Exhibit 10.39
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ASSET PURCHASE AGREEMENT
among
AMERIGROUP FLORIDA, INC.,
AVMED, INC.
and
SANTAFE HEALTHCARE, INC.
March 15, 2003
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TABLE OF CONTENTS
Page
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ARTICLE 1 PURCHASE AND SALE OF ASSETS......................................... 2
1.1 Assets to be Sold to Buyer............................................. 2
1.2 Excluded Assets........................................................ 3
ARTICLE 2 ASSUMPTION OF LIABILITIES........................................... 4
2.1 Assumed Liabilities.................................................... 4
2.2 Excluded Liabilities................................................... 4
ARTICLE 3 PURCHASE PRICE, MANNER OF PAYMENT AND CLOSING....................... 6
3.1 Purchase Price......................................................... 6
3.2 Purchase Price Adjustment.............................................. 6
3.3 Manner of Payment...................................................... 8
3.4 Closing and Effective Date............................................. 9
3.5 Allocation of Purchase Price........................................... 9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT........ 9
4.1 Organization, Good Standing, Qualification and Subsidiaries............ 9
4.2 Authorization, etc.................................................... 10
4.3 No Legal Bar.......................................................... 10
4.4 Financial Matters..................................................... 11
4.5 Absence of Undisclosed Liabilities.................................... 12
4.6 Absence of Certain Changes or Events.................................. 12
4.7 Providers and Provider Contracts...................................... 13
4.8 Status of Seller's Florida Medicaid Contract.......................... 15
4.9 Medicaid Members and Services......................................... 15
4.10 Title to Assets; Liens, etc.......................................... 16
4.11 Tax Matters.......................................................... 16
4.12 No Litigation........................................................ 16
4.13 Compliance with Laws................................................. 16
4.14 Rights in Name....................................................... 17
4.15 Insurance............................................................ 17
4.16 Affiliate Relationships.............................................. 17
4.17 No Bankruptcy........................................................ 17
4.18 Broker's and Other Fees.............................................. 17
4.19 Scope of Representations and Warranties; Misstatements and
Omissions......................................................... 17
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER............................ 18
5.1 Organization, Good Standing, Qualification and Subsidiaries........... 18
5.2 Authorization, etc.................................................... 18
5.3 No Legal Bar.......................................................... 18
5.4 No Bankruptcy......................................................... 19
5.5 Broker's and Other Fees............................................... 19
5.6 Compliance with Laws.................................................. 19
5.7 Availability of Funds................................................. 19
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5.8 Scope of Representations and Warranties; Misstatements and Omissions.. 19
ARTICLE 6 CLOSING CONDITIONS................................................. 20
6.1 Conditions of Each Party's Obligations Under this Agreement........... 20
6.2 Conditions to Closing of Buyer........................................ 21
6.3 Conditions to Closing of Seller....................................... 23
6.4 Waiver of Conditions.................................................. 24
ARTICLE 7 COVENANTS OF THE PARTIES........................................... 24
7.1 Covenants Related to Closing.......................................... 24
7.2 Additional Covenants of Seller........................................ 27
7.3 Other General Covenants............................................... 30
ARTICLE 8 EXPENSES, INDEMNITY AND SURVIVAL................................... 35
8.1 Expenses.............................................................. 35
8.2 Indemnification by Seller and Seller's Parent......................... 36
8.3 Indemnification by Buyer.............................................. 37
8.4 No Offsets............................................................ 38
8.5 Indemnification Procedure--Third Party Claims......................... 38
8.6 Indemnification Procedure--Other Claims............................... 39
8.7 Survival.............................................................. 39
8.8 Exclusive Remedy; Mitigation; No Double Recovery...................... 40
ARTICLE 9 TERMINATION........................................................ 40
9.1 Termination of Agreement.............................................. 40
9.2 Effect of Termination................................................. 41
ARTICLE 10 DEFINITIONS....................................................... 41
10.1 Certain Defined Terms................................................ 41
10.2 Accounting Terms..................................................... 46
10.3 Other Definition Provisions.......................................... 46
ARTICLE 11 GENERAL PROVISIONS................................................ 46
11.1 Amendments and Waivers; Construction................................. 46
11.2 Successors and Assigns............................................... 46
11.3 Counterparts......................................................... 46
11.4 No Waivers by Implication............................................ 46
11.5 Notices.............................................................. 47
11.6 Reproductions........................................................ 48
11.7 Entire Agreement..................................................... 48
11.8 Exhibits, Schedules and Attachments.................................. 48
11.9 Rights Cumulative.................................................... 48
11.10 Governing Law, Waiver of Jury Trial, etc............................ 49
11.11 Severability........................................................ 49
11.12 Captions............................................................ 49
11.13 Third Party Rights.................................................. 49
11.14 Time of Essence..................................................... 49
11.15 Written Agreement Required/No Oral Modification..................... 49
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EXHIBITS AND SCHEDULES
Exhibit A Form of Escrow Agreement
Exhibit B Form of Bill of Sale and Assignment
Exhibit C Form of Noncompetition Agreement
Exhibit D Form of Seller's Opinion
Exhibit E Form of Assignment and Assumption Agreement
Exhibit F Form of Buyer's Opinion
Schedule 1.1(d) Provider Database Elements
Schedule 3.5 Allocation of Purchase Price
Schedule 4.4(a) Financial Statements
Schedule 4.5 Exceptions re: No Liabilities
Schedule 4.6 Exceptions re: Absence of Certain Changes or Events
Schedule 4.7(a) Seller Medicaid Providers
Schedule 4.7(a)(i) Seller Medicaid Providers With No Written Contracts
Schedule 4.7(b) Exceptions re: Enforceability of Designated Provider Contracts
Schedule 4.7(c) Contingent Provider Contracts
Schedule 4.7(e) Designated Provider Contracts with Profit Sharing Components, etc.
Schedule 4.7(f) Designated Provider Contracts with Substantial Financial Risk
Schedule 4.7(g) Complaints by Seller Medicaid Providers
Schedule 4.7(h) Exceptions re: Credentialing
Schedule 4.9(b) Complaints From Members
Schedule 4.12 Litigation
Schedule 4.13 Compliance with Laws; Government Examinations
Schedule 4.15 Insurance
Schedule 4.16 Affiliate Provider Contracts
Schedule 7.1 List of Designated Provider Contracts
Schedule 10.1 List of Seller Vice Presidents
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of the 15th day of March,
2003 among AVMED, INC., a Florida not-for-profit corporation ("Seller"), SANTAFE
HEALTHCARE, INC., a Florida not-for-profit corporation ("Seller's Parent"), and
AMERIGROUP FLORIDA, INC., a Florida corporation ("Buyer"). (Seller, Seller's
Parent and Buyer are sometimes hereinafter referred to collectively as the
"Parties" and each individually as a "Party".) (Capitalized terms not defined
when used shall have the meanings given such terms in ARTICLE 10.)
RECITALS:
A. Seller's Parent is the sole corporate member of Seller and is a party to
this Agreement as and to the extent its interests appear below.
