those counties as to
which BHP has a Certificate of Authority) so that the same will
continue in effect after the Closing Date.
SECTION 6.5 NOTICE OF BREACH. Each Party shall
immediately give notice to the other of the occurrence of any
event, or the failure of any event to occur, that results in a
breach of any representation or warranty contained herein by such
Party or a failure by said party to comply with any covenant,
condition or agreement contained herein.
SECTION 6.6 CONDUCT. Except as provided by this
Agreement, as may be required by law or as the other party hereto
may otherwise consent in writing, no Party hereto will enter into
any transaction, take any action or permit any event to occur
which would result in any of the representations and warranties
contained in this Agreement or in any Ancillary Document deliv
ered by or on behalf of such party or any of their
representatives in connection with this Agreement or the
transactions contemplated hereby not being true and correct
immediately after such transaction has been entered into or
consummated, such action has been taken or such event has
occurred.
SECTION 6.7 FURTHER ASSURANCES. Subject to the terms and
conditions of this Agreement, each of the Parties shall use all
reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things, and execute and
deliver or cause to be executed and delivered, as the case may
be, all such further assignments, endorsements and other
documents as such other party may reasonably request in order to
consummate the transactions contemplated by this Agreement.
SECTION 6.8 FILINGS. Seller shall make or cause to be
made all such filings and submissions as may be required of
Seller under applicable laws, rules and regulations for the con
summation of the transactions contemplated by this Agreement.
FCNY shall make or cause to be made all such other filings and
submissions as may be required of FCNY under applicable laws,
rules and regulations for consummation of the transactions contem
plated by this Agreement. The Parties hereto shall coordinate
and cooperate with one another in exchanging such information and
reasonable assistance as may be requested by either of them in
connection with the foregoing.
SECTION 6.9 CONFIDENTIAL INFORMATION
(a) Each of the Parties hereto shall, and shall cause
their respective representatives to, hold in confidence all data
and information obtained with respect to the other Party, or the
business of the other Party, from any representative, officer,
director or employee of such party, or from any books or records
of such party in connection with this Agreement and the Ancillary
Documents or the transactions contemplated by this Agreement and
the Ancillary Documents, and shall not use such data and
information or disclose the same to others except for the
transactions contemplated hereby. Confidential information shall
not include information in the public domain, information
published or disseminated by the Party generating such
information without restriction to other persons, information
which is independently developed by the other Party or
information identified in writing by the furnishing Party as not
being confidential.
(b) If this Agreement is terminated pursuant to
Article IX, all written data and information obtained by either
of the Parties hereto from the other Party, and all copies
thereof, shall be returned promptly to the relevant Party and
each Party agrees to keep confidential and not use or exploit for
any purpose whatsoever any information obtained by it unless and
until such information is ascertainable from public or published
information or trade sources or is otherwise a matter of public
knowledge.
SECTION 6.10 SUBSEQUENT DELIVERIES BY SELLER. Within one
(1) week from the date of this Agreement or five (5) days prior
to the Closing, whichever shall first occur, Seller shall deliver
to FCNY the following:
(a) A true, correct and complete list and summary
description of all Contracts to which BHP is a party or by which
any of its assets may be bound.
(b) True, correct and complete copies of all Tax
Returns and reports and all schedules and all other supporting
documents thereto filed by or on behalf of BHP with all
appropriate taxing authorities, including all communications
relating thereto, for all taxable years for which the statute of
limitations has not expired.
(c) A true, correct and complete list of all employees
of BHP as of the date hereof, together with their titles or
positions and the annualized amounts of base pay or compensation
being paid to, or accrued for, each employee (including amounts
accrued under vacation, sick pay, severance and other benefit
arrangements).
(d) A true, correct and complete list (in magnetic
tape or other similar form acceptable to FCNY) of all persons who
are members of BHP as of June 30, 1997, together with copies of
its standard provider Contracts with hospitals, physicians, IPAs
and physician groups, and copies of Contracts with hospitals,
IPAs, physician groups and physicians which differ from the
standard provider Contracts.
(e) A true, correct and complete copy of BHP's "appeal
log" or other listing of claims, complaints and disputes as of
the date of the execution of this Agreement, and all files and
records relating to any claims, complaints and disputes referred
to in Section 3.24 of this Agreement.
(f) A true, correct and complete summary of the claims
history under all policies listed on Schedule 3.8(a) for BHP.
