Document:

Exhibit 10.42

 

TEXAS EASTERN PRODUCTS PIPELINE COMPANY, LLC

 

AMENDED AND RESTATED

NONEMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN

 

The
Amended and Restated Nonemployee Directors Deferred Compensation Plan (the “Plan”)
is hereby established, effective April 1, 2002, by Texas Eastern Products
Pipeline Company, LLC, a Delaware limited liability company (the “Company”),
which plan provides for optional deferral of directors’ fees, as described
below:

 

1.                                       Eligibility

 

Any
member of the Board of Directors of the Company who is
not also an employee of Duke Energy Corporation, the Company, or any other
company affiliated with Duke Energy Corporation (“Director”), is eligible to
participate under the Plan (“Participant”).

 

2.                                       Compensation
to be Deferred

 

A
Director may elect to defer any whole percentage of all directors’ fees which
may become payable to him or her with respect to services as a Director during
any calendar year (the “year”). 
Directors’ fees shall include retainer fees, committee fees, and
attendance fees, but shall not include any expense reimbursement.

 

3.                                       Time
and Method of Election to Defer

 

a.                                       In
the first year in which a Participant becomes eligible to participate in the
Plan (including the first year in which the Plan is in effect), the newly eligible
Participant may make an election to defer directors’ fees for services to be
performed subsequent to such deferral election by completing the deferral
election form that has been approved by the Committee (“Deferral Election Form”),
and filing it with the Secretary of the Company within thirty (30) days after
the date the Participant becomes eligible (or the date the Plan is first in
effect).

 

b.                                      A
Participant may elect to defer directors’ fees for any subsequent year by
completing the Deferral Election Form and filing it with the Secretary of the
Company before December 31 of the year preceding the year for which
directors’ fees shall be deferred.

 

c.                                       A
deferral election for a year shall be irrevocable and shall remain in effect
and be deemed a like election for deferral of directors’ fees for all
subsequent years unless revoked by a new Deferral Election Form filed prior to December 31
of the year preceding the first year for which the new deferral election is to
be effective.  To the extent a deferral
election is 

 

 

not in effect for a year,
directors’ fees for such year shall be paid by the Company in accordance with
its usual procedures.

 

4.                                       Phantom
Investment

 

Each
time a Participant files a Deferral Election Form, the Company shall establish
an account (“Deferred Compensation Account”) in the name of the
Participant.  The Participant’s Deferred
Compensation Account shall be increased to reflect the directors’ fees deferred
by the Participant pursuant to the Deferral Election Form.  The Participant’s Deferred Compensation
Account shall be adjusted for investment gain or loss based upon the phantom
investment elected in the Deferral Election Form.  The Participant’s Deferred Compensation
Account shall be decreased to reflect any payment of the balance thereof.  Deferred Compensation Accounts shall be
maintained by the Company in accordance with such accounting rules and
procedures as the Company, in its sole discretion, shall determine.  In the Deferral Election Form, the
Participant shall irrevocably elect from among the following options, the
phantom investment in the Deferred Compensation Account of the directors’ fees
deferred thereby:

 

100%
Fixed Income Phantom Investment

 

100%
LP Unit Phantom Investment

 

50%
Fixed Income/50% LP Unit Phantom Investment

 

Fixed
Income Phantom Investment - quarterly interest on the opening
balance for the calendar quarter, at an annual rate of 7% or such other annual
rate as a majority of the members of the Compensation Committee of the Board of
Directors who are not eligible to participate under the Plan may, from time to
time, establish.

 

LP
Unit Phantom Investment - deemed invested in, or liquidated
from, whole and fractional TEPPCO Partners LP Units, based upon the closing
price of a TEPPCO Partners LP Unit as reported on the NYSE Composite Reporting
System as of the trading day immediately preceding the day on which the
directors’ fees if not deferred would have been payable, the day on which
quarterly cash distributions are paid to holders of TEPPCO Partners LP Units,
or the last day of the year that immediately precedes payment of the balance of
the Deferred Compensation Account in a lump sum or in an annual installment,
whichever day is applicable.

 

Combined
Fixed Income and LP Unit Phantom Investment.  should the phantom investment in a Deferred
Compensation Account be 50% Fixed Income/50% LP Unit, any payment of the
balance of the Deferred Compensation Account shall be considered taken, to the
extent possible, in equal amounts from each phantom investment.

 

2

 

5.                                       Time
of Payment

 

The
Company shall pay the balance of a Participant’s Deferred Compensation Account,
in a lump sum, or in five annual installments as determined below, with the
lump sum payment or, the first installment payment, as the case may be, being
made by January 15 of the year next succeeding the year in which the
Participant’s service as a Director terminates.  Subsequent
installment payments shall be made by January 15 of subsequent years.

 

6.                                       Form
of Payment

 

In the
Deferral Election Form that results in the establishment of the Deferred
Compensation Account, a Participant shall elect to have payment of the balance
of the Deferred Compensation Account made in one of the following forms:

 

a.                                       In
a lump sum, the amount of which shall be the balance of the Participant’s
Deferred Compensation Account, as adjusted for phantom investment through the
last day of the preceding year; or

 

b.                                      In
five annual installments, the amount of each installment shall be the balance
of the Participant’s Deferred Compensation Account, as adjusted for phantom
investment through the last day of the preceding year and for any installment
previously paid, divided by the number of installments not yet paid.

 

Notwithstanding the foregoing:

 

a.                                       If
at the close of the year during which the Participant’s service as a Director
terminates, the aggregate balance of the Participant’s Deferred Compensation
Accounts does not exceed $10,000.00, the aggregate balance of the Participant’s
Deferred Compensation Accounts shall be paid to the Participant in a lump sum
by January 15 of the next succeeding year; or

 

b.                                      In
the event of the Participant’s death, the aggregate balance of the Participant’s
Deferred Compensation Accounts shall be paid to the Participant’s beneficiary
in a lump sum by January 15 of the year next succeeding the year in which
the Participant died.

 

7.                                       Death
Beneficiary

 

A
Participant may designate a beneficiary or beneficiaries to receive the
aggregate balance of the Participant’s Deferred Compensation Account that is
unpaid at the time of Participant’s death. 
Such designation, including the revocation of any prior designation by a
superseding designation, shall be made by completing the approved form and
filing with the Secretary of the Company. 
A beneficiary 

 

3

 

designation
by a Participant who is married at the time of his/her death which fails to
name the Participant’s surviving spouse as the sole beneficiary shall not be
effective unless such surviving spouse has consented to the designation in
writing, witnessed by the Secretary of the Company, another representative of
the Committee or notary public, acknowledging the effect of the designation.  Spousal consent shall not be required if, at
the time of filing such designation, the Participant established to the
satisfaction of the Secretary of the Company that the consent of the
Participant’s spouse could not be obtained because there is no spouse, the
spouse could not be located or there exist such other mitigating circumstances
as may be prescribed by the Secretary of the Company.  Any spouse’s consent (or establishment that
the consent could not be obtained) shall be effective only with respect to that
spouse.  Any Participant may change
his/her beneficiary designation at any time by filing with the Secretary of the
Company a new beneficiary designation (with such spousal consent as may be
required).  Such designation shall not
become effective until so filed and unless so filed prior to the time of
Participant’s death.  In the event that a
beneficiary designation is not in effect at the time of Participant’s death or
in the event that no designated beneficiary has survived the Participant’s
death, the Participant’s estate shall be the Participant’s sole beneficiary.

 

8.                                       Payments
to Minors and Incompetents

 

Should
the Participant become incompetent or should the Participant’s beneficiary be a
minor or incompetent, the Company is authorized to make payment to a parent or
guardian of such minor or incompetent in full discharge of its obligations to
such minor or incompetent under the Plan.

 

9.                                       Distribution
Equivalents

 

As soon as possible after each quarterly distribution
date, TEPPCO shall credit to each Participant’s Deferred Compensation Account,
a monetary amount (“Distribution Equivalents”) equal to the product of:

 

(a)                                  the total number of LP Unit phantom investments in
Participant’s Deferred Compensation Account, multiplied by

 

(b)                                 the distribution paid with respect to a TEPPCO Partners,
L.P. Unit for such quarter.

 

On the date that a credit to Participant’s Deferred
Compensation Account is made for LP Unit Phantom Investments any monetary
balance in such account attributable to Distribution Equivalents will be converted
to LP Unit Phantom Investments in accordance with the provisions of Section 4
subtitled LP Unit Phantom Investment.

 

4

 

10.                                 Plan
Administration

 

The
Compensation Committee of the Board of Directors of the Company (the “Committee”)
is the administrator of the Plan, provided, that any member of the Committee
who is eligible to participate under the Plan shall not participate in any
decision on any matter regarding the administration of the Plan.  As Plan administrator, the Committee shall
have full and exclusive authority to control and manage the operation and
administration of the Plan.  The
Committee may adopt such rules, and approve such forms, as may be necessary or
desirable for the administration of the Plan and may delegate any of its duties
and authority to others.  The Committee
has the discretion:

 

a.                                       To
interpret and construe the terms and provisions of the Plan (including any
rules adopted for the Plan);

 

b.                                      To
correct any defect, supply any omission, or reconcile any inconsistency in the
Plan;

 

c.                                       To
decide any claim arising under the Plan; and

 

d.                                      To
make factual determinations in connection with any of the foregoing.

 

A decision by the
Committee with respect to any matter pertaining to the Plan shall be conclusive
and binding on all interested parties.

 

11.                                 Unfunded
Plan

 

The
Plan is unfunded.  To the extent that a
Participant or beneficiary acquires a right to receive payments from the
Company under the Plan, such right shall not be greater than the right of an
unsecured general creditor of the Company and such right shall be an unsecured
claim against the general assets of the Company.

 

Title
to and beneficial ownership of any assets, whether cash or investments, which
the Company may set aside in a grantor trust or otherwise earmark to pay its
obligations hereunder will at all times remain the property of the Company, and
neither the Participant nor the Participant’s estate or other beneficiary shall
have any property interest whatsoever in any specific assets of the Company.

 

12.                                 Nonassignability

 

The
right of the Participant to receive payment from the Company under the Plan
shall not be assigned, transferred, pledged, or encumbered except as provided
by Section 7.  Any attempted
assignment, transfer, pledge, or encumbrance in violation of this Section 12
shall be null and void.

 

5

 

13.                                 Amendment
or Termination

 

The
Plan may be amended from time to time or terminated by the Board of Directors
of the Company, except that no amendment or termination shall, without the
consent of the Participant, impair the rights of the Participant to receive
payment of the aggregate balance of the Participant’s Deferred Compensation
Accounts.

 

14.                                 Governing
Law

 

The
Plan, and all determinations made and actions taken pursuant thereto, to extent
not governed by the provisions of the Internal Revenue Code or the securities
laws of the United States, shall be governed by and construed in accordance
with the laws of the state of Texas.

 

This Plan document has been executed on behalf of the
Company this 1st day of November, 2002.

 

 

	
   

  	
  TEXAS
  EASTERN PRODUCTS

  PIPELINE COMPANY, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ BARRY R.
  PEARL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chief Executive
  Officer and President

  	
   

  

 

6Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

 

dated as of

February 23, 2005

between

AETNA INC.

and

MAGELLAN HEALTH SERVICES, INC.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  
	
  ARTICLE
  1

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
   

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
   

  
	
  PURCHASE
  AND SALE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
   

  	
  Purchase and Sale

  	
   

  
	
  Section 2.02.

  	
   

  	
  Excluded Assets

  	
   

  
	
  Section 2.03.

  	
   

  	
  Assumed Liabilities

  	
   

  
	
  Section 2.04.

  	
   

  	
  Excluded Liabilities

  	
   

  
	
  Section 2.05.

  	
   

  	
  Assignment of Contracts and Rights

  	
   

  
	
  Section 2.06.

  	
   

  	
  Purchase Price; Allocation of Purchase
  Price

  	
   

  
	
  Section 2.07.

  	
   

  	
  Closing

  	
   

  
	
  Section 2.08.

  	
   

  	
  Network Adjustment

  	
   

  
	
  Section 2.09.

  	
   

  	
  Adjustment of Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  3

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
   

  	
  Corporate Existence and Power

  	
   

  
	
  Section 3.02.

  	
   

  	
  Corporate Authorization

  	
   

  
	
  Section 3.03.

  	
   

  	
  Governmental Authorization

  	
   

  
	
  Section 3.04.

  	
   

  	
  Noncontravention

  	
   

  
	
  Section 3.05.

  	
   

  	
  Required and Other Consents

  	
   

  
	
  Section 3.06.

  	
   

  	
  Litigation

  	
   

  
	
  Section 3.07.

  	
   

  	
  Compliance with Laws and Court Orders

  	
   

  
	
  Section 3.08.

  	
   

  	
  Properties

  	
   

  
	
  Section 3.09.

  	
   

  	
  Sufficiency of and Title to the Purchased
  Assets

  	
   

  
	
  Section 3.10.

  	
   

  	
  Intellectual Property

  	
   

  
	
  Section 3.11.

  	
   

  	
  Licenses and Permits

  	
   

  
	
  Section 3.12.

  	
   

  	
  Finders’ Fees

  	
   

  
	
  Section 3.13.

  	
   

  	
  Environmental Compliance

  	
   

  
	
  Section 3.14.

  	
   

  	
  Provider Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
   

  	
  Corporate Existence and Power

  	
   

  
	
  Section 4.02.

  	
   

  	
  Corporate Authorization

  	
   

  

 

i

 

	
  Section 4.03.

