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> Document 582 : INS 99-14 : Hearing Decision
VIA HAND DELIVERY
Alessandro A. Iuppa Superintendent of Insurance c/o Lyndy Morgan Docket No. INS-99-14 Maine Department of Professional & Financial Regulation Bureau of Insurance 124 Northern Avenue Gardiner, Maine 04345 Re: Anthem / Blue Cross Blue Shield of Maine: Executed Memorandum of Understanding Between and Among Anthem Insurance Companies, Inc., Patriot Mutual Insurance Company, and Patriot Life Insurance Company
Dear Superintendent Iuppa: As a follow-up to the Applicants’ Response to the Order on Completeness (the "Response"), I enclose two executed copies of the Memorandum of Understanding Between and Among Anthem Insurance Companies, Inc., Patriot Mutual Insurance Company, and Patriot Life Insurance Company (the "MOU"), which was previously provided in draft form at Tab 16 of the Response. The purpose of this filing is simply to provide the Superintendent with an executed copy of the MOU. Except for the signatures of the parties, the enclosed MOU is in substance the same as the copy provided as part of the Response. Please let me know if I can be of further assistance in this matter. Very truly yours,
James B. Zimpritch
Enclosure cc: Superintendent’s Consultant (via first class mail) Robert S. Frank, Esq. (via hand delivery) Judith Chamberlain, Esq. (via hand delivery) William Laubenstein, Esq. (via hand delivery) Michele M. Garvin, Esq. (via email, without enclosure) Gordon H. Smith, Esq. (via email, without enclosure) Gregory A. Brodek, Esq. (via email, without enclosure) Joseph P. Ditre, Esq. (via email, without enclosure) Robert I. Goldman (via email, without enclosure) Bonnie Post (via email, without enclosure) John Dieffenbacher-Krall (via email, without enclosure) Donald E. Quigley, Esq. (via email, without enclosure) Sandra L. Parker, Esq. (via email, without enclosure) Kellie P. Miller, M.S. (via email, without enclosure) Edward Miller (via email, without enclosure)
CERTIFICATE OF SERVICE The undersigned hereby certifies that on March 23, 2000, a copy of the Memorandum of Understanding Between and Among Anthem Insurance Companies, Inc., Patriot Mutual Insurance Company, and Patriot Life Insurance Company was served by electronic mail, without enclosure, or, where indicated, by hand delivery, on each of the persons listed below.
DATED: March 23, 2000 _____________________________ James B. Zimpritch, Esq. Jeffrey M. White, Esq. Catherine R. Connors, Esq. PIERCE ATWOOD Portland, Maine 04101 (207) 791-1100 Attorneys for Anthem Insurance Companies, Inc.
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING, dated as of __________, 2000, between and among ANTHEM INSURANCE COMPANIES, INC. ("Anthem"), an Indiana corporation, PATRIOT MUTUAL INSURANCE COMPANY d/b/a BLUE ALLIANCE INSURANCE COMPANY OF MAINE ("Blue Alliance"), a Maine corporation, and PATRIOT LIFE INSURANCE COMPANY ("Patriot Life"), a Maine corporation. W I T N E S S E T H T H A T:
WHEREAS, Anthem has entered into a certain Asset Purchase Agreement dated as of July 13, 1999, the "APA", providing for the acquisition by Anthem or a subsidiary to be formed by Anthem ("AHPM") of substantially all of the assets of Associated Hospital Services of Maine d/b/a Blue Cross and Blue Shield of Maine ("BCBSME"); and WHEREAS, pursuant to the APA, AHPM is to acquire 57% of the stock of Machigonne, Inc. ("Machigonne") and pursuant to a separate Stock Purchase Agreement between Anthem and Blue Alliance, AHPM expects to acquire 43% of the stock of Machigonne; and WHEREAS, Blue Alliance and Patriot Life are parties to various service and management agreements with BCBSME, Machigonne, and Northern General Services as follows (the "Service Agreements"):
WHEREAS, Anthem wishes to provide confirmation to Blue Alliance and Patriot Life (i) that it will cause AHPM to assume the Service Agreements effective as of the date of the closing of the APA and the Machigonne Stock Purchase Agreement (the "Closing") and will at that time amend the Service Agreements to enable Blue Alliance and/or Patriot Life, as the case may be, to terminate any or all of the Service Agreements on thirty days notice, and (ii) that Anthem intends to have AHPM and/or Machigonne and/or Northern General Services, as the case may be, provide staffing to carry out the Service Agreements after the closing with substantially the same employees who are providing services pursuant to said Service Agreements on the date hereof; and