(g) All Schedules contemplated by this Agreement but
not attached hereto upon execution.
ARTICLE VII
CONDITIONS TO FCNY'S OBLIGATIONS
Each and every obligation of FCNY under this Agreement to be
performed on or before the Closing Date shall be subject to the
satisfaction, on or before the Closing Date, of each of the
following conditions, unless otherwise waived in writing:
SECTION 7.1 SPECIFIC CONDITIONS. FCNY's obligations
under this Agreement are specifically conditioned on the
following:
(a) Completion by FCNY of its due diligence
investigation, satisfactory to FCNY in its sole discretion,
relating to the Acquired Assets, the Assumed Liabilities and the
operations and profitability of BHP.
(b) Approval of the Board of Directors of FCNY of this
Agreement and of the transactions contemplated by this Agreement.
(c) FCNY being satisfied, in its sole discretion, that
upon consummation of the transaction contemplated in this
Agreement, it would succeed to BHP's existing Certificates of
Authority for all counties in which BHP currently conducts
business or is licensed to do so, or receive new Certificates of
authority for all such counties.
(d) Relief (in form and substance satisfactory to
FCNY) from the requirement that FCNY provide family planning
services to current BHP enrollees from and after the consummation
of the Transaction.
(e) Receipt from BHP of assignments and/or consents,
where necessary (in form and substance satisfactory to FCNY) from
any state or local social services agency or any political
subdivision, and from all providers that make up its networks to
the assignment of their Contracts to FCNY. For provider
contracts in which assignment is automatic upon notice from BHP
to the provider, BHP shall give such notice and provide copies of
the notification letters to FCNY.
SECTION 7.2 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties contained in this Agreement and in
all certificates and other documents delivered by Seller to FCNY
pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be in, all material respects, true and
complete as of the date when made, and at and as of the Closing
as though such representations and warranties were made at and as
of such date, except for changes permitted by the terms of this
Agreement.
SECTION 7.3 PERFORMANCE. Seller shall have performed and
complied with all material agreements, obligations and conditions
required by this Agreement to be performed or complied with by
Seller on or prior to the Closing Date.
SECTION 7.4 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No
suit, action, investigation, inquiry or other proceeding any
governmental body or other person or legal or administrative
proceeding shall have been instituted or threatened against
COASTAL or BHP that (a) questions the validity or legality of the
transactions contemplated by this Agreement, or (b) might affect
the right of COASTAL or BHP to convey the Acquired Assets to the
FCNY.
SECTION 7.5 OPINION OF SELLER'S COUNSEL. BHP shall have
delivered to FCNY an opinion from legal counsel to Seller
("Seller's Counsel"), dated the Closing Date, in form and
substance satisfactory to FCNY and to FCNY's Counsel (as defined
below), to the effect that:
(a) BHP is a New York corporation, duly organized,
validly existing and in good standing under the laws of the State
of New York.
(b) BHP the requisite power and authority to own its
properties and conduct its business as now being conducted, and
to enter into this Agreement and to consummate the transactions
contemplated hereby.
(c) This Agreement, and all other agreements referred
to herein or contemplated hereby, have been duly authorized by
all necessary action, have been validly executed and delivered,
and constitute the legal, valid and binding obligations of BHP,
enforceable against in accordance with their respective terms,
except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of
creditors generally.
SECTION 7.6 OFFICER'S CERTIFICATE. Seller shall have
furnished FCNY with a certificate of COASTAL, signed by COASTAL's
Chief Executive Officer and dated as of the Closing Date, and a
certificate of BHP, signed by BHP's Chief Executive Officer and
dated as of the Closing Date, certifying:
(a) That the representations and warranties of COASTAL
and BHP, as applicable, contained in this Agreement are true and
complete, in all material respects, as of the Effective Date and
as of the Closing Date;
(b) That COASTAL and BHP, as applicable, have
performed and complied with all agreements, obligations and
conditions required by this Agreement to be performed or complied
with by Seller on or prior to the Closing Date; and
(c) As to the validity of an attached copy of
resolutions of COASTAL's and BHP's applicable Board of Directors
approving this Agreement and the transactions described herein.
SECTION 7.7 NO MATERIAL CHANGE. There shall have been no
material adverse change in the condition (financial or
otherwise), results of operations, assets, liabilities, reserves,
business or prospects of BHP.
