ASSET SALE AND PURCHASE AGREEMENT

Exhibit 10.1

 

Execution Copy

 

ASSET SALE AND PURCHASE AGREEMENT

 

BY AND AMONG

 

CENTENE CORPORATION,

 

BUCKEYE COMMUNITY HEALTH PLAN, INC.

 

SUMMA HEALTH SYSTEM

 

AND

 

SUMMACARE, INC.

 

JANUARY 10, 2005

 

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(Continued)

 

 

ii

TABLE OF CONTENTS

(Continued)

 

 

iii

TABLE OF CONTENTS

(Continued)

 

 

iv

ASSET SALE AND PURCHASE AGREEMENT

 

THIS ASSET SALE AND PURCHASE AGREEMENT (“ Agreement ”) is made and entered into as of this 10th day of January, 2005 (“ Execution Date ”), by and among Centene Corporation (“ Centene ”), Buckeye Community Health Plan, Inc., an Ohio health insurance corporation, a wholly-owned subsidiary of Centene (“ Buyer ”), Summa Health System, an Ohio corporation (“ Parent ”), and SummaCare, Inc., an Ohio corporation and a second-tier subsidiary of Parent (“ Seller ”).

 

RECITALS:

 

A. Buyer is licensed as a Heath Insuring Corporation (“ HIC ”) under Chapter 1751 of the Ohio Revised Code by the Ohio Department of Insurance (“ ODI ”).

 

B. Seller is licensed as a HIC by ODI.

 

C. The Medicaid Business is accredited by the National Committee for Quality Assurance (“NCQA”) with a rating of “excellent.”

 

D. Seller’s HIC operations are comprised of several business segments, including a commercial HIC business and a managed-care business operated pursuant to a Medicaid Contract with the Ohio Department for Job and Family Services (“ ODJFS ”).

 

E. Seller desires to sell, assign, and deliver to Buyer, and Buyer desires to purchase, accept assignment, and accept delivery from Seller, the Medicaid Business with the Medicaid Members being re-enrolled with Buyer, as well as other related assets described herein.

 

F. Buyer and Seller executed a Confidentiality Agreement dated September 24, 2003, relating to the transactions set forth in this Agreement (the “ Confidentiality Agreement ”).

 

G. Buyer and Seller wish to set forth the terms and conditions under which Buyer will buy and Seller will sell, or cause to be sold, the assets of the Medicaid Business.

 

NOW, THEREFORE, for and in consideration of the above recitals and the representations, warranties, mutual covenants, and agreements herein expressed, and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

In addition to certain terms defined elsewhere in this Agreement, the following terms shall be defined as set forth below.

 

“ AAA ” has the meaning ascribed to it in Section 14.2 .

 

“ Affiliates ” means (i) any Person directly or indirectly controlling, controlled by or under common control with another Person where “control” means possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise; (ii) any Person owning or controlling 10% or more of the outstanding voting securities of such other Person; (iii) any officer, director or partner of such Person; and (iv) if such person is an officer, director or partner, any such company for which such Person acts in such capacity.

 

“ Affiliated Group ” means any affiliated group as defined in Code §1504 that has filed a consolidated return for federal income tax purposes (or any similar group under state, local or foreign law) for a period during which the Seller or its Subsidiaries was a member.

 

“ Agreement ” has the meaning ascribed to it in the preamble.

 

“ Applicable Rate ” means the prime rate as published in the Wall Street Journal from time to time.

 

“ Assets ” means the assets of Seller or Seller’s Affiliates that are being acquired by Buyer as set forth in Section 2.1 of this Agreement.

 

“ Assumed Liabilities ” has the meaning ascribed it in Section 2.4 .

 

“ Average Stock Price ” means the average closing price per share of the Centene Common Stock on the New York Stock Exchange for the five (5) consecutive trading days immediately preceding date of the public announcement of the transaction.

 

“ Benefit Plan ” means any (i) nonqualified deferred compensation or retirement plan or arrangement, whether or not funded and whether or not terminated, (ii) qualified defined contribution retirement plan or arrangement that is an employee pension benefit plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), whether or not funded and whether or not terminated, (iii) qualified defined benefit retirement plan or arrangement which is an employee pension benefit plan under ERISA, whether or not funded and whether or not terminated, or (iv) employee welfare benefit plan under ERISA or fringe benefit or other retirement, bonus, severance, retention, vacation, sick pay or incentive plan or program, whether or not funded and whether or not terminated.

 

“ Board of Arbitration ” has the meaning ascribed to it in Section 14.2.

 

“ Books and Records ” has the meaning ascribed to in Section 2.1(d) .

 

“ Buyer ” has the meaning ascribed to it in the preamble.

 

“ Buyer’s Medicaid Contract ” means the contract effective on or immediately following the Closing Date by and between ODJFS and Buyer for the Service Area.

 

“ Centene Common Stock ” means the Common Stock, par value $.01, of Centene.

 

2

“ Centene Change in Control ” means the acquisition by a single entity or identifiable group, whether by merger, the purchase of stock or assets or otherwise, of all or substantially all of the stock or assets of Centene and the then-current management of Centene is no longer in control of the management and direction of the Medicaid Business in Summit County.

 

“ Closing ” means the closing of the purchase and sale of the Assets occurring on the Closing Date.

 

“ Closing Date ” means the date of Closing as determined pursuant to Section 2.6 .

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Competing Business ” means any health insurance or health benefit program, including, without limitation, any health maintenance organization, any health insurance corporation health care preferred provider organization, or traditional indemnity program offered by Seller or any of Seller’s Affiliates (or a similar or related business or expansion into related lines of business because of an expansion of the State of Ohio managed care program, including, without limitation to the extent the Ohio Enhanced Care Management program becomes a participant in the Medicaid business) to Medicaid beneficiaries through the State of Ohio Medicaid managed care program or any successor program thereto.