B. Seller is licensed and approved by the Florida Department of Financial
Services ("DFS") and the Florida Agency for Health Care Administration ("AHCA")
to operate a health maintenance organization ("HMO") in the State of Florida and
operates a Medicaid plan under the name "St. Augustine Medicaid, a division of
AvMed" ("Seller's Medicaid Plan").
C. Buyer is also licensed and approved by DFS and AHCA and operates an HMO
and Medicaid plan in the State of Florida under the name "AMERIGROUP Florida"
("Buyer's Medicaid Plan").
D. Pursuant to the State of Florida Medicaid program (the "Florida Medicaid
Program"), AHCA has entered into Standard Contract No. FA 313 with Seller
("Seller's Florida Medicaid Contract") to arrange for the provision of certain
health care services to certain eligible recipients who are enrolled in Seller's
Medicaid Plan under Seller's Florida Medicaid Contract (collectively, the
"Members"), and Seller has established management systems and a network of
healthcare providers and subcontractors (each, a "Seller Medicaid Provider") in
those Florida counties in which it has contracted with AHCA to provide the
requisite services to the Members (the business owned and operated by Seller as
described above is hereinafter referred to as the "Medicaid Business").
E. Pursuant to the Florida Medicaid Program, AHCA also has a contract with
Buyer ("Buyer's Florida Medicaid Contract") to arrange for the provision of
certain health care services to certain eligible Medicaid recipients who are
enrolled in Buyer's Medicaid Plan under Buyer's Florida Medicaid Contract.
F. On and subject to the terms and conditions set forth in this Agreement,
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller,
certain intangible assets related to the Medicaid Business, and the Parties
desire to work cooperatively to obtain the requisite approvals to effect, at
Closing, the sale, transfer, conveyance, assignment and delivery by Seller to
Buyer of such intangible assets so that at Closing Seller's Florida Medicaid
Contract would be terminated and all of the Members (other than those who
voluntarily opt-out pursuant to AHCA rules and procedures or lose eligibility)
would be enrolled in Buyer's Medicaid Plan with Buyer continuing to provide the
requisite health care services to such Members under Buyer's Florida Medicaid
Contract.
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Assets to be Sold to Buyer. On the terms and subject to the conditions
of this Agreement, and on the basis of the representations and warranties herein
contained, Seller shall sell, transfer, convey, assign and deliver to Buyer, on
the Closing Date, all of its right, title and interest in and to the following
intangible assets used in the Medicaid Business (the "Special Intangible
Medicaid Assets"), free and clear of all Liens:
(a) Rights to Provide Services under Seller's Florida Medicaid
Contract, Etc. Any and all rights of Seller under Seller's Florida Medicaid
Contract to provide services to Members from and after the Effective Date, and
the corresponding right to all capitation payments paid or payable by AHCA with
respect to such Members (and other persons), for periods of service from and
after the Effective Date;
(b) Rights Under Assumed Provider Contracts. All of Seller's rights
from and after the Effective Date under the Designated Provider Contracts
(determined pursuant to Section 7.1 below) assigned or transferred to Buyer as
of Closing in accordance with Section 7.1 below (the "Assumed Provider
Contracts"), provided, to the extent any such Designated Provider Contract
relates to multiple product lines (e.g., commercial and Medicaid) (a "Dual
Product Provider Contract"), such Designated Provider Contract will only be
assigned to Buyer if such contract or a consent to assignment permits assignment
in part and then the rights assigned to Buyer with respect to such Designated
Provider Contract shall be limited to the rights with respect to the services
provided and to be provided to Members and other persons receiving health care
services under Buyer's Medicaid Plan;
(c) Member Information. All information relating to Members which is
in Seller's possession at Closing and which is necessary or customarily used by
Seller in connection with the operation, ownership and management of Seller's
Medicaid Plan and complying with all requirements of Seller's Florida Medicaid
Contract and applicable laws and regulations, including lists (in all media used
by Seller, electronic or otherwise) of all Members containing names, addresses,
identification numbers and provider data, together with all medical and claim
histories and preauthorized records, and all Member eligibility data distributed
by AHCA through ACS or otherwise (which information shall be distributed
directly to Buyer from and after Closing);
(d) Certain Designated Medicaid Provider Information. An electronic
and hard copy list of all Designated Medicaid Providers who or which are a party
to an Assumed Provider Agreement; electronic extracts of all of Seller's AMISYS
and credentialing data as of Closing
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containing, among other things, for each such Designated Medicaid Provider, the
elements listed on Schedule 1.1(d); copies (in all media used by Seller) of the
Assumed Provider Contracts; the credentialing files for all Designated Medicaid
Providers who or which are contracted through an Assumed Provider Contract; and
all books, records and reports in Seller's possession at Closing with respect to
such providers to the extent such books, records and reports relate to the
services provided by such providers to the Medicaid Business or to the
credentialing of such providers;
(e) Additional Information. Copies of any policies, procedures,
manuals and other information in Seller's possession at Closing used solely in
connection with Seller's Florida Medicaid Business and otherwise pertaining to
the Members and/or Seller's Medicaid Plan;
(f) Brand Name. All of Seller's rights and interest in and to the name
"St. Augustine Medicaid", any and all trademarks and service marks related to
such name, if any, and all goodwill and rights associated therewith, including
all rights to protection of interests therein in all jurisdictions (for
avoidance of doubt, to the extent such name has been used in combination with
Seller's other names or logos, nothing herein shall be deemed or construed to
transfer to Buyer any rights or interest in such other names or logos);
(g) Claims and Rights. Claims and rights of every kind relating to the
Special Intangible Medicaid Assets and/or the ownership of the Medicaid Business
after the Effective Date, including prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set-off, and rights of
recoupment, except to the extent such claims and rights relate to an Excluded
Asset or an Excluded Liability; and
(h) Goodwill. All goodwill of the Medicaid Business related to the
foregoing assets.
1.2 Excluded Assets. Notwithstanding anything in Section 1.1 of this
Agreement to the contrary, Seller shall only be obligated to sell, and Buyer
shall only be entitled to purchase, the Special Intangible Medicaid Assets, and
Seller shall not have any obligation to sell to Buyer, nor shall Buyer have any
purchase rights with respect to, Seller's other assets (the "Excluded Assets").