  	
   

  	
  Governmental Authorization

  	
   

  
	
  Section 4.04.

  	
   

  	
  Noncontravention

  	
   

  
	
  Section 4.05.

  	
   

  	
  Litigation

  	
   

  
	
  Section 4.06.

  	
   

  	
  Finders’ Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  5

  	
   

  
	
  COVENANTS OF SELLER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
   

  	
  Conduct of the Business

  	
   

  
	
  Section 5.02.

  	
   

  	
  Access to Information; Confidentiality

  	
   

  
	
  Section 5.03.

  	
   

  	
  Notices of Certain Events

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  	
   

  
	
  COVENANTS OF BUYER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
   

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  7

  	
   

  
	
  COVENANTS OF BUYER AND SELLER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
   

  	
  Best Efforts; Further Assurances

  	
   

  
	
  Section 7.02.

  	
   

  	
  Certain Filings

  	
   

  
	
  Section 7.03.

  	
   

  	
  Public Announcements

  	
   

  
	
  Section 7.04

  	
   

  	
   Trademarks;
  Tradenames

  	
   

  
	
  Section 7.05.

  	
   

  	
  WARN Act

  	
   

  
	
  Section 7.06.

  	
   

  	
  License Agreement; Provision of Services

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  	
   

  
	
  TAX
  MATTERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
   

  	
  Tax Definitions

  	
   

  
	
  Section 8.02.

  	
   

  	
  Tax Representations and Warranties

  	
   

  
	
  Section 8.03.

  	
   

  	
  Responsibility for Taxes

  	
   

  
	
  Section 8.04.

  	
   

  	
  Tax Cooperation

  	
   

  
	
  Section 8.05.

  	
   

  	
  Transfer Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
   

  
	
  EMPLOYEE
  BENEFITS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01.

  	
   

  	
  ERISA Representations

  	
   

  
	
  Section 9.02.

  	
   

  	
  Employee and Offers of Employment

  	
   

  
	
  Section 9.03.

  	
   

  	
  Seller’s Employee Benefit Plans

  	
   

  
	
  Section 9.04.

  	
   

  	
  Buyer Benefit Plans

  	
   

  
	
  Section 9.05.

  	
   

  	
  No Third Party Beneficiaries

  	
   

  

 

ii

 

	
  ARTICLE
  10

  	
   

  
	
  CONDITIONS TO CLOSING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01.

  	
   

  	
  Conditions to Obligations of Buyer and Seller

  	
   

  
	
  Section 10.02.

  	
   

  	
  Conditions to Obligation of Buyer

  	
   

  
	
  Section 10.03.

  	
   

  	
  Conditions to Obligation of Seller

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  	
   

  
	
  SURVIVAL; INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01.

  	
   

  	
  Survival

  	
   

  
	
  Section 11.02.

  	
   

  	
  Indemnification

  	
   

  
	
  Section 11.03.

  	
   

  	
  Procedures for Third Party Claims

  	
   

  
	
  Section 11.04.

  	
   

  	
  Procedures for Direct Claims

  	
   

  
	
  Section 11.05.

  	
   

  	
  Purchase Price Adjustment and Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  12

  	
   

  
	
  TERMINATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.01.

  	
   

  	
  Grounds for Termination

  	
   

  
	
  Section 12.02.

  	
   

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  13

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.01.

  	
   

  	
  Notices

  	
   

  
	
  Section 13.02.

  	
   

  	
  Amendments and Waivers

  	
   

  
	
  Section 13.03.

  	
   

  	
  Expenses

  	
   

  
	
  Section 13.04.

  	
   

  	
  Successors and Assigns

  	
   

  
	
  Section 13.05.

  	
   

  	
  Governing Law

  	
   

  
	
  Section 13.06.

  	
   

  	
  Jurisdiction

  	
   

  
	
  Section 13.07.

  	
   

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  Section 13.08.

  	
   

  	
  Counterparts; Third Party Beneficiaries

  	
   

  
	
  Section 13.09.

  	
   

  	
  Entire Agreement

  	
   

  
	
  Section 13.10.

  	
   

  	
  Captions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Assignment and Assumption Agreement

  	
   

  

 

iii

 

ASSET PURCHASE AGREEMENT

 

AGREEMENT
dated as of February 23, 2005 between AETNA INC., a Pennsylvania corporation (“Buyer”), and MAGELLAN HEALTH SERVICES,
INC., a Delaware corporation (“Seller”),

 

W I T N E S S E T H :

 

WHEREAS,
Seller and its Subsidiaries conduct a business, excluding the Claims Processing
Business (as defined herein), (the “Business”) which
operates and manages the provision of behavioral healthcare services to members
of the healthcare plans of Buyer and its Subsidiaries pursuant to the Master
Service Agreement dated as of August 5, 1997 between Buyer, Seller and Human Affairs
International, Incorporated, a Subsidiary of Seller, as amended from time to
time after the date thereof (as so amended, the “MSA”);

 

WHEREAS, Buyer
desires to purchase substantially all of the assets of the Business from
Seller, and Seller desires to sell substantially all of the assets of the
Business to Buyer, upon the terms and subject to the conditions hereinafter set
forth;

 

The parties
hereto agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.01.  Definitions.  (a) The following terms, as used herein, have the following
meanings:

 

“Aetna Addendum” shall have the meaning set forth in Schedule
3 to the MSA.

 

“Affiliate” means, with respect to any
Person, any other Person directly or indirectly controlling, controlled by, or
under common control with such other Person.

 

 “Claims Processing Business”
means the operation and management by the Seller and its Subsidiaries of claims
processing services for the Business. 

 

“Closing Date” means the date of the
Closing.

 

“ERISA” means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.

 

1

 

“ERISA Affiliate” of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.

 

“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.

 

“Intellectual Property Rights” means (i)
inventions, whether or not patentable, reduced to practice or made the subject
of one or more pending patent applications, (ii) national and multinational
statutory invention registrations, patents and patent applications (including
all reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations thereof) registered or applied for in the United States and all
other nations throughout the world, all improvements to the inventions
disclosed in each such registration, patent or patent application, (iii)
trademarks, service marks, trade dress, logos, domain names, trade names and
corporate names (whether or not registered) in the United States and all other
nations throughout the world, including all variations, derivations,
combinations, registrations and applications for registration of the foregoing
and all goodwill associated therewith, (iv) copyrights (whether or not
registered) and registrations and applications for registration thereof in the
United States and all other nations throughout the world, including all
derivative works, moral rights, renewals, extensions, reversions or
restorations associated with such copyrights, now or hereafter provided by law,
regardless of the medium of fixation or means of expression, (v) computer
software, (including source code, object code, firmware, operating systems and
specifications), (vi) trade secrets and, whether or not confidential,
business information (including pricing and cost information, business and
marketing plans and customer and supplier lists) and know-how (including
manufacturing and production processes and techniques, algorithms and research
and development information), (vii) industrial designs (whether or not
registered), (viii) databases and data collections, (ix) copies and
tangible embodiments of any of the foregoing, in whatever form or medium,
(x) all rights to obtain and rights to apply for patents, and to register
trademarks and copyrights, (xi) all rights in all of the foregoing provided by
treaties, conventions and common law and (xii) all rights to sue or
recover and retain damages and costs and attorneys’ fees for past, present and
future infringement or misappropriation of any of the foregoing.

 

“Key Software” means software used or held for use in the
conduct of the Business.

 

“Lien”
means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in
respect of such property or asset.  For
the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any property or asset which it has acquired or holds subject to the
interest of a vendor or lessor under any 

 

2

 

conditional sale agreement,
capital lease or other title retention agreement relating to such property or
asset.

 

 “Note” means the
promissory note issued by Seller to Buyer under the MSA.

 

“Person”
means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.

 

“Seller Entities” means Seller and each Subsidiary of Seller
that holds Purchased Assets or is subject to Assumed Liabilities.

 

“Subsidiary” of any Person means any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.

 

“Transaction Documents” means this Agreement, the Network
Rental Agreement, the Transition Services Agreement, the License Agreement and
any other agreement to be entered into in accordance with the terms hereof.

 

(b)           Each of the
following terms is defined in the Section set forth opposite such term:

 

	
  Term

  	
   

  	
  Section

  
	
  Allocation Statement

  	
   

  	
  2.06

  
	
  Apportioned Taxes

  	
   

  	
  8.03

  
	
  Assumed Liabilities

  	
   

  	
  2.03

  
	
  Benefit Arrangements

  	
   

  	
  9.01

  
	
  Business

  	
   

  	
  Recitals

  
	
  Buyer

  	
   

  	
  Preamble

  
	
  Category I Contract

  	
   

  	
  2.08

  
	
  Category II Contract

  	
   

  	
  2.08

  
	
  Category III Contract

  	
   

  	
  2.08

  
	
  Closing

  	
   

  	
  2.07

  
	
  Closing Network Adjustment

  	
   

  	
  2.08

  
	
  Code

  	
   

  	
  8.01

  
	
  Contracts

  	
   

  	
  2.01

  
	
  Damages

  	
   

  	
  11.02

  
	
  Dedicated Staff

  	
   

  	
  9.01

  
	
  Defined Benefit Plan

  	
   

  	
  9.01

  
	
  Employee Plans

  	
   

  	
  9.01

  
	
  Environmental Laws

  	
   

  	
  3.13

  
	
  Excluded Assets

  	
   

  	
  2.02

  

 

3

 

	
  Term

  	
   

  	
  Section

  
	
  Excluded Liabilities

  	
   

  	
  2.04

  
	
  Final Network Adjustment

  	
   

  	
  2.09

  
	
  Final Determination

  	
   

  	
  11.05

  
	
  Indemnified Parties

  	
   

  	
  11.03

  
	
  Indemnifying Parties

  	
   

  	
  11.03

  
	
  IRS

  	
   

  	
  9.01

  
	
  Key Software

  	
   

  	
  7.06

  
	
  License Agreement

  	
   

  	
  7.06

  
	
  MSA

  	
   

  	
  Recitals

  
	
  Multi-Employer Plan

  	
   

  	
  9.01

  
	
  Network Rental Agreement

  	
   

  	
  2.07

  
	
  Non-Relevant Employees

  	
   

  	
  9.02

  
	
  Other Consents

  	
   

  	
  3.05

  
	
  Permits

  	
   

  	
  3.11

  
	
  Permitted Liens

  	
   

  	
  3.08

  
	
  Petty Cash

  	
   

  	
  2.01

  
	
  Post-Closing Tax Period

  	
   

  	
  8.03

  
	
  Pre-Closing Tax Period

  	
   

  	
  8.01

  
	
  Provider Contracts

  	
   

  	
  3.14

  
	
  Purchased Assets

  	
   

  	
  2.01

  
	
  Purchase Price

  	
   

  	
  2.06

  
	
  Real Property

  	
   

  	
  3.08

  
	
  Relevant Employees

  	
   

  	
  9.02

  
	
  Remaining Note Amount

  	
   

  	
  2.07

  
	
  Representatives

  	
   

  	
  11.02

  
	
  Required Consents

  	
   

  	
  3.05

  
	
  Revised Network Adjustment

  	
   

  	
  2.08

  
	
  Revised Network Adjustment Sheet

  	
   

  	
  2.08

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller Trademarks and Tradenames

  	
   

  	
  7.04

  
	
  Shortfall

  	
   

  	
  2.07

  
	
  Tax

  	
   

  	
  8.01

  
	
  Taxing Authority

  	
   

  	
  8.01

  
	
  Third Party Claims

  	
   

  	
  11.03

  
	
  Transitional Services Agreement

  	
   

  	
  7.06

  
	
  WARN Act

  	
   

  	
  7.05

  
	
  Warranty Breach

  	
   

  	
  11.02

  

 

ARTICLE 2

PURCHASE AND SALE

 

Section 2.01.  Purchase and Sale.  Except as otherwise
provided below, upon the terms and subject to the conditions of this Agreement,
Buyer agrees to

 

4

 

purchase from
Seller and Seller agrees to sell, convey, transfer, assign and deliver, or
cause to be sold, conveyed, transferred, assigned and delivered, to Buyer at
the Closing, free and clear of all Liens, other than Permitted Liens, all of
Seller’s right, title and interest in, to and under the assets, properties and
business, of every kind and description, wherever located, real, personal or
mixed, tangible or intangible, owned, held or used primarily in the conduct of
the Business by Seller or any of its Subsidiaries (the “Purchased
Assets”), and including, without limitation, all right, title and
interest of Seller or any of its Subsidiaries in, to and under:

 

(a)           all real property and leases of, and
other interests in, real property used or held for use primarily in the conduct
of the Business, in each case together with all buildings, fixtures, and
improvements erected thereon, including without limitation the items listed on
Schedule 3.08(a);

 

(b)           all personal property and interests
therein, including machinery, equipment, furniture, office equipment,
communications equipment, vehicles, supplies, spare and replacement parts, fuel
and other tangible property used or held for use primarily in the conduct of
the Business;

 

(c)           all toll-free (and other) telephone
numbers used primarily in, by or to support the Business;

 

(d)           all rights under all contracts,
agreements, leases, licenses, commitments, sales and purchase orders and other
instruments primarily related to the Business (collectively, the “Contracts”);

 

(e)           all prepaid expenses primarily
related to the Business, including but not limited to leases
and rentals;

 

(f)            all petty cash primarily related to
the Business and located at the operating facilities of the Business (“Petty Cash”);

 

(g)           all of Seller’s rights, claims,
credits, causes of action or rights of set-off against third parties relating
to the Purchased Assets, including, without limitation, unliquidated rights
under manufacturers’ and vendors’ warranties;

 

(h)           all Intellectual Property Rights
(excluding the “Magellan” name and any derivative thereof, or any other Seller
Trademarks and Tradenames) primarily related to the Business;

 

(i)            all transferable licenses, permits
or other governmental authorizations affecting, or relating in any way to, the
Business (other than

 

5

 

any PPO licenses, single-service HMO licenses,
Knox-Keene licenses, third-party administrator licenses, utilization review
organization licenses, and any similar type licenses and/or registrations, maintained
by Seller or any of its Subsidiaries); 

 

(j)            all books, records, files and
papers, whether in hard copy or computer format, used to conduct the Business (including,
without limitation, engineering information, manuals and data, lists of present
and former suppliers and providers, claims data, utilization management data
and other similar data, personnel and employment records, and any information
relating to any Tax imposed on the Purchased Assets); it being understood that
to the extent that any of the foregoing is not primarily related to the
Business then copies of such books, records, files or papers shall constitute “Purchased
Assets”, with originals to be retained by Seller; and

 

(k)           all goodwill associated with the
Business or the Purchased Assets, together with the right to represent to third
parties that Buyer is the successor to the Business.

