Exhibit 10.3

 

STOCK PURCHASE AGREEMENT

 

BY AND BETWEEN

 

CENTENE CORPORATION

 

AND

 

SWOPE COMMUNITY ENTERPRISES

 

SEPTEMBER 28, 2004

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TABLE OF CONTENTS

 

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ARTICLE I           DEFINITIONS    1 ARTICLE II           PURCHASE AND SALE OF
SHARES    8      2.1    Stock Purchase.    8      2.2    Determination of
Purchase Price.    8      2.3    The Closing.    10      2.4    Tax Matter
Cooperation.    11 ARTICLE III           REPRESENTATIONS AND WARRANTIES
CONCERNING SELLER    11      3.1    Organization and Good Standing.    11     
3.2    Authorization.    11      3.3    Non-Contravention.    12      3.4   
Ownership of Shares.    12 ARTICLE IV           REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANIES    12      4.1    Organization and Good Standing.    12
     4.2    Capitalization.    13      4.3    Subsidiaries.    13      4.4    No
Violations.    14      4.5    No Consents.    14      4.6    Financial
Statements.    14      4.7    Litigation.    15      4.8    Compliance with
Applicable Laws.    15      4.9    Title and Condition of Properties.    16     
4.10    Real Property Leases.    16      4.11    Absence of Undisclosed
Liabilities.    17      4.12    Absence of Certain Changes.    17      4.13   
Contracts.    18      4.14    Title to and Condition of Assets.    20      4.15
   No Brokers or Finders.    20      4.16    Tax Returns and Tax Liabilities.   
21      4.17    Employees and Employee Benefits.    22      4.18   
Indebtedness.    23      4.19    Providers and Provider Agreements.    23     
4.20    Status of Medicaid Contracts and Provider Agreements.    24      4.21   
Medicaid Members.    25      4.22    Intellectual Property.    25

 

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     4.23    No Acceleration of Rights or Benefits.    26      4.24   
Insurance.    26      4.25    Notes and Accounts Receivable.    26 ARTICLE V   
       REPRESENTATIONS AND WARRANTIES OF BUYER    26      5.1    Organization
and Good Standing.    26      5.2    Buyer’s Authority.    26      5.3    No
Brokers or Finders.    27      5.4    Buyer’s Consents.    27      5.5   
Regulatory Status.    27      5.6    No Violations.    27      5.7    No
Consents.    27      5.8    Legal Proceedings.    27      5.9    Sufficient
Funds.    28 ARTICLE VI           BUYER’S CONDITIONS PRECEDENT TO CLOSING    28
     6.1    Instruments of Transfer.    28      6.2    Corporate Resolutions.   
28      6.3    Statutory Net Worth.    28      6.4    Performance of Conditions
Precedent.    28      6.5    Good Standing Certificate.    28      6.6   
Secretary’s Certificates.    29      6.7    Contract Terminations.    29     
6.8    Material Adverse Change.    29      6.9    Releases.    29      6.10   
Real Property Leases.    29      6.11    Escrow Agreement.    29      6.12   
Third Party Approvals and Consents.    29      6.13    Seller’s Representations
and Warranties True and Correct.    29      6.14    Required Governmental
Consents and Approvals.    30      6.15    Litigation.    30      6.16   
Certain Covenants.    30      6.17    Deliveries.    30      6.18    Employment
Agreement.    30      6.19    Provider Agreements.    30      6.20   
Transportation Agreement.    30      6.21    FIRPTA Affidavit.    31 ARTICLE VII
          SELLER’S CONDITIONS PRECEDENT TO CLOSING    31      7.1    Instruments
of Transfer.    31      7.2    Corporate Resolutions.    31      7.3    Escrow
Agreement.    31      7.4    Agreements.    31      7.5    Performance of
Conditions Precedent.    31

 

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     7.6    Good Standing Certificate.    31      7.7    Secretary’s
Certificate.    31      7.8    Governmental Consents and Approvals.    32     
7.9    Buyer’s Representations and Warranties True and Correct.    32      7.10
   Litigation.    32      7.11    Surplus.    32      7.12    Provider
Agreement.    32      7.13    Transportation Agreement.    32 ARTICLE VIII     
     PRE-CLOSING COVENANTS    33      8.1    Conduct of Business Pending
Closing.    33      8.2    Access to Documents and Premises.    34      8.3   
Notices and Consents.    34      8.4    Notice of Developments.    35      8.5
   Exclusivity.    35      8.6    Tax Matters.    35      8.7    Additional
Financial Information.    35      8.8    Termination of Incentive Pools/Funds.
   36      8.9    Regulatory Approval.    36      8.10    Public Information
Releases.    36      8.11    Cooperation.    36      8.12    Securities Law
Compliance.    36      8.13    Employees and Employee Benefits.    37 ARTICLE IX
          POST-CLOSING OBLIGATIONS    37      9.1    General.    38      9.2   
Employees and Employee Benefits.    38      9.3    Confidentiality.    38     
9.4    Noncompetition and Nonsolicitation.    38      9.5    Agreement to
Indemnify; Insurances.    39      9.6    Retained Marks.    40 ARTICLE X       
   INDEMNIFICATION    40      10.1    Indemnification by Seller.    40      10.2
   Indemnification by Buyer.    41      10.3    Survival.    41      10.4   
Limitations.    42      10.5    Notice and Right to Defend.    43      10.6   
Remedies.    45      10.7    Determination of Loss Amount.    45 ARTICLE XI     
     TERMINATION    46      11.1    Termination.    46

 

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     11.2    Effect of Termination.    47      11.3    Waiver.    47 ARTICLE XII
          ARBITRATION    47      12.1    Conciliation and Mediation.    47     
12.2    Arbitration.    47      12.3    Equitable Relief.    48 ARTICLE XIII   
       MISCELLANEOUS    48      13.1    Notices.    48      13.2    Waiver.   
49      13.3    Counterparts.    49      13.4    Delivery by Facsimile.    49  
   13.5    Headings.    49      13.6    Severability.    50      13.7    Entire
Agreement.    50      13.8    Successors and Assigns.    50      13.9   
Governing Law.    50      13.10    Cost of Transaction.    51      13.11   
Further Assurances.    51      13.12    Construction.    51      13.13    Third
Parties.    51      13.14    Confidentiality.    52      13.15    Rights
Cumulative.    52      13.16    Amendments.    52

 

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
this 28th day of September, 2004 (the “Execution Date”), by and between Centene
Corporation, a Delaware corporation (“Buyer”), and Swope Community Enterprises,
a Missouri non-profit corporation (“Seller”). Each of Buyer and Seller are
sometimes collectively referred to herein as the “Parties” and individually as a
“Party.”

 

RECITALS:

 

A. Seller owns all of the issued and outstanding capital stock of FirstGuard
Health Plan, Inc., a Missouri corporation (“FGHP”), and FirstGuard, Inc., a
Delaware corporation (“FirstGuard”).

 

B. FirstGuard owns as of the date hereof one hundred percent (100%) of the
issued and outstanding capital stock of FirstGuard Health Plan Kansas, Inc., a
Kansas corporation (“FG Kansas” and together with FGHP and FirstGuard, the
“Companies”).

 

C. On the terms and subject to the conditions set forth in this Agreement, Buyer
desires to purchase directly or indirectly from Seller, and Seller desires to
sell to Buyer, all of the Shares (as defined herein).

 

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.

 

1.1 “AAA” has the meaning ascribed to it in Section 12.2.

 

1.2 “Actual Claims Received” has the meaning ascribed to it in Section 2.2.4.

 

1.3 “Actual Statutory Net Worth” has the meaning ascribed to it in Section
2.2.6.

 

1.4 “Affiliates” means any Person directly or indirectly controlling, controlled
by or under common control with another Person.

 

1.5 “Affiliated Entities” means Affiliates other than Persons which are human
beings.

 

1.6 “Audit Firm” has the meaning ascribed to it in Section 2.2.4.

 

1.7 “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

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contribution retirement plan or arrangement which 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 or (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 material fringe
benefit or other retirement, bonus, severance, retention, vacation, sick pay or
incentive plan, practice, arrangement, agreement or incentive plan or program,
whether or not funded and whether or not terminated.

 

1.8 “Board of Arbitration” has the meaning ascribed to it in Section 12.2.

 

1.9 “Buyer” has the meaning ascribed to it in the Preamble.

 

1.10 “Buyer Medical Claims Amount” shall have the meaning ascribed to it in
Section 2.2.4.

 

1.11 “Buyer Plans” has the meaning ascribed to it in Section 9.2.1.

 

1.12 “Cap” has the meaning ascribed to it in Section 10.4.

 

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

 

1.14 “Closing Date” means the date of Closing as determined pursuant to Section
2.3.1.

 

1.15 “COBRA” has the meaning ascribed to it in Section 4.17(b).

 

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

 

1.17 “Company Intellectual Property” has the meaning ascribed to it in Section
4.22.3.

 

1.18 “Company Permits” has the meaning ascribed to it in Section 4.8.

 

1.19 “Company Benefit Plans” has the meaning set forth in Section 4.17(b).

 

1.20 “Competing Business” means the provision within the States of Kansas and
Missouri of Medicaid managed care benefits through any claims processing agency,
health insurance or health benefit program, including, without limitation, any
health maintenance organization, healthcare preferred provider organization,
supplemental security income (SSI) or dual eligible programs (other than the
Pace program) or any other programs covered by Title 19 or 21 and AFDC and Chips
Programs; provided that the foregoing shall not be interpreted in any way to
prevent the Seller or its Subsidiaries or Affiliates from continuing to (x)
provide healthcare services directly to Medicaid participants in the role of
medical practitioners or (y) own a one-ninth interest in Comcare (subject to
adjustments for stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events);
provided that no such adjustment results in Seller or its Affiliates owning more
than 49% of the outstanding interest in Comcare or the ability to elect a
majority of the directors of

 

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Comcare. Nothing contained herein shall limit Seller’s rights to provide third
party claim processing or other related services to any Medicare or commercial
insurance provider or carrier (in each case, so long as such provider or carrier
does not participate in any Medicaid program (other than the Pace program)) or
participate in any capitated benefit programs that do not provide Medicaid
benefits.

 

1.21 “Confidentiality Agreement” means the Confidentiality Agreement between the
Parties dated February 18, 2004.

 

1.22 “Continuing Plan” has the meaning set forth in Section 8.13.2.

 

1.23 “Effective Time” has the meaning ascribed to it in Section 2.3.1.

 

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

 

1.25 “Escrow Agent” has the meaning ascribed to it in Section 2.2.2.

 

1.26 “Escrow Agreement” has the meaning ascribed to it in Section 2.2.2.

 

1.27 “Escrow Amount” means eighteen percent (18%) of the Purchase Price.

 

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

 

1.29 “Financial Statements” has the meaning set forth in Section 4.6 of this
Agreement.

 

1.30 “Former Employee” means any person who was an employee of any of the
Companies or any of their respective Subsidiaries’ at any time, but who is not
an employee of any of the Companies as of the Closing Date.

 

1.31 “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.

 

1.32 “HMO” means a licensed health maintenance organization.

 

1.33 “HPHN Agreement” has the meaning set forth in Section 10.1(e) of this
Agreement.

 

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

 

1.35 “Indebtedness” means any of the following indebtedness of the Companies,
whether or not contingent: (i) indebtedness for borrowed money (including,
without limitation, in connection with the Surplus Note (including any
principal, premium, accrued and unpaid interest, related expenses, prepayment
penalties, commitment and other fees, sale or liquidity participation amounts,
reimbursements, indemnities and all other amounts payable in connection
therewith), (ii) obligations evidenced by bonds, debentures, notes, or other
similar instruments, (iii) obligations or liabilities of the Companies under or
in connection with letters of credit or

 

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bankers’ acceptances or similar items, (iv) obligations to pay the deferred
purchase price of property or services other than those trade payables incurred
in the ordinary course of business, (v) all obligations of the Companies under
conditional sale or other title retention agreements, (vi) all obligations with
respect to vendor advances or any other advances made to the Companies, (vii)
all obligations of the Companies arising out of interest rate and currency swap
arrangements and any other arrangements designed to provide protection against
fluctuations in interest or currency rates, (viii) any deferred purchase price
obligations related to past asset or stock acquisitions by any Company or the
Seller with respect to the business of the Companies, (ix) all Liabilities of
the Companies arising from any breach of any of the foregoing, and (xiii) all
indebtedness of others guaranteed or secured by any Lien or security interest on
the assets of the Companies.

 

1.36 “Indebtedness for Borrowed Money” means any of the following indebtedness
of the Companies, whether or not contingent: (i) indebtedness for borrowed
money, including, without limitation, in connection with the Surplus Note
(including any principal, premium, accrued and unpaid interest, related
expenses, prepayment penalties, commitment and other fees, sale or liquidity
participation amounts, reimbursements, indemnities and all other amounts payable
in connection therewith), (ii) obligations evidenced by bonds, debentures,
notes, or other similar instruments, (iii) obligations or liabilities of the
Companies under or in connection with letters of credit or bankers’ acceptances
or similar items, (iv) obligations to pay the deferred purchase price of
property or services other than those trade payables incurred in the ordinary
course of business, (v) all obligations under conditional sale or other title
retention agreements, (vii) except as set forth on Schedule 1.36 all obligations
with respect to vendor advances or any other advances made to the Companies and
(viii) all Liabilities arising from any breach of any of the foregoing.

 

1.37 “Intellectual Property” means all of the following items owned by, issued
to or licensed to, the Companies along with 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 and any and all corresponding rights that, now or
hereafter, may be secured throughout the world: patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice) and any reissue, continuation, continuation-in-part,
division, revision, extension or reexamination thereof; trademarks, service
marks, trade dress, logos, Internet domain names, trade names and corporate
names together with all goodwill associated therewith; registered or
unregistered copyrights and copyrightable works and mask works; all
registrations, applications and renewals for any of the foregoing; trade secrets
and confidential information (including, without limitation, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial, business and marketing plans, and customer
and supplier lists and related information); computer software and software
systems (including, without limitation, data, databases and related
documentation); licenses or other agreements to or from third parties regarding
the foregoing; and all copies and tangible embodiments of the foregoing (in
whatever form or medium), in each case including, without limitation, the items
set forth on Schedules 4.22.1 and 4.22.2.

 

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1.38 “Interim Financial Statements” has the meaning set forth in Section 4.6 of
this Agreement.

 

1.39 “Knowledge” means, when referring to the “knowledge”, or any similar phrase
or qualification based on knowledge, the actual knowledge after reasonable
inquiry of E. Frank Ellis, Kant Doshi, Gary Brown, Joy Wheeler, Namish Patel,
Jean Rumbaugh, William Panky and Bob Kulphongpatana.