SECTION 7.8 REVIEW AND APPROVAL OF THE ACQUIRED ASSETS.
FCNY shall have completed and approved to its satisfaction, to be
exercised within its reasonable discretion, an operations, legal
and accounting review of the Acquired Assets, including, but not
limited to, the following:
(a) FCNY shall have approved of the condition of any
and all acquired real property, personal property and inventory,
based upon such inspections, reviews and investigations as FCNY
may, in its sole discretion, wish to conduct, at FCNY's sole cost
and expense, prior to Closing.
(b) FCNY shall have approved of the status and
conditions of BHP's operations, Contracts, agreements, leases,
records, payment obligations, insurance policies and other legal
obligations, based upon such inspections, reviews and
investigations as FCNY may, in its sole discretion, wish to
conduct, at FCNY's sole cost and expense, prior to Closing.
SECTION 7.9 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No
suit, action, investigation, inquiry or other proceeding by any
governmental body or other person or legal or administrative
proceeding shall have been instituted or threatened, which suit,
action, investigation, inquiry or other proceeding (a) questions
the validity or legality of the transactions contemplated by this
Agreement and might affect the right of FCNY to own, operate or
possess, after the Closing, the Acquired Assets or (b) might be
materially adverse to the business BHP or result in a liability
of FCNY with respect thereto.
SECTION 7.10 LICENSES AND PROVIDER NUMBERS. FCNY shall
have obtained reasonably satisfactory assurances from necessary
governmental authorities that FCNY will be granted all approvals,
Certificates of Authority, etc. as may be necessary to effectuate
the transactions described herein.
SECTION 7.11 INTEGRA IPA AGREEMENT. BHP shall have entered
into an amendment to the Mental Health Services Management
Agreement dated July 19, 1995 between BHP and Integra IPA, Inc.
substantially in the form of Exhibit C annexed hereto.
SECTION 7.12 APPROVAL OF SCHEDULES. The Schedules required
to be provided to FCNY pursuant to this Agreement shall be
subject to the approval of FCNY.
ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATIONS
Each and every obligation of Seller under this Agreement to
be performed on or before the Closing Date shall be subject to
the satisfaction, on or before the Closing Date, of each of the
following conditions, unless otherwise waived in writing by
Seller:
SECTION 8.1 APPROVAL OF BOARD OF DIRECTORS. Approval of
the Board of Directors of each of COASTAL and BHP of this
Agreement and of the transactions contemplated by this Agreement.
SECTION 8.2 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties contained in this Agreement and in
all certificates and other documents delivered by FCNY to Seller
pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be in, all material respects, true and
complete as of the date when made and at and as of the Closing as
though such representations and warranties were made at and as of
such date, except for changes permitted by the terms of this
Agreement.
SECTION 8.3 PERFORMANCE. FCNY shall have performed and
complied with all material agreements, obligations and conditions
required by this Agreement to be performed or complied with by
FCNY on or prior to the Closing Date.
SECTION 8.4 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No
suit, action, investigation, inquiry or other proceeding of any
governmental body or other person or legal or administrative
proceeding shall have been instituted or threatened against FCNY
that (a) questions the validity or legality of the transactions
contemplated by this Agreement, (b) might affect the right of
COASTAL or BHP to convey the Acquired Assets to the FCNY.
SECTION 8.5 OPINION OF FCNY's COUNSEL. FCNY shall have
delivered to Seller an opinion from FCNY's legal counsel, dated
the Closing Date, in form and substance satisfactory to Seller
and to Seller's Counsel (as defined) to the effect that:
(a) FCNY is a New York corporation, duly organized,
validly existing and in good standing under the laws of the State
of New York.
(b) FCNY has the requisite power and authority to own
its properties and conduct its business as now being conducted,
and to enter into this Agreement and to consummate the
transactions contemplated hereby.
(c) This Agreement, and all other agreements referred
to herein or contemplated hereby, have been duly authorized by
all necessary action, have been validly executed and delivered,
and constitute the legal, valid and binding obligations of FCNY,
enforceable against in accordance with their respective terms,
except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of
creditors generally.