 

For the
avoidance of doubt, it is understood that the inclusion of any asset in the
definition of “Purchased Assets” shall not affect the parties’ respective
ownership rights in any such assets prior to the Closing Date.

 

Section 2.02.  Excluded Assets.    Buyer expressly
understands and agrees that the following assets and properties of Seller or
its Subsidiaries (the “Excluded Assets”)
shall be excluded from the Purchased Assets:

 

(a)           all cash and cash equivalents on hand
and in banks, except for Petty Cash; 

 

(b)           insurance policies; 

 

(c)           any Tax refunds and credits of Seller
(or any member of any consolidated, affiliated, combined or unitary group of
which Seller is or has been a member) relating to the Business for the
Pre-Closing Tax Period; 

 

(d)           any Intellectual Property Rights that
are not primarily related to the Business;

 

(e)           any claims that Seller may have
against Buyer under the MSA; 

 

(f)            any Purchased Assets sold or
otherwise disposed of in the ordinary course of business and not in violation
of any provisions of this

 

6

 

Agreement or the MSA during the period from
the date hereof until the Closing Date; and

 

(g)           the Key Software.

 

For the avoidance of doubt, it is understood that the omission of any
asset from the list of “Excluded Assets” set forth in this Section 2.02 shall
not cause any such omitted asset to be purchased under this Agreement (unless
such omitted asset is a Purchased Asset under Section 2.01).

 

Section 2.03.  Assumed Liabilities. Upon the terms and subject to the conditions of this
Agreement, Buyer agrees, effective at the time of the Closing, to assume only
the following liabilities (the “Assumed
Liabilities”):

 

(a)           all liabilities and obligations of
Seller expressly assumed by Buyer pursuant to Article 9 hereof.

 

Section 2.04.  Excluded Liabilities.  Notwithstanding any
provision in this Agreement or any other Transaction Document or other writing
to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming
any other liability or obligation of Seller or any of its Subsidiaries (or any
predecessor of Seller or any of its Subsidiaries or any prior owner of all or
part of its businesses and assets) of whatever nature, whether presently in
existence or arising hereafter.  All such
other liabilities and obligations shall be retained by and remain obligations
and liabilities of Seller or any of its Subsidiaries (all such liabilities and
obligations not being assumed being herein referred to as the “Excluded Liabilities”).  Without limiting the generality of the
foregoing, Excluded Liabilities include, without limitation:

 

(a)           any liability or obligation of Seller
or any of its Subsidiaries relating to or arising out of, directly or
indirectly, events, acts, omissions, conditions or facts occurring prior to or
existing at the time of the Closing;

 

(b)           any liability or obligation of
Seller, or any member of any consolidated, affiliated, combined or unitary
group of which Seller is or has been a member, for Taxes;

 

(c)           any liabilities or obligations of
Seller or any of its Subsidiaries not expressly assumed by Buyer pursuant to Article
9 hereof; and

 

(d)           any liability or obligation relating
to an Excluded Asset.

 

Section 2.05.  Assignment of Contracts and Rights.  Anything in this
Agreement or any other Transaction Document to the contrary notwithstanding,

 

7

 

this Agreement
shall not constitute an agreement to assign any Purchased Asset or any claim or
right or any benefit arising thereunder or resulting therefrom if such
assignment, without the consent of a third party thereto, would constitute a
breach or other contravention of such Purchased Asset or in any way adversely
affect the rights of Buyer or Seller, or any of their respective Subsidiaries,
thereunder.  Seller and Buyer will use
their best efforts (but without any payment of money by Buyer) to obtain the
consent of the other parties to any such Purchased Asset or any claim or right
or any benefit arising thereunder for the assignment thereof to Buyer as Buyer
may request.  If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of Seller or any of its Subsidiaries thereunder so
that Buyer would not in fact receive all such rights, Seller and Buyer will
cooperate in a mutually agreeable arrangement under which Buyer would obtain
the benefits and assume the obligations thereunder in accordance with this
Agreement, including sub-contracting, sub-licensing, or sub-leasing to Buyer,
or under which Seller would enforce for the benefit of Buyer, with Buyer
assuming Seller’s obligations, any and all rights of Seller against a third
party thereto.  Seller will promptly pay
to Buyer when received all monies received by Seller or any of its Subsidiaries
under any Purchased Asset or any claim or right or any benefit arising
thereunder, except to the extent the same represents an Excluded Asset. In such
event, Seller and Buyer shall, to the extent the benefits therefrom and
obligations thereunder have not been provided by alternate arrangements
satisfactory to Buyer and Seller, negotiate in good faith an adjustment in the
consideration paid by Buyer for the Purchased Assets, to the extent not
otherwise adjusted pursuant to Section 2.08.

 

Section 2.06.  Purchase Price; Allocation of Purchase Price.  (a) 
The purchase price for the Purchased Assets (the “Purchase Price”) is $30,000,000 (Thirty
Million Dollars), payable through an offset against some or all of Seller’s principal
and interest payment obligations under the Note by way of a reduction in the
amount of principal and accrued but unpaid interest under the Note, plus
cash in the event the Purchase Price exceeds the principal amount of, and all
accrued but unpaid interest on, the Note. 
The Purchase Price shall be paid as provided in Section 2.07 and shall
be subject to adjustment as provided in Section 2.09.

 

(b)           As soon as
practicable after the Closing (but no later than 90 days after the Closing), Buyer
shall deliver to Seller a statement (the “Allocation
Statement”) allocating the Purchase Price (and any other items
required to be treated as additional purchase price for U.S. federal income tax
purposes) among the Purchased Assets in accordance with Section 1060 of the
Code.  If within 30 days after the
delivery of the Allocation Statement Seller notifies Buyer in writing that
Seller objects to the allocation set forth in the Allocation Statement, Buyer
and Seller shall use commercially reasonable efforts to resolve such

 

8

 

dispute within
20 days.  In the event that Buyer and
Seller are unable to resolve such dispute within 20 days, Buyer and Seller
shall jointly retain a nationally recognized accounting firm to resolve the
disputed items.  Upon resolution of the
disputed items, the allocation reflected on the Allocation Statement shall be
adjusted to reflect such resolution. The costs, fees and expenses of such
accounting firm shall be borne equally by Buyer and Seller.

 

(c)           Seller and Buyer
agree to (i) be bound by the Allocation Statement and (ii) act in accordance
with the Allocation Statement in the preparation, filing and audit of any Tax
return (including, without limitation filing any Form 8594 required to be filed
with its federal income Tax return for the taxable year that includes the date
of the Closing).

 

(d)           If (i) an adjustment
is made with respect to the Purchase Price pursuant to Section 2.09 and/or (ii)
the Closing Network Adjustment is not reflected in the Allocation Statement
submitted by Buyer to Seller in accordance with Section 2.06(b), the Allocation
Statement shall be adjusted in accordance with Section 1060 of the Code and as
mutually agreed by Buyer and Seller to reflect such adjustment and/or the
Closing Network Adjustment.  In the event
that an agreement is not reached within 20 days after the determination of the
Final Network Adjustment, any disputed items shall be resolved in the manner
described in Section 2.06(b).  Buyer and
Seller agree to file any additional information return required to be filed
pursuant to Section 1060 of the Code and to treat the Allocation Statement as
adjusted in the manner described in Section 2.06(c).

 

(e)           Not later than 30
days prior to the filing of any Form 8594 relating to this transaction required
to be filed, the party filing such form shall deliver to the other party a copy
of its Form 8594.

 

Section 2.07.  Closing.  The closing (the “Closing”) of the purchase and sale of the Purchased Assets and
the assumption of the Assumed Liabilities hereunder shall take place at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York,
on December 30, 2005, for and as of December 31, 2005, or at Buyer’s sole election,
no later than 10 business day, after satisfaction of the conditions set forth
in Article 10, if such conditions were not satisfied on December 30, 2005.

 

(a)           Buyer shall (i)
offset some or all of Seller’s principal and interest payment obligations under
the Note (in an aggregate amount equal to the Purchase Price plus the Closing
Network Adjustment) by way of a reduction in the amount of principal and
accrued but unpaid interest under the Note, and (ii) in the event the Purchase
Price plus the Closing Network Adjustment exceeds the offset amounts (the “Shortfall”), deliver to Seller an amount equal to the
Shortfall in immediately available funds by wire transfer to an account of
Seller with a bank in New York City designated by Seller, by notice to Buyer,
which notice

 

9

 

shall be
delivered not later than two business days prior to the Closing Date (or if not
so designated, then by certified or official bank check payable in immediately
available funds to the order of Seller in such amount).

 

(b)           In the event the sum
of the Purchase Price and the Closing Network Adjustment is less than the
principal amount of, and accrued but unpaid interest on, the Note (after giving
effect to the offset contemplated by Section 2.07(a)) (such difference, the “Remaining Note Amount”), then at the Closing Seller shall
also make a payment of the Remaining Note Amount to Buyer, such payment to be
made by wire transfer of immediately available funds to an account of Buyer
with a bank in New York City designated by Buyer, by notice to Seller, which
notice shall be delivered not later than two business days prior to the Closing
Date (or if not so designated, then by certified or official bank check payable
in immediately available funds to the order of Buyer in such amount).

 

(c)           Seller and Buyer
shall enter into an Assignment and Assumption Agreement substantially in the
form attached hereto as Exhibit A, and Seller shall deliver to Buyer such
deeds, bills of sale, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment as the parties and their
respective counsel shall deem reasonably necessary or appropriate to vest in
Buyer all right, title and interest in, to and under the Purchased Assets.

 

(d)           Seller and Buyer
shall enter into a Transitional Services Agreement as contemplated by Section
7.06.

 

(e)           Upon the prior
written request of Buyer (exercisable in its sole discretion), Seller and Buyer
shall enter into a Network Rental Agreement substantially in the form attached
as Attachment 1 to Schedule 3 to the MSA (the “Network
Rental Agreement”).

 

Section 2.08.  Network
Adjustment. 
(a) No later than 10 days prior to the Closing Date, Buyer will cause to
be prepared and delivered to Seller the Closing Network Adjustment Sheet and a
certificate based on such Closing Network Adjustment Sheet setting forth Buyer’s
good faith calculation of the Closing Network Adjustment estimated as of the
Closing Date.  As promptly as
practicable, but no later than 120 days, after the Closing Date, Buyer will
cause to be prepared and delivered to Seller the Revised Network Adjustment
Sheet and a certificate based on such Revised Network Adjustment Sheet setting
forth Buyer’s calculation of the Revised Network Adjustment as of the 90th
day after the Closing Date.  The “Closing  Network Adjustment Sheet”
means an itemized list of each (i) outpatient provider Aetna Addendum (“Category I Contract”), (ii) partial hospital and intensive
outpatient facility provider Aetna Addendum (“Category II
Contract”) and (iii) inpatient facility provider Aetna Addendum (“Category III Contract”), in each case (1) which have been
entered into

 

10

 

pursuant to
Section 5 of the MSA and (2) which are effective as of the Closing Date and as
to which no notice of termination has been received from the provider
thereunder.  The “Closing
Network Adjustment” means a dollar
amount equal to 95% of the sum of (i) $500 for each Category I Contract, (ii)
$2,500 for each Category II Contract and (iii) $5,000 for each Category III
Contract, based upon the figures set forth on the Closing Network Adjustment
Sheet.  The “Revised
Network Adjustment Sheet” means an
itemized list of each Category I Contract, Category II Contract and Category
III Contract, in each case (1) which have been entered into prior to the
Closing Date pursuant to Section 5 of the MSA and (2) which are effective as of
the 90th day after the Closing Date and as to which no notice of
termination has been received from the provider thereunder; provided that no termination by Buyer (or any of its
Affiliates) of any such Aetna Addendum shall result in such Aetna Addendum
being deemed “not effective” for purposes of this sentence.  If Buyer shall, subsequent to the Closing
Date and prior to the 90th day after the Closing Date, take any action or
wrongfully fail to pay any material obligation to a provider, or breach any
other material obligation to a provider, in each case causing any provider to
terminate (or to deliver notice of termination of) any Aetna Addendum, then the
“Revised Network Adjustment” shall be calculated as if such provider had not
terminated (or delivered notice of termination) of such Aetna Addendum.  The “Revised  Network Adjustment” means a dollar amount equal to 100% of
the sum of (i) $500 for each Category I Contract, (ii) $2,500 for each Category
II Contract and (iii) $5,000 for each Category III Contract, based upon the
figures set forth on the Revised Network Adjustment Sheet.  For purposes of any determination made
pursuant to this Section 2.08(a), to the extent that any provider contract
qualifies in more than one of Categories I, II and III, then such provider
contract shall be considered to be in the one Category that provides for the
greatest network adjustment payment hereunder.