 

“ Confidentiality Agreement ” has the meaning ascribed to it in the recitals.

 

“ ERISA ” has the meaning set forth in the definition of Benefit Plan.

 

“ Excluded Assets ” means those assets of Seller that are excluded from the transaction that is the subject of this Agreement pursuant to Section 2.2 .

 

“ Excluded Contract ” has the meaning ascribed to it in Section 2.2(d) .

 

“ Excluded Liabilities ” means those liabilities of Seller that are excluded from the transaction that is the subject of this Agreement pursuant to Section 2.4(b) .

 

“ Execution Date ” has the meaning ascribed to it in the preamble.

 

“ Financial Statements ” has the meaning set forth in Section 3.1(e) of this Agreement.

 

“ First Capitation Date ” means the date one (1) day after the date upon which Buyer receives the First Capitation Payment.

 

“ First Capitation Payment ” means the first capitation payment following the Closing Date which is received by Buyer directly from ODJFS as a payment for Buyer’s own account.

 

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time, consistently applied throughout the specified period and in the immediately prior comparable period.

 

3

“ Governmental Entity ” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

 

“ HIC ” has the meaning ascribed to it in the recitals.

 

“ Hired Employee ” has the meaning set forth in Section 9.4(b) of this Agreement.

 

“ IBNR Expenses ” means the actuarial estimate of medical expenses that have been incurred by Medicaid Members but not reported.

 

“ In-Scope Employee ” has the meaning set forth in Section 9.4(b) of this Agreement.

 

“ Intellectual Property ” means any of the following in any jurisdiction throughout the world including, without limitation, all income, royalties, damages and payments due or payable at the Closing or thereafter, including, without limitation, damages and payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof: patents and patent applications and patent disclosures, trademarks, trade names, service marks, brand names, Internet domain names, inventions, copyrights and copyrightable works (including software), processes, formulae, trade dress, business and product names, logos, slogans, trade secrets and confidential information, industrial models, designs, methodologies, computer programs (including all source code) and related documentation, technical information, manufacturing, engineering and technical drawings, know-how and all pending applications for and registrations of patents, trademarks, service marks and copyrights.

 

“ Interim Financial Statements ” has the meaning set forth in Section 3.1(e) of this Agreement.

 

“ Lien ” means any interest in property securing an obligation owed to, or a claim by, a person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, charge, pledge, assignment, hypothecation, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or other encumbrance of any nature whatsoever on or with respect to any cash, property, right to receive income or other assets of any nature whatsoever.

 

“ Medicaid ” means medical assistance provided under a state plan approved under both Title XIX and Title XXI of the Social Security Act, as amended from time to time.

 

“ Medicaid Business ” means the business of providing managed care services to Medicaid Members in the Service Area and of receiving from the State the corresponding premium and other revenue as payment for such services pursuant to the terms of the Seller’s Medicaid Contract.

 

“ Medicaid Business Employee ” has the meaning assigned in Section 3.1(r) .

 

“ Medicaid Members ” means the persons enrolled under Seller’s Medicaid Contract.

 

4

“ Medicaid Providers ” means the physicians, hospitals and other health care providers that have contracted with Seller and/or Seller’s Affiliates to provide covered health care services to Medicaid Members.

 

“ Medical Claim ” has the meaning ascribed to it in the Section 11.4(c) .

 

“ Non-Prevailing Party ” means the party in an arbitration pursuant to Section 14.2 whose position is the furthest from the decision reached.

 

“ ODI ” has the meaning ascribed to it in the recitals.

 

“ ODJFS ” has the meaning ascribed to it in the recitals.

 

“ Parent ” has the meaning ascribed to it in the preamble.

 

“ Person ” means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization or any other entity.

 

“ Provider Agreements ” means the written agreements for the provision of health care services to Medicaid Members that have been executed by and between providers, including, without limitation, those with physicians, hospitals, ancillary and other institutional providers, laboratories, vision providers, behaviorial health providers, durable medical equipment service providers, and provider HICs, and Seller and/or Seller’s Affiliates.

 

“ Purchase Price ” has the meaning ascribed to it in Section 2.5(a) .

 

“ Purchased Provider Agreements ” has the meaning ascribed to it in Section 2.1(b) .

 

“ Regulations ” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder.

 

“ Securities Exchange Act of 1934 ” means the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder.

 

“ Seller ” has the meaning ascribed to it in the preamble.

 

“ Seller’s Medicaid Contract ” means the contract(s) executed by and between ODJFS and Seller in effect as of the date of this Agreement for the Service Area.

 

“ Seller’s Permits ” has the meaning ascribed to it in Section 3.1(g) .

 

“ Service Area ” means the Summit County, Ohio, service area, designated by ODJFS, for purposes of the Medicaid program.

 

“ State ” means the State of Ohio.

 

5

“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). The term “ Subsidiary ” shall include all Subsidiaries of such Subsidiary.

 

“ Taxes ” means all federal, state, local and foreign income, employment, franchise, capital stock, excise, gross receipts, sales, use, property, real estate and stamp taxes, license, occupation, premium, windfall profits, environmental (including under Code §59A), withholding, social security (or similar), unemployment, disability, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner; payments in lieu of taxes, levies, duties, assessments and fees of any nature or other taxes of any kind whatsoever, together with all related penalties, fines or additions to tax or interest thereon, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

 

“ Tax Returns ” means any returns, reports, forms, declarations, claims for refund, information reports, amended returns or other documents (including any related or supporting schedules, supporting statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Person or the administration of any laws or regulations or, administrative requirements relating to any Taxes.

 

“ Violation ” has the meaning ascribed to it in Section 3.1(c) .