 

1.40 “Leased Real Property” means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures, or other interest in real property held by any of the Companies.

 

1.41 “Leases” means all leases, subleases, licenses, concessions and other
agreements, including all amendments, extensions, renewals, guaranties, and
other agreements with respect thereto, pursuant to which any of the Companies
holds any Leased Real Property, including the right to all security deposits and
other amounts and instruments deposited by or on behalf of any of the Companies
thereunder.

 

1.42 “Liability” means any liability, debt, interest, penalty, fine, claim,
demand, judgment, cause of action or other loss, cost or expense or obligation
of whatever kind or nature (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes.

 

1.43 “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.

 

1.44 “Material Adverse Effect” or “Material Adverse Change” means any effect or
change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating results or operations of the Companies,
taken as a whole; provided, however, that none of the following shall be deemed,
individually or in the aggregate, to constitute, and none of the following shall
be taken into account in determining whether there has been or will be, a
Material Adverse Effect or Material Adverse Change: (a) this Agreement, the
transactions contemplated by this Agreement or any event, circumstance, change
or effect arising out of or relating to the announcement thereof, (b) Buyer’s
announcement or other disclosure of its plans or intentions with respect to the
conduct of the Companies after the Closing Date or any other actions of Buyer,
(c) changes or conditions (including changes in economic or financial markets,
regulatory or legislative conditions, whether resulting from acts of war or
terrorism, an escalation of hostilities or otherwise) affecting the U.S. economy
or the healthcare industry generally (other than those resulting from regulatory
and/or legislative changes in the States of Kansas and Missouri directly
affecting the Companies) or (d) any disapproval or failure to act by the
applicable regulatory authorities in the State of Kansas regarding FG Kansas’
pending request for a rate increase.

 

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1.45 “Medicaid” means medical assistance provided under a state plan approved
under Title XIX and Title XXI of the Social Security Act.

 

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

 

1.47 “Medicaid Contract” means the contract(s) executed by and between the State
of Kansas, or Missouri, as the case may be, and any of the Companies in effect
as of the date of this Agreement for the Service Area.

 

1.48 “Medicaid Enrollment Shortfall” has the meaning ascribed to it in Section
2.2.1.

 

1.49 “Medicaid Members” means the persons enrolled under any of the Companies’
Medicaid Contracts.

 

1.50 “Medicaid Providers” means the physicians, hospitals and other health care
providers that have contracted with any of the Companies or any of their
Affiliates to provide covered health care services to Medicaid Members.

 

1.51 “Medical Claim” means any medical claim, Liability or other obligation
(including without limitation IBNR Expenses) incurred prior to the Effective
Time in connection with the provision of covered health care services to
Medicaid Members.

 

1.52 “Medical Claims Actual Final Amount” has the meaning ascribed to it in
Section 2.2.4.

 

1.53 “Medical Claims Estimate” has the meaning ascribed to it in Section 2.2.3.

 

1.54 “Medical Claims Final True Up Date” has the meaning ascribed to it in
Section 2.2.4.

 

1.55 “Non-Prevailing Party” means the party in an arbitration pursuant to
Article XIII or an audit as a result of a dispute regarding the Medical Claims
Actual Final Amount or the Actual Statutory Net Worth under Section 2.2 whose
position is the furthest from the decision reached.

 

1.56 “Owned Intellectual Property” has the meaning ascribed to it in Section
4.22.1.

 

1.57 “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.

 

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1.58 “Provider Agreements” means the written agreements for the provision of
health care services that have been executed by and between providers and any of
the Companies and, to the extent such agreements relate to the Companies’
business, any Affiliates of the Companies.

 

1.59 “Purchase Price” has the meaning ascribed to it in Section 2.2.1.

 

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

 

1.61 “Retained Marks” has the meaning ascribed to it in Section 9.6.

 

1.62 “Securities Act” means the Securities Act of 1933, as amended from time to
time.

 

1.63 “Service Area” means collectively, the Kansas City, Missouri, service area
(comprised of Clay, Cass, Henry, Jackson, Johnson, Lafayette, Platte, St. Clair
and Ray Counties) and the state of Kansas.

 

1.64 “Seller” has the meaning ascribed to it in the Preamble.

 

1.65 “Shares” means the shares of capital stock of FGHP, FirstGuard and FG
Kansas owned, directly or indirectly, by Seller on the date hereof.

 

1.66 “Statutory Net Worth” means net worth as calculated by the applicable
governing body or bodies of either State.

 

1.67 “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.

 

1.68 “Surplus Note” means the note, a copy of which is attached as Exhibit A.

 

1.69 “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

 

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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.

 

1.70 “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.

 

1.71 “Threshold” has the meaning ascribed to it in Section 10.4.

 

1.72 “Transferred Employee” refers to any person who is an employee of any of
the Companies or any of their respective Subsidiaries as of the Closing Date.

 

ARTICLE II

PURCHASE AND SALE OF SHARES

 

2.1 Stock Purchase.

 

On and subject to the terms and conditions set forth in this Agreement, on the
Closing Date, Buyer shall purchase from Seller, and Seller shall sell, transfer
and assign to Buyer, all of the Shares, free and clear of all Liens.

 

2.2 Determination of Purchase Price.

 

2.2.1 The aggregate purchase price to be paid for the Shares (the “Purchase
Price”) shall be an amount equal to $93,000,000 less (i) Indebtedness for
Borrowed Money outstanding immediately prior to the Closing, less (ii) any
Liability of the Companies that are not paid at or prior to the Closing under
the agreements set forth on Schedule 2.2.1 that become payable as a result of
the transactions contemplated hereunder, less (iii) any accruals for vacation
expense reflected on the books immediately prior to the Closing, less (iv) an
amount equal to $715 multiplied by the Medicaid Enrollment Shortfall. For
purposes hereof, the “Medicaid Enrollment Shortfall” means the amount by which
the Medicaid enrollment for the Service Area, as determined by membership in the
Service Area on the most recent State reports received prior to the Closing
Date, is less than 130,000 persons enrolled under the Companies’ Medicaid
contracts (as determined by the applicable regulatory authorities); provided,
however, that regardless of actual membership, the maximum Medicaid Enrollment
Shortfall for purposes of determining the adjustment set forth under clause (v)
above shall be 15,000.

 

2.2.2 The Escrow Amount shall be set aside out of the Purchase Price and
delivered by the Buyer via wire transfer of immediately available funds to an
escrow agent reasonably acceptable to Buyer and Seller (the “Escrow Agent”)
under an escrow agreement to be entered into on the Closing Date by and among
Seller, Buyer and the Escrow Agent substantially in the form of Exhibit B
attached hereto (the “Escrow Agreement”). The Escrow Amount shall be available
on an exclusive basis (except as specifically set forth in Section 10.4) to
satisfy amounts owing to Buyer in connection with this Agreement.

 

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2.2.3 Within ten (10) Business Days prior to the Closing Date, Seller shall in
good faith and consistent with reserve practices in effect for fiscal year 2004
prepare an estimate of the actual Medical Claims as of the Closing Date as
certified by an independent actuary (the “Medical Claims Estimate”).

 

2.2.4 On the sixteen-month anniversary of the Closing Date (the “Medical Claims
Final True Up Date”), Buyer shall determine actual claims received for services
rendered to Medicaid Members related to periods on or before the Closing Date
(“Actual Claims Received”) with respect to the Medicaid Business as of the
Closing Date (the “Buyer Medical Claims Amount”). Buyer hereby covenants and
agrees to pay Medical Claims between the Closing Date and the Medical Claims
Final True Up Date in a manner no less stringent than the Companies’ past
practices. Buyer shall prepare and send to Seller within 60 days following the
Medical Claims Final True Up Date its computation of the Actual Claims Received
as of the Closing Date together with supporting information reasonably requested
by Seller. Within 45 days following the receipt of such report, Seller must
provide Buyer with written objection to such report detailing what parts of the
Buyer Medical Claims Amount are being disputed. To the extent such written
notice is not delivered within such time frame, the Buyer Medical Claim Amount
shall become final and binding. Any disagreement between Buyer and Seller that
cannot be resolved by the Parties within 60 days after the receipt of Seller’s
written objections will be resolved by KPMG (the “Audit Firm”). The Parties
shall have an opportunity to present their position to the Audit Firm and shall
cooperate with the Audit Firm in making available to them any records or work
papers requested by the Audit Firm. The decision of the Audit Firm shall be set
forth in writing and will be conclusive and binding on the Parties and subject
to judicial enforcement. The Non-Prevailing Party shall pay all costs and fees
of the Audit Firm and the reasonable attorney fees and other costs of the
prevailing party in connection with such dispute.

 

2.2.5 Upon the final determination of the Medical Claims Actual Final Amount, to
the extent that the Medical Claims Actual Final Amount exceeds the Medical
Claims Estimate, Buyer and Seller shall promptly provide written notice to the
Escrow Agent, instructing the Escrow Agent to pay an amount equal to such excess
to the Buyer by wire transfer of immediately available funds; provided that to
the extent any disputed Medical Claims remain outstanding or unresolved after
the 16 month anniversary of the Closing Date, the Escrow Amounts equal to such
claims shall not be released from the Escrow Account until such time as such
Medical Claims disputes have come to final resolution. The aggregate final
amount determined pursuant to this Section and Section 2.2.4 shall be deemed the
“Medical Claims Actual Final Amount.”

 

2.2.6 On the thirtieth (30th) day after the Closing Date, Buyer shall determine
the actual Statutory Net Worth as of the Closing Date (“Actual Statutory Net
Worth”) and deliver written notice to Sellers of such amount. The Buyer shall
determine the Actual Statutory Net Worth using (i) the same accounting
principles and methodologies as used in the Companies balance sheets at June 30,
2004 and (ii) the Medical Claims Estimate as set forth in Section 2.2.3. Within
30 days following the receipt of such calculation, Seller must provide Buyer
with written objection to such calculation detailing what parts of the Actual
Statutory Net Worth are being

 

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disputed. To the extent such written notice is not delivered within such time
frame, the Actual Statutory Net Worth shall become final and binding. Any
disagreement between Buyer and Seller that cannot be resolved by the Parties
within 60 days after the receipt of Seller’s written objections will be resolved
by the Audit Firm. The Parties shall have an opportunity to present their
position to the Audit Firm and shall cooperate with the Audit Firm in making
available to them any records or work papers requested by the Audit Firm. The
decision of the Audit Firm shall be set forth in writing and will be conclusive
and binding on the Parties and subject to judicial enforcement. The
Non-Prevailing Party shall pay all costs and fees of the Audit Firm and the
reasonable attorney fees and other costs of the prevailing party in connection
with such dispute. Upon such determination, to the extent that the Actual
Statutory Net Worth exceeds $6,000,000, Buyer shall deliver such excess amount
by wire transfer of immediately available funds to Seller or to the extent that
the Actual Statutory Net Worth is less than $6,000,000, Seller shall deliver an
amount equal to such deficiency by wire transfer of immediately available funds
to Buyer. Any payment by Seller hereunder shall be taken into account to avoid
double counting in connection with the medical claims true up pursuant to
Section 2.2.4 above. In addition, the deductions provided for by Section
2.2.1(i), (ii) and (iii) shall be taken into account to avoid double counting in
connection with the determination of the amount payable, if any, pursuant to
this Section 2.2.6. The aggregate adjustment amount determined pursuant to this
Section shall be deemed the “Statutory Net Worth Adjustment Amount.”

 

2.3 The Closing.

 

2.3.1 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 no later than the second business day 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 if such conditions have not been satisfied or waived in time to close by
December 10, 2004, the closing shall take place on the later to occur of January
3, 2005 or the second business day after the conditions have been so satisfied.
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, at 12:01 a.m. (Central Time, adjusted for daylight savings
time, if applicable) on the day after the Closing Date (the “Effective Time”).
The Closing shall take place 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.

 

2.3.2 Subject to the terms and conditions set forth in this Agreement, the
Parties hereto shall consummate the following “Closing Transactions” on the
Closing Date:

 

2.3.2.1 Seller shall deliver to Buyer the certificate(s) representing the
Shares, duly endorsed for transfer or accompanied by duly executed stock powers;

 

2.3.2.2 Buyer shall deposit the Escrow Amount into escrow with the Escrow Agent
pursuant to the terms and conditions set forth in the Escrow Agreement;

 

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2.3.2.3 Buyer shall deliver by wire transfer to Seller the Purchase Price (as
reduced by the Escrow Amount) payable to Seller in immediately available funds
to an account designated at least two (2) Business Days prior to the Closing
Date by Seller to Buyer in writing;

 

2.3.2.4 Each of the Parties shall deliver the respective, certificates and other
instruments required to be delivered by or on behalf of them under Articles VII
and VIII hereof; and

 

2.3.2.5 Seller shall deliver to Buyer all corporate books and records and other
property of each of the Companies in Seller’s possession.

 

2.4 Tax Matter Cooperation.

 

At the request of Buyer, Seller shall use commercially reasonable efforts to
cooperate with Buyer on all Tax related matters concerning this transaction.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES CONCERNING SELLER

 

As of the Execution Date, Seller represents and warrants to Buyer that each of
the following representations and warranties are true and correct as of the date
hereof and will be true and correct as of the Closing Date. When information is
included in schedules referenced in this Article III, Article IV or Article V 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.

 

3.1 Organization and Good Standing.

 

Seller is duly organized, validly existing, and in good standing under the laws
of the State of Missouri.

 

3.2 Authorization.

 

Seller has full power and authority (including full corporate or other entity
power and authority) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Seller, enforceable in accordance with its terms and conditions.
Except as set forth on Schedule 3.2, Seller need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
Governmental Entity, nor is any such authorization, consent, or approval
required, in order to consummate the transactions contemplated by this
Agreement. The execution, delivery, and performance of this Agreement and all
other agreements contemplated hereby have been duly authorized by Seller.

 

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3.3 Non-Contravention.

 

Assuming that all items set forth on Schedule 3.2 are complied with, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will except as set forth on Schedule 3.3, (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any Governmental Entity
to which Seller is subject or any provision of its charter, bylaws, or other
governing documents, (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which Seller is a party or by which he or it is bound or to which any of his
or its assets is subject or (C) result in the imposition or creation of a Lien
upon or with respect to the Shares.