 

(b)           If
Seller disagrees with Buyer’s calculation of the Revised Network Adjustment
delivered pursuant to Section 2.08(a), Seller may, within 20 days after
delivery of the documents referred to in the second sentence of Section 2.08(a),
deliver a notice to Buyer disagreeing with such calculation and setting forth
Seller’s calculation of such amount.  Any
such notice of disagreement shall specify those items or amounts as to which
Seller disagrees, and Seller shall be deemed to have agreed with all other
items and amounts contained in the Revised Network Adjustment Sheet and the
calculation of the Revised Network Adjustment delivered pursuant to Section
2.08(a).

 

(c)           If a notice of
disagreement shall be duly delivered pursuant to Section 2.08(b), Buyer and
Seller shall, during the 15 days following such delivery, use their best
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the amount of the Revised Network Adjustment,
which amount shall not be less than the amount thereof shown in Buyer’s
calculations delivered pursuant to Section 2.08(a) nor more than

 

11

 

the amount
thereof shown in Seller’s calculation delivered pursuant to Section 2.08(b).  If during such period, Buyer and Seller are
unable to reach such agreement, then they shall be entitled to exercise their
remedies under Section 13.06.

 

(d)           Buyer and Seller
agree that they will cooperate and assist in the preparation of the Closing
Network Adjustment Sheet and the Revised Network Adjustment Sheet, the
calculation of the Closing Network Adjustment and the Revised Network
Adjustment and in the conduct of any reviews referred to in this Section 2.08,
including without limitation, the making available to the extent necessary of
books, records and personnel.

 

Section 2.09.  Adjustment of Purchase Price.  (a) If the Closing Network Adjustment exceeds the Final Network
adjustment, Seller shall pay to Buyer, as an adjustment to the Purchase Price
and in the manner and with interest as provided in Section 2.09(b), the amount
of such excess.  If the Final Network
Adjustment exceeds the Closing Network Adjustment, Buyer shall pay to Seller,
as an adjustment to the Purchase Price and in the manner and with interest as provided
in Section 2.09(b), the amount of such excess. 
“Final Network Adjustment”
means the Revised Network Adjustment (i) as shown in Buyer’s calculation
delivered pursuant to the second sentence of Section 2.08(a) if no notice of
disagreement with respect thereto is duly delivered pursuant to Section 2.08(b);
or (ii) if such a notice of disagreement is delivered, (A) as agreed by Buyer
and Seller pursuant to Section 2.08(c), or (B) in the absence of such
agreement, as determined pursuant to Section 13.06.

 

(b)           Any payment pursuant
to Section 2.09(a) shall be made at a mutually convenient time and place within
10 days after the Final Network Adjustment has been determined by delivery by
Buyer or Seller, as the case may be, of a certified or official bank check
payable in immediately available funds to the other party or by causing such
payments to be credited to such account of such other party as may be
designated by such other party.  The
amount of any payment to be made pursuant to this Section 2.09 shall bear
interest from and including the Closing Date to but excluding the date of
payment at a rate per annum equal to the interest rate under the Note.  Such interest shall be calculated daily and
shall be payable at the same time as the payment to which it relates.

 

ARTICLE 3

REPRESENTATIONS AND
WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date that:

 

12

 

Section 3.01.  Corporate Existence and Power.  Each of the Seller Entities is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on the
business as now conducted.  Each of the Seller
Entities is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary.  

 

Section 3.02.  Corporate Authorization.  The execution, delivery and performance by each
Seller Entity of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby are within the
corporate powers and have been duly authorized by all necessary corporate
action on the part of such Seller Entity. 
Each Transaction Document to which any Seller Entity is a party constitutes
a valid and binding agreement of such Seller Entity.

 

Section 3.03.  Governmental Authorization.  Except as set forth in Schedule 3.03, the
execution, delivery and performance by each Seller Entity of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby require no action by or in respect of, or
filing with, any governmental body, agency or official other than compliance
with any applicable requirements of the HSR Act.

 

Section 3.04.  Noncontravention.  The execution, delivery and performance by each
Seller Entity of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate the certificate of incorporation or bylaws of such Seller
Entity, (ii) assuming compliance with the matters referred to in Section 3.03,
violate any applicable law, rule, regulation, judgment, injunction, order or
decree, (iii) assuming the obtaining of all Required and Other Consents,
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Buyer or to a loss
of any benefit relating to the Business to which such Seller Entity is entitled
under any provision of any agreement or other instrument binding upon such Seller
Entity or by which any of the Purchased Assets is or may be bound or (iv)
result in the creation or imposition of any Lien on any Purchased Asset, other
than Permitted Liens.

 

Section 3.05.  Required and Other Consents.  (a) 
Schedule 3.05(a) sets forth each agreement, contract or other instrument
binding upon Seller or any of its Subsidiaries or any Permit requiring a
consent or other action by any Person as a result of the execution, delivery
and performance of this Agreement or any other Transaction Document (the “Required Consents”).

 

(b)           Schedule 3.05(b)
sets forth each other consent or action by any Person (the “Other Consents”) under such agreements, contracts or other

 

13

 

instruments or
such Permits that is necessary with respect to the execution, delivery and
performance of this Agreement or any other Transaction Document.

 

Section 3.06.  Litigation.  There is no action, suit, investigation or
proceeding (or any basis therefor) pending against, or to the know ledge of
Seller, threatened (with a reasonable likelihood of being commenced) against or
affecting, the Business or any Purchased Asset before any court or arbitrator
or any governmental body, agency or official which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by the Transaction Documents.

 

Section 3.07.  Compliance with Laws and Court Orders.  Neither Seller nor any Subsidiary of Seller is
in violation of, has since the date of the MSA violated, or to the knowledge of
Seller is under investigation with respect to or has been threatened to be
charged with or given notice of any violation of, any law, rule, regulation,
judgment, injunction, order or decree applicable to the Purchased Assets or the
conduct of the Business.

 

Section 3.08.  Properties.  (a) 
Schedule 3.08(a) correctly describes all real property used or held for
use in the Business included in the Purchased Assets (the “Real
Property”), which Seller or any of its Subsidiaries owns, leases,
operates or subleases, any title insurance policies and surveys with respect
thereto, and any Liens thereon, specifying in the case of leases or subleases,
the name of the lessor or sublessor, the lease term and basic annual rent.

 

(b)           Schedule 3.08(b) correctly
describes all personal property used or held for use in the Business included
in the Purchased Assets, including, without limitation, machinery, equipment,
furniture, vehicles, supplies, spare and replacement parts, fuel and other
trade fixtures and fixed assets, which Seller or any of its Subsidiaries owns,
leases or subleases, and any Liens thereon, specifying in the case of leases or
subleases, the name of the lessor or sublessor, the lease term and basic annual
rent.

 

(c)           The Seller Entities
have good and marketable, indefeasible, fee simple title to, or in the case of
leased Real Property or personal property have valid leasehold interests in,
all Purchased Assets (whether real, personal, tangible or intangible).  No Purchased Asset is subject to any Lien,
except for (i) Liens disclosed on Schedule 3.08(c) or (ii) Liens which do not
materially detract from the value of such Purchased Asset, or materially
interfere with any present or intended use of such Purchased Asset
(collectively, the “Permitted Liens”).

 

(d)           There are no
developments affecting any of the Purchased Assets pending or, to the knowledge
of Seller threatened, which might materially detract from the value, materially
interfere with any present or intended use or materially adversely affect the
marketability of such Purchased Assets.

 

14

 

(e)           The Real Property
includes all real property, and only such real property, as is used or held for
use in connection with the conduct of the business and operations of the
Business as heretofore conducted and as presently planned to be conducted by
Buyer.

 

(f)            All leases of Real
Property or personal property are in good standing and are valid, binding and
enforceable in accordance with their respective terms and there does not exist
under any such lease any default or any event which with notice or lapse of
time or both would constitute a default. 
True and complete copies of each such lease have been delivered to Buyer.

 

(g)           The buildings,
structures and equipment included in the Purchased Assets have no material
defects, are in good operating condition and repair and have been reasonably
maintained consistent with standards generally followed in the industry (giving
due account to the age and length of use of same, ordinary wear and tear
excepted), are adequate and suitable for their present and intended uses.

 

(h)           None of the
Purchased Assets is an equity interest in an entity.

 

Section 3.09.  Sufficiency of and Title to the Purchased Assets.  (a) The Purchased Assets, together with the
rights of Buyer under the Transaction Documents (including the arrangements
contemplated by Section 2.05), constitute all of the property and assets used
or held for use in the Business other than the Key Software and are adequate to
conduct the Business as conducted as of the date hereof and as of the Closing
Date disregarding the Key Software.

 

(b)           Upon consummation of
the transactions contemplated hereby, Buyer will have acquired good and
marketable title in and to, or a valid leasehold interest in, each of the
Purchased Assets, free and clear of all Liens, except for Permitted Liens.

 

Section 3.10.  Intellectual Property.  (a) Schedule 3.10 is
a list of all Intellectual Property Rights (i) owned by Seller or its Subsidiaries
for use or held for use in the conduct of the Business, and (ii) licensed or
sub-licensed by Seller or its Subsidiaries for use or held for use in the
conduct of the Business, specifying as to each, (x) the owner of such
Intellectual Property Right and (y) the jurisdiction by or in which such
Intellectual Property Right is recognized without regard to registration or has
been issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application number.  Seller or its Subsidiaries,
as applicable, (i) holds all rights, title and interest in and to all
Intellectual Property Rights owned by such Person for use or held for use in
the conduct of the Business, free and clear of any Lien, and (ii) has a valid
and binding license or sublicense to, or other legally enforceable right to,
all Intellectual Property Rights used or held for use by

 

15

 

such Person
in, or necessary for the conduct of the Business, except for the Intellectual
Property Rights owned by such Person.

 

(b)           Neither Seller nor
any of its Subsidiaries or any other Person, is in default (or with or without
the giving of notice, the lapse of time, or both, would be in default) in any
respect under any license, sublicense or other right to use any Intellectual
Property Rights used or held for use by Seller or its Subsidiaries in, or
necessary for the conduct of the Business. 
No Intellectual Property Right used or held for use by the by Seller or
its Subsidiaries in, or necessary for the conduct of the Business is subject to
any outstanding claim, audit, demand, order, judgment, decree, stipulation or
agreement restricting the use thereof by Seller or its Subsidiaries or
restricting the licensing thereof by Seller or its Subsidiaries to any
Person.  There is no infringement of or
unlawful use by any Person of any of (i) Intellectual Property Rights listed in
Schedule 3.10, or (ii) the Intellectual Property Rights covered by the last
sentence of Section 3.10(a).

 

Section 3.11.  Licenses
and Permits.  Schedule 3.11 correctly describes each
license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the Business (the “Permits”) together with the name of the
government agency or entity issuing such Permit.  Except as set forth on Schedule 3.11, (i) the
Permits are valid and in full force and effect, (ii) none of Seller or any of
its Subsidiaries is in default, and no condition exists that with notice or
lapse of time or both would constitute a default, under the Permits and (iii)
none of the Permits will, assuming the related Required Consents and Other
Consents have been obtained prior to the Closing Date, be terminated or
impaired or become terminable, in whole or in part, as a result of the
transactions contemplated hereby.  Except
as set forth in Schedule 3.11, upon consummation of such transactions, Buyer
will, assuming the related Required Consents and Other Consents have been
obtained prior to the Closing Date, have all of the right, title and interest
in all the Permits.

 

Section 3.12.  Finders’
Fees. 
There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Seller who
might be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement. 

 

Section 3.13.  Environmental Compliance.  No written notice, request for information,
order, complaint or penalty has been received, and there are no judicial,
administrative or other actions, suits or proceedings pending or threatened
which allege a violation of any Environmental Law, in each case relating to the
Purchased Assets or Real Property and arising out of any Environmental
Law.  Seller has obtained or caused to be
obtained all environmental permits necessary for the operation of the Purchased
Assets and the Real Property to comply with all applicable Environmental Laws
and Seller is in compliance with the terms of such permits and, with respect to
the operation of

 

16

 

the Purchased
Assets and the Real Property, with all other applicable Environmental
Laws.  There has been no written
environmental audit conducted within the past five years by Seller of any
Purchased Asset or any of the Real Property which has not been delivered to
Buyer prior to the date hereof.  For
purposes of this Section 3.13, “Environmental
Laws” means any federal, state, local or foreign law (including,
without limitation, common law), treaty, judicial decision, regulation, rule,
judgment, order, decree, injunction, permit or governmental restriction or any
agreement with any governmental authority or other third party, whether now or
hereafter in effect, relating to the environment, human health and safety or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.