The Excluded Assets shall include:
(a) All of Seller's cash, cash equivalents, investment assets, bank
accounts, statutory deposits and accounts receivable held or existing as of
Closing (excluding any capitation payments received by Seller which relate to
periods from and after the Effective Date, which Seller shall promptly turn over
to Buyer);
(b) All provider contracts of Seller that are not listed on Schedule
7.1 as a Designated Provider Contract and all Contingent Provider Contracts that
are not assigned or transferred to Buyer as of Closing (the "Excluded Provider
Contracts");
(c) All of Seller's owned real property, if any, and all of Seller's
tangible personal property;
(d) All of Seller's leases and subleases of real and personal
property;
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(e) All Tax refund claims of Seller of any type or description;
(f) All of Seller's Benefit Plans and employment agreements;
(g) Seller's corporate minute books and records;
(h) Seller's information systems and proprietary processes;
(i) All rights to payments or recoveries due Seller from third parties
relating to services provided prior to the Effective Date and services in
connection with Excluded Claims, including, without limitation, rights to
reinsurance recoveries, rebates, refunds and subrogation; provided, in no event
shall Seller be entitled to capitation payments from AHCA relating to periods
from and after the Effective Date (for avoidance of doubt, Seller's right to
payments or recoveries from third parties relating to the Excluded Claims shall
not entitle Seller to any capitation paid on or after the Effective Date with
respect to such Members);
(j) Any and all other assets of Seller which are not related to the
Special Intangible Medicaid Assets and/or the Medicaid Business.
ARTICLE 2
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. Buyer agrees that at Closing it will assume, and
agrees to fully and faithfully pay, perform and discharge, as the case may be,
when due, only the following obligations of Seller (the "Assumed Liabilities"):
(a) The coverage and provision of health care services to Members who
are transferred to Buyer, but only to the extent such services are required
under Buyer's Florida Medicaid Contract and accrue and relate to dates of
service from and after the Effective Date (and are not otherwise Excluded
Claims); and
(b) Subject to Section 2.2 below, the obligations and liabilities
under the Assumed Provider Contracts, but only to the extent of contractual
obligations and liabilities which are to be initially performed or which accrue
from and after the Effective Date and relate solely to services provided from
and after the Effective Date (excluding Excluded Claims); provided, in the case
of Dual Product Provider Contracts, such assumed obligations and liabilities
shall apply only to the Medicaid Business.
The Parties specifically acknowledge and agree that neither the assignment by
Seller of its rights under Seller's Florida Medicaid Contract pursuant to
Section 1.1(a) above nor the terms of this Section 2.1 shall be deemed or
construed to be an assumption by Buyer of all of Seller's duties and obligations
under Seller's Florida Medicaid Contract.
2.2 Excluded Liabilities. Notwithstanding any provision of this Agreement
or any other document or instrument to the contrary, Buyer shall have the
obligation to assume only the Assumed Liabilities, Buyer shall not assume any
other liability or obligation of Seller, regardless of whether
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such obligation arises before or after the Effective Date, all of which shall be
retained by Seller (the "Excluded Liabilities"), and the Excluded Liabilities
shall be deemed to include, without limitation:
(a) All medical claim liabilities of Seller or the Medicaid Business
related to periods and dates of service prior to the Effective Date, including,
without limitation, IBNR;
(b) Any and all claims included in any of the following categories
(the "Excluded Claims"): (i) all medical claim liabilities (whether accruing
before or after the Effective Date) which relate to a preauthorization and/or an
admission which after the date of this Agreement and prior to the Effective Date
was erroneously denied or improperly pended, (ii) for non-maternity cases, all
medical claim liabilities (whether accruing before or after the Effective Date)
which relate to a Member who is admitted to a hospital or other inpatient
facility through the Effective Date (a "Span Admission"); provided, with respect
to the liabilities arising under this subsection (ii), Seller shall not have any
liability related to a Span Admission for services rendered after the earlier of
(x) the tenth (10th) day after the Effective Date; and (y) the date such Member
is discharged (a Member shall not be deemed discharged if re-admitted within
forty-eight (48) hours of the time of discharge), and (iii) for maternity cases,
all medical claim liabilities (whether accruing before or after the Effective
Date) which relate to a Span Admission for both the mother and newborn until
both the mother and newborn are discharged (a Member shall not be deemed
discharged if re-admitted within forty-eight (48) hours of the time of
discharge), provided, with respect to medical claim liabilities of any newborn
transferred to a neonatal intensive care unit, Seller shall not have any
liability for services rendered after the tenth (10th) day after the Effective
Date (although under this Section 2.2(b) Seller is obligated to pay for Excluded
Claims, Buyer shall perform medical management functions related to Span
Admissions in the manner set forth Section 7.3(f) below);
(c) Any and all debts, liabilities and administrative and other
obligations arising out of or under Seller's Florida Medicaid Contract
(including, without limitation, all obligations which relate to the termination
or close-out of Seller's obligations under Seller's Florida Medicaid Contract);
(d) Any and all debts, liabilities and administrative and other
obligations arising out of or under the Assumed Provider Contracts (i) which
accrued or were to be performed prior to the Effective Date, (ii) which relate
to the dates of service (or periods of required service) prior to the Effective
Date or to Excluded Claims (including claims run-out obligations and withhold or
bonus pool settlements), or (iii) which arise out of a breach of any of such
contracts related to events or circumstances occurring prior to the Effective
Date (provided, the foregoing shall not be deemed to limit Seller's right to
have liability apportioned to Buyer, if Seller is entitled to relief pursuant to
Section 8.3(a)(iii));
(e) Seller's Benefit Plans (including all obligations pursuant to the
continuation coverage rules of ERISA Sections 601-608 and Code Section 4980B)
(the "Excluded Benefit Plans") and obligations to Seller's employees;
(f) Any and all Taxes arising from or related to the ownership of the
Special Intangible Medicaid Assets or the conduct of the Medicaid Business prior
to the Effective Date,
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including any personal property and sales taxes relating to the periods prior to
the Effective Date or any other Taxes payable by Seller; and
(g) Any and all debts, liabilities and obligations of Seller which are
not related to the Special Intangible Medical Assets.
ARTICLE 3
PURCHASE PRICE, MANNER OF PAYMENT
AND CLOSING
3.1 Purchase Price. In consideration of the sale, assignment, transfer,
conveyance and delivery of the Special Intangible Medicaid Assets to Buyer at
Closing, and in consideration for the representations, warranties, covenants and
agreements of Seller contained herein and in the Ancillary Agreements and
Instruments, Buyer shall pay Seller, at the time and in the manner set forth
below, an amount equal to the product determined by multiplying (a) $322.58 by
(b) the Closing Transferred Membership (defined below) (the "Preliminary
Purchase Price"), subject to the adjustment pursuant to Section 3.2 below (as
adjusted, the "Purchase Price").
3.2 Purchase Price Adjustment.
(a) Subject to Section 3.2(b) below:
(i) If the Closing Transferred Membership is less than the
Reconciled Transferred Membership, then for purposes of calculating the Purchase
Price, the Preliminary Purchase Price shall be increased by an amount equal to
the product determined by multiplying (A) $322.58 by (B) the difference of the
Reconciled Transferred Membership minus the Closing Transferred Membership; and
(ii) If the Closing Transferred Membership is greater than the
Reconciled Transferred Membership, then for purposes of calculating the Purchase
Price, the Preliminary Purchase Price shall be decreased by an amount equal to
the product determined by multiplying (A) $322.58 by (B) the difference of the
Closing Transferred Membership minus the Reconciled Transferred Membership.