 

3.4 Ownership of Shares.

 

Seller directly or indirectly (through its ownership of FirstGuard) holds of
record and owns beneficially 100% of the Shares set forth on Schedule 3.4, free
and clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. There
are no rights outstanding, options, warrants, purchase rights, or other
contracts or commitments that could require Seller to sell, transfer, or
otherwise dispose of any capital stock of the Companies (other than this
Agreement). Except as set forth on Schedule 3.4, no former shareholder of any of
the Companies has any claim or rights against the Companies or Seller. Seller is
not a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of any of the Companies or any of
their respective Subsidiaries.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES

 

As of the Execution Date, Seller represents and warrants to Buyer that each of
the following representations and warranties are true and correct as of the date
hereof and will be true and correct as of the Closing Date (except as otherwise
provided herein):

 

4.1 Organization and Good Standing.

 

Each of the Companies is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
full corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the Medicaid Business in which it is engaged and to own
and use the properties owned and used by it. Schedule 4.1 lists the directors
and officers of each of the Companies. Seller has delivered to Buyer correct and
complete copies of the charter and bylaws of each of the Companies (as amended
to date). No Company is in default under or in violation of any provision of its
charter or bylaws.

 

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4.2 Capitalization.

 

The entire authorized capital stock of (i) FirstGuard consists of 1,000 Shares,
100 of which are issued and outstanding, (ii) FGHP consists of 400,000 Class A
Shares, of which 360,000 Shares are issued and outstanding and none of which are
held in treasury, and 200,000 Class B Shares, none of which are issued,
outstanding or held in treasury and (iii) FG Kansas consists of 1,000,000
Shares, of which 125 Shares are issued and outstanding and 25 of which are held
in treasury. All of the issued and outstanding Shares have been duly authorized,
are validly issued, fully paid, and non-assessable, and are held directly or
indirectly (through its ownership of FirstGuard) of record by Seller as set
forth in Schedule 4.2. No shares of the capital stock of any of the Companies
are reserved for any purpose; there are no preemptive or similar rights with
respect to the issuance, sale or other transfer (whether present, past or
future) of the capital stock of any of the Companies and there are no agreements
or other obligations (contingent or otherwise) which may require any of the
Companies to issue, repurchase or otherwise acquire any shares of its capital
stock or any of its other securities of any kind. Except as set forth on
Schedule 4.2, no former shareholder of any of the Companies has claim or rights
against the Companies or Seller. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the
Companies to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to any of
the Companies. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of any of the
Companies.

 

4.3 Subsidiaries.

 

Schedule 4.3 sets forth for each of the Companies’ respective Subsidiaries
(other than FG Kansas as a Subsidiary of FG), if any, (i) its name and
jurisdiction of incorporation, (ii) the number of shares of authorized capital
stock of each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, and (iv) the number
of shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each of the Companies’ respective
Subsidiaries have been duly authorized and are validly issued, fully paid, and
non-assessable. Each of the Companies holds of record and owns beneficially all
of the outstanding shares of each of its respective Subsidiaries, free and clear
of any restrictions on transfer. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the
Companies or their respective Subsidiaries to sell, transfer, or otherwise
dispose of any capital stock of any of their respective Subsidiaries or that
could require any Subsidiary of any of the Companies to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any of the Companies’ respective Subsidiaries. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of any of the Companies. No
Company controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of any of the Companies. Except for the
Subsidiaries set forth in Schedule 4.3, no Company owns or has any right to
acquire, directly or indirectly, any outstanding capital stock of, or other
equity interests in, any Person.

 

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4.4 No Violations.

 

Except as disclosed on Schedule 4.4, the execution, delivery and performance of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, (a) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which any of the Companies is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Lien upon the
Shares or any of the Companies’ assets), (b) assuming that all items set forth
on Schedule 3.2 are complied with, violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any Governmental Entity to which any of the Companies is subject,
(c) violate any provision of the charter or bylaws of any of the Companies or
(d) provide any Governmental Entity (as defined below) or Person the right to
withdraw, revoke, suspend, cancel, terminate or modify any consent, license,
permit, waiver or other authorization issued or originated previously.

 

4.5 No Consents.

 

Except for such filings, authorizations, orders and approvals described on
Schedule 4.5, no other consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to any of the Companies or Seller in connection with the
execution and delivery of this Agreement by Seller, or the consummation by
Seller of the transactions contemplated hereby.

 

4.6 Financial Statements.

 

Seller has delivered to Buyer, complete and correct copies of (a) each of the
Companies’ balance sheets as of December 31, 2002 and 2003 and those related
statements of income and cash flows, for the fiscal years ended on those dates,
together with footnotes (the “Financial Statements”), the financial statements
of FGHP and FG Kansas being audited and (b) each of the Companies’ unaudited
balance sheet and statement of income for the period ended on June 30, 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) and in
the case of the FirstGuard financial statements, the absence of footnotes, the
financial position, results of operations and cash flows of the Companies, and
in the case of FGHP and FG Kansas such financial statements are in conformity
with statutory or other accounting practices prescribed or permitted by the
insurance regulatory authorities in the respective State, in each case applied
on a basis consistent throughout the reported periods. Except as indicated in
Schedule 4.6, each of the foregoing financial statements (including in all cases
the notes thereto, if any) is consistent in all material respects with the books
and records of the Companies (which, in turn, are accurate and complete in all
material respects). Except as indicated in Schedule 4.6, such financial
statements (a) do not contain, as the case may be, any item of extraordinary or
non-recurring income or expense (except as specified therein); and (b)

 

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reflect all write-offs or necessary revaluation of assets of a material nature
(except as specified therein). The reserves recorded in the accounting records
of each of the Companies for HMO contract benefits, losses, claims and expenses
and any other reserves (a) were prepared in accordance with the statutory or
other actuarial and accounting practices prescribed or permitted by the
insurance regulatory authorities of the States, (b) make good and sufficient
provisions for all insurance obligations of each of the Companies; (c) meet the
requirements of any law, rule or regulation applicable to such reserves and the
requirements of the Company Permits (as defined below); and (d) except as set
forth on Schedule 4.6, 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 account of each of the Companies.

 

4.7 Litigation.

 

Except as set forth in Schedule 4.7 and except for (a) administrative
proceedings regarding Provider claims and (b) member appeals that are in the
ordinary course of business, in the case of (a) and (b) arising after the date
hereof, no Company (i) is subject to any outstanding injunction, judgment,
order, decree or ruling or (ii) is a party or, to the Knowledge of Seller, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any Governmental Entity. None of the actions,
suits, proceedings, hearings, and investigations set forth in Schedule 4.7 has
had or would reasonably be expected to have a Material Adverse Change. Except as
set forth in Schedule 4.7, no Company is subject to any arbitration proceedings
under collective bargaining contracts or otherwise or, any governmental
investigations or inquiries. Except as set forth on Schedule 4.7, no Company
will be subject to any Liability not fully covered by insurance (other than the
deductible under such insurance) maintained by the Companies, in respect of the
matters set forth on Schedule 4.7. To the Knowledge of Seller, no such action,
suit, proceeding, hearing, or investigation may be or has been threatened
against any of the Companies.

 

4.8 Compliance with Applicable Laws.

 

Except as set forth on Schedule 4.8, each of the Companies has conducted and is
conducting its business in compliance with all material 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 any
of the Companies not to remain in such compliance, nor has any of the Companies
received notification from any Governmental Entity asserting that 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 such Company or such Subsidiary. Each of the Companies holds all
material certificates, permits, licenses, consents, orders and approvals from
all Governmental Entities (collectively, the “Company Permits”) which are
necessary to own or lease its assets and operate its business in the manner
heretofore conducted, and the Company Permits are in full force and effect.
Schedule 4.8 sets forth a complete and accurate listing of the Company Permits.
Each of the Companies has filed all material statements and reports with the
insurance regulatory authorities as required by applicable laws, regulations,
licensing requirements and orders administered or issued by such

 

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regulatory authorities. The Companies have not received written notice of, and
to the Knowledge of Seller, no event has occurred with respect to any of the
Company Permits that would cause the revocation, termination or suspension of
any of such Company Permits or give rise to any obligation on the part of any of
the Companies to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature. To the Knowledge of Seller, no Company 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. To the Knowledge of Seller, Schedule 4.8 lists all
examinations of each Company conducted by a Governmental Entity and identifies
by date any correspondence between any Governmental Entity and each Company
regarding sanctions, conclusions made and/or corrective action required or
suggested based on such examination.

 

4.9 Title and Condition of Properties.

 

None of the Companies own any real property.

 

4.10 Real Property Leases.

 

Schedule 4.10 sets forth the address of each parcel of Leased Real Property, and
a true and complete list of all Leases for each such Leased Real Property
(including the date and name of the parties to such Lease document). Each of the
Companies has delivered to Buyer a true and complete copy of each such Lease
document, and in the case of any oral Lease, a written summary of the material
terms of such Lease. Except as set forth in Schedule 4.10, with respect to each
of the Leases:

 

4.10.1 Such Lease is legal, valid, binding, enforceable and in full force and
effect;

 

4.10.2 The transaction contemplated by this Agreement does not require the
consent of any other party to such Lease, will not result in a breach of or
default under such Lease, and will not otherwise cause such Lease to cease to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the Closing;

 

4.10.3 No Company or, to the Knowledge of Seller, any other party to the Lease
is in breach or default under such Lease, and no event has occurred or
circumstance exists which, with the delivery of notice, the passage of time or
both, would constitute such a breach or default, or permit the termination,
modification or acceleration of rent under such Lease;

 

4.10.4 No Company has subleased, licensed or otherwise granted any Person or
Governmental Entity the right to use or occupy such Leased Real Property or any
portion thereof;

 

4.10.5 No Company has collaterally assigned or granted any other Lien in such
Lease or any interest therein; and

 

4.10.6 There are no Liens on the interest created by such Lease.

 

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4.11 Absence of Undisclosed Liabilities.

 

Except (a) as set forth on Schedule 4.11 hereto, (b) as reflected or reserved
against on the face of the Interim Financial Statements, or (c) 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), to the knowledge of Seller,
no Company has any obligation or Liability of any nature whatsoever (whether
absolute, accrued, contingent, disputed or otherwise).

 

4.12 Absence of Certain Changes.

 

Except (i) as set forth on Schedule 4.12, (ii) for the execution and delivery of
this Agreement and changes in each of the Companies’ assets, properties or
business attributable to the transactions contemplated or necessitated by this
Agreement, and (iii) as disclosed in each of the Companies’ Interim Financial
Statements as previously delivered or to be delivered to Buyer, since December
31, 2003:

 

4.12.1 No Company, except as otherwise expressly permitted in this Agreement,
has redeemed or repurchased, directly or indirectly, any shares of capital stock
or declared, set aside or paid any dividends or made any other distributions
with respect to any shares of its capital stock;

 

4.12.2 No Company has issued, sold or transferred any notes, bonds or other debt
securities or any equity securities, securities convertible, exchangeable or
exercisable into equity securities, or warrants, options or other rights to
acquire equity securities, of such Company or any Subsidiary;

 

4.12.3 No Company has sold, leased, licensed (as licensor), assigned, disposed
of or transferred (including transfers to Seller or any employees or Affiliates
of such Company or any Subsidiary) any of its assets (whether tangible or
intangible), except for sales of assets not in excess of $100,000 in the
aggregate;

 

4.12.4 No Company has hired or fired members of such Company’s or any
Subsidiary’s senior management;

 

4.12.5 No Company has (i) executed, amended, or terminated any contract
involving an expense amount in excess of $100,000 annually or $250,000 in the
aggregate to which it is or was a party, (ii) amended, terminated or waived any
of its rights thereunder, or (iii) prior to the date hereof received notice of
termination, amendment, or waiver of any contract or any material rights
thereunder;

 

4.12.6 No Company has permitted any Lien, charge or encumbrance involving an
amount in excess of $50,000 on any of its assets;

 

4.12.7 None of the Companies has taken any action outside of the ordinary course
of business which would reasonably tend to cause Medicaid Members to cease their
respective affiliations with it.

 

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4.12.8 No Company has modified or terminated any Continuing Benefit Plan;

 

4.12.9 No Company has failed to pay any Medical Claim or Indebtedness when due
(unless contested in good faith), except in compliance with applicable law and
where such failure would not reasonably be expected to lead to adverse relations
with a Medicaid Provider, and all material claim liabilities have been properly
recorded on the books of each of the Companies;

 

4.12.10 No Company has suffered or would be reasonably expected to have suffered
(i) prior to the date hereof, a Material Adverse Change, (ii) to Sellers’
Knowledge, after the date hereof, a Material Adverse Change or (iii) any
material negative change in its premium or other revenues, claims or other costs
(including IBNR Expenses) not related to an increase in such Company’s revenues;

 

4.12.11 No Company has incurred or paid any Indebtedness, obligation or other
Liability except in the ordinary course of its business, consistent with its
past practice, in excess of $100,000 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 other than in the ordinary course of
business; provided that this Section 4.12.11 shall not be interpreted to apply
to Medical Claims;

 

4.12.12 No Company has suffered any strike, dispute, grievance, controversy or
other similar labor trouble with respect to its employees;

 

4.12.13 Prior to the date hereof, no Company has instituted, settled, or agreed
to settle, any litigation, action or proceeding before any Governmental Entity
and after the date hereof no such action has been taken except in the case of
administrative claims proceedings in the ordinary course of business of which
Buyer has been notified prior to the taking thereof;

 

4.12.14 No Company has made any material changes in its servicing, billing or
collection operations or policies;

 

4.12.15 No Company has 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);

 

4.12.16 No Company has taken or omitted to take any action 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

 

4.12.17 Except as disclosed above or on Schedule 4.12, no Company has entered
into any agreement or made any commitment to take any of the types of action
described above.