 

Section 3.14.  Provider Contracts.  Prior to the date
of this Agreement, Seller has delivered to Buyer (i) true and complete
originals of each executed Aetna Addendum in effect as of the date of this
Agreement and (ii) all rates (other than individual facility rates) applicable
to the providers who have executed such Aetna Addenda..  Seller is not bound by any arrangements or
commitments with any network provider that has executed an Aetna Addendum other
than (x) Provider Contracts and (y) arrangements or commitments that are not
primarily related to the Business.  Each
Provider Contract is a valid and binding agreement of Seller or the Subsidiary of
Seller that is party thereto, is in full force and effect and is in compliance
with applicable laws.  None of Seller,
Seller’s Subsidiaries or, to the knowledge of Seller, any other party thereto
is in default or breach under the terms of any such Provider Contract, and, to
the knowledge of Seller, no event or circumstance has occurred that, with notice
or lapse of time or both, would constitute any event of default thereunder.

 

ARTICLE 4

REPRESENTATIONS AND
WARRANTIES OF BUYER

 

Buyer
represents and warrants to Seller as of the date hereof and as of the Closing
Date that:

 

Section 4.01.  Corporate Existence and Power.  Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of Pennsylvania and has
all corporate powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted.

 

Section 4.02.  Corporate Authorization.  The execution, delivery and performance by
Buyer of the Transaction Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby are within the corporate
powers of Buyer and have been duly authorized by all necessary

 

17

 

corporate
action on the part of Buyer.  Each
Transaction Document constitutes a valid and binding agreement of Buyer.

 

Section 4.03.  Governmental Authorization.  Except as set forth in Schedule 4.03, the
execution, delivery and performance by Buyer of the Transaction Documents to
which it is a party and the consummation of the transactions contemplated
hereby and thereby require no material action by or in respect of, or material
filing with, any governmental body, agency or official other than compliance
with any applicable requirements of the HSR Act.

 

Section 4.04.  Noncontravention.  The execution, delivery and performance by
Buyer of the Transaction Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby do not and will not (i)
violate the certificate of incorporation or bylaws of Buyer or (ii) assuming
compliance with the matters referred to in Section 4.03, violate any applicable
material law, rule, regulation, judgment, injunction, order or decree.

 

Section 4.05.  Litigation.  There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by the Transaction
Documents.

 

Section 4.06.  Finders’
Fees. 
There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Buyer who might
be entitled to any fee or commission from Seller or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.

 

ARTICLE 5

COVENANTS OF SELLER

 

Seller agrees that:

 

Section 5.01.  Conduct of the Business.  From the date hereof until the Closing Date,
Seller shall, and shall cause each of its Subsidiaries to, conduct the Business
in accordance with the MSA and, to the extent not addressed in the MSA, in the
ordinary course consistent with past practice, and shall use its best efforts
to preserve intact the business organizations and relationships with third
parties and to keep available the services of the present employees of the
Business. On or prior to September 1, 2005, Seller will provide Buyer with true
and complete copies (which copies may be in an electronic scanned form that is
deemed acceptable by the Buyer and is reasonably organized and searchable) of
(i) each executed Aetna Addendum in effect as of such date (excepting those

 

18

 

previously
provided pursuant to Section 3.14 hereof) and (ii) each executed network
provider contract underlying each Aetna Addendum (including those previously
provided pursuant to Section 3.14 hereof), including each applicable amendment
and compensation schedule, including all of the individual facility rates, in
effect as of such date (collectively, the “Provider Contracts”),
and, prior to the Closing, shall provide Buyer with copies of any additional
copies of any such documents executed after such date. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date,
Seller will not and will cause each of its Subsidiaries not to:

 

(a)           with respect to the Business acquire
a material amount of assets from any other Person;

 

(b)           sell, lease, license or otherwise dispose
of any Purchased Assets except (i) pursuant to existing contracts or
commitments and (ii) in the ordinary course consistent with past practice;

 

(c)           modify the compensation or benefits
of any Dedicated Staff except for increases in the ordinary course consistent
with past practice; provided that
any modification to the compensation or benefits of any Dedicated Staff with a
base salary in excess of $75,000 per year shall require the consent of Buyer
except for merit increases in the ordinary course of business consistent with
past practice planned to go into effect in March 2005, and provided
that the average base salary increase for all such Dedicated staff with base
salaries in excess of $75,000 is not greater than four percent (4%) of current
base salaries;

 

(d)           agree or commit to do any of the
foregoing; or

 

(e)           (i) take or agree or commit to take
any action that would make any representation or warranty of Seller hereunder
inaccurate in any respect at, or as of any time prior to, the Closing Date or (ii)
omit or agree or commit to omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any respect at any
such time.

 

Section 5.02.  Access to Information; Confidentiality.  (a) 
From the date hereof until the Closing Date, Seller will, and will cause
each of its Subsidiaries to, (i) give Buyer, its Subsidiaries, counsel,
financial advisors, auditors and other authorized representatives full access
to the offices, properties, books and records of Seller or its Subsidiaries relating
to the Business, (ii) furnish to Buyer, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information relating to the Business (including any information necessary
in the credentialing of providers) as such Persons may reasonably request and (iii)
instruct the employees, counsel and

 

19

 

financial
advisors of Seller and its Subsidiaries to cooperate with Buyer in its
investigation of the Business.  Any
investigation pursuant to this Section shall be conducted in such manner as not
to interfere unreasonably with the conduct of the business of Seller or its Subsidiaries.  No investigation by Buyer or other information
received by Buyer shall operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by Seller hereunder.

 

(b)           After the Closing,
Seller and its Subsidiaries will hold, and will use their best efforts to cause
their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning the Business, except to
the extent that such information can be shown to have been (i) previously known
on a nonconfidential basis by Seller, (ii) in the public domain through no
fault of Seller or its Subsidiaries or (iii) later lawfully acquired by Seller or
its Subsidiaries from sources other than those related to its prior ownership
of the Business.  The obligation of
Seller and its Subsidiaries to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information.

 

(c)           On and after the
Closing Date, Seller will, and will cause each of its Subsidiaries to, afford
promptly to Buyer and its agents reasonable access to its books of account,
financial and other records (including, without limitation, accountant’s work
papers), information, employees and auditors to the extent necessary or useful
for Buyer in connection with any audit, investigation, dispute or litigation or
any other reasonable business purpose relating to the Business; provided that any such access by Buyer shall not
unreasonably interfere with the conduct of the business of Seller or its Subsidiaries.

 

Section 5.03.  Notices of Certain Events.  Seller shall promptly notify Buyer of:

 

(a)           any notice or other communication
from any Person alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by the Transaction Documents;

 

(b)           any notice or other communication
from any governmental or regulatory agency or authority in connection with the
transactions contemplated by the Transaction Documents;

 

(c)           any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened
against, relating to or involving or otherwise affecting Seller, any of its Subsidiaries
or the

 

20

 

Business that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.06 or that relate to the consummation of the transactions contemplated by the
Transaction Documents; and

 

(d)           the damage or destruction by fire or
other casualty of any Purchased Asset or part thereof or in the event that any
Purchased Asset or part thereof becomes the subject of any proceeding or, to
the knowledge of Seller, threatened proceeding for the taking thereof or any
part thereof or of any right relating thereto by condemnation, eminent domain
or other similar governmental action.

 

ARTICLE 6

COVENANTS OF BUYER

 

Buyer agrees
that:

 

Section
6.01.  Confidentiality;Access to Information.  Prior to the Closing
Date and after any termination of this Agreement, Buyer and its Subsidiaries will
hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Business, Seller or any of its Subsidiaries furnished
to Buyer or its Subsidiaries in connection with the transactions contemplated
by the Transaction Documents, except to the extent that such information can be
shown to have been (i) previously known on a nonconfidential basis by Buyer or
any of its Subsidiaries, (ii) in the public domain through no fault of Buyer or
its Subsidiaries or (iii) later lawfully acquired by Buyer or its Subsidiaries from
sources other than Seller; provided that
Buyer and any Subsidiary of Buyer may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by the Transaction Documents
and to its lenders or other Persons in connection with obtaining the financing
for the transactions contemplated by the Transaction Documents so long as such
Persons are informed by Buyer of the confidential nature of such information
and are directed by Buyer to treat such information confidentially.  The obligation of Buyer and its Subsidiaries to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information.  If this Agreement is terminated, Buyer and
its Subsidiaries will, and will use their best efforts to cause their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to Seller, upon request, all
documents and other materials, and

 

21

 

all copies
thereof, obtained by Buyer or its Subsidiaries or on their behalf from Seller or
its Subsidiaries in connection with this Agreement that are subject to such
confidence.  On or after the Closing
Date, Buyer will, and will cause each of its Subsidiaries to  reasonably cooperate with Seller and its
agents and to provide Seller and its agents with information reasonably
necessary to comply with regulatory reporting requirements (e.g., information
for utilization management and third party administrative reports).

 

ARTICLE 7

COVENANTS OF BUYER AND SELLER

 

Buyer and
Seller agree that:

 

Section 7.01.  Best Efforts; Further Assurances.  (a)
Subject to the terms and conditions of this Agreement, Buyer and Seller will
use their reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary or desirable under
applicable laws and regulations to consummate the transactions contemplated by the
Transaction Documents.  Seller and Buyer
agree to execute and deliver, or cause to be executed and delivered, such other
documents, certificates, agreements and other writings and to take or to cause
to be taken such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by the
Transaction Documents and to vest in Buyer good and marketable title to the
Purchased Assets.

 

(b)           Seller hereby
constitutes and appoints, effective as of the Closing Date, Buyer and its
successors and assigns as the true and lawful attorney of Seller with full
power of substitution in the name of Buyer, or in the name of Seller but for
the benefit of Buyer, (i) to collect for the account of Buyer any items of
Purchased Assets and (ii) to institute and prosecute all proceedings which
Buyer may in its sole discretion deem proper in order to assert or enforce any
right, title or interest in, to or under the Purchased Assets, and to defend or
compromise any and all actions, suits or proceedings in respect of the
Purchased Assets.  Buyer shall be
entitled to retain for its own account any amounts collected pursuant to the
foregoing powers, including any amounts payable as interest in respect thereof.

 

Section 7.02.  Certain Filings.  Seller and Buyer
shall cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by the Transaction
Documents and (ii) in taking such actions or

 

22

 

making any such filings, furnishing
information required in connection therewith and seeking timely to obtain any
such actions, consents, approvals or waivers.

 

Section 7.03.  Public Announcements.  The parties agree
to consult with each other before issuing any press release with respect to
this Agreement or the transactions contemplated hereby or by any other
Transaction Document and, except for any press releases the making of which may
be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release prior to such
consultation.

 

Section 7.04.  Trademarks; Tradenames.  (a) Except as set forth in the other subsections of this Section
7.04, after the Closing, Buyer and its Subsidiaries shall not use any of the
marks or names set forth on Schedule 7.04 (collectively or individually as the
context requires, the “Seller Trademarks and
Tradenames”).

 

(b)           Buyer agrees to use
reasonable efforts to cease using the Seller Trademarks and Tradenames on
buildings and other fixed assets as soon as possible within a period not to
exceed one year after the Closing Date. 

 

Section 7.05.  WARN Act.  The parties agree
to cooperate in good faith to determine whether any notification may be
required under the Worker Adjustment and Retraining Notification Act (the “WARN Act”) as a result of the transactions
contemplated by the Transaction Documents. 
Buyer will be responsible for providing any notification that may be
required under the WARN Act with respect to any Relevant Employees.  Seller will be responsible for providing any
notification that may be required under the WARN Act with respect to any Non-Relevant
Employees.

 

Section 7.06.  License Agreement; Provision of Services.  (a)  Intentionally
Omitted.

 

(b)           For a period of 45
days following the Closing Date, Seller shall, and shall cause its Subsidiaries
to, provide at Buyer’s request payroll,
accounts receivable collection, accounts payable/cost accounting, general accounting and financial reporting, IT systems
operation and technical support, and human resources and employee benefits
services, as well as the claims processing, utilization management and similar
services (utilizing, to the extent elected by Buyer, Seller’s systems) (together
with such other services as are reasonably necessary to operate the Business in
the ordinary course consistent with past practices) to Buyer of the type Seller
and its Subsidiaries have provided to the Business prior to the Closing
Date.  Such services shall be provided at
a cost equal to the direct and indirect costs Seller or the applicable Subsidiary
of Seller assesses to Subsidiaries of Seller from time to time for the same or
similar services as of the Closing Date (including any cost specifically
associated with

 

23

 

providing such services but excluding any
cost attributable to general overhead allocation), plus a fee equal to 10% of such
direct and indirect costs.  Such services
shall be of a quality and scope at least equal to the quality and scope of
similar services being provided to the Business as of such date.  In the event the Claims Processing Business
is purchased by Buyer under this Agreement, then subsequent to such purchase,
Buyer shall pay on Seller’s behalf (and Seller shall, within five business
days, reimburse Buyer for any such payments) all amounts due and owing to
providers in respect of claims relating to services provided by such providers
prior to the Closing Date.  Prior to
Closing, the parties will agree on documentation (the “Transitional Services Agreement”) setting
forth the detailed terms of Seller’s and Buyer’s obligations under this Section
7.06(b).

 

Section 7.07.  Additional Assets.  To the extent that
Seller or any of its Subsidiaries own any assets that are neither Purchased
Assets nor the Key Software, but that are necessary or appropriate to ensure that
the Buyer is able to operate the Business after the Closing Date in a manner
consistent with past practice of Seller before the Closing Date, then Buyer and
Seller shall work together in good faith to enter into an arrangement that will
provide Buyer with access to such assets as may be reasonably necessary in the
conduct of the Business after the Closing Date.