 

ARTICLE II

SALE OF ASSETS

 

2.1 Sale and Purchase of Assets . Seller hereby agrees to sell, transfer, convey, assign and deliver to Buyer, or cause to be sold, transferred, conveyed, assigned and delivered to Buyer, free and clear of all Liens and encumbrances of any kind, and Buyer hereby agrees to purchase and accept assignment from Seller or Seller’s Affiliates, for payment of the Purchase Price specified in Section 2.5 , all of the legal and beneficial right, title and interest in, to and under Assets of every kind and description that are owned and used by Seller, or owned or used by Seller’s Affiliates (as listed on Schedule 2.1 ), in the operation of or related to, necessary and/or material to the Medicaid Business in the Service Area, including, without limitation, the following:

 

(a)

All of Seller’s rights to continue to operate the Medicaid Business, including but not limited to the right to enter into a replacement for the Seller’s Medicaid Contract, all rights to provide ODJFS prescribed health services to Medicaid Members and the corresponding right to receive capitation payments, premium payments, delivery supplemental payments, and any other revenues payable by ODJFS under Buyer’s Medicaid Contract with respect to such members from and after the Closing;

 

6

(b)

Seller’s rights, title and interests in the Provider Agreements that are listed on Schedule 2.l(b) (the “ Purchased Provider Agreements ”), as may be amended prior to the Closing through terminations, expirations, and additions made in the ordinary course of business, except that to the extent any Purchased Provider Agreements are not assignable to Buyer, Buyer will enter into replacement provider agreements on terms that are no less favorable to the Medicaid Business than the original Provider Agreements;

 

(c)

All of Seller’s rights, title and interests in all other contracts of Seller which relate to the Medicaid Business and are listed on Schedule 2. l(c) , as may be amended prior to the Closing through terminations, expirations, and additions made in the ordinary course of business (the “ Other Contracts ”, and collectively with the Purchased Provider Agreements and the Seller’s Medicaid Contract, the “ Business Contracts ”);

 

(d)

True and correct copies of financial and other books, records, information and title documents necessary for Buyer to operate the Medicaid Business after the Closing Date (the “ Books and Records ”);

 

(e)

Books, records and information pertaining to the transferred Medicaid Members, including lists of all names, addresses, identification numbers, provider data, and copies (electronic and/or hard copy) of all books and records maintained for such members, including medical and claim histories;

 

(f)

Any capitation payment made by ODJFS to Seller after the Closing Date for any period after the Closing Date unless such payment is made and properly due pursuant to Seller’s Medicaid Contract for periods prior to the Closing Date;

 

(g)

Books, records and information pertaining to Medicaid Providers, including without limitation lists of all of Seller’s Medicaid Providers for the Medicaid Members and the Purchased Provider Agreements, containing names, addresses, and other data maintained for each provider; provided that the provision of such information does not violate any contractual confidentiality provisions or the confidentiality restrictions of applicable law; and provider further that Schedule 2.1(g) describes the type of information that will be withheld on such basis and the reason for such information being withheld;

 

7

(h)

True and correct copies of all of the credentialing files and supporting or related documentation for any Medicaid Provider that has entered into a provider agreement with Buyer;

 

(i)

Medical management materials, including copies of policies and procedures used in connection with the Medicaid Business (unless identified in Section 2.2 as Excluded Assets);

 

(j)

Rights and interests of every kind relating to the Assets and/or the ownership of the Medicaid Business that arise or accrue after the Closing, including payments of any kind by or on behalf of Medicaid Members, refunds, causes of action, and rights of recovery, except to the extent such claims and rights relate exclusively to an Excluded Liability or are Excluded Assets;

 

(k)

All Intellectual Property (including goodwill and other intangibles) used in connection with the Medicaid Business other than those set forth in Schedule 2.2(h);

 

(l)

All rights to Medicaid Member outreach programs, including but not limited to the procedures, methods, and materials for member outreach utilized by Seller in the Service Area prior to the Closing Date; and

 

(m)

Seller’s existing stock of pre-printed advertising brochures, marketing materials, literature, form contracts, form certificates of coverage, membership handbooks and other pre-printed materials related to the Medicaid Business, to be utilized by Buyer consistent with Section 11.4(b) of this Agreement; provided however that Buyer acknowledges that it shall not use any such items bearing the Seller’s tradename(s), trademark(s), service mark(s), whether registered or unregistered, or logos.

 

2.2 Excluded Assets . The following assets of Seller are not included in the defined term “ Assets ,” and they are not being transferred or assigned to Buyer under this Agreement. They are considered “ Excluded Assets .”

 

(a)

Seller’s rights, title and interests in the real property owned or leased by Seller or Seller’s Affiliates;

 

(b)

Seller’s rights, title and interests in its contracts of employment;

 

(c)

Right, title and interests in Seller’s Medicaid Contract (including retroactive additions (net of deductions)), including without limitation accounts receivable and for the twelve months immediately following the Closing Date, any right to receive payments from ODJFS for delivery and birth arising from admissions prior to the Closing Date;

 

(d)

Except as otherwise set forth in this Agreement, Seller’s rights, title and interests in contracts (“ Excluded Contracts ”) and other assets in each case set forth on Schedule 2.2(d) ;

 

8

(e)

Seller’s rights, title and interests in the insurance policies or programs covering Seller, its officers, directors, employees and agents, and any claims for refunds or recoveries under any insurance policies or programs, including without limitation, directors and officers liabilities insurance, error and omissions insurance, and stop loss insurance;

 

(f)

Seller’s rights, title and interests in claims against third parties arising with respect to acts and omissions occurring on dates prior to the Closing, if any;

 

(g)

All cash, cash equivalents, and statutory deposits of Seller relating to the Medicaid Business (excluding capitation payments described in Section 2.1(f) );

 

(h)

All Intellectual Property identified in Schedule 2.2(h); and

 

(i)

All assets owned or used by Seller or Seller’s Affiliates that are not necessary for, related to in any way, have ever been used in or were developed for use in, the operation of the Medicaid Business.