SECTION 8.6 OFFICER'S CERTIFICATE. FCNY shall have
furnished to Seller a certificate of FCNY, signed by FCNY's
President and Chief Executive Officer and dated as of the Closing
Date, certifying:
(a) that the representations and warranties of FCNY
contained in this Agreement are true and complete, in all
material respects, as of the Effective Date and as of the Closing
Date;
(b) that FCNY has performed and complied with all
agreements, obligations and conditions required by this Agreement
to be performed or complied with by FCNY on or prior to the
Closing Date; and
(c) as to the validity of an attached copy of
resolutions of FCNY's Board of Directors approving this Agreement
and the transactions described herein.
SECTION 8.7 LEASE OF EMPLOYEES. Upon the Closing, Seller
agrees to lease to FCNY and FCNY agrees to lease from Seller all
of Seller's employees as of the Closing Date, other than those
employees set forth in Schedule 2.3(a)(iv), pursuant to an
agreement between Seller and FCNY to be entered into prior to or
at the Closing (the "Transition Services Agreement"),
substantially in the form of Exhibit D hereto.
SECTION 8.8 REGULATORY MATTERS. Seller shall be satisfied,
in its sole but reasonable discretion, that the state and local
agencies and political subdivisions having jurisdiction over the
transactions contemplated hereby shall have approved such
transactions in a manner that permits those enrollees of Seller
who do not affirmatively elect membership in a prepaid health
services plan other than FCNY to become enrollees of FCNY
pursuant to a "default" mechanism.
ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.1 METHODS OF TERMINATION. Notwithstanding
anything to the contrary in this Agreement, this Agreement may be
terminated, and the transactions contemplated by this Agreement
may be abandoned, at any time, but not later than the conclusion
of the transactions contemplated hereby, as follows:
(a) By the mutual agreement of BHP and FCNY; or
(b) By FCNY, on or before the Closing Date, if FCNY
determines, in its reasonable discretion, that any of the
conditions provided for in Article VII of this Agreement have not
been satisfied or waived in writing by FCNY prior to such Closing
Date (or such earlier date as may be applicable to any particular
condition as expressly set forth in Article VII hereof); or
(c) By FCNY, in its sole discretion and in accordance
with Section 2.7(c) hereof, if the number of BHP enrollees falls
below 35,000; or
(d) By Seller, on or before the Closing Date, if
Seller determines, in its reasonable discretion, that any of the
conditions provided for in Article VIII of this Agreement have
not been satisfied or waived in writing by BHP prior to such
Closing Date.
SECTION 9.2 PROCEDURE UPON TERMINATION. In the event of
termination of this Agreement and abandonment of the transactions
contemplated hereunder pursuant to Sections 2.7(b) or 9.1 hereof,
written notice of such termination and abandonment shall be given
to the other Party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without
further action by FCNY or Seller, as the case may be.
Additionally, following such termination and abandonment:
(a) Each Party shall redeliver to the other, all
documents, work papers, and other material of any party relating
to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the Party furnishing the same.
(b) The provisions of Sections 2.3(b)(ii), 2.7, 2.8,
6.9, 10.1, 10.2, 10.3, 11.4 and 11.10 hereof shall survive the
Closing.
(c) Each Party shall pay its own expenses incident to
preparation for the consummation of this Agreement and the
transactions contemplated hereunder.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 INDEMNIFICATION BY FCNY. FCNY shall
indemnify, defend and hold harmless COASTAL and BHP, their
officers, directors, affiliates, successors and assigns from and
against any and all claims, losses, costs, expenses, liabilities,
obligations and damages, including reasonable attorneys fees and
court costs, that COASTAL or BHP may incur to the extent arising
out of or resulting from:
(a) the claim of any third party for alleged
liabilities or obligations of FCNY arising out of FCNY's use or
disposition of the Acquired Assets or the operation of the
business represented by the Acquired Assets following the Closing
Date, including without limitation, liabilities or obligations
constituting Assumed Liabilities;
(b) the breach by FCNY of any representation,
warranty, covenant or agreement made by FCNY in this Agreement,
whether or not such breach should have been known by Seller;
(c) the failure of FCNY to perform any of its
covenants or agreements hereunder; or
(d) any claim, action, suit or proceeding relating to
the purported lapse of BHP's provider agreement with any provider
with whom FCNY also has a provider agreement, except in the case
of any provider agreement where the provider that is a party
thereto has expressly agreed or consented in writing to such
lapse and/or acknowledged that BHP will have no further liability
or obligations under such provider agreement after the Closing
Date, except for liabilities or obligations relating to periods
ending on or prior to the Closing Date.
