UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MARCH 24, 2008
UNITED AMERICAN HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 001-11638 38-2526913
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
300 RIVER PLACE, SUITE 4950, DETROIT, MICHIGAN 48207
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (313) 393-4571
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communication pursuant to Rule 425 under the Securities Act.
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act.
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act.
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act.
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On January 7, 2008, the Department of Finance and Administration of the
State of Tennessee, Bureau of TennCare ("TennCare"), issued a Request for
Proposal (as since amended, "RFP") for managed care services to be provided in
the East Grand Region and the West Grand Region of Tennessee. The RFP indicates
TennCare's intent to award two contracts in the East Grand Region and two
contracts in the West Grand Region. TennCare's award of the contracts is
scheduled for April 22, 2008, with the signing of the contracts to occur no
later than May 9, 2008. The performance of the contracts is expected to start in
the West Grand Region on November 1, 2008 and in the East Grand Region on
January 1, 2009. It is expected that each contract will require the successful
bidder to provide comprehensive medical services on a capitated, full-risk basis
to Medicaid beneficiaries assigned to it by TennCare in the applicable Region.
In response to the RFP, on March 11, 2008, our subsidiary, UAHC Health Plan
of Tennessee, Inc. ("UAHC-TN"), and Molina Healthcare, Inc., a Delaware
corporation ("Molina"), jointly submitted a proposal to apply for contracts with
TennCare for both the East and West Grand Regions. The proposal potentially
could result in UAHC-TN and Molina jointly receiving two TennCare contracts (one
for each region), or one TennCare contract for one Region, or no TennCare
contract for either Region. UAHC-TN currently provides managed care services on
a modified-risk basis under an existing TennCare contract in the West Grand
Region only, which is expected to end when the anticipated new TennCare
contracts for that Region become effective.
In connection with the joint proposal, on March 24, 2008 we and our
subsidiaries, United American of Tennessee, Inc. and UAHC-TN, entered into a
Purchase Agreement with Molina dated as of March 24, 2008. A copy of the
agreement is filed as an exhibit to this Report. We and our affiliates have no
relationship with Molina other than in respect of that agreement, any agreements
contemplated by that agreement and the joint proposal.
Currently, our wholly owned subsidiary, United American of Tennessee, Inc.,
owns 100% of the issued and outstanding capital stock of UAHC-TN. Under the
Purchase Agreement, if (and only if,) UAHC-TN enters into at least one of the
new TennCare contracts, Molina will become a part owner of UAHC-TN by purchasing
newly issued UAHC-TN capital stock from UAHC-TN, either: (A) shares representing
19.9% of the total issued and outstanding UAHC-TN stock, for a purchase price of
$4,500,000, in the event UAHC-TN executes one new TennCare contract; or (B)
shares representing 49.9% of the total issued and outstanding UAHC-TN stock, for
a purchase price of $18,040,000, in the event UAHC-TN executes two new TennCare
contracts. The Purchase Agreement requires the stock purchase closing to occur
on a date mutually agreed upon by the parties that is no earlier than the
signing of the full-risk contract(s) and no later than the effective date(s) of
the contract(s), or on such other date as the parties may mutually agree in
writing.
The Purchase Agreement requires the delivery at the closing of a
Shareholder Agreement among UAHC-TN and its shareholders, including Molina. The
form of that agreement is an exhibit to the Purchase Agreement. The Purchase
Agreement also requires us to seek approval from our shareholders of the
Purchase Agreement(including for Molina's Purchase Option, as described in the
next paragraph) and makes our obtaining that approval a condition precedent to
the stock purchase closing. The Purchase Agreement may be terminated at any time
prior to the closing by mutual written consent of the parties and in certain
other events.
In the Shareholder Agreement, if and when executed, United American of
Tennessee, Inc. ("UAT") would grant Molina the exclusive option to purchase all
UAHC-TN stock owned by UAT, for a purchase price described below
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("Molina's Purchase Option"). Molina could exercise the option at any time
between the dates that are 24 and 48 months (in the event UAHC-TN executes one
new TennCare contract), or 36 and 60 months (in the event UAHC-TN executes two
new TennCare contracts), from the effective date of the new TennCare
contract(s). In addition, Molina could exercise the option at any time that (i)
UAHC-TN requires a capital infusion of more than $5,000,000 upon a capital call
by its Board of Directors as set forth in the Shareholder Agreement, or UAHC-TN
requires additional capital as mandated by TennCare and/or the Tennessee
Department of Commerce and Insurance, and (ii) UAT declines to contribute its
proportionate share, and (iii) Molina elects to and actually does contribute
100% of the required capital.
Under the Shareholder Agreement, Molina's exercise of its option to
purchase all UAHC-TN stock owned by UAT would require it to pay UAT a purchase
price equal to the percentage share of UAHC-TN then owned by UAT multiplied by
the Fair Market Value of UAHC-TN determined as of the closing date of the
purchase. As used in the Shareholder Agreement, the "Fair Market Value of
UAHC-TN" is equal to the sum of (1) UAHC-TN's Medicaid membership multiplied by
$345 per Medicaid member, plus (2) UAHC-TN's Medicare Advantage and/or Medicare
Advantage Special Needs Plan membership multiplied by $2,500 per Medicare
member, plus (3) the market value of any Medicare Advantage Prescription Drug
Program plan business operations of UAHC-TN, plus (4) the sum of capital then
held by UAHC-TN in excess of the statutory minimum capital required.
Also in the Shareholder Agreement, Molina would grant UAT the exclusive
option to purchase all UAHC-TN stock owned by Molina, for a purchase price equal
to the percentage share of UAHC-TN then owned by Molina multiplied by the
above-defined Fair Market Value of UAHC-TN determined as of the closing date of
the purchase. UAT could exercise the option at any time between the dates that
are 60 and 72 months from the effective date of the new TennCare contract.
Also in the Shareholder Agreement, UAT would grant Molina the exclusive
option (called the "Put") to require UAT to purchase all UAHC-TN stock owned by
Molina for a price equal to the percentage share of UAHC-TN then owned by Molina
multiplied by the Total Value of UAHC-TN. Molina could exercise the Put at any
time between the dates that are 60 and 72 months from the effective date of the
new TennCare contract. As used in the Shareholder Agreement, the "Total Value of
UAHC-TN" would be (i) the valuation proposed in writing by Molina with its
notice of exercising the Put, if agreed to by UAT, or (ii) the alternative
valuation proposed by UAT to Molina, or (iii) if Molina and UAT could not agree
upon the Total Value of UAHC-TN within 30 days after Molina's notice of
exercising the Put, the valuation determined by arbitration procedures set forth
in the Purchase Agreement.
The Shareholder Agreement would require a 12-member Board of Directors of
UAHC-TN, with Molina and UAT electing directors in proportion to their
respective ownership interests. If two full-risk contracts are awarded to
UAHC-TN, then certain matters specified in the Shareholder Agreement would
require the unanimous approval of the Board of Directors.
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
The following exhibit is filed as part of this Report:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 Purchase Agreement dated as of March 24, 2008, among Molina
Healthcare, Inc., United American Healthcare Corporation, United
American of Tennessee, Inc. and UAHC Health Plan of Tennessee,
Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 24, 2008 UNITED AMERICAN HEALTHCARE CORPORATION
By: /s/ Stephen D. Harris
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Name: Stephen D. Harris
Title: Executive Vice President and
Chief Financial Officer
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