 

4.13 Contracts.

 

4.13.1 Except as specifically contemplated by this Agreement and except as set
forth in Schedule 4.13, none of the Companies is a party to or bound by, whether
written or oral, any:

 

  (a) collective bargaining agreement or contract with any labor union or any
bonus, pension, profit sharing, retirement or any other form of deferred
compensation plan or any stock purchase, stock option, hospitalization insurance
or similar plan or practice, whether formal or informal, or any arrangement for
which the benefits thereunder will be increased or triggered, or the vesting of
benefits thereunder will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement;

 

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  (b) consulting or management services agreement or contract for the employment
of any current or former officer on a full-time, part-time or consulting basis
or any severance agreements, other than those that are terminable by the
applicable Company on no more than thirty (30) days’ notice without liability or
financial obligation to such Company;

 

  (c) agreement or indenture relating to Indebtedness or to mortgaging, pledging
or otherwise placing a Lien on any of its assets;

 

  (d) agreements with respect to the lending or investing of its funds in or to
other Persons;

 

  (e) license or royalty agreements;

 

  (f) guaranty of any Indebtedness or other obligation, other than endorsements
made for collection in the ordinary course of business;

 

  (g) lease or agreement under which it is lessee of, or holds or operates, any
personal property owned by any other party requiring payments in excess of, for
any individual matter $50,000 and in the aggregate $150,000;

 

  (h) lease or agreement under which it is lessor of or permits any third party
to hold or operate any property, real or personal, owned or controlled by it;

 

  (i) contract or group of related contracts with the same party for the
purchase or sale of supplies, products or other personal property or for the
furnishing or receipt of services which either calls for performance over a
period of more than one year (except if such contracts do not involve a sum in
excess of $100,000 annually) or involves consideration in an amount in excess of
$100,000;

 

  (j) contract or group of related contracts with the same party continuing over
a period of more than one year from the date or dates thereof, not terminable by
the Party thereto on thirty (30) days or less notice without penalties or
involving consideration in an amount in excess of $100,000;

 

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  (k) contract containing non-competition provisions having the effect of
prohibiting any of the Companies from freely engaging in business anywhere in
the world;

 

  (l) contract (or group of related contracts) or understanding for
subcontracting work that requires it to pay in excess of $100,000 on an annual
basis or in the aggregate in excess of $150,000 over the term of such contract
(or group of related contracts);

 

  (m) other agreement (or group of related agreements) material to it whether or
not entered into in the ordinary course of business that provides for it to
spend or receive, in the aggregate, more than either $100,000 during the current
calendar year or the next calendar year or in the aggregate in excess of
$150,000 over the term of such agreement (or group of related agreements);

 

  (n) contract with any officer, director, shareholder or other Affiliate of any
of the Companies or any of their respective Subsidiaries; or

 

  (o) agreement relating to ownership of or investments in any business or
enterprise (including investments in joint ventures and minority equity
investments).

 

4.13.2 Except as specifically contemplated by this Agreement or disclosed in
Schedule 4.13, (i) to Seller’s Knowledge, no contract or commitment required to
be disclosed on Schedule 4.13 has been materially breached or canceled by the
other party thereto, (ii) since June 30, 2004, no customer or supplier has
indicated in writing to any of the Companies, any of their respective
Subsidiaries or Seller that it may or shall stop or materially decrease the rate
of business done with any of the Companies or that it desires to renegotiate its
contract with any of the Companies or any of their respective Subsidiaries,
(iii) each of the Companies has performed all material obligations required to
be performed in connection with the contracts or commitments required to be
disclosed on Schedule 4.13 and are not in receipt of any claim of default under
any contract or commitment required to be disclosed on the Schedule 4.13, (iv)
none of Seller or the Companies has any Knowledge of any breach or anticipated
breach by any party to any contract set forth on Schedule 4.13, and (v) each
agreement identified on Schedule 4.13 is a valid and binding obligation of each
of the Companies party thereto and, to the Knowledge of the Seller and the
Companies, the valid and binding obligation of each other party thereto.

 

4.14 Title to and Condition of Assets.

 

Each of the Companies owns or leases all buildings, machinery, equipment, and
other tangible assets necessary for the conduct of its business as presently
conducted.

 

4.15 No Brokers or Finders.

 

Except with respect to Banc of America Securities LLC, no broker or finder is
involved on behalf of any of the Companies or any of their Affiliates in
connection with the transactions

 

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contemplated by this Agreement, nor may any broker or finder involved on behalf
of Seller claim any commission on account of the consummation of the
transactions contemplated by this Agreement, nor will any of the Companies have
any Liability with respect to any such commissions (including, without
limitation, to Banc of America Securities LLC and its Affiliates) post-Closing.

 

4.16 Tax Returns and Tax Liabilities.

 

The representations and warranties in this Section 4.16 are true and correct
except as disclosed on Schedule 4.16 attached hereto.

 

4.16.1 Each of the Companies has timely filed all United States Federal income
and all other material Tax Returns that it was required to file; all such Tax
Returns were correct and complete in all material respects and based on the
applicable measure of such Company’s operations during the period in question;
and true and correct copies of all such Tax Returns are included in each of the
Companies’ files.

 

4.16.2 Each of the Companies has timely paid or caused to be paid as of the date
hereof all Taxes due and payable by the Companies. No Company is currently the
beneficiary of any extension of time within which to file any Tax Return. No
written claim has ever been made by an authority in a jurisdiction in which a
Company does not file a Tax Return that such Company is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the assets of any of
the Companies that arose in connection with any failure (or alleged failure) to
pay any Tax.

 

4.16.3 No Company has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
No foreign, federal, state, or local tax audits or administrative or judicial
Tax proceedings are pending or being conducted with respect to any Company. None
of the Companies has received from any foreign, federal, state, or local taxing
authority (including jurisdictions where none of the Companies has filed Tax
Returns) any written (i) notice indicating an intent to open an audit or other
review, (ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against any Company. Schedule 4.16.3 attached
hereto lists all federal, state, local, and foreign income Tax Returns filed
with respect to the Companies for taxable periods ended on or after December 31,
1998, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Seller has made
available to the Buyer correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Companies filed or received since December 31, 1998.

 

4.16.4 No Company is a party to any Tax allocation or sharing agreement. No
Company (i) has been a member of an Affiliated Group filing a consolidated
federal income Tax Return and (ii) has liability for the 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.

 

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4.16.5 None of the Companies is a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of any “excess parachute payment” within the meaning of Code §280G
(or any corresponding provision of state, local or foreign Tax law). None of the
Companies has distributed stock of another Person, or has had its stock
distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Code §355 or §361.

 

4.16.6 None of the Companies will be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any: (A) change in
method of accounting for a taxable period ending on or prior to the Closing
Date; or (B) “closing agreement” as described in Code §7121 (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date.

 

4.17 Employees and Employee Benefits.

 

(a) Schedule 4.17(a) sets forth, with respect to each of the Transferred
Employees, such Transferred Employee’s name and position, date of employment and
title or job position, the total annual salary, wages, bonus or other
compensation. Except as set forth on Schedule 4.17(a), (i) none of the Companies
is a party to any written or oral employment contract or agreement with any of
such Transferred Employees which precludes their termination at will, (ii) none
of such Transferred Employees is now, or will by the passage of time hereafter
become, entitled to receive any vacation time, vacation pay or severance pay
attributable to services rendered prior to the Closing Date, and (iii) since
June 30, 2004, there has been no change of, or agreement to change, any terms of
employment for such Transferred Employees, including without limitation, salary,
wage rates, commission formulae, or other compensation, except for normal
“merit” raises given in the ordinary course of business. No such Transferred
Employee has indicated any intention to terminate his or her employment. There
is no union contract or other collective bargaining agreement in existence
affecting any of the Companies or any of their respective Subsidiaries.

 

(b) Schedule 4.17(b)(i) contains a true and complete list of all Benefit Plans
in which Transferred Employees or Former Employees participate as of the Closing
Date (“Company Benefit Plans”). Except as set forth on Schedule 4.17(b)(ii),
none of the Companies or any of their respective Subsidiaries maintains or
contributes to or has any liability with respect to, or will have any liability
as a result of the consummation of this transaction with respect to, any Company
Benefit Plans on behalf of Transferred Employees or Former Employees as of the
Closing Date. Each Company Benefit Plan that is intended to be qualified within
the meaning of Section 401(a) of the Code has received a determination from the
Internal Revenue Service (the “IRS”) that such Company Benefit Plan is qualified
under Section 401(a) of the Code, and, to Seller’s Knowledge, nothing has
occurred since the date of such determination that would adversely affect the
qualification of such Benefit Plan in form. Each Company Benefit Plan and any
related trust, insurance contract or fund has been maintained, funded and
administered in compliance in all material respects with its respective terms
and with all applicable laws and regulations, including, but not limited to,
ERISA and the Code. Seller has complied in all material respects with the health
care continuation requirements of Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code (“COBRA”); and Seller has no obligation under any

 

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Company Benefit Plan or otherwise to provide post employment health or life
insurance benefits to current or former employees of the Companies or their
Subsidiaries, except as specifically required by COBRA. Neither Seller nor, to
Seller’s Knowledge, any other “disqualified person” (within the meaning of
Section 4975 of the Code) or “party in interest” (within the meaning of Section
3(14) of ERISA) has taken any action with respect to any of the Company Benefit
Plans which could subject any such Company Benefit Plan (or its related trust)
or Seller or the Companies or any officer, director or employee of any of the
foregoing to any material penalty or tax under Section 502(i) of ERISA or
Section 4975 of the Code. No asset of any of the Companies or any of its
Subsidiaries is subject to any lien under ERISA or the Code, and neither the
Companies nor any of its Subsidiaries has incurred, nor reasonably expects to
incur, any liability under Title IV of ERISA or to the Pension Benefit Guaranty
Corporation. None of the Companies has any liability (potential or otherwise)
with respect to any “employee benefit plan” (as defined in Section 3(3) of
ERISA) solely by reason of being treated as a single employer under Section 414
of the Code with any other entity.

 

4.18 Indebtedness.

 

Except as set forth on the attached Schedule 4.18, the Companies have no
outstanding Indebtedness.

 

4.19 Providers and Provider Agreements.

 

4.19.1 Schedule 4.19.1 lists each physician, group, IPA, hospital, PHO,
ancillary service provider or other health care service provider that
participates in each of the Companies’ business as a Medicaid Provider and
states their (i) respective effective dates and (ii) for those scheduled for
recredentialing during the next twenty four (24) months, the month for which
such recredentialing is scheduled. Each such Medicaid Provider has been
credentialed in accordance with such Company’s policies and procedures and
applicable State regulatory requirements and has entered into a written Provider
Agreement with such Company as applicable, and/or an Affiliate of such Company,
except as would not have a material negative effect on the Companies’ provision
of medical services.

 

4.19.2 Each of the Companies has paid and pays each applicable Medicaid Provider
in accordance with the compensation terms that have been, or are, in effect, as
applicable, with respect to each Medicaid Provider’s contract and in the time
required by the Provider Agreements and applicable state law, except for payment
reconciliation disputes in the ordinary course of business and as would not be
reasonably likely to result in adverse relations with the applicable Medicaid
Provider. Except as described on Schedule 4.19.2, since June 30, 2004 through
the date hereof, no Company has made or granted any increase in the compensation
payable or to become payable by it to any Medicaid Provider and after the date
hereof no Company shall have taken such action outside the ordinary course of
business and consistent with past practices unless in accordance with
contractual obligations existing on the date hereof.

 

4.19.3 Schedule 4.19.3 lists each Medicaid Provider to whom administrative
functions have been delegated and describes all function(s) so delegated. To the
Knowledge of Seller, (i) each agreement for the delegation of administrative
functions complies with the requirements of applicable law and (ii) each of the
Companies has complied and continues to comply with all

 

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applicable requirements of law, including those set forth in the Medicaid
Contracts, relating to oversight and monitoring of the entities to which each of
the Companies has delegated administrative functions.

 

4.19.4 Except as described on Schedule 4.19.4, each of the Provider Agreements
(a) will continue in full force and effect notwithstanding and without regard to
the consummation of the transactions contemplated under this Agreement, and (b)
is terminable on less than 187 days notice.

 

4.19.5 Except as described on Schedule 4.19.5, none of the Provider Agreements
require any of the Companies or their Affiliates to pay the provider on a
most-favored provider basis, obligate any of the Companies or Affiliates to pay
access or administrative fees, require (or may require) any of the Companies or
Affiliates to pay bonuses from an incentive compensation pool or fund, or has a
profit-sharing component.

 

4.19.6 Except as described on Schedule 4.19.6, none of the Provider Agreements
limit the rights of any of the Companies or Affiliates to engage in any
business, or to compete with any person, contains an exclusivity provision
restricting its ability to do business in certain geographical areas, or
obligates or binds it to use, or offer to use, the services of a Medicaid
Provider in preference to any other provider.

 

4.19.7 If any of the “physicians” or “physician groups” contracted under the
Provider Agreements are placed at “substantial financial risk,” as each such
term is defined by 42 C.F.R. §422.208 et seq. (the “PIP Regulation”) in
connection with services provided to Medicaid Members, the Companies and
Affiliates have complied in all material respects with the reporting and
enrollee survey requirements of the PIP Regulation.

 

4.19.8 Schedule 4.19.8 sets forth the “Provider Review Category Reports” as of
the date hereof.

 

4.19.9 Schedule 4.19.9 lists each monetary settlement or pending settlement with
a Medicaid provider since January 1, 2003 that is not reflected in any of the
Companies’ IBNR Expense, as provided to Buyer.

 

4.20 Status of Medicaid Contracts and Provider Agreements.

 

With respect to each of the Medicaid Contracts and Provider Agreements: (a) the
agreement is a valid and binding obligation of each of the Companies party
thereto and, to the Knowledge of Seller, the valid and binding obligation of
each other party thereto, (b) to the Knowledge of Seller, except with regard to
the contested or appealed payment matters set forth on Schedule 4.20, no party
is in material breach or default beyond any applicable grace period, and no
event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification or suspension
under the agreement. Without limiting the foregoing, to the Knowledge of Seller,
(i) no Company is in material breach or default of any provision of the Medicaid
Contracts beyond any applicable grace period, and (ii) the Provider Agreements
comply with the terms of the Medicaid Contracts and applicable state and Federal
regulations in all material respects, and (iii) to the Knowledge of Seller, no
party has repudiated any provision of any of the agreements. With respect to the
Provider Agreements,

 

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each of the Companies is in full compliance with the applicable provisions of
the prompt payment of claims laws, except as would not have an adverse effect on
the Companies’ provision of medical services.

 

4.21 Medicaid Members.

 

Schedule 4.21 describes each material formal written complaint and sets forth
the Companies regular “Member Appeal Category Trend” and “Member Grievance
Category Trend Reports” as of the date hereof.

 

4.22 Intellectual Property.

 

4.22.1 Schedule 4.22.1 sets forth a complete and correct list of all of the
patents and patent applications, trademark and copyright registrations and
applications, and material trademarks, trade names and service marks owned by
each of the Companies (the “Owned Intellectual Property”). The Owned
Intellectual Property is owned free and clear of all Liens, and no claim by any
third party contesting the validity, enforceability, use or ownership of any of
the Owned Intellectual Property is currently outstanding, except as set forth on
Schedule 4.22.1.

 

4.22.2 Schedule 4.22.2 sets forth a complete and correct list of all material
licenses or similar agreements or arrangements with respect to Intellectual
Property, whether such Company is licensee or licensor of such rights, in each
case identifying the subject Intellectual Property and nature of the licensing
relationship (the “Licensed Intellectual Property”). Except as set forth on
Schedule 4.22.2, all Owned and Licensed Intellectual Property owned or used by
each of the Companies immediately prior to the Closing hereunder will be owned
or available for use by such Company on identical terms and conditions
immediately subsequent to the Closing hereunder.