 

2.3 Exclusion of Certain Contracts . Notwithstanding anything to the contrary contained in this Agreement, Buyer shall have the right, in its sole discretion, from the date hereof until seven (7) days prior to the Closing Date, to specifically exclude any Business Contract, as Buyer shall specify in a written notice to Seller, whereupon such contract or contracts shall, to the extent excluded, cease to be “Assets” hereunder and shall become “Excluded Assets” and thereby be excluded from the Assets; provided that such exclusions shall not result in an adjustment to the Purchase Price.

 

2.4 Liabilities .

 

(a) Assumed Liabilities . As of the Closing, in addition to any and all Losses against which Buyer agrees to indemnify Seller pursuant to Article XII of this Agreement, Buyer shall assume the direct obligation to pay, discharge, and perform, as appropriate, only those liabilities specifically identified in this Section 2.4(a) (collectively, the “ Assumed Liabilities ”) which are as follows: any and all liabilities and obligations arising with respect to periods after the Closing Date under the Buyer’s Medicaid Contract, including, without limitation, all obligations to pay and administer payment under the Purchased Provider Agreements or replacement provider agreements for covered services rendered to Medicaid Members after the Closing, but excluding, however any obligation for claims for payment for services rendered to Medicaid Members who are hospitalized, or, subject to Section 2.4(d) hereof, whose admission has been authorized, on or prior to the Closing and continuing through such Medicaid Members’ discharge.

 

(b) Liabilities Not to be Assumed . Buyer shall not assume and shall not be obligated to pay, discharge or perform any obligations and liabilities of Seller or Seller’s Affiliates relating to the Medicaid Business or any other business not listed in Section 2.4(a) of this Agreement, regardless of whether such obligation arises before or after the Closing Date, including, without limitation, the following (collectively, “ Excluded Liabilities ”):

 

(i) Any and all liabilities or obligations of Seller or Seller’s Affiliates in connection with the Medicaid Business, whether reported or unreported, arising or accruing prior

 

9

to the Closing, including without limitation, any liability for contractual obligations under the Seller’s Medicaid Contract arising prior to the Closing, which shall include but not be limited to, Medical Claims (whether incurred under a Purchased Provider Agreement or otherwise) for services rendered to Medicaid Members on or prior to the Closing and claims of Medicaid Members who are hospitalized prior to the Closing through the date of discharge for such members;

 

(ii) Any and all liabilities, of Seller, Seller’s Affiliates or any third party, whether currently known or unknown, with respect to claims or potential claims for medical malpractice or professional liability with respect to the Medicaid Business relating to periods prior to the Closing in each case regardless of when the claim is asserted;

 

(iii) Any and all liabilities of Seller, Seller’s Affiliates or any third party, whether currently known or unknown, relating to litigation or claims of any kind or nature with respect to the Medicaid Business arising out of or accruing from or relating to the Medicaid Business prior to the Closing, in each case regardless of when the claim is asserted;

 

(iv) Liabilities arising from relating to or in connection with the Excluded Assets;

 

(v) Liabilities that do not relate to the Medicaid Business;

 

(vi) Liabilities which are not otherwise directly related to the Assets;

 

(vii) Liabilities arising from, related to or in connection with any of Seller’s expenses related to the transactions contemplated by this Agreement (unless otherwise provided in this Agreement);

 

(viii) Liabilities arising from, related to or in connection with any cure or other amount payable with respect to the assignment or termination of any contractual obligation to Buyer hereunder;

 

(ix) Any liability of any kind to, or with respect to, Seller’s current or former employees, independent contractors, directors or officers (or any dependants or beneficiaries thereof), including without limitation, salaries or compensation of any kind, continued employment, vacation or severance pay, or with respect to the Benefit Plans of Seller (including all obligations pursuant to the continuation coverage rules of ERISA Sections 601-608 and Code Section 4980B) or any benefit plans of any other entity that together with Seller constitutes a controlled group of entities under Code Section 414(b), (c), (m) or (o);

 

(x) Any and all Taxes or assessments arising from or related to ownership of the Assets or the conduct of the Medicaid Business on or prior to the Closing Date, including, without limitation (A) any personal property or sales or use taxes, (B) any liability of Seller for unpaid Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise; (C) any liability of Seller for income, transfer, sales, use, and other Taxes arising in connection with the consummation of the transactions contemplated hereby (including any income Taxes arising

 

10

because Seller is transferring the assets); or (D) any other Taxes or assessments payable by Seller;

 

(xi) Any and all retroactive subtractions to capitation payments earned by Seller for periods prior to Closing and related to the Medicaid Business; and

 

(xii) Any and all Losses against which Seller agrees to indemnify Buyer pursuant to Article XII of this Agreement.

 

(c) Transfer Taxes; Recording Fees . Notwithstanding, Section 2.4(b)(x) , Seller and Buyer share the burden equally of any and all sales, use, transfer or other similar taxes imposed as a result of the consummation of the transactions between Buyer and Seller contemplated by this Agreement.

 

(d) Authorized Admissions and Services . Seller shall be responsible for all claims for payment for services rendered to Medicaid Members whose in-patient hospital admission occurred prior to the Closing Date, regardless of date of discharge. Buyer shall be responsible for the payment for services rendered to Medicaid Members for admissions or services authorized by Seller prior to Closing Date in the ordinary course of business that occur after the Closing Date (which list of authorized admissions and authorized treatment and services will be identified on Schedule 2.4(d) to this Agreement to be provided to Buyer five (5) Business Days prior to Closing, and updated one (1) Business Day prior to Closing); provided, however , Buyer shall have the right to review such authorizations to determine whether the admissions and requested treatment or services are medically necessary or appropriate and to retract and deny any such authorization that is not medically necessary or appropriate (by notifying affected Medicaid Members or Medicaid Providers, as appropriate), prior to the admission or rendering of requested treatment or services. Any obligations or liabilities arising from Buyer’s decision to retract and deny such admissions or services, if such admissions and services were initially authorized in a manner consistent with Buyer’s policies and procedures, shall be considered Assumed Liabilities.