SECTION 10.2 INDEMNIFICATION BY COASTAL AND BHP. COASTAL
and BHP, jointly and severally, shall indemnify, defend and hold
harmless FCNY, its members officers, directors, affiliates,
successors and assigns from and against any and all claims,
losses, costs, expenses, liabilities, obligations and damages,
including reasonable attorneys fees and court costs, that FCNY
may incur to the extent arising out of or resulting from:
(a) any and all liabilities and obligations of Seller
of any nature whatsoever, except for those liabilities and
obligations of Seller that FCNY specifically assumes pursuant to
this Agreement and those liabilities and obligations as to which
FCNY has undertaken to indemnify COASTAL and BHP pursuant to
Section 10.1 hereof;
(b) the breach by Seller of any representation,
warranty, covenant or agreement made by Seller in this Agreement,
whether or not such breach should have been known by FCNY;
(c) the failure of Seller to perform any of its
covenants or agreements hereunder;
(d) any and all actions, claims or proceedings or
investigations, whether commenced or instituted prior to or
subsequent to the Closing Date, that relate to Seller or the
Acquired Assets, in which the principal event giving rise thereto
occurred prior to the Closing Date, or which result from or arise
out of any action or inaction of Seller, or of any director,
officer employee, agent, representative or subcontractor of
Seller, prior to the Closing Date, including, but not limited to
claims by any broker or finder for a commission or finder's fee;
and
(e) any and all actions, claims, proceedings or
investigations with respect to FCNY's title to any the Acquired
Assets, including, but not limited to, (i) Seller's failure to
convey any of the Acquired Assets to FCNY free and clear of all
mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever, except as
set forth on applicable Disclosure Schedules, and (ii) Seller's
failure to obtain the requisite consents of third parties to the
transactions contemplated in this Agreement, except for such
consents as are expressly waived by FCNY.
SECTION 10.3 INDEMNIFICATION LIMITATIONS
(a) Notwithstanding anything to the contrary contained
in Section 10.2, neither Coastal nor BHP shall have any indemnity
obligation thereunder in respect of any claim against FCNY that
is first asserted after the expiration of the statute of
limitations applicable to such liability, obligation, action,
claim, proceeding or investigation on which the claim for
indemnity is based.
(b) Notwithstanding anything to the contrary contained
in Section 10.2, in no event shall Coastal or BHP have any
indemnity obligation thereunder in an amount that would cause the
aggregate amount of indemnification provided by COASTAL and/or
BHP to exceed the sum of $7,750,000; provided, however, that such
limitation shall not apply to any indemnity obligation arising
under Section 10.2(a) or Section 10.2(d) in respect of third
party claims asserted against FCNY.
SECTION 10.4 NOTIFICATION OF CLAIMS. Promptly after the
receipt of notice of any third party claim (a "Third Party
Claim") made against a party who is entitled to indemnity here
under (the "Indemnified Party"), the Indemnified Party shall
notify the party from whom indemnity may be sought hereunder (the
"Indemnifying Party") in writing of the receipt of such claim.
The omission of the Indemnified Party to so notify the
Indemnifying Party of any such claim shall relieve the
Indemnifying Party from any liability in respect of such claim
which it may have to the Indemnified Party, but only to the
extent that the Indemnifying Party was injured by the Indemnified
Party's omission to so notify the Indemnified Party. The
Indemnifying Party shall have the right, upon written notice to
the Indemnified Party delivered within 15 days after receipt of
notice from the Indemnified Party of a Third Party Claim (such 15
day period, the "Notice Period"), to assume the defense of the
Third Party Claim at its expense with counsel of its choice. If
the indemnifying fails to notify the Indemnified Party within the
Notice Period that the Indemnifying Party desires to defend the
Third Party Claim, or if the Indemnifying Party gives such notice
but fails to prosecute vigorously and diligently or settle the
Third Party Claim, then the Indemnified Party will have the right
to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings. The
party defending a Third Party Claim will have full control of
such defense and proceedings, including any compromise of
settlement thereof; provided, however, that if requested by the
defending party, the non-defending party agrees, at the sole cost
and expense of the defending party, to provide reasonable coopera
tion with the defending party and its counsel in contesting any
Third Party Claim.
SECTION 10.5 OTHER REMEDIES. The indemnity provisions set
forth in this Agreement shall not, in any way, foreclose
enforcement of any other right or remedy that FCNY or COASTAL or
BHP may have under this Agreement or at law or equity.