 

ARTICLE 8

TAX MATTERS

 

Section 8.01.  Tax
Definitions. 
The following terms, as used in this Agreement, have the following
meanings:

 

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

 

“Pre-Closing Tax Period”
means, collectively, (i) all Tax periods ending on or before the Closing Date
and (ii) with respect to a Tax period that commences before and ends after the
Closing Date, the portion of such period up to and including the Closing Date.

 

“Tax” means (i) any tax,
governmental fee or other like assessment or charge of any kind (including, but
not limited to, withholding on amounts paid to or by any Person), together with
any interest, penalty, addition to tax or additional amount imposed by any
domestic or foreign governmental authority responsible for the imposition of
any such tax (a “Taxing Authority”),
or (ii) liability for the payment of any amounts of the type described in (i)
as a result of being party to any agreement or any express or implied
obligation to indemnify any other Person.

 

24

 

Section 8.02.  Tax
Representations and Warranties.  Seller
represents and warrants to Buyer that:

 

(a)           Except for Taxes set
forth on Schedule 8.02 (which Taxes shall not be material, individually or in
the aggregate) Seller has timely paid all Taxes required to be paid, the
non-payment of which would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or the Purchased Assets or would result
in Buyer becoming liable therefor.

 

(b)           Seller has
established, in accordance with generally accepted accounting principles
consistently applied, adequate reserves for the payment of all Taxes not yet
due that arise from or with respect to the Purchased Assets or the Business,
the non-payment of which would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or the Purchased Assets or would result
in Buyer becoming liable therefor.

 

Section 8.03.  Responsibility for Taxes.  (a)
Seller shall timely pay all Taxes that arise from or with respect to the
Purchased Assets or the Business and that are incurred in or attributable to
the Pre-Closing Tax Period.

 

(b)           All real property
Taxes, personal property Taxes and similar ad valorem obligations levied with
respect to the Purchased Assets for a taxable period which includes (but does
not end on) the Closing Date (collectively, the “Apportioned Taxes”) shall be apportioned between Seller and
Buyer based on the number of days of such taxable period included in the
Pre-Closing Tax Period and the number of days of such taxable period after the
Closing Date (with respect to any such taxable period, the “Post-Closing Tax Period”).  Seller shall be liable for the proportionate
amount of such Taxes that is attributable to the Pre-Closing Tax Period, and
Buyer shall be liable for the proportionate amount of such Taxes that is
attributable to the Post-Closing Tax Period.

 

(c)           Apportioned Taxes
shall be timely paid, and all applicable filings, reports and returns shall be
filed, as provided by applicable law. 
The paying party shall be entitled to reimbursement from the non-paying
party in accordance with Section 8.03(b). 
Upon payment of any such Apportioned Tax, the paying party shall present
a statement to the non-paying party setting forth the amount of reimbursement
to which the paying party is entitled under Section 8.03(b), together with such
supporting evidence as is reasonably necessary to calculate the amount to be
reimbursed.  The non-paying party shall
make such reimbursement promptly but in no event later than 10 days after the
receipt of such statement.

 

Section 8.04.  Tax
Cooperation. 
Buyer and Seller shall furnish or cause to be furnished to each other,
upon request, as promptly as practicable, such information and assistance
relating to the Business and the Purchased Assets (including, without
limitation, access to books and records) as is reasonably

 

25

 

necessary for the filing of all Tax returns,
the making of any election relating to Taxes, the preparation for any audit by
any Taxing Authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax.  Buyer
and Seller shall retain all books and records with respect to Taxes pertaining
to the Purchased Assets for a period of at least six years following the
Closing Date.  At the end of such period,
each party shall provide the other with at least ten days prior written notice
before destroying any such books and records, during which period the party
receiving such notice can elect to take possession, at its own expense, of such
books and records (to the extent that such books and records may be relevant to
a Tax matter of such party).  Seller and
Buyer shall cooperate with each other in the conduct of any audit or other
proceeding relating to Taxes involving the Purchased Assets or the Business.

 

Section 8.05.  Transfer
Taxes.  (a) In accordance with Section
1146(c) of the Bankruptcy Code, the making or delivery of any instrument of
transfer under a plan confirmed under Section 1129 of the Bankruptcy Code shall
not be taxed under any law imposing a stamp or similar tax.  The instruments transferring the Purchased
Assets to Buyer shall contain the following endorsement: “Because this Assignment
and Assumption Agreement has been authorized pursuant to Order of the United
States Bankruptcy Court for the Southern District of New York relating to a
plan of reorganization of Magellan Health Services, Inc., it is exempt from
transfer taxes, stamp taxes or similar taxes pursuant to 11 U.S.C. §1146(c).”

 

(b)           In the event sales,
use or other transfer Taxes are assessed at Closing or at any time thereafter
on the transfer of any Purchased Assets, such Taxes incurred as a result of the
transactions contemplated hereby shall be borne 50% by Buyer and 50% by Seller.  The party that is responsible under
applicable law for filing a return and other documentation with respect to any
such transfer Taxes and paying such transfer Taxes to a Taxing Authority shall
be entitled to receive from the other party, no later than on the date of
payment, an amount equal to 50% of such Taxes. 
Buyer and Seller shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar documentation.

 

ARTICLE 9

EMPLOYEE BENEFITS

 

Section 9.01.  ERISA Representations.  Seller
represents and warrants to Buyer that:

 

(a)           Schedule 9.01(a)
lists each “employee benefit plan,”
as such term is defined in Section 3(3) of ERISA, which (1) is subject to any
provision of ERISA, (2) is or at any time has been maintained, administered or
contributed to by Seller or any of its ERISA Affiliates and (3) covers or
covered in the past any member of the Dedicated Staff (hereinafter referred to
collectively as the

 

26

 

“Employee
Plans”).  “Dedicated Staff” means the employees
reasonably necessary to deliver the services required under the MSA, excluding,
however, any employees performing functions in the Claims Processing Business.

 

(b)           (i) No Employee Plan
is a “Multiemployer Plan” (within the meaning
of Section 3(37) of ERISA) and no Employee Plan is subject to Title IV of ERISA
(a “Defined Benefit Plan”).

 

(ii)           Neither Seller nor any of Seller’s Subsidiaries
has incurred any liability under Title IV of ERISA arising in connection with
the termination of or complete or partial withdrawal from any plan covered or
previously covered by Title IV of ERISA that could become, after the Closing
Date, an obligation of Buyer or any of its Subsidiaries.  Seller warrants that the Closing will not
result in the imposition or assessment against Buyer or the Purchased Assets of
any liability with respect to any Multiemployer Plan, Defined Benefit Plan or
any employee benefit plan sponsored or contributed to at any time by Seller or
any Subsidiary of Seller.  Seller agrees
to indemnify and hold harmless Buyer with respect to imposition or assessment
against Buyer or the Purchased Assets of any liability related to any
obligation to contribute to or otherwise relating to or arising out of any
Multiemployer Plan, Defined Benefit Plan or Employee Plan.

 

(c)           Each Employee Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its adoption to
date, has been determined by the Internal Revenue Service to be so qualified
and Seller knows of no fact or set of circumstances that has adversely
affected, or is reasonably likely to adversely affect, the qualification of
such Employee Plan prior to the Closing, and
each trust forming a part thereof is exempt from tax pursuant to Section 501(a)
of the Code.

 

(d)           True and complete
copies (including any amendments thereto) of all of the following documents
have been provided or otherwise made available to Buyer: (i) Employee Plan
documents, any trust instruments, insurance contracts, written interpretations
and written descriptions forming a part of any Employee Plan; (ii) the most
recent determination or opinion letter issued by the Internal Revenue Service
(the “IRS”) with respect to each
Employee Plan; (iii) for the most recent plan year, Annual Reports on Form 5500
Series required to be filed with any governmental agency for each Employee
Plan; (iv) all summary plan descriptions for each Employee Plan which is
required to prepare and distribute summary plan descriptions.

 

(e)           Each Employee Plan
and each related trust agreement, annuity contract or other funding instrument
is in substantial compliance, both as to form and operation, with its terms and
is in substantial compliance with applicable law

 

27

 

(including, where applicable, ERISA and the
Code), except where the failure to so administer such Employee Plan has been
corrected in accordance with the IRS Employee Plan Compliance Resolution System
and will not result in the disqualification of any of such Employee Plan.

 

(f)            None of Seller, any
of its Subsidiaries or any ERISA Affiliates has any liability with respect to
any transaction in violation of Sections 404 or 406 of ERISA or any “prohibited
transaction,” as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Code to which any Employee Plan or any other employee benefit plan sponsored or
contributed to by Seller or any Subsidiary of Seller is subject which could
result in imposition or assessment on the Purchased Assets or Buyer of any
liability.  None of Seller, any of its
Subsidiaries or any ERISA Affiliates has knowingly participated in a violation
of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any Employee
Plan or any other employee benefit plan sponsored or contributed to by Seller
or any Subsidiary of Seller which could result in imposition or assessment on
the Purchased Assets or Buyer of any liability. 
The Secretary of Labor has not assessed Seller or any of its Subsidiaries
a civil penalty under Section 502(l) of ERISA that remains unpaid.

 

(g)           None of the Seller,
its Subsidiaries or any ERISA Affiliate has any liability for unpaid
contributions with respect to any Employee Plan or any other employee benefit
plan sponsored or contributed to by Seller or any Subsidiary of Seller.  The Seller, its Subsidiaries or an ERISA
Affiliate has made all required contributions under each Employee Plan or any
other employee benefit plan sponsored or contributed to by Seller or any Subsidiary
of Seller, for all prior periods and proper accruals have been made and are
reflected on the appropriate balance sheet and books and records.  No Employee Plan is subject to any tax under
Section 511 of the Code.

 

(h)           Schedule 9.01(h)
includes a list of each employment, severance or other similar contract,
arrangement or policy (written or oral) and each plan or arrangement (written
or oral) providing for insurance coverage (including any self-insured
arrangements), workers’ compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (1) is not an Employee Plan, (2) is entered
into, maintained or contributed to, as the case may be, by Seller or any of its
ERISA Affiliates and (3) covers or covered in the past any member of the
Dedicated Staff.  Such contracts,
policies, plans and arrangements as are described above, true and complete
copies or descriptions of all of which have been made available or furnished
previously to Buyer are hereinafter referred to collectively as the “Benefit Arrangements.”  Each Benefit Arrangement has been maintained
in

 

28

 

substantial compliance with its terms and
with the requirements prescribed by applicable law.

 

(i)            With respect to the
Dedicated Staff, there are no employee post-retirement medical or health plans
in effect, except as required by Section 601 of ERISA.

 

(j)            Seller warrants
that neither the execution and delivery of this Agreement by Seller, nor the
consummation of the transaction contemplated hereby, will result in the
acceleration or creation of any rights of any person to benefits under any
Employee Plan, Benefit Arrangement, program or employment agreement including,
without limitation, the acceleration of vesting or exercisability of any stock
options, the acceleration of vesting of any restricted stock, the acceleration
of accrual or vesting of any benefits under any pension benefit plan or the
acceleration or creation of any rights under any severance plan, parachute
provision or change in control provision that would result in the imposition of
any liability on Buyer or the Purchased Assets.

 

(k)           The Purchased Assets
are not now nor will they after the passage of time be subject to any Lien
imposed under Section 412(n) of the Code by reason of the failure of Seller or
its Subsidiaries to make timely installments or other payments required by
Section 412 of the Code.

 

(l)            There are no
pending or, to the knowledge of Seller, threatened claims (other than routine
requests for benefits) by, on behalf of or against any of the Employee Plans or
any trusts related thereto. No Employee Plan is, or within the last three (3)
years has been, the subject of examination or audit by a governmental authority
or a participant in a government sponsored amnesty, voluntary compliance or
similar program.

 

(m)          Neither Seller nor
any of its Subsidiaries is, with respect to the Business, a party to or bound
by any collective bargaining agreement nor, with respect to the Business, has
Seller or its Subsidiaries experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. Seller and its
Subsidiaries have not committed any unfair labor practice with respect to the
Business.  None of the stockholders,
directors, officers, or employees with responsibility for employment matters of
Seller or its Subsidiaries has any knowledge of any organizational effort
presently being made or threatened by, or on behalf of, any labor union with
respect to the Business.

 

Section 9.02.  Employee and Offers of Employment.  (a)
Buyer may, on or prior to the Closing Date and in its sole discretion, offer to
employ each employee of Seller who is a member of the Dedicated Staff (all such
employees who receive such an offer being referred to herein as “Relevant Employees”) effective on the
Closing Date (or, in the case of Relevant Employees who are on disability or

 

29

 

leave of absence, as soon as they are removed
from disability status or return from leave) with salary or wages consistent
with the salary or wages provided by Seller to such Relevant Employee
immediately prior to the Closing Date; provided,
however, that Buyer shall be obligated to hire any such Relevant Employee on
disability status or leave only if (i) Buyer is, on the date of such Relevant Employee’s
removal from disability status or return from leave, operating the facility at
which the Relevant Employee was last employed, and (ii) the Relevant
Employee accepts Buyer’s offer of employment. 
Buyer’s offers of employment shall not require any Relevant Employee to
relocate his or her site of employment more than 35 miles from the site in
effect immediately prior to the Closing Date. 
Buyer and Seller shall cooperate in ensuring that benefit coverage for
Relevant Employees prior to Closing is coordinated with coverage provided after
the Closing.