 

2.5 Purchase Price .

 

(a) Determination of Purchase Price . Subject to the terms and conditions of this Agreement, in consideration of the sale, transfer, assignment, conveyance and delivery of the Assets (including the provider agreement entered into between Parent and Buyer and the Purchased Provider Agreements) and the Seller’s or Parent’s agreements set forth herein (including the non-competition provisions of Section 9.3 ), the aggregate purchase price (the “ Purchase Price ”) shall consist of the following (i) an amount (the “ Consideration Amount ”) equal to the product of (A) the number of Medicaid Members enrolled with Seller on the Closing Date multiplied by (B) $800; comprised of (X) 70% in cash (the “ Cash Consideration ”) and (Y) 30% in shares of Centene’s Common Stock (the “ Stock Consideration Amount ”), with the number of shares determined by dividing the Stock Consideration Amount by the Average Stock Price and (ii) Buyer’s assumption of the Assumed Liabilities. The Cash Consideration and the Stock Consideration shall each be payable or deliverable, as the case may be, to Seller, Parent or Seller’s Affiliates, as directed by Seller in a written notice to Buyer, within five (5) Business days after the First Capitation Date by wire transfer of immediately available funds, or delivery

 

11

of the appropriate shares of Common Stock to an account specified to Buyer by Seller in writing at least two (2) Business Days before the Closing Date. In the event the price per share at the time as of the effective date of the registration statement filed pursuant to the registration rights agreement attached hereto as Exhibit C is lower than the Average Stock Price, Buyer shall deliver an additional amount of cash equal to the aggregate difference between the price per share on such date and the Average Stock Price. In the event the price per share at the effective date of such registration statement is higher than the Average Stock Price, Seller or Parent shall retain such profit, which shall not be considered a part of the Purchase Price.

 

The Centene Common Stock constituting the Stock Consideration Amount will not be subject to any restrictions on transfer other than under the registration agreement described in Section 8.2 or under the Securities Act. Subject to such restrictions, the Sellers may transfer such Centene Common Stock at any time after Closing; provided however, that if such shares are to be transferred other than pursuant to the registration statement, (i) Centene’s obligation to deliver additional cash in the event of a price decline shall be null and void with respect to such shares and (ii) such transfer will be subject to Centene’s prior written approval.

 

(b) Allocation Buyer shall prepare an allocation of the Purchase Price (and all other capitalized costs) among the Assets and non-compete agreement described in Section 9.3 for all purposes (including financial accounting and tax purposes). Buyer shall deliver a preliminary allocation to Seller and Parent on or prior to the Closing Date. Seller shall timely and properly prepare and deliver all such documents and other information as Buyer may reasonably request to prepare such allocation.

 

2.6 Closing and Closing Date . The actions contemplated to consummate the transactions under this Agreement shall take place on the Closing Date, which, unless otherwise agreed by Buyer and Seller, shall be effective the last day of the month during the calendar month after all conditions precedent of Buyer and Seller which are set forth in this Agreement have been fully satisfied or have been waived in writing; provided , however , that notwithstanding the actual time of the day on the Closing Date at which the actions contemplated to consummate this Agreement shall occur, and unless otherwise agreed to by the parties, the Closing shall be deemed to be effective as of and to occur, and subject to the terms hereof the risk of loss for the Medicaid Business shall pass from Seller to Buyer, at 12:01 a.m. (Central Time, adjusted for daylight savings time, if applicable) on the day after the Closing Date. The Closing shall commence on the Closing Date at the offices of Kirkland & Ellis LLP, located at 200 East Randolph Drive, Chicago, Illinois 60601, or at such other location as may be agreed upon by the parties.

 

2.7 Actions to be Taken at Closing . Subject to the terms and conditions set forth in this Agreement, at the Closing:

 

(a) Buyer’s Deliveries . Buyer shall deliver to Seller or Parent:

 

(i) One or more Bill of Sale Assignment and Assumption Agreements, substantially in the form of Exhibit A conveying all right, title and interest in, to and under the Assets to be conveyed to Buyer hereunder, free and clear of all Liens and such other instruments

 

12

and agreements, duly executed by Buyer, as may be reasonably necessary to effect Buyer’s assumption of the Assumed Liabilities;

 

(ii) All necessary consents, estoppels, approvals, authorizations or other documents from third parties in a form reasonably satisfactory to Seller required to be obtained by Buyer under the terms of this Agreement;

 

(iii) Copies of the resolutions duly adopted by the Board of Directors of Buyer authorizing Buyer’s execution, delivery and performance of this Agreement and of all documents related hereto or contemplated herein;

 

(iv) Such other documents as reasonably required by Seller to complete the transactions contemplated hereunder; and

 

(v) Each of the items required under Article VII .