 

4.22.3 Except as set forth in Schedule 4.22.3, (a) to the Knowledge of Seller,
each of the Companies owns and possesses all right, title and interest in and
to, or has a valid and enforceable right to use all of the Intellectual Property
listed on Schedule 4.22.3, free and clear of all Liens, and no claim by any
third party contesting the validity, enforceability, use or ownership of any
such Intellectual Property has been made, is currently outstanding or, to the
Knowledge of Seller, is threatened, and there are no grounds for same, (b) each
of the Companies owns or has a valid and enforceable right to use all
Intellectual Property necessary for such Company to conduct its business as
currently conducted (the “Company Intellectual Property”), (c) no loss or
expiration of any Company Intellectual Property has occurred that has had or
would reasonably be expected to have an adverse effect, and no such loss or
expiration is pending, threatened or reasonably foreseeable, (d) no Company has
received any notices of, nor is any Company aware of any facts which indicate a
likelihood of, any infringement or misappropriation by any third party with
respect to the Company Intellectual Property (including, without limitation, any
demand or request that any of the Companies license rights from a third party),
(e) no Companies nor the operation of the Companies’ business infringe or
misappropriate the rights of any third parties, and Seller is not aware of any
infringement or misappropriation which might occur as a result of the continued
operation of such business, and (f) to the Knowledge of Seller, none of the
Company Intellectual Property has been infringed, misappropriated or otherwise
misused by any third party.

 

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4.23 No Acceleration of Rights or Benefits.

 

Except as described in Schedule 4.23 attached hereto, neither Seller nor any of
the Companies will be obligated after Closing to make any payment to any Person
in connection with the transactions contemplated by this Agreement. No rights or
benefits of any Person have been (or will be) accelerated or increased as a
result of the consummation of the transactions contemplated by this Agreement.

 

4.24 Insurance.

 

4.24.1 The attached Schedule 4.24 lists each insurance policy maintained for or
on behalf of the Companies with respect to its properties, assets and business.
All of such insurance policies are in full force and effect, and, to the
Knowledge of Seller, no default exists with respect to the obligations of the
Companies or Seller under any such insurance policies and neither the Seller nor
any Company has received any notification of cancellation of any of such
insurance policies. Except as set forth in the Policies listed on Schedule 4.24,
no Company has any self-insurance or co-insurance programs.

 

4.25 Notes and Accounts Receivable.

 

Except as set forth on Schedule 4.25, all notes and accounts receivable of each
of the Companies are reflected properly on their books and records, are valid
receivables which to the Knowledge of Seller are not subject to setoffs or
counterclaims, subject only to the reserve for bad debts set forth on the face
of the Interim Financial Statements (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of each of the Companies as applicable.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As of the Execution Date and as of the Closing Date, Buyer represents and
warrants to Seller as follows:

 

5.1 Organization and Good Standing.

 

Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.

 

5.2 Buyer’s Authority.

 

Buyer 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 Buyer.
This Agreement constitutes a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.

 

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5.3 No Brokers or Finders.

 

Except as disclosed on Schedule 5.3, no broker or finder is involved on behalf
of Buyer in connection with the purchase and sale of the Shares, nor may any
broker or finder involved on behalf of Buyer claim any commission on account of
the purchase and sale of the Shares.

 

5.4 Buyer’s Consents.

 

Except as disclosed on Schedule 5.4, no other consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to Buyer in connection with the execution
and delivery of this Agreement by Buyer, or the consummation by Buyer of the
transactions contemplated hereby.

 

5.5 Regulatory Status.

 

Except as set forth on Schedule 5.5, Buyer has not received notice that it is
the subject of any investigations or disputes with any Governmental Entity.

 

5.6 No Violations.

 

Except as disclosed on Schedule 5.6, the execution, delivery and performance of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, (a) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which Buyer is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Lien upon Buyer’s assets), (b)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any Governmental Entity
to which Buyer is subject or any provision of the charter or bylaws of Buyer or
(c) provide any Governmental Entity (as defined below) or Person the right to
withdraw, revoke, suspend, cancel, terminate or modify any consent, license,
permit, waiver or other authorization issued or originated previously.

 

5.7 No Consents.

 

Except for such filings, authorizations, orders and approvals described on
Schedule 5.7, no other consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Buyer in connection with the execution and delivery of this
Agreement by Buyer, or the consummation by Buyer of the transactions
contemplated hereby.

 

5.8 Legal Proceedings.

 

5.8.1 There are no claims, actions, suits, proceedings or investigations pending
or, to Buyer’s knowledge, threatened against Buyer that would materially and
adversely affect Buyer’s ability to consummate any of the transactions
contemplated by this Agreement.

 

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5.8.2 There is no order, writ, injunction or judgment to which Buyer is subject
that would materially and adversely affect Buyer’s ability to consummate any of
the transactions contemplated by this Agreement.

 

5.8.3 No investigation or review by any Governmental Entity with respect to
Buyer is pending or, to Buyer’s knowledge, threatened against Buyer other than
any investigation or review that would not materially and adversely affect
Buyer’s ability to consummate the transactions contemplated by this Agreement.

 

5.9 Sufficient Funds.

 

Buyer has or will have sufficient funds to pay the Purchase Price.

 

ARTICLE VI

BUYER’S CONDITIONS PRECEDENT TO CLOSING

 

Buyer’s obligation to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:

 

6.1 Instruments of Transfer.

 

All actions to be taken by Seller in connection with consummation of the
transactions contemplated hereby and all certificates, instruments, and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Buyer;

 

6.2 Corporate Resolutions.

 

Seller shall provide Buyer with appropriate resolutions from its Board of
Directors, authorizing Seller to effectuate the actions required by it to
consummate the transactions contemplated by this Agreement.

 

6.3 Statutory Net Worth.

 

The aggregate Statutory Net Worth of FGHP and FG Kansas combined at Closing
shall be at least $6,000,000.

 

6.4 Performance of Conditions Precedent.

 

All covenants, agreements and conditions contained in this Agreement to be
performed or complied with by Seller on or prior to the Closing Date shall have
been performed or complied with in all material respects.

 

6.5 Good Standing Certificate.

 

Seller shall have delivered to Buyer a certificate, executed by the proper state
official, as to the good standing of each of the Companies and Seller in their
respective jurisdiction of incorporation.

 

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6.6 Secretary’s Certificates.

 

Seller shall have delivered to Buyer a certificate from its secretary or
assistant secretary attaching a copy of resolutions authorizing the execution,
delivery and performance of this Agreement and all other documents and the
taking of all action required thereunder or in connection therewith on behalf of
Seller.

 

6.7 Contract Terminations.

 

Seller shall (or cause the Companies to) terminate each of the contracts set
forth on Schedule 6.7 in a manner satisfactory to Buyer.

 

6.8 Material Adverse Change.

 

There shall have been no change, event or development that has had or would
reasonably be expected to have a Material Adverse Change.

 

6.9 Releases.

 

All releases from third parties of any and all Liens relating to the assets and
property of the Companies will have been obtained by Seller.

 

6.10 Real Property Leases.

 

The Companies and Seller shall amend the existing lease agreement as set forth
on the attached Schedule 6.10.

 

6.11 Escrow Agreement.

 

The Escrow Agreement shall be executed in form attached hereto as Exhibit B.

 

6.12 Third Party Approvals and Consents.

 

Seller shall have delivered to Buyer all such written approvals, consents
(including, but not limited to Provider consents) and waivers of third parties
identified on Schedule 4.4 as “Required Consents” to be obtained in connection
with the transactions contemplated by this Agreement.

 

6.13 Seller’s Representations and Warranties True and Correct.

 

The representations and warranties of Seller set forth in Articles III and IV of
this Agreement shall be true and correct in all material respects as of the
Execution Date and as of the Closing Date as though made on and as of the
Closing Date except for changes permitted by this Agreement (provided that
representations and warranties that are as of a specific date shall speak only
as of such date; and provided further that any representation or warranty that
is already modified by “materiality” or “material” or similar words of that
nature shall not be deemed so modified for purposes of this condition). Buyer
shall have received a certificate signed on behalf of Seller by an authorized
officer of Seller to such effect.

 

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6.14 Required Governmental Consents and Approvals.

 

The Parties shall have obtained all of the consents and approvals set forth on
Schedule 3.2 and no governmental agency shall have announced its intention to
subject either Company’s current contracts to a re-assignment or a new
procurement process in connection with the transactions contemplated hereby
(other than the required member notification process for this transaction). Each
of the Parties shall use its commercially reasonable efforts to obtain such
approvals, consents or exemptions without any term or condition (including,
without limitation, a limited effective period for any of the Medicaid
Contracts) that would materially impair the value of any of the Companies’
business to Buyer. All conditions to such consents and/or approvals required to
be satisfied prior to the Closing Date by the terms of such consents and/or
approvals shall have been satisfied, and all waiting periods in respect of
approvals or consents from Governmental Entities shall have expired or been
terminated.

 

6.15 Litigation.

 

No Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, statute, ordinance, rule, regulation,
judgment, decree, injunction or other order that is in effect and restrains,
enjoins or otherwise prohibits consummation of the transactions contemplated
hereby.

 

6.16 Certain Covenants.

 

Seller shall have complied with its obligations in Article VIII in all material
respects.

 

6.17 Deliveries.

 

Seller shall have delivered to Buyer all items set forth in Section 2.3.2.

 

6.18 Employment Agreement.

 

Buyer shall have entered into employment agreements, dated as of the date
hereof, with Joy Wheeler (the “Employment Agreement”) in the forms attached
hereto as Exhibit C, such employment agreement to become effective upon the
Closing Date.

 

6.19 Provider Agreement.

 

FirstGuard shall have entered into a long term provider agreement with Swope
Health Services for the provision of primary care and behavioral health
services, in the form attached hereto as Exhibit D, such agreement to become
effective upon the Closing Date.

 

6.20 Transportation Agreement.

 

FirstGuard and Swope Health Services shall have amended the transportation
agreement to which they are each a party on the terms set forth on Schedule 6.20
hereto, such amendment to become effective upon the Closing Date.

 

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6.21 FIRPTA Affidavit.

 

Seller shall deliver to Buyer an affidavit, under penalties of perjury, stating
that the Seller is not a “foreign person” within the meaning of Code §1445,
dated as of the Closing Date and in form and substance satisfactory to the
Buyer.

 

ARTICLE VII

SELLER’S CONDITIONS PRECEDENT TO CLOSING

 

The obligation of Seller to consummate the transactions to be performed by them
in connection with the Closing is subject to satisfaction of the following
conditions:

 

7.1 Instruments of Transfer.

 

All Actions to be taken by Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, instruments, and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Seller;

 

7.2 Corporate Resolutions.

 

Buyer shall provide Seller with appropriate resolutions from its Board of
Directors, authorizing Buyer to effectuate the actions required by Buyer to
consummate the transactions contemplated by this Agreement.

 

7.3 Escrow Agreement.

 

The Escrow Agreement shall be executed in form attached hereto as Exhibit B.

 

7.4 Agreements.

 

Buyer shall have executed and delivered to Seller all agreements, instruments,
certificates and other documents to be delivered by Buyer.

 

7.5 Performance of Conditions Precedent.

 

All covenants, agreements and conditions contained in this Agreement to be
performed or complied with by Buyer on or prior to the Closing Date shall have
been performed or complied with in all material respects.

 

7.6 Good Standing Certificate.

 

Buyer shall have delivered to Seller a certificate, executed by the proper
official, as to its good standing in the State of Delaware.

 

7.7 Secretary’s Certificate.

 

Buyer shall have delivered to Seller a certificate from the secretary or
assistant secretary of Buyer attaching copies of resolutions authorizing the
execution, delivery and performance of this Agreement and all other documents
and the taking of all action required thereunder or in connection therewith on
behalf of Buyer.

 

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7.8 Governmental Consents and Approvals.

 

The Parties shall have obtained from any and all Governmental Entities all
appropriate and necessary approvals or consents required, or exemptions thereof
to effect the transactions set forth in this Agreement.

 

7.9 Buyer’s Representations and Warranties True and Correct.

 

The representations and warranties of Buyer set forth in Article V of this
Agreement shall be true and correct in all material respects as of the Execution
Date and as of the Closing Date as though made on and as of the Closing Date
(provided that representations and warranties that are as of a specific date
shall speak only as of such date; and provided further that any representation
or warranty that is already modified by “materiality” or “material” or similar
words of that nature shall be true and correct in all respects). Seller shall
have received a certificate signed on behalf of Buyer by an authorized officer
of Buyer to such effect.

 

7.10 Litigation.

 

No Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, statute, ordinance, rule, regulation,
judgment, decree, injunction or other order that is in effect and restrains,
enjoins or otherwise prohibits consummation of the transactions contemplated
hereby.

 

7.11 Surplus.

 

Seller shall have been able to successfully cause the Companies to dividend out
to Seller all but $6,000,000 of the Statutory Net Worth of both FGHP and FG
Kansas combined.

 

7.12 Provider Agreement.

 

FirstGuard shall have entered into a long term provider agreement with Swope
Health Services for the provision of primary care and behavioral health
services, in the form attached hereto as Exhibit D, such agreement to become
effective upon the Closing Date.

 

7.13 Transportation Agreement.

 

FirstGuard and Swope Health Services shall have amended the transportation
agreement to which they are each a party on the terms set forth on Schedule 6.20
hereto, such amendment to become effective upon the Closing Date.

 

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ARTICLE VIII

PRE-CLOSING COVENANTS

 

8.1 Conduct of Business Pending Closing.

 

From the Execution Date until the Closing, Seller agrees that, except (i) as
otherwise provided under this Agreement, (ii) as set forth on Schedule 8.1,
(iii) for the declaration and payment of dividends by the Companies to satisfy
the condition set forth in Section 7.11, or (iv) as consented to by Buyer in
writing, Seller will cause each of the Companies to:

 

  (a) conduct its business in a commercially prudent manner, as a going concern
and in the ordinary course, and consistent with such operation, comply in all
material respects with applicable legal and contractual obligations, consistent
with past practice;

 

  (b) maintain its cash management practices and its policies, practices and
procedures with respect to collection of trade accounts receivable,
establishment of reserves for uncollectible accounts, accrual of accounts
receivable, prepayment of expenses, payment of trade accounts payable, accrual
of other expenses, deferral of revenue, and acceptance of customer deposits in
accordance with past custom and practice and applicable accounting principles
consistently applied;

 

  (c) use commercially reasonable efforts to cause its current insurance
policies not to be canceled or terminated or any of the coverage thereunder to
lapse, unless, simultaneously with such termination, cancellation or lapse,
replacement policies, providing coverage equal to or greater than the coverage
under the canceled, terminated or lapsed policies to the extent practicable for
market premiums, are in full force and effect; provided, however, that it shall
not be considered commercially reasonable to terminate a policy or allow it to
lapse solely as a result of a change in premium;

 

  (d) administer, pay and discharge all of its Medical Claims received related
to the dates of service prior to the Closing Date, and perform all reporting
obligations under the Medicaid Contracts, in each case in the ordinary course of
business consistent with past practice;

 

  (e) use commercially reasonable efforts to maintain all material contracts
including the Provider Agreements;

 

  (f) use commercially reasonable efforts to maintain, in the ordinary course of
business and in accordance with past practice, its network of Medicaid
Providers, and credential and recredential such providers in accordance with
each of the companies’ policies and procedures;

 

  (g) use commercially reasonable efforts to maintain in full force and effect
all Company Permits;

 

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  (h) use commercially reasonable efforts to maintain in full force and effect
all Company Intellectual Property; or

 

  (i) not take any action (or omit to take any action), which action or omission
would cause any representation or warranty contained herein to be untrue in any
material respect at any time through the Closing Date, as if such representation
or warranty were made at and as of such time except those representations and
warranties that are made as of a certain date.