(b) The foregoing notwithstanding, the Purchase Price shall be an
amount equal to the Preliminary Purchase Price if the increase or decrease, as
applicable, in the Reconciled Transferred Membership from the Closing
Transferred Membership is equal to or less than five percent (5%) of the Closing
Transferred Membership (solely for purposes of an example, if the Closing
Transferred Membership was 31,000, the Reconciled Transferred Membership would
have to be greater than 32,550 for an upward adjustment to the Preliminary
Purchase Price and less than 29,450 for a downward adjustment to the Preliminary
Purchase Price).
(c) The "Closing Transferred Membership" shall be the number of
Members initially transferred to Buyer on the Effective Date, determined based
on the Members initially appearing on the ACS enrollment tape used by AHCA for
purposes of paying capitation to Buyer for such Members for the month of the
Effective Date (the "Effective Month"). (To the extent the ACS
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enrollment tape does not identify such Members through use of an identifier,
Seller shall deliver to Buyer copies of Seller's enrollment tape and
reinstatement files for the month prior to the Effective Date so that a
comparison can be performed for purposes of identifying the Members.)
(d) The "Reconciled Transferred Membership" shall be the sum of: (i)
those individual Members who meet both of the following conditions: (A) he or
she was validly included in the Closing Transferred Membership and (B) he or she
continues to be enrolled with Buyer as of the second month after Closing in
which capitation is paid (counting the Effective Month as the first capitated
month) (the "Reconciliation Month"), determined based on comparing the ACS
enrollment tape for the Effective Month with the ACS enrollment tape used by
AHCA for purposes of paying capitation to Buyer for the Reconciliation Month;
(ii) those individual Members who are enrolled with Buyer as of the
Reconciliation Month (determined in the manner described above), but who were
not included in the Closing Transferred Membership because such Member was
disenrolled from Seller's Medicaid Plan during the ninety (90) day period
preceding the Effective Date for eligibility reasons and then reinstated after
the Effective Date but prior to the generation of the enrollment tape for the
Reconciliation Month; provided, the foregoing assumes AHCA will be able to
supply Buyer with a statement of such Members who were disenrolled for
eligibility reasons (the "Statement of Reinstated Members"); and (ii) those
persons who are Seller's Enrolled RTEs. "Seller's Enrolled RTEs" means persons
who were not included in the Closing Transferred Membership, but who were on
Seller's "request to enroll" filings as of Closing and, consequently, became
enrolled with Buyer after Closing and continued to be enrolled with Buyer as of
the Reconciliation Month, as determined by Buyer reviewing the Benova marketing
files delivered to Buyer from Seller and the ACS enrollment tape used by AHCA
for purposes of paying capitation to Buyer for the Reconciliation Month (the
"RTE Files"). (For avoidance of doubt, no person shall be double counted by
being placed in more than one of the categories in subsections (i) through (iii)
above.)
(e) Within ten (10) business days of receipt of the enrollment tape
for the Reconciliation Month, the Statement of Reinstated Members (if available
from AHCA) and the RTE Files, Buyer shall deliver to Seller a statement with the
calculation of the Reconciled Transferred Membership and the final Purchase
Price (the "Buyer's Adjustment Statement") together with copies of the
enrollment tapes for the Effective Month and the Reconciliation Month, the
Statement of Reinstated Members (if available from AHCA) and the RTE Files. The
Buyer's Adjustment Statement and the Purchase Price reflected thereon shall be
deemed definitively determined and final and binding on the Parties unless
Seller objects in writing within ten (10) business days of its receipt of the
Buyer's Adjustment Statement and provides a written statement of its
calculations of the Reconciled Transferred Membership and the Purchase Price
(the "Seller's Adjustment Statement"). Failing timely objection in accordance
with the preceding sentence, the Buyer's Adjustment Statement shall be deemed
the Definitive Statement (defined below). If Seller submits a timely objection,
Seller and Buyer shall work in good faith to resolve the dispute, and any mutual
agreement of Buyer and Seller with respect to the Reconciled Transferred
Membership and the Purchase Price shall be deemed the Definitive Statement. If
Seller and Buyer cannot agree on a final and binding calculation of the
Reconciled Transferred Membership and Purchase Price within ten (10) days of
Seller's delivery to Buyer of a timely objection with Seller's Adjustment
Statement, Seller and Buyer shall submit the enrollment tape for the Effective
Month, the enrollment tape for the Reconciliation Month, the Statement of the
Reinstated Members, the RTE Files and Buyer's Adjustment Statement
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and Seller's Adjustment Statement to PricewaterhouseCoopers or other mutually
acceptable nationally-qualified accounting firm (the "Independent Accounting
Firm") for preparation of the Definitive Statement. The Independent Accounting
Firm's preparation of the Definitive Statement shall consist solely and
exclusively of (i) reviewing the enrollment tape for the Effective Month, the
enrollment tape for the Reconciliation Month, the Statement of the Reinstated
Members and the RTE Files, (ii) calculating the Reconciled Transferred
Membership in accordance with the terms of Section 3.2(d) above based solely on
its review of such tapes, statements and files, and (iii) calculating the
Purchase Price in accordance with the terms of Sections 3.1 and 3.2 above based
solely on its calculation of the Reconciled Transferred Membership. Within
thirty (30) days after the Parties' submission of the dispute, the Independent
Accounting Firm shall complete the preparation of the Definitive Statement and
deliver it to Seller and Buyer, which shall upon such delivery be final and
binding on the Parties. The costs and fees of the Independent Accounting Firm
incurred in connection with the preparation of the Definitive Statement shall be
paid by the Party (Buyer or Seller, as the case may be) whose calculation of the
Purchase Price (as set forth in its applicable Adjustment Statement) is furthest
in dollars from the Purchase Price set forth in the Definitive Statement. The
"Definitive Statement" shall be the statement of the definitively determined and
final and binding calculation of the Reconciled Transferred Membership and the
Purchase Price, whether determined by (A) Seller's failure to timely object to
Buyer's Adjustment Statement, (B) the parties' mutual agreement if Seller
submits a timely objection to Buyer's Adjustment Statement, or (C) the
Independent Accounting Firm.
3.3 Manner of Payment.
(a) At Closing, a cash amount equal to twenty-five percent (25%) of
the Preliminary Purchase Price (the "Escrow Deposit") shall be delivered by
Buyer to SouthTrust Bank or its successor (Norfolk, Virginia), as escrow agent,
to hold in an escrow account (the "Escrow Account") pursuant to the terms of an
escrow agreement in substantially the form attached hereto as Exhibit A (the
"Escrow Agreement") and the difference of the Preliminary Purchase Price minus
the Escrow Deposit shall be delivered by Buyer to Seller in immediately
available funds.
(b) (i) After the Reconciled Transferred Membership and Purchase Price
are calculated, the amounts distributable to Seller and/or Buyer from the Escrow
Account and/or payable by one to the other will be determined by comparing the
Preliminary Purchase Price to the amount of the Purchase Price.