 

(b) Seller’s Deliveries . Seller, and Seller’s Affiliates, as applicable, shall deliver to Buyer, or to the extent any Assets are owned by Seller’s Affiliates, shall cause Seller’s Affiliates to deliver to Buyer:

 

(i) All right, title and interest in, to and under the Assets to be conveyed, free and clear of all Liens and encumbrances, to Buyer hereunder;

 

(ii) One or more Bill of Sale, Assignment and Assumption Agreements, substantially in the form of Exhibit A , conveying all right, title and interest in, to and under the Assets to be conveyed to Buyer hereunder, free and clear of all Liens, and such other instruments and agreements, duly executed by Seller, as may be reasonably necessary to effect Seller’s assignment of the Assumed Liabilities;

 

(iii) All necessary consents, estoppels, approvals, authorizations or other documents from third parties in a form reasonably satisfactory to Buyer required to be obtained by Seller or Seller’s Affiliates hereunder;

 

(iv) All necessary consents, estoppels, approvals, authorizations or other documents executed by Seller’s Affiliates in a form reasonably satisfactory to Buyer which are necessary to convey to Buyer the Assets owned by Seller’s Affiliates;

 

(v) A true and correct list of all Medicaid Members who have been authorized by Seller to be admitted for hospitalization on a date following Closing, plus documentation utilized by Seller to make such authorization;

 

(vi) Copies of the resolutions duly adopted by the Boards of Directors of Seller or Parent authorizing Seller’s or Parent’s execution, delivery and performance of this Agreement and of all documents related hereto or contemplated herein;

 

(vii) Such other documents reasonably required by Buyer to transfer fully the Assets and Assumed Liabilities to Buyer or to complete the transactions contemplated hereunder; and

 

13

(viii) Each of the items required under Article VI .

 

(c) Third Party Consents . To the extent that Seller’s rights under any contracts relating to the Medicaid Business (which are part of the Assets) may not be assigned without the consent of a third party, which consent has not been obtained prior to Closing, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful. Both Seller and Buyer acknowledge and agree that in addition to the Purchased Provider Agreements (which are not assignable to Buyer and will be dealt with pursuant to Section 11.1(b) ), each of the agreements set forth on Schedule 2.7(c) are not assignable and Seller has agreed to either secure the consents of its contracting parties or to take all actions necessary in order to provide the benefits of any such agreement to Buyer. Seller, at its expense, shall use its commercially reasonable efforts to obtain any such required consent as promptly as possible after Closing. If any such consents are not obtained or if any attempted assignment would be ineffective or would impair Buyer’s rights so that Buyer would not in effect acquire the benefit of all such rights, Seller, to the maximum extent permitted by law and by the terms of the applicable contract(s), at Seller’s expense, shall use its commercially reasonable efforts in acting as Buyer’s agent in order to obtain for Buyer the benefits thereunder, and shall cooperate, to the maximum extent permitted by law and by the terms of the applicable contract(s), with Buyer in any other reasonable arrangement designed to provide the benefits of such contracts to Buyer. Seller shall, without further consideration therefor, pay and remit to the Buyer promptly all monies, rights, and other considerations received in respect of the Buyer’s performance of any obligations, and, at the Buyer’s request, shall direct that such payments be made directly to the Buyer. Without limiting the foregoing, Seller shall not terminate any such contract without the prior written consent of Buyer. Buyer may, from time to time, upon five (5) Business Days’ written notice to Seller, terminate any arrangements which are the subject of this Section 2.7(c) with respect to periods after such notice, without liability or further obligation to Seller or any third party.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

 

3.1 Representations and Warranties of Parent and Seller . Parent and Seller jointly and severally represent and warrant to Buyer that each of the following representations and warranties are true and correct as of the Execution Date and will be true and correct as of the Closing Date. When information is included in schedules referenced in this Article III or Article IV or elsewhere in this Agreement such information shall be deemed disclosed only as to such schedule unless the disclosure is reasonably apparent from its face to be applicable to other sections of this Agreement. Information included in any schedule shall apply to all matters in the representation containing such schedule. The inclusion of information on any schedule shall not be deemed as admission or acknowledgment by virtue of its inclusion that such information is required to be set forth therein or that such information is material. Capitalized terms used in the schedules and not otherwise defined therein shall have the respective meanings ascribed to them in this Agreement.

 

(a) Organization and Good Standing . Seller is a for-profit corporation duly organized, validly existing and in good standing under the laws of the State of Ohio and has all requisite corporate power and corporate authority to own, lease and operate the Assets Seller

 

14

purports to own and to carry on the Medicaid Business as it is now being conducted by Seller. Except as set forth on Schedule 3.1(a) , Seller has no Subsidiary and does not own any shares of capital stock or other equity of any other Person.

 

(b) Authority . Each of Parent and Seller has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller and Parent, respectively, and, as necessary, their respective Affiliates. This Agreement constitutes a valid and binding obligation of both Parent and Seller, enforceable against Parent and Seller in accordance with its terms, except insofar as enforcement may be limited by insolvency or similar laws affected the enforcement of creditors’ rights in general, and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(c) No Violations . Except as disclosed on Schedule 3.1(c) , the execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in, any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of any benefit under, or the creation of a Lien, security interest or other encumbrance with respect to, any portion of the Assets or Assumed Liabilities (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, a “ Violation ”), pursuant to any provision of the Articles of Incorporation or Bylaws or regulations of Seller or Parent, (ii) result in any Violation of any contract which constitutes part of the Assets or Assumed Liabilities, (iii) result in any Violation of any judgment, order or decree entered with respect to Seller or Parent or to which the Assets or the Assumed Liabilities are subject, (iv) result in any Violation of any statute, law, ordinance, rule or regulation applicable to the Assets or the Assumed Liabilities or (v) provide any Governmental Entity or Person the right to withdraw, revoke, suspend, cancel, terminate or modify any consent, license, permit, waiver or other authorization issued or originated previously.

 

(d) No Consents . Except as described on Schedule 3.1(d) , no other consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller, or the consummation by Seller of the transactions contemplated hereby.