 

8.2 Access to Documents and Premises.

 

From the Execution Date through the Closing Date, Buyer, its counsel,
accountants, and other representatives shall, subject to confidentiality
covenants made by Seller to third parties and state and federal antitrust laws,
have the right to reasonable access to the books and records, facilities and
personnel of Seller and each of the Companies, including access by Buyer’s
representatives, to the extent possible without waiving any privileges, to
information regarding all actions, suits, proceedings or investigations of any
kind, now pending or threatened in writing, involving Seller or any of the
Companies or Seller’s or any of the Companies’ Affiliates. Any such access shall
occur during normal business hours and shall be scheduled by Buyer and Seller
following request for access made to Seller. All actions shall be conducted by
Buyer and Seller in such a manner as to maximize the retention of all applicable
privileges, and Buyer’s representatives shall use their best efforts to conduct
their inspection in such a manner as not to be disruptive to Seller’s or any of
the Companies’ employees or business operations. Sellers acknowledge that Buyer
will be undertaking transition and integration planning during this period, and
will make its books and records, personnel and facilities reasonably available
to Buyer and its Representatives for such purpose.

 

8.3 Notices and Consents.

 

Seller will cause each of the Companies to give any notices to third parties,
and will cause each of the Companies to use commercially reasonable efforts to
obtain any third party consents referred to in Section 4.5 above. Each of the
Parties will (and Seller will cause each of the Companies to) give any notices
to, make any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 3.32, 4.4, and 4.5 above.
Without limiting the generality of the foregoing, each of the Parties will file
(and Seller will cause each of the Companies to file) any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its commercially
reasonable efforts to obtain (and Seller will cause each of the Companies to use
commercially reasonable efforts to obtain) an early termination of the
applicable waiting period, and will make (and Seller will cause each of the
Companies to make) any further filings pursuant thereto that may be necessary,
proper, or advisable in connection therewith.

 

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8.4 Notice of Developments.

 

Seller will give prompt written notice to Buyer of any material adverse
development causing a breach of any of the representations and warranties in
Article III or Article IV above. Buyer will give prompt written notice to Seller
of any material adverse development which may cause a breach of any of its own
representations and warranties in Article V above. No disclosure by any Party
pursuant to this Section 8.4, however, shall be deemed to amend or supplement
the schedules hereto or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.

 

8.5 Exclusivity.

 

Seller will not (and Seller will not cause or permit any of the Companies to)
(i) solicit, initiate, or encourage the submission of any proposal or offer from
any Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets, of any of the Companies
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. Seller will not vote its Shares in favor of any such acquisition.
Seller will notify Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing and the details of any
such proposal, offer, inquiry, or contact.

 

8.6 Tax Matters.

 

8.6.1 Except as required by law, without the prior written consent of Buyer,
Seller shall not allow any Company to make or change any election, change an
annual accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to any of the Companies, surrender any right to claim a
refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to any of the Companies, or
take any other similar action relating to the filing of any Tax Return or the
payment of any Tax, if such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action would have the effect of
increasing the Tax Liability of any of the Companies for any period ending after
the Closing Date or decreasing any Tax attribute of any of the Companies
existing on the Closing Date.

 

8.6.2 All Tax sharing agreements or similar agreements with respect to or
involving any of the Companies or any of their respective Subsidiaries shall be
terminated as of the Closing Date and, after the Closing Date, the Buyer, each
of the Companies and their respective Subsidiaries shall not be bound thereby or
have any liability thereunder.

 

8.7 Additional Financial Information.

 

Each of the Companies shall furnish to Buyer within twenty days of the end of
each month prior to Closing, unaudited statements of operations and run rate
reports for each such month as well as such management, cost, and utilization
reports (including claims lags and experience reports) that each of the
Companies generates and uses in the normal course of business.

 

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8.8 Termination of Incentive Pools/Funds.

 

Except as set forth on Schedule 8.8, Seller shall use commercially reasonable
efforts to ensure that none of its Provider Agreements requires any periodic
incentive payments from a shared risk or referral services pool/fund and, to the
extent, any such contract contains such a pool/fund as of the Closing Date,
Seller shall be responsible to reconcile and settle such pools through Closing
and shall pay any required bonuses.

 

8.9 Regulatory Approval.

 

Seller and Buyer shall diligently and timely prepare and file the applications
and submissions as may be required with respect to the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby. Buyer and Seller agree to take all commercially reasonable
actions required or requested by such authorities for the expeditious
consideration and rendering of all such approvals, consents and authorizations.
Seller and Buyer shall diligently and timely cooperate with each other and with
all other parties in the submission of applications and of any and all such
additional information or documentation requested by any such regulatory
authorities.

 

8.10 Public Information Releases.

 

8.10.1 Each of the Parties shall use reasonable efforts to consult with each of
the other Parties on any initial press release, public announcement or publicly
disseminated communication, including, but not limited to, and subject to
applicable regulatory approval, such communications with Medicaid Members or
Providers, concerning this transaction. Thereafter, between the Execution Date
and the Closing the Parties agree to use reasonable efforts to consult with each
other and the applicable regulatory body, if required, prior to any press
release, public announcement or publicly disseminated communication concerning
this transaction, to discuss the content of any such announcement and to refrain
from making any such press releases or public announcements without first
receiving the other’s prior consent, which shall not be unreasonably withheld.
Seller shall be deemed to have given such consent if Seller has not provided
written notice of objection to Buyer within two (2) days following Buyer’s
notice to Seller of such proposed communication.

 

8.11 Cooperation.

 

The Parties agree to cooperate reasonably with each other, from the Execution
Date until the Closing Date, and use their respective commercially reasonable
efforts in good faith, to satisfy all conditions, undertakings and agreements
contained in this Agreement.

 

8.12 Securities Law Compliance.

 

Seller is (i) aware that the United States securities laws prohibit any person
who has material nonpublic information about a company from purchasing or
selling securities of such company or from communicating such information to any
other person under circumstances in

 

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which it is reasonably foreseeable that such person is likely to purchase or
sell such securities and (ii) familiar with the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder and agrees that it will
neither use, nor cause any third party to use, any material nonpublic
information regarding the Buyer in contravention of such Act or any such rules
and regulations, including, without limitation, Rules 10b-5 and 14e-3.

 

8.13 Employees and Employee Benefits.

 

8.13.1 Seller agrees to provide for full vesting, as of the Closing Date, of the
account balances of all Transferred Employees who are participants in any
Company Benefit Plan subject to Code Section 401(a). Seller shall not be
obligated to make any discretionary matching or other nonelective contributions
to such Company Benefit Plans subject to Code Section 401(a) on behalf of such
Transferred Employees for the plan year in which the Closing Date occurs, except
as may be required under the terms of such Company Benefit Plans; provided,
however, that Seller shall make any matching contribution under the FirstGuard
Health Plan, Inc. Retirement Plan that would otherwise have been made on behalf
of each Transferred Employee for the plan year in which the Closing occurs,
which contribution shall be pro rated based on the number of days elapsed during
such plan year through the Closing Date, and determined without regard to any
year-end employment requirements.

 

8.13.2 Except with respect to the Company Benefit Plans set forth on Schedule
4.17(b)(ii) (each, a “Continuing Plan”), Buyer shall not assume any Company
Benefit Plans or any liability thereunder (other than contributions accruing in
a manner consistent with past practices and in the ordinary course prior to the
Closing Date which are not made on or before the Closing Date), or accept any
transfer of assets or liabilities from any such Company Benefit Plans. Any
Company Benefit Plan which is not a Continuing Plan and of which any of the
Companies is the sole sponsor shall be terminated prior to the Closing Date or
sponsorship of any such Company Benefit Plan shall be transferred to Seller
prior to the Closing Date.

 

8.13.3 Seller shall retain all responsibility and liability for any COBRA
obligations with respect to any qualified beneficiary who is receiving (or who
is eligible to elect) COBRA continuation coverage as of the Closing Date. COBRA
continuation coverage shall not be offered by Seller to Transferred Employers
(or their related beneficiaries and dependents) as a result of this transaction.

 

8.13.4 As of the Closing Date, Buyer shall allow Transferred Employees to
participate in Buyer’s flexible benefits plan and Seller shall spin-off the
health care and dependent care account balances (and related assets and
liabilities) to the Buyer’s flexible benefits plan.

 

ARTICLE IX

POST-CLOSING OBLIGATIONS

 

The Parties agree as follows with respect to the period following the Closing.

 

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9.1 General.

 

In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Article XI below). Seller
acknowledges and agrees that from and after the Closing, Buyer will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to each of the Companies and
each of their respective Subsidiaries; provided that, Buyer shall provide Seller
reasonable access to such information, as well as to Buyer’s employees, for all
appropriate purposes.

 

9.2 Employees and Employee Benefits.

 

9.2.1 Buyer agrees that, effective as of the Closing Date, Buyer shall provide
Transferred Employees who are receiving benefits under the Company Benefit Plans
on the Closing Date with employee benefits that are no less favorable than those
provided to similarly situated current and former employees of Buyer. (“Buyer
Plans”). Buyer shall provide Transferred Employees with credit for all service
with the Companies (or any member of Companies’ controlled group pursuant to
Code Section 414(b), (c), (m) or (o)) prior to the Closing Date for all purposes
under Buyer Plans, including but not limited to eligibility for participation
and contribution allocation requirements, except to the extent necessary to
prevent duplication of benefits. With respect to any medical, dental or other
welfare benefits that are provided at any time to such Transferred Employees
under Buyer Plans, any applicable pre-existing condition exclusions (except to
the extent not satisfied under the comparable Company Benefit Plan as of such
time) shall be waived, and any expenses incurred before such time under the
comparable Company Benefit Plan during the plan year in which the Closing Date
occurs shall be taken into account under such Buyer Plans for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions. Buyer further agrees that, in connection with the termination of
employment of any Transferred Employee, it will provide a minimum termination
payment no less favorable than Buyer’s usual severance policy.

 

9.3 Confidentiality.

 

All nonpublic information provided to, or obtained by, Seller in connection with
the transactions contemplated hereby shall be “Confidential Information” for
purposes of the Confidentiality Agreement, which will continue in effect until
terminated pursuant to the terms set forth therein.

 

9.4 Noncompetition and Nonsolicitation.

 

9.4.1 For a period of five (5) years from and after the Closing Date, neither
Seller nor any of its Subsidiaries or Affiliated Entities will engage directly
or indirectly in a Competing Business in the Service Area; provided, however,
that no owner of less than 5% of the outstanding stock of any publicly-traded
corporation shall be deemed to engage solely by reason thereof in any such
businesses. If the final judgment of a court of competent jurisdiction

 

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declares that any term or provision of this Section 9.4 is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.

 

9.4.2 Seller acknowledges that the rights and compensation provided in this
Agreement are adequate consideration for the agreements made by Seller in this
Section 9.4, and that such covenants, and the territorial, time and other
limitations with respect thereto, are reasonable and properly required for the
adequate protection of Buyer’s acquisition of the Shares, and Seller agrees that
such limitations are reasonable with respect to their business activities and do
not impose undue hardship on them.

 

9.4.3 Both parties hereto hereby agree that during the non-competition period
set forth above and at all times thereafter each such party will refrain from
making any disparaging remarks about the other party hereto or, to the extent
applicable, any of such party’s officers, directors, employees, agents,
representatives, affiliates, products or services. It is understood and agreed,
however, that this section is not intended to limit the right of any party
hereto to give truthful testimony should any party hereto be subpoenaed or
otherwise testify in any proceeding or other action before any Governmental
Entity.

 

9.5 Agreement to Indemnify; Insurances.

 

It is understood and agreed that the Companies shall, to the fullest extent
permitted under applicable law, indemnify and hold harmless, and, after the
Closing Date, the Buyer shall for a period of six years following the Closing
Date, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each director, officer, employee, fiduciary and agent of the Companies
or any of their Subsidiaries and their respective Subsidiaries and Affiliates
including, without limitation, officers and directors servicing as such on the
date hereof or on the Closing Date (collectively, the “Indemnified Parties”)
from and against any costs or expenses (including reasonable attorneys’ fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to any of the transactions
contemplated hereby, and in the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Closing date),
(i) the applicable Company or the Buyer shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the applicable Company or the Buyer, promptly as
statements therefore are received, and (ii) the applicable Company or the Buyer
will cooperate in the defense of any such matter; provided, however, that
neither the applicable Company nor the Buyer shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed). For a period of six years following the
Closing Date, the Buyer shall maintain or obtain officers’ and directors’
liability insurance covering the Indemnified Parties who currently or at the
Effective Time are covered by any of the Companies’ officers and directors
liability insurance policies on terms not less favorable than those in effect on
the date hereof in terms of coverage and amounts; provided, however, that if the
aggregate annual premiums for such

 

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insurance at any time during such period exceed 200% of the premium paid by the
Companies for such insurance as of the date of this Agreement, then the Buyer
shall provide the maximum coverage that will then be available at an annual
premium equal to 200% of such per annum rate as of the date of this Agreement.
The Buyer shall continue in effect the indemnification provisions provided in
the Companies’ Certificate of Incorporation, Bylaws; resolutions and any other
written agreement between them for a period of not less than six years following
the Effective Time. This Section 9.5 shall survive the Closing. Notwithstanding
Section 13.13, this Section 9.5 is intended to be for the benefit of and to
grant third party rights to the Indemnified Parties whether or not they are
parties to this Agreement, and each of the Indemnified Parties shall be entitled
to enforce the covenants contained herein.