(ii) If the Purchase Price is equal to or exceeds the Preliminary
Purchase Price (such difference, the "Shortfall Amount"), then within five (5)
business days of the delivery to Seller of the Adjustment Statement (A) Buyer
shall deliver to the Escrow Agent a cash amount equal to the Shortfall Amount,
if any; and (B) subject to the terms of the Escrow Agreement, Seller and Buyer
shall by joint written instructions direct the Escrow Agent to distribute to
Seller the funds held in the Escrow Account.
(iii) If the Purchase Price is less than the Preliminary Purchase
Price (such difference, the "Excess Amount"), then within five (5) business days
of the delivery to Seller of the Adjustment Statement, Seller and Buyer shall by
joint written instructions direct the Escrow Agent to distribute (A) to Buyer,
an amount equal to the Excess Amount; and (B) subject to the terms of the
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Escrow Agreement, to Seller the balance of the funds held in the Escrow Account
after the distribution to Buyer of the Excess Amount.
(iv) The interest earned on the Escrow Deposit, if any, shall be
divided on a pro rata basis between Seller and Buyer, based on the proportionate
share of the Escrow Account distributable to each. If the escrow agent charges a
fee related to the maintenance of the Escrow Account, Buyer shall pay such fee.
3.4 Closing and Effective Date. The closing for the sale by Seller to Buyer
of the Special Intangible Medicaid Assets, the assumption by Buyer of the
Assumed Liabilities and the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Willcox &
Savage, P.C., 1800 Bank of America Center, One Commercial Place, Norfolk,
Virginia, at 10:00 a.m. local time on the last business day of the month in
which all conditions set forth in Section 6.1 have been satisfied and all
conditions set forth in Sections 6.2 and 6.3 have been satisfied or waived
(other than conditions with respect to actions which the respective Parties will
take at Closing itself) or such other date as the Parties may mutually determine
(as determined, the "Closing Date"), and shall be effective for purposes of
allocating risk as of 12:01 a.m. on the first day of the month immediately
following the Closing Date (the "Effective Date"). The parties intend to effect
such Closing by delivering documents prior to or contemporaneously with Closing
in lieu of in person.
3.5 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Special Intangible Medicaid Assets in accordance with the allocation
protocols (and amounts determined therefrom) set forth in Schedule 3.5 to be
attached hereto by Buyer prior to or at Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT
In order to induce Buyer to enter into this Agreement, (a) Seller
represents and warrants to Buyer that the Seller's Representations and
Warranties in this ARTICLE 4 are correct and complete as of the date of this
Agreement and will be correct and complete on the Closing Date (as though made
then and as though the Closing Date were substituted throughout this ARTICLE 4,
except where a specific date is indicated), and (b) Seller's Parent represents
and warrants to Buyer that the Seller's Parent's Representations and Warranties
in this ARTICLE 4 are correct and complete as of the date of this Agreement and
will be correct and complete on the Closing Date (as though made then and as
though the Closing Date were substituted throughout this ARTICLE 4, except where
a specific date is indicated).
"Seller's Representations and Warranties" means all representations and
warranties in this ARTICLE 4 other than the Seller's Parent's Representations
and Warranties. "Seller's Parent's Representations and Warranties" means the
representations and warranties under Sections 4.1, 4.2, 4.3, 4.4, 4.17, 4.18 and
4.19 that relate to Seller's Parent, as specifically identified.
4.1 Organization, Good Standing, Qualification and Subsidiaries. Each of
Seller and Seller's Parent is a Florida corporation duly organized, validly
existing and in good standing under
9
the laws of Florida. Each of Seller and Seller's Parent has full corporate power
and authority to conduct its business and to own its property, as now conducted
and owned, and has full corporate power and authority necessary to permit it to
execute and deliver this Agreement and all Ancillary Agreements and Instruments
required to be executed and delivered by it under this Agreement, and to carry
out the terms of this Agreement and of all Ancillary Agreements and Instruments.
Seller has no subsidiaries.
4.2 Authorization, etc. The execution and delivery by Seller of this
Agreement and all Ancillary Agreements and Instruments required to be executed
by Seller hereunder have been duly and validly authorized by all necessary
action in respect thereof on the part of Seller (including, without limitation,
all necessary approvals of Seller's directors and members). The execution and
delivery by Seller's Parent of this Agreement and all Ancillary Agreements and
Instruments required to be executed by Seller's Parent hereunder have been duly
and validly authorized by all necessary action in respect thereof on the part of
Seller's Parent (including, without limitation, all necessary approvals of
Seller's Parent's directors). This Agreement represents, and when executed and
delivered at Closing the Ancillary Agreements and Instruments will represent,
the legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms, subject to (a) applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally from
time to time in effect and (b) limitations on the enforcement of equitable
remedies. This Agreement represents, and when executed and delivered at Closing
the Ancillary Agreements and Instruments will represent, the legal, valid and
binding obligation of Seller's Parent, enforceable against it in accordance with
its terms, subject to (a) applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from time to
time in effect and (b) limitations on the enforcement of equitable remedies.
4.3 No Legal Bar. Subject to the receipt of the Closing Governmental
Authorizations described in Section 6.1 below, the execution and delivery by
Seller and Seller's Parent of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, (i) conflict with or violate the
Articles of Incorporation or Bylaws of Seller or Seller's Parent, (ii) result in
a breach of, result in or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in the
cancellation or unilateral modification or amendment of, or accelerate the
performance required by, or result in the creation of any Lien upon any of the
Special Intangible Medicaid Assets under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
agreement, lease or other instrument, obligation or arrangement to which Seller
or Seller's Parent is a party or to which Seller or Seller's Parent or any of
the Special Intangible Medicaid Assets may be subject (nor does a breach or
default which would have any such effect, or which would otherwise impair the
consummation of the transactions contemplated hereby, presently exist), or (iii)
conflict with or violate any order, writ, judgment, injunction, decree, award,
ruling, statute, rule or regulation applicable to Seller or Seller's Parent or
any of the Special Intangible Medicaid Assets or the Medicaid Business; nor is
Seller or Seller's Parent subject to, or a party to, any charter, bylaws,
mortgage, lien, agreement, contract, order, judgment or decree which would
prevent the consummation of the transactions contemplated by this Agreement or
compliance by Seller or Seller's Parent with the terms, conditions and
provisions hereof. Except for Seller's Florida Medicaid Contract, Seller is not
a party to any contract which limits its rights to engage in, or to compete with
any person in, the Medicaid Business, or
10
which contains exclusivity provisions restricting the geographical area in
which, or the method by which, the Medicaid Business may be conducted.