ARTICLE XI
ADDITIONAL AGREEMENTS
SECTION 11.1 LEASE ARRANGEMENTS. BHP agrees to make
available to FCNY the offices of BHP located in Syracuse,
Melville, White Plains, and New York City, New York (the
"Retained Offices") on the following terms and conditions:
(a) If the Closing occurs prior to September 30, 1997,
BHP shall maintain each of the Retained Offices and pay all the
rent due thereon until September 30, 1997 or until such earlier
date as FCNY vacates any or all of such offices.
(b) With respect to periods after September 30, 1997,
FCNY shall have the right to continue to use and occupy any one
or more of the Retained Offices, provided that FCNY pays to BHP
all rent and other direct occupancy costs (such as heat,
ventilation, air conditioning, electricity, etc. if not included
in the rent) for the period of FCNY's occupancy, in accordance
with the following:
(i) With respect to the space leased by BHP on
the 25th floor of the office located at 122 East 42nd Street, New
York City, New York (the "NYC Office"), FCNY shall have the right
to continue to occupy and use such space during the months of
October and November, 1997, if FCNY desires to do so and gives
written notice thereof to BHP by no later than September 1, 1997.
FCNY shall in all events vacate such space by no later than 11:59
p.m. on November 30, 1997;
(ii) With respect to the space leased by BHP on
the 21st floor of the NYC Office and each of the other Retained
Offices, FCNY shall have the right to continue to occupy and use
any of such offices through the expiration of the lease therefor
for so long as FCNY desires to do so; provided, however, that
FCNY shall be obligated to vacate any such office on not less
than thirty (30) days' written notice given by BHP to FCNY; and
(iii) With respect to each of the Retained
Offices which FCNY may occupy after the Closing Date, FCNY may
discontinue its occupancy thereof, and thereby relieve itself of
the obligation to pay all rent and other occupancy costs
therefor, by giving written notice to BHP not less than thirty
(30) days prior to the date on which FCNY intends to vacate.
(c) Any rent or other direct occupancy costs payable
by FCNY to BHP for Retained Offices occupied by FCNY after
September 30, 1997 shall be paid by FCNY to BHP no later than two
(2) business days prior to the date on which BHP is obligated to
make payment thereof, provided that BHP has furnished FCNY with
an invoice therefor, together with reasonable supporting
documentation, not less than four (4) business days prior to the
date on which BHP is obligated to make payment thereof.
(d) BHP's undertakings in this Section 11.1 are
expressly subject to the grant of such landlord consents as may
be required for the sublease arrangements contemplated hereby.
BHP agrees that, if any such landlord consents shall be required,
it shall use commercially reasonable efforts to obtain the same,
it being specifically understood that BHP shall not be required
to incur any out-of-pocket costs or expenses in connection
therewith (if any out-of-pocket expenses are necessary to be
incurred, BHP shall so advise FCNY and FCNY shall elect, in its
sole discretion, whether to pay for same).
(e) It is specifically understood and agreed that BHP
shall have no obligation to maintain its office located in
Albany, New York, the lease for which may be terminated by BHP at
any time in its sole discretion.
SECTION 11.2 REINSURANCE PROCEEDS. IF FCNY shall receive
any proceeds pursuant to any reinsurance policy under which
health care expenses incurred by BHP in respect of a BHP enrollee
are counted towards such policy's per enrollee stop loss limit or
threshold (the "Enrollee Threshold"), BHP shall be entitled to a
portion of such proceeds equal to a fraction, the numerator of
which shall be the amount of health care expenses incurred by BHP
in respect of such enrollee and the denominator of which shall be
the amount of the Enrollee Threshold. FCNY shall provide BHP
with written notice of each claim submitted by FCNY under any
such reinsurance policy and shall remit to BHP, within five (5)
days after receipt of any reinsurance proceeds in which BHP is
entitled to share, the portion thereof to which BHP is entitled.
Each of FCNY and BHP shall have the right, upon reasonable
advance notice and during normal business hours, to inspect and
audit the books and records of the other for the purpose of
ascertaining amounts that are relevant to the amount of
reinsurance proceeds to which BHP may be entitled hereunder.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 PUBLIC ANNOUNCEMENTS. Any press release or
other public announcement regarding the execution of this
Agreement or relating to the transactions contemplated hereby
shall be approved by both FCNY and Seller, and neither party
shall make or cause any press release or public announcement to
be made without the other Party's prior approval of the contents
of such release or announcement (other than to parties who must
approve or consent to execution of the Agreement or any of the
transactions contemplated by this Agreement).