 

(b)           (i) Schedule 9.02(b)
sets forth for each member of the Dedicated Staff his or her name, title, base
salary and target bonus (excluding any long-term incentive plan bonus).  Seller will fully cooperate with Buyer’s
efforts to hire any Relevant Employees. 
Seller shall provide (and shall amend its severance or bonus plans to
the extent necessary to provide) that Relevant Employees (other than Dennis P.
Moody) will not be entitled to treat the offer from Buyer or any subsequent
employment with Buyer as a “termination” of employment with Seller or similar
event for purposes of any Employee Plan or Benefit Arrangement.  Seller makes no representation as to whether
Relevant Employees will accept employment with Buyer. 

 

(ii)           During the 12-month period beginning
on the day following the Closing Date, (i) Seller shall not solicit, hire or
employ any Relevant Employee (other than Dennis P. Moody) and (ii) Buyer shall
not solicit, hire or employ any Dedicated Staff who is not a Relevant Employee,
or any Relevant Employee who does not accept an offer the employment
contemplated by Section 9.02(a) (collectively, “Non-Relevant
Employees”) or any other employee of Seller.

 

(iii)          Seller shall cooperate and assist with
the implementation of any retention or incentive bonus arrangement with respect
to any Relevant Employees that Buyer, in its sole direction, elects to adopt; provided, however, that the cost of any such arrangements
shall be borne by Buyer.

 

(c)           No later than 35
days prior to the Closing Date Seller shall provide Buyer with written notice
of any changes to the information set forth in Schedule 9.02(b).  No later than 30 days prior to the Closing
Date Buyer shall provide Seller a list of the members of the Dedicated Staff
who will not be given offers of employment pursuant to Section 9.02(a).  During the 60-day period beginning on the
Closing Date, no more than 20 positions in the Business formerly held by
Non-Relevant Employees will be filled by the transfer of Buyer employees to the

 

30

employment site of such Non-Relevant
Employees.  No later than 60 days after
the Closing Date Buyer shall provide Seller written information about the
positions in the Business held by Non-Relevant Employees that will be filled by
Buyer employees.

 

(d)           If Seller terminates
the employment of any Non-Relevant Employee (other than Dennis P. Moody) during
the 60-day period beginning on the Closing Date, Buyer shall be responsible for
and shall promptly reimburse Seller for 50% of the severance costs paid to each
such Non-Relevant Employee.  Seller shall
be solely responsible, and Buyer shall have no liability, for any severance
costs in respect of any other Non-Relevant Employees.

 

Section 9.03.  Seller’s Employee Benefit Plans.  (a)
Seller shall retain all obligations and liabilities under the Employee Plans
and Benefit Arrangements in respect of each current or former member of the
Dedicated Staff (including any beneficiary thereof).  Except as expressly set forth in Section 2.03
and this Article 9, Seller or its designated Subsidiary shall retain all
liabilities and obligations in respect of Relevant Employees under the Employee
Plans and Benefit Arrangements, and neither Buyer nor any of its Subsidiaries shall
have any liability with respect thereto. 
No assets or liabilities of any Employee Plan or Benefit Arrangement
shall be transferred to, or assumed by, Buyer or any of its Subsidiaries or to
any plan of Buyer or any of its Subsidiaries.

 

(b)           Seller’s plans shall
be responsible for medical expenses covered by Seller’s welfare benefit plans; provided that such expenses were incurred
prior to the Closing Date regardless of whether payments are made after
Closing.  As of the Closing, any member of the Dedicated Staff who is
receiving benefits under Seller’s short-term disability program shall be deemed
to be an employee of Seller until such time as such employee is no longer
eligible for Seller’s short-term disability program. If at such time the
employee is eligible for long-term disability benefits or disability
retirement, the employee shall receive such benefits under Seller’s long-term
disability program or pension plan.

 

(c)           Seller shall vest
all Relevant Employees in all benefits accrued through the Closing Date under
Seller’s Employee Plans that are intended to qualify under Section 401(a) of
the Code.

 

(d)           Seller will remain
responsible for (i) all benefits payable to members of the Dedicated Staff who, as of the close of business on
the day immediately preceding the Closing Date, were determined to be totally
and permanently disabled in accordance with the applicable provisions of Seller’s
health, accident, sickness, salary continuation, or short-term or long-term
disability benefit plans or programs, and (ii) all benefits payable to members of the Dedicated Staff, who as
of the close of business on the business day immediately preceding the Closing
Date, were receiving short-term disability benefits in accordance with the

 

31

 

applicable provisions of Seller’s short-term
disability benefit- plans or programs; and (iii) all benefits payable to members of the Dedicated Staff who, as
of the close of business on the business day immediately preceding the Closing
Date, were on any type of leave other than vacation leave.

 

Section 9.04.  Buyer Benefit Plans.  (a) Buyer’s
health and welfare plans shall be responsible for health and accident claims
incurred after the Closing Date relating to Relevant Employees.  With respect to each Relevant Employee:

 

(i)            Buyer shall waive pre-existing
condition requirements, evidence of insurability provisions, waiting period
requirements or any similar provisions under any employee benefit plan or
compensation arrangements maintained or sponsored by or contributed to by Buyer
for such Relevant Employee to the extent such exclusion, restriction,
limitation, or requirement has been waived, satisfied or does not apply under
the terms of any Employee Plan prior to Closing.

 

(ii)           Buyer shall apply toward any
deductible requirements and out-of-pocket maximum limits under its employee
welfare benefit plans any amounts paid (or accrued) by each Relevant Employee
under Seller’s welfare benefit plans during the current plan year.

 

(b)           Buyer shall
recognize for purposes of participation, eligibility and vesting (but not for
purposes of benefit accrual and compensation arrangements) under its employee
benefit plans, the service of any Relevant Employee with Seller or any of its
affiliates prior to the Closing Date.

 

(c)           Seller shall be
responsible for satisfying obligations under Section 601 et seq. of ERISA and Section 4980B of the
Code, to provide continuation coverage to or with respect to any member of the
Dedicated Staff (or beneficiary thereof) who is not a Relevant Employee in
accordance with law with respect to any “qualifying event” occurring on, prior
to, or after the Closing Date.  Buyer
shall be responsible for satisfying obligations under Section 601 et seq. of ERISA and Section 4980B of the
Code, to provide continuation coverage to or with respect to any Relevant
Employee in accordance with law with respect to any “qualifying event” which
occurs on or after the Closing Date.

 

(d)           Buyer shall be
responsible for all workers’ compensation benefits payable to Relevant
Employees with respect to injuries to Relevant Employees occurring after the
Closing Date.

 

(e)           Seller
shall be responsible for all vacation earned by Relevant Employees but not
taken as of the Closing Date in excess of the lesser of (i) seven days or (ii)
the number of annual carryover days permitted under Seller’s policy

 

32

 

applicable to its employees generally at the
Closing Date, in each case per Relevant Employee.

 

Section 9.05.  No Third Party Beneficiaries.  No
provision of this Article 9 shall create any third party beneficiary or other
rights in any employee or former employee (including any beneficiary or
dependent thereof) of Seller or of any of its Subsidiaries in respect of
continued employment (or resumed employment) with either Buyer or any of its Subsidiaries
and no provision of this Article 9 shall create any such rights in any such
Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or Benefit Arrangement or any plan or
arrangement which may be established by Buyer or any of its Subsidiaries.

 

ARTICLE 10

CONDITIONS TO CLOSING

 

Section 10.01.  Conditions to Obligations of Buyer and Seller. 
The obligations of Buyer and Seller to consummate the Closing
are subject to the satisfaction of the following conditions:

 

(a)           Any applicable
waiting period under the HSR Act relating to the transactions contemplated
hereby shall have expired or been terminated.

 

(b)           No provision of any
applicable law or regulation and no judgment, injunction, order or decree shall
prohibit the consummation of the Closing.

 

(c)           All actions by or in
respect of or filings with any governmental body, agency, official or authority
required to permit the consummation of the Closing shall have been taken, made
or obtained.

 

Section 10.02.  Conditions to Obligation of Buyer.  The
obligation of Buyer to consummate the Closing is subject to the satisfaction of
the following further conditions:

 

(a)           (i) Each Seller Entity
shall have performed in all material respects all of its obligations under the
Transaction Documents and the MSA required to be performed by it on or prior to
the Closing Date, (ii) the representations and warranties of Seller contained
in this Agreement and in any certificate or other writing delivered by Seller
pursuant hereto (A) that are qualified by materiality shall be true at and as
of the Closing Date as if made at and as of such date, and (B) that are not
qualified by materiality shall be true in all material respects at and as of
the Closing Date as if made at and as of such time, in each case individually
and in the aggregate, and (iii) Buyer shall have received a certificate signed
by the Vice President of Seller to the foregoing effect.

 

33

 

(b)           There shall not be
threatened (with a reasonable likelihood of being commenced), instituted or
pending any action or proceeding by any Person before any court or governmental
authority or agency, domestic or foreign, (i) seeking to restrain, prohibit or
otherwise interfere with the ownership or operation by Buyer or any of its Subsidiaries
of all or any material portion of the Purchased Assets or the business or
assets of Buyer or any of its Subsidiaries or to compel Buyer or any of its Subsidiaries
to dispose of all or any material portion of the Purchased Assets or of Buyer
or any of its Subsidiaries or (ii) seeking to require divestiture by Buyer or
any of its Subsidiaries of any Purchased Assets.

 

(c)           There shall not be
any action taken, or any statute, rule, regulation, injunction, order or decree
proposed, enacted, enforced, promulgated, issued or deemed applicable to the
purchase of the Purchased Assets, by any court, government or governmental
authority or agency, domestic or foreign, other than the application of the
waiting period provisions of the HSR Act to the purchase of the Purchased
Assets, that, in the reasonable judgment of Buyer could, directly or
indirectly, result in any of the consequences referred to in Sections 10.02(b)(i)
and 10.02(b)(ii) above.

 

(d)           Each Seller Entity shall
have received all Required Consents (or entered into alternative arrangements (other
than with respects to leases of Real Property) as contemplated by Section 2.05)
and all consents, authorizations or approvals from the governmental agencies
referred to in Section 3.03 in each case in form and substance reasonably
satisfactory to Buyer, and no such consent, authorization or approval shall
have been revoked.

 

(e)           Buyer shall have
obtained an ALTA extended coverage form of owner’s or leasehold owner’s title
insurance policies, or binders to issue the same, dated the Closing Date and in
amounts satisfactory to Buyer insuring or committing to insure, at ordinary
premium rates without any requirement for additional premiums, good and
marketable title to the Real Property being transferred pursuant to the terms
of this Agreement free and clear of any Liens, except for Permitted Liens.

 

(f)            The Transitional
Services Agreement and the License Agreement, in each case in form and
substance satisfactory to Buyer in its reasonable discretion, shall have been
entered into by Seller or one of its Subsidiaries, on the one hand, with Buyer
or one of its Subsidiaries, on the other.

 

(g)           Upon the prior
written request of Buyer (exercisable in its sole discretion), a Network Rental
Agreement in form and substance satisfactory to Buyer in its reasonable
discretion shall have been entered into by Seller or one of its Subsidiaries,
on the one hand, with Buyer or one of its Subsidiaries, on the other.

 

34

 

(h)           Buyer shall have
received all documents it may reasonably request relating to the existence of each
Seller Entity and the authority of each Seller Entity for each Transaction
Document to which it is a party, all in form and substance reasonably
satisfactory to Buyer.

 

Section 10.03.  Conditions to Obligation of Seller.  The
obligation of Seller to consummate the Closing is subject to the satisfaction
of the following further conditions:

 

(a)           (i) Buyer shall have
performed in all material respects all of its obligations under the Transaction
Documents and the MSA required to be performed by it at or prior to the Closing
Date, (ii) the representations and warranties of Buyer contained in this
Agreement and in any certificate or other writing delivered by Buyer pursuant
hereto shall be true in all material respects at and as of the Closing Date, as
if made at and as of such date, in each case individually and in the aggregate,
and (iii) Seller shall have received a certificate signed by the Vice President
of Buyer to the foregoing effect.

 

(b)           Buyer shall have
received all consents, authorizations or approvals from governmental agencies
referred to in Section 4.03, in each case in form and substance reasonably
satisfactory to Seller, and no such consent, authorization or approval shall
have been revoked.

 

(c)           Seller shall have
received all documents it may reasonably request relating to the existence of
Buyer and the authority of Buyer for each Transaction Document to which it is a
party, all in form and substance reasonably satisfactory to Seller.

 

ARTICLE 11

SURVIVAL; INDEMNIFICATION

 

Section 11.01.  Survival.  The representations
and warranties of the parties hereto contained in this Agreement or in any
other Transaction Document or in any certificate or other writing delivered
pursuant to or in connection with any Transaction Document shall survive the
Closing until the second anniversary of the Closing Date; provided
that the representations and warranties contained in Articles 8 or 9 shall
survive until expiration of the statute of limitations applicable to the
matters covered thereby (giving effect to any waiver, mitigation or extension
thereof), if later and; provided, further,
that the representations and warranties set forth in Sections 3.02, 3.08, 3.09,
3.12, 3.13, 4.02 and 4.06 shall survive indefinitely.  Notwithstanding the preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy thereof giving
rise to such right of

 

35

 

indemnity shall have been given to the party
against whom such indemnity may be sought prior to such time.  The covenants and agreements of the parties
(including, without limitation, the covenants and agreements of the parties set
forth in this Article 11) contained in this Agreement or in any other
Transaction Document shall survive indefinitely.