4.4 Financial Matters.
(a) Attached hereto as Schedule 4.4(a) are the following financial
statements (collectively, the "Financial Statements"): (i) complete and correct
copies of Seller's Parent's unaudited combined consolidating balance sheet as of
December 31, 2002 and Seller's Parent's related combined consolidating unaudited
income statement for the twelve (12) month period ended December 31, 2002, all
prepared in accordance with GAAP (ii) complete and correct copies of Seller's
audited balance sheets as of December 31, 2001 and December 31, 2000 and
Seller's unaudited balance sheet as of December 31, 2002, and Seller's related
audited income statements for the twelve (12) month periods ended December 31,
2001 and December 31, 2000 and Seller's unaudited income statement for the
twelve (12) month period ended December 31, 2002, all prepared in accordance
with GAAP and SAP and (iii) Seller's unaudited income statements solely with
respect to the Medicaid Business for the twelve (12) month periods ended
December 31, 2002, December 31, 2001 and December 31, 2000, all prepared in
accordance with GAAP. The Financial Statements have been prepared in accordance
with GAAP and/or SAP as indicated above, consistently applied throughout the
periods indicated (provided SAP standards may not have been consistently applied
from period to period where SAP's standards have been amended and the medical
expense categories and line items in Seller's unaudited income statements solely
with respect to the Medicaid Business for the twelve (12) month periods ended
December 31, 2001 and December 31, 2000 have not been retroactively adjusted to
reflect the year-end changes in estimates from the monthly estimates as was done
for the twelve (12) month period ended December 31, 2002), present fairly the
financial condition of Seller's Parent and Seller, as applicable, as of such
dates and the results of operations of Seller's Parent, Seller and the Medicaid
Business, as applicable, for such periods, are complete and correct in all
material respects, and are in accordance with the books and records of Seller
(which books and records are complete and correct in all material respects);
provided, however, that the unaudited balance sheets and income statements are
subject to normal year-end adjustments (which, to the knowledge of Seller's
Parent and the Knowledge of Seller, as applicable, will not be material
individually or in the aggregate) and lack footnote disclosures. Seller's IBNR
liability reflected in its December 31, 2002 Financial Statements is
management's best estimate of Seller's IBNR liability and has been prepared in
accordance with GAAP. Seller's IBNR liability by line of business reflected in
its December 31, 2002 Financial Statements, comprising commercial, Medicare and
Medicaid, is at or above the point estimate reflected in its actuary's draft
work sheets, which support the actuary's certification expected to be issued on
or before April 1, 2003. Seller's IBNR liability by line of business reflected
in its December 31, 2001 Financial Statements, comprising commercial, Medicare
and Medicaid, is at or above the point estimate reflected in its actuary's
certification dated February 15, 2002.
(b) The Audited Year-End Statements and Interim Monthly Reports
delivered pursuant to Section 7.2(f) will be prepared in accordance with GAAP or
SAP as indicated in Section 7.2(f) consistently applied throughout the periods
indicated (provided SAP standards may not have been consistently applied from
period to period where SAP's standards have been amended), will, as applicable,
present fairly the financial condition of Seller's Parent and Seller as of
December 31, 2002 and the end of each month reported in 2003 through the Closing
Date and the results of
11
operations of Seller and the Medicaid Business for the periods reported, will be
complete and correct in all material respects, and will be in accordance with
the books and records of Seller (which books and records will be complete and
correct in all material respects); provided, however, that the unaudited balance
sheets and income statements will be subject to normal year-end adjustments
(which, to the knowledge of Seller's Parent and the Knowledge of Seller, as
applicable, will not be material individually or in the aggregate) and will lack
footnote disclosures. The IBNR liability reflected in the Interim Monthly
Reports of Seller has been determined using methods consistent with those
employed in interim periods during 2002.
4.5 Absence of Undisclosed Liabilities. Except (a) for obligations incurred
since December 31, 2002 in the ordinary course of business (none of which arises
out of, results from or relates to any breach of contract, tort or violation of
law), or (b) as set forth on Schedule 4.5, Seller does not have any obligations
or liabilities of any nature whatsoever relating to the Special Intangible
Medicaid Assets or the Medicaid Business (whether absolute, accrued, contingent,
or otherwise).
4.6 Absence of Certain Changes or Events. Except as set forth on Schedule
4.6 hereto, since December 31, 2002, Seller has conducted the Medicaid Business
only in the ordinary course and has not:
(a) suffered (involuntarily or voluntarily) (or received notice of any
initiative, event or occurrence which, with or without the passage of time,
could reasonably result in) any adverse changes in condition (financial or
otherwise), results of operations, earnings, assets, prospects, business
(including, without limitation, any change in its premium or other revenues,
claims or other costs (including IBNR)), or relations with governmental
authorities, Members, Seller Medicaid Providers, or its employees, which
individually or in the aggregate have had (or could reasonably be expected to
have) a materially adverse effect on the Special Intangible Medicaid Assets or
the Medicaid Business or the condition (financial or otherwise), results of
operations, earnings, assets, prospects or business of the Medicaid Business,
excluding effects of changes that are generally applicable to (i) the United
States economy or local economy in which the Medicaid Business is operated (as
opposed to changes relating to the Medicaid Program) or (ii) the United States
securities markets;
(b) sold, leased, licensed, transferred or assigned any of the Special
Intangible Assets;
(c) created, permitted or allowed any Lien with respect to the Special
Intangible Medicaid Assets;
(d) failed to pay any medical claims when due in accordance with its
internal policies and procedures and applicable regulatory and contractual
requirements (excepting an insubstantial number and amount of claims which may
be delinquent with certain providers, provided such delinquencies have not
caused a breach by Seller of any applicable provider contract nor would the loss
of any provider to whom such amounts are due be material to the Medicaid
Business);
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(e) made or granted any increase in the compensation payable or to
become payable by Seller (or for which Seller may have any liability) under any
Designated Provider Contract to any Seller Medicaid Provider with respect to the
Medicaid Business (other than increases required under the present terms of
contracts);
(f) executed, amended, or terminated any contract with AHCA or any
Designated Provider Contract or any other contract with a third party related to
the Medicaid Business which involves annual consideration (paid or received) of
more than Twenty-Five Thousand Dollars ($25,000) to which it is or was a party
or by which any of the Special Intangible Medicaid Assets are bound or affected;
amended, terminated or waived any of its material rights thereunder; or received
notice of termination, amendment, or waiver of any such material contract or any
material rights thereunder (excepting any Designated Provider Contract which may
be terminated after the date of this Agreement in the manner described in
Section 7.2(a)(iii) below);
(g) instituted, settled, or agreed to settle, any litigation, action,
or proceeding before any court or governmental body having a material effect on
the Special Intangible Assets or the Medicaid Business;
(h) incurred any material indebtedness, obligation or other liability
(contingent or otherwise) relating to the Medicaid Business, except in the
ordinary course of its business, consistent with past practice, and, to the
Knowledge of Seller, there does not exist a set of circumstances that could
reasonably be expected to result in any such material indebtedness, obligation
or liability; or
(i) entered into any agreement or made any commitment to take any of
the types of action described in subsections 4.6(a) through 4.6(h) above.