 

9.6 Retained Marks.

 

Buyer agrees that within forty-five (45) days following the Closing, it will
cease any and all use of the Swope trade name and trademark (the “Retained
Marks”) or any name or trademark incorporating or confusingly similar to the
Retained Marks, including without limitation any use of the Retained Marks on
any stationery, Web sites, advertising, promotional or other materials. The
right of the Buyer to use the Retained Marks during the period referred to in
this section is subject to the following conditions: (i) Buyer will use
commercially reasonable efforts to comply with Seller’s quality control
standards made known to Buyer in writing with respect to use of the Retained
Marks and will submit to Seller, before use, any materials created by Buyer
after the Closing, including without limitation advertising materials, on which
the Retained Marks appear for Seller’s approval; (ii) Buyer acknowledges that
the Retained Marks shall remain the property of Seller, and that all use of the
Retained Marks by the Buyer shall inure to the benefit of Seller; and (iii)
Buyer shall not use the Retained Marks in any other way that, to Buyer’s
knowledge, would jeopardize their strength or validity or diminish their value.

 

ARTICLE X

INDEMNIFICATION

 

10.1 Indemnification by Seller.

 

Seller shall indemnify and hold harmless Buyer and its respective officers,
directors, employees, agents and Affiliates and successors and assigns of any of
the foregoing against any and all actual damages resulting from claims,
obligations, losses, costs, expenses, fees, liabilities and damages, whenever
arising or incurred, including interest, penalties and reasonable attorneys’
fees and disbursements (including amounts paid in settlement and costs of
investigation) (each individually a “Loss,” and collectively, “Losses”), arising
out of, in connection with or otherwise relating to:

 

  (a) The breach by Seller or inaccuracy of any representation or warranty made
by Seller in this Agreement;

 

  (b) The breach or non-performance by Seller of any covenant or agreement made
by Seller in this Agreement;

 

  (c) (i) all income Taxes (or the nonpayment thereof) of the Companies for all
Taxable periods ending on or before the Closing Date and the

 

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portion through the end of the Closing Date for any Taxable period that includes
(but does not end on) the Closing Date (“Pre-Closing Tax Period”), (ii) all
income Taxes of any member of an Affiliated Group of which any Company (or any
predecessor of the foregoing) is or was a member on or prior to the Closing
Date, including pursuant to Treasury Regulation §1.1502-6 (or any analogous or
similar state, local, or foreign law or regulation for which any company is
liable), and (iii) any and all income Taxes of any Person imposed on any Company
as a transferee or successor, by contract or pursuant to any law, rule, or
regulation, which income Taxes have accrued before the Closing;

 

  (d) Any Company Benefit Plan (other than any Continuing Plan) currently or
previously maintained or contributed to by any controlled group of companies (as
defined in Code Section 414) which includes any of the Companies or Seller.;

 

  (e) Any Liabilities arising out of, related to or incurred as a result of that
certain Stock Repurchase Agreement, dated as of August 26, 2004, by and among FG
Kansas, FirstGuard and Heartland Physicians Health Network, Inc. (the “HPHN
Agreement”); and

 

  (f) Any Liabilities arising out of, related to or incurred as a result of the
commercial business of Seller or the Companies.

 

10.2 Indemnification by Buyer.

 

After the Closing Date and subject to the limitations of Section 10.4, Buyer
shall indemnify and hold harmless Seller and its respective officers, directors,
employees, agents and Affiliates, and successors and assigns of any of the
foregoing against any and all Losses, arising out of, in connection with or
otherwise relating to:

 

  (a) The breach by Buyer or inaccuracy of any representation or warranty, made
by Buyer in this Agreement; and

 

  (b) The breach or non-performance by Buyer of any covenants or agreements made
by Buyer in this Agreement.

 

10.3 Survival.

 

10.3.1 Except those contained in Article IX, all of the covenants and agreements
(excluding those set forth in Sections 10.1(a), (b) and (d) and Sections 10.2(a)
and (b), which shall terminate eighteen months after the Closing Date), made by
the Parties in this Agreement shall survive the Effective Date and continue in
full force and effect after the Effective Date without any time limitation.

 

10.3.2 The representations and warranties in this Agreement and the schedules
and exhibits attached hereto shall survive the Closing as follows:

 

10.3.3 The representations and warranties in Section 4.16 (Tax Returns and
Liabilities) shall terminate when the applicable statutes of limitations with
respect to the liabilities in question expire (after giving effect to any
extensions or waivers thereof), plus thirty (30) days;

 

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10.3.4 The representations and warranties in Section 3.2 (Authorization),
Section 3.4 (Ownership of Shares), and Section 4.1 (Organization and Good
Standing), Section 4.2 (Capitalization), Section 4.3 (Subsidiaries) and Section
4.15 (No Brokers or Finders), shall not terminate; and

 

10.3.5 Except as set forth in Sections 10.3.3 and 10.3.4, the representations
and warranties shall terminate eighteen months after of the Closing Date and any
claims brought in connection therewith must be brought prior to such time.

 

10.4 Limitations.

 

Seller will not be liable to Buyer for any Losses pursuant to Sections 10.1(a),
(b), (d) or (f) unless and until the aggregate amount of such Losses that would
otherwise be recoverable pursuant to such Section but for this Section 10.4
exceeds $850,000 (the “Threshold”), and then only for amounts that exceed the
Threshold; provided, that Buyer may not assert any additional claims against the
Seller pursuant to Sections 10.1(a), (b), (d) or (f) once Seller has paid an
amount equal to the Escrow Amount (the “Cap”) in the aggregate to Buyer pursuant
to such Section; provided, further, that for Losses as a result of, arising out
of, relating to, allocable to, in the nature of, or caused by, (i) breaches of
the representations and warranties set forth in Sections 3.2 (Authorization),
4.1 (Organization and Good Standing), 4.2 (Capitalization), 4.15 (No Brokers or
Finders) and 4.16 (Tax Returns and Tax Liabilities), or (ii) Liabilities arising
under or in connection with Sections 10.1(c), (e) or (f), Seller will be liable
to Buyer for all such Losses without regard to the Cap, and such Losses will be
subject to the Threshold but will not be counted in the determination of the Cap
being met or exceeded. The indemnification rights and obligations set forth in
this Article X shall survive the Closing without limit, except as set forth in
Section 10.3.

 

Buyer will not be liable to Seller for any Losses pursuant to Section 10.2(a) or
(b) unless and until the aggregate amount of such Loss that would otherwise be
recoverable pursuant to such Sections but for this Section 10.34 exceeds the
Threshold, and then only for amounts that exceed the Threshold; provided, that
Seller may not assert any additional claims against Buyer pursuant to Section
10.1(a), (b) or (c) once Buyer has paid an amount equal to the Cap in the
aggregate to Seller pursuant to such Section; provided, further, that for Losses
as a result of, arising out of, relating to, allocable to, in the nature of, or
caused by, breaches of the representations and warranties set forth in Sections
5.1 (Organization and Good Standing) and 5.3 (No Brokers and Finders), Buyer
will be liable to Seller for all such Losses without regard to the Cap, and such
Losses will be subject to the Threshold but will not be counted in the
determination of the Cap being met or exceeded. The indemnification rights and
obligations set forth in this Article X shall survive the Closing without limit
except as set forth in Section 10.3.

 

Buyer agrees that if (i) there shall have been a failure of the closing
condition set forth in Section 6.8 (Material Adverse Change) and (ii) Seller
shall have acknowledged the same and agreed in writing that the Buyer has the
right to terminate this Agreement with no liability to the

 

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Sellers or the Companies whatsoever and (iii) Buyer elects to waive its right to
terminate and close the transaction notwithstanding such failure, then Seller
shall have no obligation to provide indemnity pursuant to this Article X with
regard to the facts and circumstances underlying such failure of such closing
condition. In the event that Buyer elects to terminate this Agreement pursuant
to (ii) above, Buyer agrees not to compete with the Seller’s business in the
Service Area for a period of twenty-four months following the date of such
termination; provided, however, that such agreement not to compete will
terminate upon a change of control of FirstGuard, and that it shall not apply to
any competition that shall result from an acquisition by Centene of a plan that
operates inside and outside of the Service Area. Except as otherwise provided in
this Agreement, each of the Parties hereby acknowledges that their sole and
exclusive remedy after the Closing with respect to any and all Losses (other
than claims, or causes of action arising from, fraud, willful breach or
intentional misrepresentation). Except as otherwise provided in this Agreement,
each of the Parties hereby acknowledges that their sole and exclusive remedy
after the Closing with respect to any and all Losses shall be pursuant to the
indemnification provisions set forth in this Article X. The Parties also
acknowledge and agree that, to avoid double counting, to the extent any Losses
are duplicative of amounts for which the aggrieved Party has (i) already
received recompense through one of the adjustment mechanisms set forth in
Section 2.2 or (ii) the amount at issue was considered in the calculation of
Statutory Net Worth as required by Sections 2.2.6 or 6.3, such Party may not
receive double recovery by seeking indemnity under this Article X for the same
Losses, and that as a principle of contract interpretation, this Agreement will
be construed in a manner to prevent such double recovery.

 

10.5 Notice and Right to Defend.

 

10.5.1 Should any claim or action by a third party arise after the Closing Date
for which a Party may be liable to another Party under the indemnity provisions
of this Agreement, the indemnitee shall notify the indemnitor in writing and in
reasonable detail as soon as practicable after the indemnitee receives notice of
such claim or action in the manner provided for the giving of notices under this
Agreement, provided, that failure to notify in such manner shall relieve the
indemnitor from Liability under this Agreement with respect to such claim only
if, and only to the extent that, such failure to notify the indemnitor results
in the forfeiture by the indemnitor of material rights and defenses otherwise
available to the indemnitor with respect to such claim. The expenses of all
proceedings, contests, lawsuits, or investigations of claims with respect to
such claims or actions, shall be borne by the indemnitor. If an indemnitor
wishes to assume the defense of such claim or action, it shall give written
notice to the indemnitee within ten (10) days after notice from the indemnitee
of such claim or action of its intention to assume the defense, and the
indemnitor shall thereafter assume the defense of any such claim or Liability
through counsel reasonably satisfactory to the indemnitee, provided that the
indemnitee may also participate in such defense at its own expense;

 

10.5.2 If the indemnitor shall not assume the defense of, or if after so
assuming it shall fail to defend, any such claim or action, or such action
involves a claim which (a) the indemnitee reasonably believes could be
materially detrimental to or materially injure the indemnitee’s reputation,
customer relations or future business prospects, (b) seeks non-monetary relief
(except where non-monetary relief is merely incidental to a primary claim or
claims for monetary damages), (c) involves criminal allegations, (d) is one in
which the indemnitor is also a party and joint representation would be
inappropriate or there may be legal defenses available to the

 

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indemnitee which are different from or additional to those available to the
indemnitor, or (e) involves a claim which, upon petition by the indemnitee, the
appropriate court rules that the indemnitor failed or is failing to vigorously
prosecute or defend, then the indemnitee shall have the sole right to defend
such claim or action. In any action or proceeding with respect to which
indemnification is being sought hereunder, the indemnitee or the indemnitor,
whichever is not assuming the defense of such action, shall have the right to
participate in such litigation and to retain its own counsel at such party’s own
expense. The indemnitee may defend against any such claim or action in such
manner as it may reasonably deem appropriate and the indemnitee may settle such
claim or litigation on such terms as it may reasonably deem appropriate, and the
indemnitor shall promptly reimburse the indemnitee for the amount of all
reasonable expenses, legal and otherwise, incurred by the indemnitee in
connection with the defense and/or settlement of such claim or action. If no
settlement of such claim or action is made, the indemnitor shall satisfy any
judgment rendered with respect to such claim or in such action before indemnitee
is required to do so, and pay all expenses, legal or otherwise, incurred by the
indemnitee in the defense against such claim or litigation.

 

10.5.3 An indemnitor may not, without the prior written consent of the
indemnitee, settle or compromise any claim or consent to the entry of any
judgment with respect to which indemnification is being sought hereunder unless
(i) simultaneously with the effectiveness of such settlement, compromise or
consent, the indemnitor pays in full any obligation imposed on the indemnitee by
such settlement, compromise or consent and obtain releases of the indemnitee in
full from such third party claim and (ii) such settlement, compromise or consent
does not contain any equitable order, judgment or term that in any manner
affects, restrains or interferes with the business of the indemnitee or any of
the indemnitee’s Affiliates.

 

10.5.4 In the event an indemnitee shall claim a right to payment pursuant to
this Agreement not involving a third party claim covered by Section 10.5.1, such
indemnitee shall send written notice of such claim to the appropriate
indemnitor. Such notice shall specify the basis for such claim. As promptly as
possible after the indemnitee has given such notice, such indemnitee and the
appropriate indemnitor shall establish the merits and amount of such claim (by
mutual agreement or pursuant to the arbitration provisions herein).

 

10.5.5 Except as otherwise provided herein, any indemnification of a Party
pursuant to this Article X shall be effected by wire transfer of immediately
available funds from the indemnifying Party, to an account(s) designated by the
indemnified Party, within ten (10) days after the final determination thereof.
Any such indemnification payments shall include interest at the Applicable Rate
calculated on the basis of the actual number of days elapsed over 360, from the
date of such final determination to the date of payment. Any amounts owing from
Seller pursuant to this Article X shall be made from the Escrow Funds (as
defined in the Escrow Agreement) in the Escrow Account (as defined in the Escrow
Agreement). All indemnification payments under this Article X shall be deemed
adjustments to the Purchase Price set forth in Section 2.1.

 

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10.6 Remedies.

 

Notwithstanding anything to the contrary herein, nothing shall preclude any
Party from seeking any remedy based upon fraud or willful or criminal misconduct
or intentional breach of any of the provisions of this Agreement.

 

10.7 Determination of Loss Amount.

 

10.7.1 The amount of any Loss subject to indemnification under Article 10 shall
be calculated net of any insurance proceeds received by the indemnitee on
account of such Loss. No loss, liability, damage or expense shall be deemed to
have been sustained by such Party to the extent of any proceeds previously
received by such Party from any insurance recovery (net of (A) all out-of-pocket
costs directly related to such recovery and (B) any deductibles for the
applicable insurance policy and (C) reasonable estimates of increased premiums
resulting from such recovery) with respect to insurance coverage in place as of
the date hereof. Nothing in this Agreement shall obligate any indemnitee to seek
recovery under any insurance policy for any Loss.