WHEREAS, after the Closing, Anthem is willing to cause AHPM, Machigonne and Northern to negotiate in good faith with Blue Alliance and/or Patriot Life, as the case may be, with respect to any changes in the Service Agreements requested by Blue Alliance and/or Patriot Life; and WHEREAS, in order to facilitate orderly regulatory proceedings relating to the acquisition by Anthem and AHPM of BCBSME and the assumption of obligations under the Service Agreements, Blue Alliance and Patriot Life are willing to provide confirmation to Anthem regarding its director and management succession plan (the "Succession Plan"); NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto agree as follows: 1. As provided in section 5.06 of the APA, and notwithstanding any provision to the contrary in Section 1.1 of each of the Service Agreements, at the Closing, and for a period of up to two years thereafter, Anthem will cause AHPM to assume and perform, and Machigonne and Northern General Services to perform, each of the Service Agreements to which BCBSME, Machigonne or Northern General Services, as the case may be, is a party, and to cause each of said Service Agreements to be amended by adding an additional sentence at the end of Section 1.1 to provide as follows:
2. Immediately following the Closing Anthem will cause AHPM, Machigonne and/or Northern General Services, as the case may be, to utilize the personnel who are currently performing services under the Service Agreements to which said entities are parties to continue to perform said services under said Service Agreements, to the extent consistent with the Anthem shared service environment described in Item 5 of Anthem's Form A dated September 15, 1999, and to the extent otherwise practicable; provided, however, that if different senior level personnel are to perform management services under any of the Service Agreements, Anthem will provide to Blue Alliance or Patriot Life, as the case may be, prior notice and an opportunity to consult with Anthem with respect thereto.
3. In the event that after the Closing Blue Alliance and/or Patriot Life desires to renegotiate the terms of any of the Service Agreements, Anthem agrees to cause AHPM, Machigonne, and Northern General Services, as the case may be, to negotiate in good faith with Blue Alliance or Patriot Life, as the case may be. 4. In order to facilitate the orderly processing of Anthem's filings with the Maine Bureau of Insurance under the Maine Insurance Code with respect to changes in control affecting BCBSME, Blue Alliance and/or Patriot Mutual, Blue Alliance and Patriot Life hereby confirm their present intent to implement the Succession Plans annexed hereto as Exhibit A and Exhibit B. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Memorandum of Understanding as of the day and year first above written. ANTHEM INSURANCE COMPANIES, INC.
By:___________________________________
PATRIOT MUTUAL INSURANCE COMPANY d/b/a BLUE ALLIANCE INSURANCE COMPANY OF MAINE
By:____________________________________ PATRIOT LIFE INSURANCE COMPANY
By:____________________________________
Anthem.JBZ.Memorandum of Understanding.3.08.2000
EXHIBIT A TO MEMORANDUM OF UNDERSTANDING
SUCCESSION PLAN – PATRIOT MUTUAL INSURANCE COMPANY
I. INTRODUCTION This exhibit is intended to be read in conjunction with the Memorandum of Understanding and all defined terms used herein are used as defined in the Memorandum of Understanding, with the exception that Patriot Mutual Insurance Company d/b/a Blue Alliance Mutual Insurance Company of Maine may also be referred to as "Patriot" or the "Company." Patriot is presently controlled as control is defined in Maine law and understood in practice, by BCBSME. That control is effected by means of: (1) Bylaw requirements for common directorships; (2) common directors; (3) common officers; and (4) Service Agreements identified in the Memorandum of Understanding to which the Company is a party. At or before the closing, the Bylaw requirements will have been eliminated and beginning not later than the time of the closing, the Company will not have common directors or common officers with Anthem, AHPM, Machigonne or Northern General Services. Also at the closing, the Service Agreements will be assumed as provided in the Memorandum of Understanding. At or before the end of a period not to exceed two years following the date of the closing, it is intended and expected that all of the Service Agreements will have been terminated.
II. BYLAWS At a meeting of the Blue Alliance Board of Directors of Patriot on January 19, 2000, it was unanimously voted to amend the Bylaws to eliminate the requirement that members of the Board of Blue Alliance, also be members of the Board or Staff of BCBSME. The Bylaw change is in the process of being submitted to the Bureau of Insurance for its approval. It is not presently contemplated that additional Bylaw amendments will be necessary.