4.7 Providers and Provider Contracts.
(a) Schedule 4.7(a) is a complete and correct list of each physician,
group, IPA, PHO, hospital/facility, ancillary service provider and other health
care service provider that participates in the Medicaid Business as a Seller
Medicaid Provider, and such list includes a complete and correct description of
the following with respect to each contract with each Seller Medicaid Provider:
the contracting parties (including the provider name), the type of provider,
contract form number or type and the form of compensation used. Except as set
forth on Schedule 4.7(a)(i), each such Seller Medicaid Provider has a written
contract with Seller. To Seller's Knowledge, none of such providers has been
placed on the convicted vendor list. To Seller's Knowledge, no Member is
receiving continued care from a terminated provider, except in cases where a
Member has sought care from a terminated provider on an out-of-network basis or
a terminated provider is continuing to provide care under statutory and/or
contractual continuity of care requirements.
(b) A complete and correct copy of each Designated Provider Contract
has previously been delivered to Buyer. Except as set forth on Schedule 4.7(b),
each Designated Provider Contract is legal, valid, binding, enforceable by
Seller and in full force and effect and will continue to be legal, valid,
binding and enforceable by Buyer in accordance with its terms immediately
following consummation of the Transaction assuming any required consent to
13
assignment is obtained from the affected provider. Neither Seller nor, to the
Knowledge of Seller, any other party is in breach or default beyond any
applicable grace period, and no event has occurred which with notice or lapse of
time would constitute breach or default, or permit termination, modification or
suspension under any Designated Provider Contract. Each Designated Provider
Contract complies in all material respects with the terms of Seller's Florida
Medicaid Contract and all applicable AHCA rules and regulations, each Medicaid
Provider is paid in accordance with the terms of its, his or her contract, and
all medical claims are paid when due in accordance with Seller's internal
policies and procedures and applicable regulatory and contractual requirements
(excepting an insubstantial number and amount of claims which may be delinquent
with certain providers, provided such delinquencies have not caused a breach by
Seller of any applicable provider contract nor would the loss of any provider to
whom such amounts are due be material to the Medicaid Business).
(c) Schedule 4.7(c) is a complete and correct list of all of the
Designated Provider Contracts that are Contingent Provider Contracts.
(d) The information provided to Buyer pursuant to Section 1.1(d) for
each Designated Medicaid Provider that is a party to an Assumed Provider
Contract is correct and complete in all material respects.
(e) Except as described on Schedule 4.7(e), none of the Designated
Provider Contracts:
(i) has a term of more than one year,
(ii) obligates Seller to purchase reinsurance for the provider or
provide stop loss protection or otherwise adjusts compensation payable to such
provider based on claims experience,
(iii) requires Seller to pay, or to use or offer to use the
services of, the provider on a most-favored provider basis,
(iv) obligates Seller to pay access or administrative fees,
(v) has a profit sharing component,
(vi) limits the rights of Seller to engage in, or to compete with
any Person in, the Medicaid Business,
(vii) contains an exclusivity provision restricting Seller's
ability to do business in certain geographical areas,
(viii) obligates or binds Seller to use, or offer to use, the
services of a Medicaid Provider in preference to any other provider,
(ix) delegates to the provider medical management duties, or
14
(x) includes any provision for rate escalation based upon the
consumer price index, inflation rates or other economic indicators.
(f) Except as described on Schedule 4.7(f), none of the "physicians"
or "physician groups", as such terms are defined at 42 C.F.R. (S) 417.479 et.
seq. (the "PIP Regulation"), contracted under the Designated Provider Contracts
are placed at "substantial financial risk", as defined by the PIP Regulation in
connection with the services provided to Members. To the extent applicable,
Seller is in compliance in all material respects with the reporting and enrollee
survey requirements of the PIP Regulation.
(g) Schedule 4.7(g) describes as of the date hereof, and will be
updated as of a date no more than five (5) days prior to the Closing Date to
describe, each written complaint received by Seller from a Seller Medicaid
Provider since January 1, 2002 and generally describes the nature and
disposition of such complaint.
(h) Except as set forth on Schedule 4.7(h), Seller has credentialed
each Seller Medicaid Provider in accordance with AHCA, AAAHC and NCQA
requirements.
4.8 Status of Seller's Florida Medicaid Contract. Seller's Florida Medicaid
Contract is legal, valid, binding, enforceable and in full force and effect and
will be terminated contemporaneously with the consummation of the Transaction
without any liability whatsoever to Buyer, and the transfer to Buyer of Seller's
rights under Seller's Florida Medicaid Contract pursuant to the Bill of Sale and
Assignment will be legal, valid, binding and enforceable by Buyer following the
consummation of the Transaction. Neither Seller nor, to the Knowledge of Seller,
any other party is in breach or default under Seller's Florida Medicaid Contract
beyond any applicable grace period, and no event has occurred which with notice
or lapse of time or both would constitute a breach or default, or permit
termination, modification, suspension or imposition of sanctions, under Seller's
Florida Medicaid Contract.
4.9 Medicaid Members and Services.
(a) The information to be delivered to Buyer pursuant to Section
1.1(c) for each Member will contain all material information that Seller is
required to maintain under the terms of Seller's Florida Medicaid Contract (and
applicable laws, rules and regulations), and all of the information delivered to
Buyer will be, upon delivery, correct and complete in all material respects.
(b) Schedule 4.9(b) describes as of the date hereof, and will be
updated as of a date no more than five (5) days prior to the Closing Date to
describe, each written complaint received by Seller (including its predecessor
in interest, as applicable) from a Member since January 1, 2002 and generally
describes the nature and disposition of such complaint.
(c) With respect to all requests for services duly made by or for a
Member prior to Closing, Seller has complied in all respects with its internal
medical management policies and procedures (including utilization review and
pre-authorization procedures) and the use of such policies and procedures
complies in all material respects with Seller's Florida Medicaid Contract and
15
all applicable laws, rules and regulations. Seller has adjudicated all requests
for preauthorizations, referrals, and admissions in the ordinary course of
business.
4.10 Title to Assets; Liens, etc. Seller has good and marketable title to
the Special Intangible Medicaid Assets, free and clear of all Liens. Subject to
obtaining the Closing Governmental Authorizations and the consents under
Contingent Provider Contracts identified on Schedule 4.7(c), Seller has the
authority and right to sell, assign, transfer and deliver to Buyer title to such
Special Intangible Medicaid Assets, free and clear of all Liens, and at and as
of the Closing Date the Special Intangible Medicaid Assets shall be sold,
assigned, transferred and delivered to Buyer free and clear of all Liens.
4.11 Tax Matters. Seller has made and is current with respect to all
reports, returns and other filings (herein sometimes collectively referred to as
"Tax Returns") required to be furnished from time-to-time to all Federal, state,
local or other governmental authorities of any nature (including, without
limitation, as applicable, all real and/or personal property, franchise and
withholding taxes and other Tax Returns); all such Tax Returns so furnished were
true, correct and complete in all material respects; based on the affairs,
revenues, enrollment or other applicable measure of Seller's operations or
assets during the period in question, each such Tax Return correctly stated and
reported the amount due; and all amounts reflected as due and payable on the Tax
Returns have been or will be paid by Seller on or before their due date
regardless of whether due and payable prior to or following the Closing Date.
There are no liens for Taxes (other than for current Taxes not yet due and
payable) on the Special Intangible Medicaid Assets.