 

Section 11.02.  Indemnification.  (a) Seller hereby
indemnifies Buyer, its Subsidiaries and their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents
(collectively, with respect to any Person, such Person’s “Representatives”)
against and agrees to hold each of them harmless on an after-Tax basis (as
described in Section 11.05) from any and all damage, loss, liability and
expense (including, without limitation, reasonable expenses of investigation
and reasonable attorneys’ fees and expenses in connection with any action, suit
or proceeding whether involving a third-party claim or a claim solely between
the parties hereto) (“Damages”)
incurred or suffered by them arising out of:

 

(i)            any misrepresentation or breach of
warranty (disregarding any qualification or exception contained in such
representation or warranty relating to materiality), covenant or agreement made
or to be performed by Seller or any other Seller Entity pursuant to any of the
Transaction Documents;

 

(ii)           any Excluded Liability (including,
without limitation, the failure of any Seller Entity to perform or in due
course pay and discharge any Excluded Liability); or

 

(iii)          the enforcement of their rights under
this Section 11.02.

 

The fact that the survival period with respect to any representation or
warranty has terminated or that indemnification for breaches of representations
and warranties is subject to the limitations set forth in this Section 11.02(a)
shall not limit or affect in any respect the Seller’s indemnification
obligations with respect to any Excluded Liabilities (even if such Excluded
Liability is also the subject of a representation or warranty).

 

(b)           Buyer hereby
indemnifies Seller, its Subsidiaries and their respective Representatives
against and agrees to hold each of them harmless on an after-Tax basis (as
described in Section 11.05) from any and all Damages incurred or suffered by
them arising out of:

 

(i)            any misrepresentation or breach of
warranty (disregarding any qualification or exception contained in such
representation or warranty relating to materiality), covenant or agreement made
or to be performed by Buyer pursuant to any of the Transaction Documents;

 

36

 

(ii)           any Assumed Liability (including,
without limitation, any failure by Buyer to perform or in due course pay and
discharge any Assumed Liability); or

 

(iii)          the enforcement of their rights under
this Section 11.02.

 

Section 11.03.  Procedures for Third Party Claims.  (a)
The parties seeking indemnification under Section 11.02 (the “Indemnified Parties”) agree to give prompt notice to the
parties against whom indemnity is sought (the “Indemnifying
Parties”) of the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought under Section
11.02 (the “Third Party Claims”).  The failure by any Indemnified Party so to
notify the Indemnifying Parties shall not relieve any Indemnifying Party from
any liability which it may have to such Indemnified Party with respect to any
claim made pursuant to this Section 11.03, except to the extent such failure
shall actually prejudice an Indemnifying Party.

 

(b)           Upon receipt of
notice from the Indemnified Parties pursuant to Section 11.03(a), the
Indemnifying Parties will, subject to the provisions of Section 11.03(c),
assume the defense and control of such Third Party Claims but shall allow the
Indemnified Parties a reasonable opportunity to participate in the defense of
such Third Party Claims with their own counsel and at their own expense (except
as provided in Section 11.03(d)).  The
Indemnifying Parties shall select counsel, contractors and consultants of recognized
standing and competence after consultation with the Indemnified Parties; shall
take all steps necessary in the defense or settlement of such Third Party
Claims; and shall at all times diligently and promptly pursue the resolution of
such Third Party Claims.  The Indemnified
Parties shall, and shall cause each of their Subsidiaries and Representatives
to, cooperate fully with the Indemnifying Parties in the defense of any Third
Party Claim defended by the Indemnifying Parties.

 

(c)           The Indemnifying
Parties shall be authorized to consent to a settlement of, or the entry of any
judgment arising from, any Third Party Claim, without the consent of any
Indemnified Party; but only if the Indemnifying Parties shall (i) pay or cause
to be paid all amounts arising out of such settlement or judgment concurrently
with the effectiveness of such settlement; (ii) not encumber any of the assets
of any Indemnified Party or agree to any restriction or condition that would
apply or adversely affect any Indemnified Party or to the conduct of any
Indemnified Party’s business; and (iii) obtain, as a condition of any
settlement or other resolution, a complete release of any Indemnified Party
potentially affected by such Third Party Claim.

 

(d)           The Indemnifying
Parties shall also be liable for the reasonable fees and expenses of counsel
incurred by each Indemnified Party in defending any Third Party Claim if such
Third Party Claim, if successful, is likely to result in a

 

37

 

judgment,
decree or order of injunction or other equitable relief or relief for other
than money Damages against such Indemnified Party.

 

Section 11.04.  Procedures for Direct Claims.  In
the event any Indemnified Party should have a claim for indemnity against any
Indemnifying Party that does not involve a Third Party Claim, the Indemnified
Party shall deliver notice of such claim with reasonable promptness to the
Indemnifying Party.  The failure by any
Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability that it may have to such Indemnified
Party with respect to any claim made pursuant to this Section 11.04, it being
understood that notices for claims in respect of a breach of a representation
or warranty must be delivered prior to the expiration of the survival period
for such representation or warranty.  If
the Indemnifying Party does not notify the Indemnified Party within 30 calendar
days following its receipt of such notice that the Indemnifying Party disputes
its liability to the Indemnified Party under this Article, the claim specified
by the Indemnified Party in such notice shall be conclusively deemed a
liability of the Indemnifying Party under this Article 11, and the Indemnifying
Party shall pay the amount of such liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any portion
of the claim) is estimated, on such later date when the amount of such claim
(or such portion of such claim) becomes finally determined.  If the Indemnifying Party has timely disputed
its liability with respect to such claim as provided above, the Indemnifying
Party and the Indemnified Party shall resolve such dispute in accordance with Section
13.06.

 

Section 11.05.  Purchase Price Adjustment and Interest.  Any
amount paid by a party to another party under Section 11.02 will be treated for
all Tax purposes as an adjustment (which shall be allocated pursuant to the
procedures set forth in Section 2.06) to the Purchase Price unless a Final
Determination (as defined below) causes any such amount not to constitute such
an adjustment for federal income Tax purposes. 
In the event of such a Final Determination, the payor party shall pay an
additional amount that reflects the hypothetical Tax consequences of the
receipt or accrual of such payment, using the maximum statutory rate (or rates,
in the case of an item that affects more than one Tax) applicable to the
recipient of such payment for the relevant year, reflecting for example, the
effect of deductions available for interest paid or accrued and for Taxes such
as state and local income Taxes.  Any
payment required to be made by a party under Section 11.02 that is not made
when due shall bear interest at the rate per annum determined, from time to
time, under the provision of Section 6621(a)(2) of the Code for each day until
paid.  A “Final
Determination” means (i) any final determination of liability in
respect of a Tax that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise (including the
expiration of a statute of limitations or a period for the filing of claims for
refunds, amended returns or appeals from adverse determinations), or (ii) the
payment of Tax by Buyer, Seller or any of their

 

38

 

Subsidiaries,
whichever is responsible for payment of such Tax under applicable law, with
respect to any item disallowed or adjusted by a Taxing Authority, provided that
such responsible party determines that no action should be taken to recoup such
payment and the other party agrees.  

 

ARTICLE 12

TERMINATION

 

Section 12.01.  Grounds for Termination.  This
Agreement may be terminated at any time prior to the Closing:

 

(a)           by mutual written agreement of Seller
and Buyer;

 

(b)           by either Seller or Buyer if the
Closing shall not have been consummated on or before June 30, 2006 (which date
may be extended by Aetna in its sole discretion as provided in Section 9(B) of
the MSA, so long as Aetna agrees to extend the term of the MSA until such date
of Closing (it being understood that the MSA shall be so extended if Aetna so
elects)); or

 

(c)           by either Seller or Buyer if there
shall be any law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or governmental body having competent jurisdiction.

 

The party
desiring to terminate this Agreement pursuant to clauses 12.01(b) and 12.01(c)
shall give notice of such termination to the other party.

 

Section 12.02.  Effect of Termination.  If this
Agreement is terminated as permitted by Section 12.01, such termination shall
be without liability of either party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) to the other party
to this Agreement; provided that
if such termination shall result from the (i) willful failure of either party
to fulfill a condition to the performance of the obligations of the other
party, (ii) failure to perform a covenant of this Agreement or (iii) breach by
either party hereto of any representation or warranty or agreement contained
herein, such party shall be fully liable for any and all Damages incurred or
suffered by the other party as a result of such failure or breach.  The provisions of Section 6.01, 13.03, 13.05,
13.06 and 13.07 shall survive any termination hereof pursuant to Section 12.01.

 

39

 

ARTICLE 13

MISCELLANEOUS

 

Section 13.01.  Notices.  All notices,
requests and other communications to any party hereunder shall be in writing
(including facsimile transmission) and shall be given,

 

if to Buyer,
to:

 

Aetna
Inc.

151 Farmington Avenue

Hartford, Connecticut 06156

Attention:, Louis Briskman, General Counsel

Fax: (860) 273-8340

 

with a copy to:

 

Davis
Polk & Wardwell

450 Lexington Avenue

New York, New York  10017

Attention: David L. Caplan

Fax: (212) 450-4800

 

if to Seller,
to:

 

Magellan
Health Services, Inc.

6950 Columbia Gateway Drive

Columbia, Maryland  21046

Attention:  President and General Counsel

Fax:  (410) 953-4715

 

All such
notices, requests and other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5:00 p.m. in the place
of receipt and such day is a business day in the place of receipt.  Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.

 

Section 13.02.  Amendments and Waivers.  (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.

 

(b)           No failure or delay
by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of

 

40

 

any other right, power or privilege.  The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 13.03.  Expenses.  Except as otherwise
provided herein, all costs and expenses incurred in connection with the
Transaction Documents shall be paid by the party incurring such cost or
expense.

 

Section 13.04.  Successors and Assigns.  The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided
that no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each other party
hereto, except that Buyer may transfer or assign, in whole or from time to time
in part, to one or more of its Subsidiaries, the right to purchase all or a
portion of the Purchased Assets, but no such transfer or assignment will
relieve Buyer of its obligations hereunder.

 

Section 13.05.  Governing Law.  Agreement shall be
governed by and construed in accordance with the law of the State of New York,
without regard to the conflicts of law rules of such state.

 

Section 13.06.  Jurisdiction.  Except as otherwise
expressly provided in this Agreement, the parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, so long as one of such courts shall have subject matter jurisdiction
over such suit, action or proceeding, and that any cause of action arising out
of this Agreement shall be deemed to have arisen from a transaction of business
in the State of New York, and each of the parties hereby irrevocably consents
to the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum.  Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. 
Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 13.01 shall be deemed effective
service of process on such party.

 

Section 13.07.  WAIVER OF JURY TRIAL.  EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR

 

41

 

RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 13.08.  Counterparts; Third Party Beneficiaries.  This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.  This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto. 
No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.

 

Section 13.09.  Entire Agreement.  This Agreement and
the other Transaction Documents constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and supersede all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter of this Agreement.

 

Section 13.10.  Captions.  The captions herein
are included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.

 

42

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed by
their respective authorized officers as of the day and year first above
written.

 

	
   

  	
  AETNA INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Bridge

  	
   

  
	
   

  	
   

  	
  Name: John Bridge

  
	
   

  	
   

  	
  Title: Vice President - Development

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MAGELLAN HEALTH SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel N. Gregoire

  	
   

  
	
   

  	
   

  	
  Name: Daniel N. Gregoire

  
	
   

  	
   

  	
  Title: Executive Vice President,

  General Counsel

  
						

 

 

EXHIBIT A

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as
of December 30, 2005, between AETNA INC., a Pennsylvania corporation (“Buyer”), and [MAGELLAN HEALTH SERVICES, INC.] [OTHER SELLER
ENTITIES], a Delaware corporation (“Seller”).

 

W I T N E S S E T H :

 

WHEREAS, Buyer and Seller have concurrently
herewith consummated the purchase by Buyer of the Purchased Assets pursuant to
the terms and conditions of the Asset Purchase Agreement dated [                     , 200   ]
between Buyer and Seller, (the “Asset
Purchase Agreement”; terms defined in the Asset Purchase Agreement
and not otherwise defined herein being used herein as therein defined);

 

WHEREAS, pursuant to the Asset Purchase
Agreement, Buyer has agreed to assume certain liabilities and obligations of
Seller with respect to the Purchased Assets and the Business;

 

NOW, THEREFORE, in consideration of the sale
of the Purchased Assets and in accordance with the terms of the Asset Purchase
Agreement, Buyer and Seller agree as follows:

 

1.             (a) Seller does
hereby sell, transfer, assign and deliver to Buyer all of the right, title and
interest of Seller in, to and under the Purchased Assets; provided
that no sale, transfer, assignment or delivery shall be made of any or any
material portion of any of the Contracts or Permits if an attempted sale,
assignment, transfer or delivery, without the consent of a third party, would
constitute a breach or other contravention thereof or in any way adversely
affect the rights of Buyer or Seller thereunder.

 

(b)           Buyer does hereby
accept all the right, title and interest of Seller in, to and under all of the
Purchased Assets (except as aforesaid) and Buyer assumes and agrees to pay,
perform and discharge promptly and fully when due all of the Assumed
Liabilities and to perform all of the obligations of Seller to be performed
under the Contracts except to the extent liabilities thereunder constitute
Excluded Liabilities.

 

2.             This Agreement
shall be governed by and construed in accordance with the law of the State of
New York, without regard to the conflicts of law rules of such state.

 

1

3.             This Agreement may
be executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the day and year first above
written.

 

 

	
   

  	
  AETNA INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [MAGELLAN
  HEALTH SERVICES, INC.]  [OTHER SELLER
  ENTITIES]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title: 

  
						

 

2

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