III. DIRECTORS At meetings on August 18, 1999 and September 14, 1999, the Blue Alliance Board decided that the four non-management directors, with the advice and assistance of independent advisors and attorneys, would conduct any and all negotiations with Anthem on behalf of Blue Alliance. The Committee of Non-Management Directors ("Committee") has met on several occasions with its independent advisors, and independently of management or other officials or representatives of BCBSME. The four members of the Committee have stated a willingness to continue to serve on the Patriot Board for a period of time after the closing. Under the amended Bylaws, after the closing, the Patriot Board will consist of seven individuals, four of whom will initially be the current non-management directors and three of whom will be suitably qualified individuals who are not affiliated with Anthem, AHPM or BCBSME. Thereafter, members of the Board will be duly elected in accordance with Corporate Bylaws and applicable law. The Committee has begun the process of identifying qualified individuals who will be able and willing to serve as members of the Board. It is anticipated that the appropriately qualified individuals will have agreed to serve sufficiently in advance of the closing to permit timely submission of their credentials for review by the Superintendent and staff of the Bureau of Insurance. Although specific details have not yet been developed, it is anticipated that Board members will be appropriately compensated for their service.
IV. OFFICERS Absent material change of circumstances, it is anticipated that the current Chairman of the Patriot Board will continue to serve as Chairman of the Patriot Board for a time after the closing; that other officers will need to be chosen; and that the President will be a full-time employee of the Company. Given the assumption of the Agreements as provided in the Memorandum of Understanding, during the initial period following the closing, it is expected and intended that Anthem will cause AHPM, Machigonne and Northern General Services as the case may be, to fully perform all obligations under the Services Agreements, including those aspects of the Services Agreements which call for management services, as opposed to administrative services. The Committee members and their independent advisors are at work developing plans for staffing and operating the Company after termination of the Services Agreements.
V. BUSINESS PLAN At the direction of the Committee, independent advisors are working with members of the BCBSME staff who are responsible for performance of the existing Service Agreements to develop a business plan for consideration by the Board and ultimately for filing with the Bureau of Insurance. Given the anticipated assumption of the Agreements, it is expected and intended that the Company’s present business plan will continue to govern the Company’s operations after closing until the Company has had an appropriate opportunity to develop and submit to the Bureau of Insurance an alternative business plan.
VI. CONCLUSION At or before the closing, the Company will submit for approval by the Bureau its proposed directors and officers. At the earliest reasonable time, the Company will submit information concerning its three year business plan.
EXHIBIT B TO MEMORANDUM OF UNDERSTANDING
SUCCESSION PLAN – PATRIOT LIFE INSURANCE COMPANY
I. INTRODUCTION This exhibit is intended to be read in conjunction with the Memorandum of Understanding and all defined terms used herein are used as defined in the Memorandum of Understanding. Patriot Life is presently controlled as control is defined in Maine law and understood in practice, by BCBSME. That control is effected by means of: (1) BCBSME’s control of Patriot Mutual Insurance Company d/b/a Blue Alliance Insurance Company of Maine, which in turn owns 100% of the issued and outstanding shares of Patriot Life; (2) Blue Alliance Bylaws requiring common directorships with BCBSME; (3) common directors, i.e., all directors of Patriot Life are identical with all directors of Blue Alliance and all Blue Alliance directors are BCBSME directors or senior management employees of BCBSME; (4) common officers; and (5) a Management Services Agreement dated October 1, 1995 as amended between Patriot Life and Machigonne. As set forth in Exhibit A, at and after the time of the Closing, Patriot Mutual and Patriot Life will not have common directors or common officers with Anthem, AHPM, Machigonne or Northern General Services and the Management Services Agreement identified above will be assumed as provided in the Memorandum of Understanding. At or before the end of a period not to exceed two years following the date of the Closing, it is expected and intended that the Management Services Agreement will have been terminated.
II. BYLAWS, DIRECTORS AND OFFICERS See Exhibit A. No Bylaw changes are necessary with respect to Patriot Life in order to effect changes in the Patriot Life Board in conjunction with the Closing. Absent material changes of circumstances, it is to be anticipated that the directors and officers of Patriot Life, at and after the Closing, will be and become the same as the directors and officers of Patriot Mutual at and after the Closing.
III. BUSINESS PLAN At the direction of the Committee, independent advisors are working with members of the BCBSME staff who are responsible for performance of the existing Management Services Agreement to develop a business plan for consideration by the Board and ultimately for filing with the Bureau of Insurance. Given the anticipated assumption of the Management Services Agreement, it is expected and intended that Patriot Life’s present business plan will continue to govern its operations after Closing until Patriot Life has had an adequate opportunity to develop and submit to the Bureau of Insurance an alternative business plan.
IV. CONCLUSION At or before the Closing, Patriot Life will submit for approval by the Bureau its proposed directors and officers. At the earliest reasonable time, Patriot Life will submit information concerning its three year business plan. Last Updated: December 8, 2011 |
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