 

(e) Seller’s Financial Statements . Seller has delivered to Buyer, complete and correct copies of (i) the audited balance sheets of Seller as of December 31, 2002 and 2003 and those related audited statements of income and cash flows, for the fiscal years ended on those dates, together with all footnotes (the “ Financial Statements ”) and (ii) the unaudited balance sheet and statement of income of Seller for the period ended on August 31, 2004 (the “ Interim Financial Statements ”). All of such financial statements fairly present, in all material respects, as of and for the periods then ended, as the case may be (subject, in the case of the unaudited balance sheet and income statement, to normal, recurring adjustments and the absence of footnotes), the financial position, results of operations and cash flows of Seller in conformity with GAAP or where inconsistent with GAAP in conformity with statutory or other accounting practices

 

15

prescribed or permitted by the insurance regulatory authorities in the State of Ohio, in each case applied on a basis consistent throughout the reported periods. Such Financial Statements (iii) do not contain, as the case may be, any item of extraordinary or non-recurring income or expense (except as specified therein); and (iv) reflect all write-offs or necessary revaluation of assets (except as specified therein). Except as set forth on Schedule 3.1(e), the reserves recorded in the accounting records of Seller for HIC contract benefits, losses, claims and expenses and any other reserves (i) were prepared in accordance with the statutory or other actuarial and accounting practices prescribed or permitted by the insurance regulatory authorities of the State of Ohio, (ii) make sufficient provisions for all insurance obligations of Seller; (iii) meet the requirements of any law, rule or regulation applicable to such reserves and the requirements of Seller’s Permits (as defined below); and (iv) are computed on the basis of assumptions consistent with those used in computing the corresponding reserves in the prior fiscal year. All payments to and/or settlements with Medicaid Providers have been accounted for in the appropriate medical expense reserve account (by category of medical expense) and have been reflected as a medical expense of Seller or Summa Health Network, as applicable.

 

(f) Litigation . Except as set forth on Schedule 3.1(f) , there are (i) no actions, suits, proceedings, of any kind pending, or governmental investigations of any kind now pending or to Seller’s or Parent’s knowledge, threatened in writing and involving the Assets, the Medicaid Business, or the Assumed Liabilities, (ii) no action, suit, demand, investigation or proceeding which is pending or threatened which questions the validity or propriety of this Agreement or any action taken or to be taken by Seller or Parent in connection with this Agreement or (iii) to Seller’s or Parent’s knowledge, no event has occurred or circumstances exist that is reasonably likely to give rise to or serve as a basis for the commencement of either (i) or (ii). Seller is not subject to any judicial injunction or mandate or any administrative order or administrative restriction directed to or against it as a result of its ownership of the Assets or its conduct of the Medicaid Business as now or heretofore conducted by it, and no Governmental Entity has at any time challenged or questioned in writing, or commenced or given notice of intention to commence any investigation relating to, the legal right of Seller to conduct the Medicaid Business or any part thereof as now or heretofore conducted by it.

 

(g) Compliance With Applicable Laws . Except as set forth on Schedule 3.1(g) , the Medicaid Business is being conducted in compliance with all applicable laws, rules, ordinances, regulations, licenses, or judgments, or orders, rules, regulations, licenses, judgments, or decrees of Governmental Entities, and no condition exists which with or without notice or passage of time or both shall cause Seller not to remain in such compliance, nor has Seller received notification from any Governmental Entity asserting that, with respect to the Medicaid Business, it is not in compliance with any of the statutes, regulations or ordinances which such governmental authority enforces, or that the governmental agency or department is threatening to revoke, suspend or modify any governmental authorization applicable to the Medicaid Business. Seller has not utilized and does not utilize brokers or agents in the conduct of the Medicaid Business. Seller holds all certificates of authority, permits, licenses, consents, certificates, orders and approvals from all Governmental Entities which are necessary to own or lease the Assets and operate the Medicaid Business in the manner heretofore conducted (collectively, “ Seller’s Permits ”), and Seller’s Permits are in full force and effect. Schedule 3.1(g) sets forth a complete and accurate listing of the Seller’s Permits. Seller has filed all statements and reports with insurance regulatory authorities required by the law, regulations, licensing requirements and

 

16

orders administered or issued by such regulatory authorities. No event has occurred with respect to any of such Seller’s Permits which would cause revocation, termination or suspension of any of such Seller’s Permits or give rise to any obligation on the part of Seller (pre-Closing) or Buyer (post-Closing) to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. Seller has not, and none of its executive officers, directors or employees (in their respective capacities as such) has, engaged in any activity constituting fraud or abuse under the laws relating to health care or insurance. Schedule 3.1(g) lists all examinations of Seller subsequent to January 1, 2002, related to the Medicaid Business conducted by a Governmental Entity and identifies by date any correspondence between such a Governmental Entity and Seller regarding sanctions, conclusions made and/or corrective action required or suggested based on such examination.

 

(h) Owned Real Property . Seller does not own any real property that is used in the Medicaid Business.

 

(i) Real Property Leases . Schedule 3.1(i) , sets forth all of the Real Property Leases. Neither Seller nor Parent is a party to any Real Property Lease that is necessary to the operation of the Medicaid Business.

 

(j) Absence of Undisclosed Liabilities . Except (i) as set forth on Schedule 3.1(j) hereto, (ii) as reflected or reserved against on the face of the Interim Financial Statements, or (iii) for obligations or liabilities incurred in the ordinary course of business after the date of the Interim Financial Statements (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law), Seller has no obligations or liabilities of any nature whatsoever relating to the Medicaid Business (whether absolute, accrued, contingent, disputed or otherwise and including, without limitation, deferred Tax liabilities, vacation time or pay, severance pay, and any other liabilities relating to or arising out of any act, omission, transaction, circumstance, sale of services, or other condition which occurred or existed on or before such date); nor does there exist a set of circumstances relating to the Medicaid Business resulting from transactions effected or events occurring on or prior to the Closing Date or from any action omitted to be taken during such period that could reasonably be expected to result in any such obligation or liability relating to the Medicaid Business.