SECTION 12.2 NOTICES. All notices made pursuant to this
Agreement shall be duly made if given in person or if sent by
United States mail, certified mail, return receipt requested,
postage prepaid, or sent by facsimile to the Parties at the
addresses set forth below:
If to FCNY: Fidelis Care New York
95-25 Queens Boulevard
Rego Park, New York 11734
Attention: Mark L. Lane
President and Chief Executive
Officer
With a copy to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attention: Andrew B. Roth, Esq.
If to Sellers: Better Health Plan, Inc.
c/o Coastal Physician Group, Inc.
2828 Crossdale Drive
Durham, North Carolina 27705
Attention: Ms. Debbie Redd
Chief Executive Officer
Coastal Physician Group, Inc.
2828 Crossdale Drive
Durham, North Carolina 27705
Attention: Steven M. Scott, M.D.
Chief Executive Officer
With a copy to: Kalkines Arky Zall & Bernstein,
L.L.P.
1675 Broadway
New York, New York 10019
Attention: Cary G. Rosner, Esq.
Any such notice, if sent by United States mail, shall be deemed
to have been given three (3) days after posting, addressed and
prepaid a set forth above, notices that are delivered in person
shall be deemed to have been given when delivered and notices
that are given by facsimile shall be deemed given the date the
facsimile is received.
SECTION 12.3 PAYMENT OF EXPENSES. Except as specifically
provided for in this Agreement, Seller and FCNY shall each pay
their own expenses, including, but not limited to, the
disbursements and fees of all their respective attorneys,
accountants, advisors, and other representatives, incidental to
the preparation and carrying out of this Agreement.
SECTION 12.4 ASSIGNMENT AND SUCCESSORS. This Agreement may
not be assigned by any party without the prior written consent of
the other Party, which consent may be given or withheld in such
Party's sole discretion. Subject to such limitation on
assignment, this Agreement and the rights, privileges, duties and
obligations hereunder shall be binding upon and inure to the
benefit of the Parties and their respective successors and
permitted assigns.
SECTION 12.5 EXHIBITS AND SCHEDULES; ENTIRE AGREEMENT. All
references to Agreement herein shall mean this Agreement together
with all schedules and exhibits hereto, and all agreements,
certificates and other instruments to be delivered the parties
pursuant to this Agreement. This Agreement embodies the entire
understanding of the parties, and there are no further or other
agreements or understandings, written or oral, in effect between
the parties relating to the subject matter of this Agreement.
This Agreement may be amended only by a writing signed by both
parties.
SECTION 12.6 WAIVER. No waiver of any term, provision or
condition of this Agreement, whether by conduct or otherwise,
shall be deemed to be or be construed as a further or continuing
waiver of any such term, provision or condition or as a waiver of
any other terms, provisions or conditions of this Agreement.
SECTION 12.7 COUNTERPARTS. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an
original, but all of which together shall constitute a single
original agreement.
SECTION 12.8 SEVERABILITY. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
SECTION 12.9 NO THIRD PARTY BENEFICIARIES. The parties
hereto do not intend, and nothing in this Agreement shall be
deemed, to give any person other than the parties hereto any
right or interest in the Acquired Assets to be transferred from
Seller to FCNY hereunder or any claim or right to payment to or
from FCNY or Seller based on this Agreement.
SECTION 12.10 CONTINUOUS COOPERATION. Both prior to and
after the Closing Date, Seller shall cooperate with FCNY to make
a smooth transition to FCNY's operation of the Acquired Assets.
Seller shall provide such further documents and information as
FCNY may reasonably request prior to or after Closing Date in
order to protect FCNY's title to the Acquired Assets and assist
in FCNY's successful assumption of the Acquired Assets.
SECTION 12.11 CHOICE OF LAW. This Agreement shall be
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on the date first above written.
COASTAL PHYSICIANS GROUP, INC.
By: /S/ STEVEN M. SCOTT
Steven M. Scott, M.D.
Chief Executive Officer
BETTER HEALTH PLAN, INC.