 

10.7.2 The amount of Loss with respect to which an indemnitee is to be
indemnified pursuant to Article 10 initially shall be determined without regard
to any Tax Benefit. However, to the extent that the indemnitee actually realizes
a tax benefit (a “Tax Benefit”) with respect to any payment for Losses made
hereunder through a refund of Taxes or reduction in actual amount of Taxes that
otherwise would be payable by the indemnitee, the indemnitee shall pay to the
indemnitor the amount of such Tax Benefit (but not in excess of the
indemnification payment or payments actually received from the indemnitor with
respect to such Losses) at such time or times as and to the extent that the
indemnitee or any Affiliate of such indemnitee actually realizes such Tax
Benefit. For this purpose, Tax Benefits shall be calculated by computing the
amount of Taxes before and after inclusion of any Tax items attributable to such
Losses for which indemnification was made and treating such Tax items as the
last items claimed for any taxable period and shall be reduced by the amount of
any related Tax detriment suffered by the indemnitee. Buyer, on the one hand,
and Seller, on the other hand, agree to provide the other or its designated
representatives with assistance and such documents and records reasonably
requested by them that are relevant to their ability to determine when an amount
is payable to, or receivable from, the other party pursuant to this Section,
including copies of Tax Returns, estimated Tax payments, schedules and related
supporting documents. If any adjustments are made to any Tax Return relating to
the indemnitee for any taxable period as a result of or in settlement of any
audit, other administrative proceeding or judicial proceeding or as the result
of the filing of an amended return to reflect the consequences of any
determination made in connection with any such audit or proceeding and if such
adjustment results in any change in the amount of any Tax Benefit or Tax
detriment to the indemnitee, appropriate payments will be made between the
indemnitor and the indemnitee in accordance with the previous sentence to
properly reflect such adjustment amount.

 

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ARTICLE XI

TERMINATION

 

11.1 Termination.

 

This Agreement may be terminated at any time prior to the Closing Date:

 

  (a) by mutual written consent of the Parties;

 

  (b) by Buyer or Seller at either’s option, if the Closing Date shall not have
occurred on or before March 31, 2005; provided, however, that the right to
terminate this Agreement under this Section 11.1(b), shall not be available to
any Party whose failure to fulfill any obligation under this Agreement has
substantially contributed to, or resulted in, the failure of the Closing to have
occurred on or before such date;

 

  (c) by Buyer or Seller at either’s option, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties hereto shall use all reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable;

 

  (d) by Seller in the event the Buyer’s representations and warranties
contained in Article V of this Agreement are not true and correct in all
material respects or the covenants contained in this Agreement have not been
complied with in all material respects, provided that Buyer has received notice
of the breach indicated therein and has failed to effect a cure thereof to the
reasonable satisfaction of Seller not later than thirty (30) days after such
notice;

 

  (e) by Buyer in the event any of the Companies or Seller of representations
and warranties contained in this Agreement are not true and correct in all
material respects or the covenants contained in this Agreement have not been
complied with in all material respects, provided that Seller has received notice
of the breach indicated therein and has failed to effect a cure thereof to the
reasonable satisfaction of Buyer not later than thirty (30) days after such
notice;

 

  (f) by Buyer if any of the conditions set forth in Article VI shall have
become (in the good faith determination of Buyer) incapable of fulfillment prior
to the Termination Date and shall not have been waived by Buyer;

 

  (g) by Seller if any of the conditions set forth in Article VII shall have
become (in the good faith determination of Seller) incapable of fulfillment
prior to the Termination Date and shall not have been waived by Seller; or

 

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  (h) by Buyer if, prior to the Closing Date, there is any Material Adverse
Change; provided that Seller has received notice of such Material Adverse Change
and has failed to effect a cure thereof to the reasonable satisfaction of Buyer
not later than thirty (30) days after such notice;

 

11.2 Effect of Termination.

 

Except as otherwise specified in this Agreement, including but not limited to in
Article XI, upon the termination of this Agreement pursuant to Section 11.1,
this Agreement shall forthwith become null and void, except that nothing herein
shall relieve any party from liability for any breach of this Agreement prior to
such termination.

 

11.3 Waiver.

 

At any time prior to the Closing Date, any term, provision or condition of this
Agreement may be waived in writing (or the time for performance of any of the
obligations or other acts of the parties hereto may be extended) by the party
that is entitled to the benefits thereof. Such an election shall not be deemed a
waiver of any rights or remedies of the waiving party with respect to the matter
which gave rise to such right to terminate.

 

ARTICLE XII

ARBITRATION

 

12.1 Conciliation and Mediation.

 

If a dispute between the Parties relating to this Agreement, or under any other
agreement executed and delivered in connection herewith, is not resolved within
fifteen (15) days from the date that either Party has notified the other that
such dispute exists, then such dispute shall be submitted jointly to binding
arbitration.

 

12.2 Arbitration.

 

Any dispute submitted to arbitration pursuant to this Article XII shall be
determined by the decision of a board of arbitration (“Board of Arbitration”)
consisting of three members who are members of and certified by the American
Arbitration Association (“AAA”) and each of whom is experienced in managed care
or health care arbitrations, selected as hereinafter provided. Buyer shall
select an arbitrator and Seller shall select an arbitrator, each of whom shall
be a member of the Board of Arbitration who is independent of the Parties. A
third Board of Arbitration member, independent of the Parties, shall be selected
by mutual agreement of the other two Board of Arbitration members. If the other
two Board of Arbitration members fail to reach agreement on such third member
within twenty (20) days after their selection, such third member shall
thereafter be selected by the AAA upon application made to it for such purpose
by any party to the arbitration. The Board of Arbitration shall meet in
Wilmington, Delaware, or such other place as a majority of the members of the
Board of Arbitration determines more

 

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appropriate, and shall reach and render a decision in writing (which shall state
the reasons for its decisions in writing and shall make such decisions entirely
on the basis of the substantive law governing the Agreement and which shall be
concurred in by a majority of the members of the Board of Arbitration) with
respect to the items in dispute. In connection with rendering its decisions, the
Board of Arbitration shall adopt and follow the Commercial Rules of Arbitration
of the AAA in effect as of the date of the arbitration. To the extent practical,
decisions of the Board of Arbitration shall be rendered no more than thirty (30)
calendar days following commencement of proceedings with respect thereto. The
Board of Arbitration shall cause its written decision to be delivered to Buyer
and Seller. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on Buyer and Seller and each party to the arbitration
shall be entitled to enforce such decision to the fullest extent permitted by
law and entered in any court of competent jurisdiction. The Non-Prevailing Party
shall pay all costs and fees of the Board of Arbitration and reasonable attorney
fees and other costs of the prevailing party in connection with such dispute.

 

12.3 Equitable Relief.

 

Notwithstanding any other provision of this Agreement, any Party shall have the
right to seek equitable relief, in a court of competent jurisdiction, to the
extent that equitable relief is available to a Party hereto. If a Party chooses
to pursue equitable relief, such conduct shall not constitute a waiver of or be
deemed inconsistent with the provisions set forth in this Article XII.

 

ARTICLE XIII

MISCELLANEOUS

 

13.1 Notices.

 

All notices and other communications hereunder shall be in writing and shall be
either (a) deposited in first class United States mail, certified, with postage
prepaid, (b) delivered by messenger, (c) sent by overnight courier, or (d) sent
by fully completed and confirmed facsimile transmission (with a written
confirmation simultaneously sent in first class United States mail), as follows:

 

If to Seller:   Copy to: Swope Community Enterprises   Willkie Farr & Gallagher
LLP 3801 Blue Parkway   787 Seventh Avenue Kansas City, MO 64130   New York, New
York 10019 Attention: Frank Ellis   Attention: William J. Grant, Esq.

                   Gary Brown

  Fax: (212) 728-8111 Fax: (816) 922-7611    

 

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If to Buyer:   Copy to: Centene Corporation   Kirkland & Ellis LLP
7711 Carondelet, Suite 800   200 East Randolph Drive St. Louis, MO 63105  
Chicago, IL 60601 Attention: Michael F. Neidorff   Attention: Gerald T. Nowak,
Esq. Fax: (314) 725-5180   Fax: (312) 861-2200

 

or such other address or fax number as any party may request by notice given as
aforesaid. Notices sent as provided herein shall be deemed given on the date
received by the recipient. If a recipient rejects or refuses to accept a notice
given pursuant to this Section 13.1, or if a notice is not deliverable because
of a changed address or fax number of which no notice was given in accordance
with the provisions hereof, such notice shall be deemed to be received two days
after such notice was mailed (whether as the actual notice or as the
confirmation of a faxed notice) in accordance with the terms hereof. The
foregoing shall not preclude the effectiveness of actual written notice given to
a party at any address or by any means.

 

13.2 Waiver.

 

No waiver by either Buyer or Seller hereto of its rights under any provision of
this Agreement shall constitute a waiver of such Party’s rights under such
provision at any other time or a waiver of such Party’s rights under any other
provision of this Agreement.

 

13.3 Counterparts.

 

This Agreement may be executed in any number of counterparts each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.

 

13.4 Delivery by Facsimile.

 

This Agreement and any signed contract entered into in connection herewith or
contemplated hereby, and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine, shall be treated in all manner
and respects as an original contract and shall be considered to have the same
binding legal effects as if it were the original signed version thereof
delivered in person. At the request of any party hereto or to any such contract,
each other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties. No party hereto or to any such contract shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or contract was transmitted or communicated through the use of
facsimile machine as a defense to the formation of a contract and each such
party forever waives any such defense.

 

13.5 Headings.

 

The headings contained in this Agreement have been inserted for convenience of
reference only and shall in no way restrict or modify any of the terms or
provisions hereof.

 

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13.6 Severability.

 

If any provision of this Agreement is held by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable, such invalid,
illegal or unenforceable provision shall be severed from the remainder of this
Agreement, and the remainder of this Agreement shall be enforced. In addition,
the invalid, illegal or unenforceable provision shall be deemed to be
automatically modified, and, as so modified, to be included in this Agreement,
such modification being made to the minimum extent necessary to render the
provision valid, legal and enforceable. Notwithstanding the foregoing, if the
severed or modified provision concerns all or a portion of the essential
consideration to be delivered under this Agreement by one party to the other,
the remaining provisions of this Agreement shall also be modified to the extent
necessary to adjust equitably the parties’ respective rights and obligations
hereunder.

 

13.7 Entire Agreement.

 

This Agreement and the other agreements, certificates and documents of the
Parties contemplated herein constitute the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements or understandings between the Parties, except the Confidentiality
Agreement, which will continue in effect until terminated pursuant to the terms
set forth therein. The exhibits, schedules and attachments attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions in this Agreement shall control. Each Party is
responsible for the accuracy of its respective schedules regardless of any
assistance provided by the other party in connection with the preparation of the
schedules. This Agreement shall not constitute an agreement or be considered as
evidence of an agreement between the parties until executed and delivered by the
parties.

 

13.8 Successors and Assigns.

 

This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the Parties hereto.
Notwithstanding the foregoing, this Agreement shall not be assignable by any
Party without the prior written consent of the others, and any attempt at an
assignment in violation of this Section 13.8 shall be void ab initio.
Notwithstanding the foregoing statement, Buyer may assign its rights and
obligations hereunder to any one or more of its Subsidiaries. This Agreement
shall only be binding on the Parties upon execution and delivery of this
Agreement by each of the Parties.

 

13.9 Governing Law.

 

This Agreement is to be governed by and interpreted under the laws of the State
of Delaware, without resort to choice of law or conflict of law principles which
direct the application of the laws of a different state.

 

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13.10 Cost of Transaction.

 

Whether or not the transactions contemplated hereby are consummated:

 

13.10.1 Buyer shall pay the fees, expenses, and disbursements of Buyer and its
agents, representatives, accountants, and counsel.

 

13.10.2 Seller shall pay the fees, expenses and disbursements of each of the
Companies and Seller and its agents, representatives, accountants and counsel.

 

13.10.3 Seller shall absorb or pay, as applicable, all costs and expenses
(including wages, overhead and professional fees) relating to all notices or
other communications to the Medicaid Providers and Medicaid Members required to
be sent by Seller or the Companies prior to the Closing in connection with this
transaction, except that Buyer shall reimburse Seller for the costs of printing
and mailing such notices.

 

13.10.4 Notwithstanding the foregoing, the filing fee related to any filing made
pursuant to the Hart Scott Rodino Act shall be borne by Buyer.

 

13.11 Further Assurances.

 

Each party hereto agrees for the benefit of the other Parties hereto to execute
and deliver any necessary documents, instruments or agreements, and to take any
and all necessary actions, in order to (i) fully vest in Buyer all right, title
and interest to the Shares, and (ii) carry out the terms of this Agreement and
the transactions contemplated by this Agreement.

 

13.12 Construction.

 

Whenever the context of this Agreement requires, the gender of all words herein
shall include the masculine, feminine, and neuter, and the number of all words
herein shall include the singular and plural. All references to section numbers
in this Agreement shall be references to sections in this Agreement, unless
otherwise specifically indicated. All Parties to this Agreement have been
represented by counsel and, accordingly, this Agreement shall not be construed
strictly for or against any party hereto. This Agreement shall not be construed
more strictly against one party than the other by virtue of the fact that it may
have been prepared by counsel for one of the Parties, it being recognized that
each party has contributed substantially and materially to the preparation of
this Agreement.

 

13.13 Third Parties.

 

None of the provisions of this Agreement shall confer rights or benefits as
third party beneficiaries or otherwise upon any third party that is not
expressly a party to this Agreement including, without limitation, the Medicaid
Members, and the provisions of this Agreement shall not be enforceable by any
such third party.

 

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13.14 Confidentiality.

 

The Parties acknowledge and agree that this Agreement is within the scope of the
Confidentiality Agreement. Notwithstanding the Confidentiality Agreement, which
shall survive the execution of this Agreement, the Parties may disclose any
terms or conditions of this Agreement to any third parties to comply with
securities laws or HMO or insurance laws, and as needed to meet prudent business
requirements of shareholders, investors, bondholders, members and other
creditors.

 

13.15 Rights Cumulative.

 

Except as set forth herein, all rights, powers and remedies herein given to each
Party are cumulative and not alternative, and are in addition to all statutes or
rules of law. Any forbearance or delay by such Party in exercising the same
shall not be deemed to be a waiver thereof, and the exercise of any right or
partial exercise thereof shall not preclude the further exercise thereof, and
the same shall continue in full force and effect until specifically waived by an
instrument in writing executed by such Party.

 

13.16 Amendments.

 

No amendment, modification, termination or waiver of any provision of this
Agreement shall be effective unless the same shall be set forth in a writing
signed by each Party, and then only to the extent specifically set forth
therein.

 

* * *

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Execution Date.

 

BUYER: CENTENE CORPORATION By:  

/s/ Michael F. Neidorff

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Chairman and CEO

--------------------------------------------------------------------------------

   

 

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SELLER: SWOPE COMMUNITY ENTERPRISES By:  

/s/ E. Frank Ellis

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Chairman and CEO

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