 

(k) Absence of Certain Changes . Since December 31, 2003, except (i) as set forth on Schedule 3.1(k) , (ii) for the execution and delivery of this Agreement and changes in Seller’s properties or Medicaid Business attributable to the transactions contemplated or necessitated by this Agreement, and (iii) as disclosed in Seller’s Interim Financial Statements as previously delivered or to be delivered to Buyer:

 

(i) Seller has not made any material change in its accounting methods or practices or its present fiscal year with respect to its condition, operations, the Medicaid Business, the Assets, or the Assumed Liabilities, except as may be required by statutory accounting principles, in which case Seller has promptly notified Buyer in writing of the nature of and reason for the change;

 

17

(ii) Seller has not executed, amended, or terminated any contract which would adversely affect (either in the aggregate or individually) the Medicaid Business to which it is or was a party or by which any of the Assets are bound or affected; amended, terminated or waived any of its rights thereunder; or received notice of termination, amendment, or waiver of any contract or any material rights thereunder;

 

(iii) Seller has not permitted any Lien on the Assets;

 

(iv) Seller has (A) conducted its Medicaid Business in a commercially prudent manner, as a going concern and in the ordinary course and consistent with such operation, complied in all material respects with applicable legal and contractual obligations, consistent with past practice; (B) used commercially reasonable efforts, consistent with past practice, to preserve the goodwill of its Medicaid Members and its employees; and (C) not taken any action outside of the ordinary course of business which would reasonably be expected to cause Medicaid Members to disenroll from Seller’s Medicaid Business.

 

(v) Seller has not made or granted any increase in the terms or conditions of compensation payable or to become payable by Seller (or for which Seller or Buyer may have any liability) to any Medicaid Provider with respect to the Medicaid Business other than changes in the Ohio Medicaid Fee Schedules and changes in the transfer pricing agreement between Seller and Summa Health System Hospitals;

 

(vi) Seller has not failed to pay any medical claim liability or indebtedness relating to the Medicaid Business when due and all such claim liabilities have been properly recorded on the books of Seller;

 

(vii) Seller has not suffered (involuntarily or voluntarily), with respect to the Medicaid Business, any adverse changes in condition (financial or otherwise), results of operations, earnings, properties, prospects, or business (including, without limitation, any change in its premium or other revenues, claims or other costs (including IBNR Expenses), or relations with governmental authorities, Medicaid Members, Medicaid Providers, or any of its employees, agents, underwriters, or others);

 

(viii) Seller has not incurred or paid any indebtedness, obligation or other liability (contingent or otherwise) relating to the Medicaid Business, except in the ordinary course of its business, consistent with its past practice and in any event not in excess of $75,000 in the aggregate, and there does not exist a set of circumstances that could reasonably be expected to result in any such indebtedness, obligation or liability;

 

(ix) Seller had not suffered any strike, dispute, grievance, controversy or other similar labor trouble with respect to employees serving the Medicaid Business;

 

(x) Seller has not instituted, settled, or agreed to settle, any litigation, action or proceeding before any Governmental Entity relating to the Medicaid Business;

 

(xi) Seller has not made any changes in servicing, billing or collection operations or policies of the Medicaid Business;

 

18

(xii) Seller has not merged or consolidated with any other corporation or other entity or permitted any other entity to merge into it (unless the surviving entity is bound by the terms of this Agreement and prepared to perform its obligations hereunder);

 

(xiii) Seller has not taken or omitted to take any action, or permitted the occurrence of any change or event, which would render any of its representations and warranties contained herein untrue at and as of the Closing Date with the same effect as though such representations and warranties had been made at and as of the Closing Date; and

 

(xiv) Seller has not entered into any agreement or made any commitment to take any of the types of action described in Section 3. l(k)(i) through Section 3.1(k)(xiii) above.

 

(l) Contracts . Schedule 3.1(l) contains a complete and accurate listing of all of the Business Contracts (including without limitation the Purchased Provider Agreements and Seller’s Medicaid Contract). Each of the Business Contracts is in full force and effect and is valid and enforceable by Seller in accordance with its terms, except insofar as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights in general, and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Seller is not in default in the observance or the performance of any term or obligation to be performed by it under any such contract. To Seller’s or Parent’s knowledge, no other person is in material default in the observance or the performance of any term or obligation to be performed by it under any such contract. Seller has provided originals or true and correct copies of all such contracts constituting part of the Assets or Assumed Liabilities.

 

(m) Title to and Condition of Assets . Seller has good and valid title to the Assets free and clear of all Liens, and, except as set forth on Schedule 3.1 (d) or 3.1(s)(iv) , without any restrictions on transfer. Except as set forth on Schedule 3.1 (m) , all of the Assets are useable in the ordinary course of business. The Assets are suited for and include all assets necessary for the conduct of the Medicaid Business in a manner consistent with the past custom and practices of the Seller.

 

(n) No Broker or Finders . No broker or finder is involved on behalf of Seller or an Affiliate of Seller in connection with the sale of the Assets, nor may any broker or finder involved on behalf of Seller claim any commission on account of the sale of the Assets.

 

(o) Operating Data . On or prior to the date hereof, Seller has delivered to Buyer certain of its operating data and certain performance data for the Medicaid Business, including, without limitation, information with respect to the details comprising the Medical expense components of the Medicaid Business; to Seller’s and Parent’s knowledge, such data accurately and fairly presents the operations of the Medicaid Business, and is consistent with the information contained in the Books and Records.

 

(p) Tax Returns and Tax Liabilities .

 

(i) Seller has timely filed all Tax Returns that it was required to file (including, without limitation, all real and personal property, informational, franchise and withholding Taxes and other Returns) or has submitted an extension within which to file such

 

19

Tax Returns; all such Tax Returns were correct and complete in all respects and based on the applicable measure of Seller’s operations or Assets during the period in question; and true and correct copies of all such Tax Returns are included in Seller’s files.

 

(ii) All Taxes owed by Seller (whether or not shown or required to be shown on any Tax Return) have been paid on or before the date for which payment is required to avoid interest and penalties thereon. Except as identified in Schedule 3.1(p), Seller is not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction whe