By: /S/ DEBORAH L. REDD
Deborah L. Redd
Chief Executive Officer
NEW YORK STATE CATHOLIC HEALTH PLAN, INC.
By: /S/ MARK L. LANE
Mark L. Lane
President and Chief Executive Officer
EXHIBIT A
PROMISORRY NOTE
[TO BE ADDED]
EXHIBIT B
ESCROW AGREEMENT
[TO BE ADDED]
EXHIBIT C
AMENDMENT TO INTEGRA IPA AGREEMENT
[TO BE ADDED]
EXHIBIT D
TRANSITION SERVICES AGREEMENT
[TO BE ADDED]
LIST OF SCHEDULES
[TO BE ADDED AND SCHEDULES TO BE PREPARED BY BHP]
SCHEDULE 2.2
ASSETS NOT ACQUIRED OR ASSUMED
The Acquired Assets shall not include:
Any financial assets of BHP existing on the Closing Date
including, without limitation, the following:
(i) cash and cash equivalents.
(ii) accounts receivable of any kind or
nature whatsoever.
(iii) prepaid expenses.
(iv) deposits or prepaid rent relating to any
of the BHP offices.
(v) notes receivable and other debt
obligations owned by BHP, including debt
obligations owed by providers or provider groups
within BHP's provider network.
INDEX OF OMITTED EXHIBITS AND SCHEDULES
Exhibit A Form of Promissory Note
Exhibit B Form of Escrow Agreement
Exhibit C Form of Second Amendment to Mental
Health Services Agreement between Better
Health Plan, Inc. and Integra, IPA, Inc.
Exhibit D Form of Transition Services Agreement
Schedule 2.1(a) Certificate of Authority and County
Contracts
Schedule 2.1(b) List of Provider Contracts
Schedule 2.1(d) Locations of Books, Records, Files
Schedule 2.1(e) List of Computer and Telecommunications
Hardware, Software and Equipment
Schedule 2.1(f) List of Intangible Assets
Schedule 2.2 List of Assets Not Acquired or Assumed
Schedule 2.3(a)(iv) List of Employees Not Retained By Buyer
Schedule 2.4(b) List of Liens, Etc. Affecting Acquired
Assets
Schedule 2.5(b) Schedule of Prepaid Expenses
Schedule 2.9 Allocation of Purchase Price Among
Acquired Assets
Exhibit 2.10 Form of Bill of Sale
Schedule 3.1 List of Licenses, Permits, Etc.
Exhibit 3.1(a) Certificate of Incorporation of Better
Health Plan, Inc.
Exhibit 3.1(b) By-Laws of Better Health Plan, Inc.
Schedule 3.6 List of Undisclosed Liabilities
Schedule 3.7(b) Material Adverse Changes Since December
31, 1996
Schedule 3.7(c) List of Material Debts, Liabilities or
Obligations
Schedule 3.8(a) Summary of Insurance Policies
Schedule 3.8(b) List of Outstanding Insurance Claims
Schedule 3.9 List of Liens on Owned Personal Property
Schedule 3.9(c) List of Leased Real Property
Schedule 3.9(e) List of Material Defects, Etc., of
Personal Property
Schedule 3.10 Non-Compliance with Laws
Schedule 3.11(a) Certain Regulatory Filings
Schedule 3.11(b) Regulatory Approvals Required for
Closing of Transaction
Schedule 3.12 List of Contract Defaults
Schedule 3.13 Summary of Litigation
Schedule 3.14 Summary of Interested Party Transactions
Schedule 3.15 List of Tax Deficiencies, Audits, Etc.
Schedule 3.16(a) Summary of Employee Benefit Plans
Schedule 3.16(d) List of Employment, Consulting and
Severance Agreements
Schedule 3.16(e) List of Collective Bargaining Agreements
Schedule 3.17(a) List of Non-Compliance with
Environmental Laws
Schedule 3.17(b) List of Environmental Licenses
Schedule 3.17(c) Summary of Environmental Hazards or
Claims
Schedule 3.19 List of Intellectual Property Rights
Schedule 3.22 List of Provider Disenrollments
Schedule 3.24 Summary of Certain Complaints and
Grievances
AGREEMENT
Coastal Physician Group, Inc. hereby agrees, pursuant to Item
601(b)(2) of Regulation S-K, to furnish supplementally upon
request, to the Securities and Exchange Commission, a copy of any
omitted exhibit or schedule shown above.