4.12 No Litigation. Except as set forth on Schedule 4.12, there are no
demands, actions, suits, investigations or proceedings pending or, to the
Knowledge of Seller, threatened in any court or by or before any governmental
agency affecting the Special Intangible Medicaid Assets or the Medicaid Business
as now or heretofore conducted by Seller or which questions the validity or
propriety of this Agreement or the consummation of the Transaction. Seller is
not subject to any judicial injunction or mandate or any administrative order or
administrative restriction directed to or against it as a result of its
ownership of the Special Intangible Medicaid Assets or its conduct of the
Medicaid Business as now or heretofore conducted by it, and, to the best of
Seller's Knowledge, no governmental agency has challenged or questioned in
writing, or commenced or given notice of intention to commence any investigation
relating to, the legal right of Seller to conduct the Medicaid Business or any
part thereof as now or heretofore conducted by it.
4.13 Compliance with Laws. Seller has all Governmental Authorizations
necessary to permit it to own or have rights in the Special Intangible Medicaid
Assets and operate the Medicaid Business, has complied and is in compliance in
all material respects with the terms of Seller's Florida Medicaid Contract and
with all laws, rules, regulations, ordinances, reporting and licensing
requirements and orders applicable to the Medicaid Business (including, without
limitation, all laws, rules and regulations referenced in Section 70.2 of
Seller's Florida Medicaid Contract), and, to Seller's Knowledge, no condition
exists that, with or without notice or the passage of time or both, shall cause
Seller not to remain in such compliance. Without limiting the foregoing, and
except as set forth on Schedule 4.13, Seller has not received notification from
any agency or department of federal, state or local government asserting that,
with respect to the conduct of the Medicaid Business, it is not in compliance in
any material respect with any of the statutes, regulations or
16
ordinances which such governmental authority enforces, nor has Seller received a
notice from any such federal, state or local governmental agency threatening to
revoke, suspend or modify any Governmental Authorization applicable to the
Medicaid Business. Since January 1, 2002, Seller has filed all reports,
registrations and statements, together with any amendments required to be made
thereto, that under Seller's Florida Medicaid Contract and applicable laws,
rules and regulations Seller is required to file with AHCA and other
governmental authorities having jurisdiction over the Medicaid Business.
Schedule 4.13 lists all examinations of Seller conducted by such a governmental
authority since January 1, 2002 and identifies by date any correspondence
between such governmental authority and Seller regarding sanctions, conclusions
made and/or corrective action required or suggested based on such examination.
4.14 Rights in Name. Seller owns or possesses all intellectual property
rights in the name "St. Augustine Medicaid Plan." Seller's use of such name has
not interfered with, infringed upon, misappropriated or otherwise come into
conflict with any intellectual property rights of any third parties. To the
Knowledge of Seller, no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with Seller's rights in such
name.
4.15 Insurance. Schedule 4.15 sets forth a true and complete list of all
insurance policies carried by Seller with respect to the Medicaid Business,
together with, in respect of each such policy, the name of the insurer, the
policy number, the annual policy premium payable therefor, the limits of
coverage, the deductible amount (if any), the expiration date thereof and each
pending claim thereunder. Complete and correct copies of the certificate of
insurance for each policy have previously been delivered or made available to
Buyer by Seller. All such policies are in full force and effect. All premiums
due thereon have been paid in a timely manner. (Nothing herein shall be
construed as a transfer of any such policies to Buyer at Closing; Buyer will
maintain its own insurance.)
4.16 Affiliate Relationships. Except as set forth on Schedule 4.16, Seller
is not and has not within the past twenty-four (24) months been a party to any
provider agreement with Seller's Parent or any other Affiliate of Seller.
4.17 No Bankruptcy. Neither Seller nor Seller's Parent is insolvent or the
subject of Bankruptcy or any similar proceeding.
4.18 Broker's and Other Fees. Except for Cain Brothers & Company, LLC,
whose fees shall be paid in full by Seller or its Affiliates, neither Seller nor
Seller's Parent or any of their respective shareholders, directors or officers
has employed any broker or finder or incurred any liability for any broker's or
finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement.
4.19 Scope of Representations and Warranties; Misstatements and Omissions.
(a) Except for the representations and warranties made in this
Agreement and in the certificates, statements, exhibits, schedules or other
documents furnished to Buyer pursuant hereto, neither Seller nor Seller's Parent
makes any other representations or warranties to Buyer,
17
whether express, implied or statutory, in connection with the transactions
contemplated by this Agreement.
(b) No representation or warranty made by Seller in this Agreement or
in any certificate, statement, exhibit or schedule, or other document furnished
to Buyer pursuant hereto, or in connection with the transactions contemplated by
this Agreement, contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
In order to induce Seller to enter into this Agreement, Buyer hereby
represents and warrants to Seller that the statements contained in this ARTICLE
5 are correct and complete as of the date of this Agreement and will be correct
and complete on the Closing Date (as though made then and as though the Closing
Date were substituted throughout this ARTICLE 5, except where a specific date is
indicated).
5.1 Organization, Good Standing, Qualification and Subsidiaries. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida. Buyer has full corporate power and authority to conduct
its business and own its property as now conducted and owned, and has full
corporate power and authority necessary to permit it to execute and deliver this
Agreement and all Ancillary Agreements and Instruments required to be executed
and delivered by it under this Agreement, and to carry out the terms of this
Agreement and of all such Ancillary Agreements and Instruments.
5.2 Authorization, etc. The execution and delivery by Buyer of this
Agreement and all Ancillary Agreements and Instruments required to be executed
by Buyer hereunder have been duly and validly authorized by all necessary action
in respect thereof on the part of Buyer. This Agreement represents, and when
executed and delivered at Closing the Ancillary Agreements and Instruments will
represent, the legal, valid and binding obligation of Buyer, enforceable against
it in accordance with its terms, subject to (a) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect and (b) limitations on the
enforcement of equitable remedies.
5.3 No Legal Bar. Subject to the receipt of the Closing Governmental
Authorizations described in Section 6.1 below, the execution and delivery by
Buyer of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the Articles of
Incorporation or Bylaws of Buyer, or (ii) result in a breach of, result in or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the cancellation or unilateral
modification or amendment of, or accelerate the performance required by, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, agreement, lease or other instrument, obligation or
arrangement to which Buyer is a party or to which Buyer or any of its assets or
properties may be subject (nor does a breach or default which would have any
such effect, or which would otherwise impair the consummation of the
18
transactions contemplated hereby, presently exist), or (iii) conflict with or
violate any order, writ, judgment, injunction, decree, award, ruling, statute,
rule or regulation applicable to Buyer or any of its material assets; nor is
Buyer subject to, or a party to, any charter, bylaws, mortgage, lien, agreement,
contract, order, judgment or decree which would prevent the consummation of the
transactions contemplated by this Agreement or compliance by Buyer with the
terms, conditions and provisions hereof.
5.4 No Bankruptcy. Buyer is not insolvent or the subject of Bankruptcy or
any similar proceeding.
5.5 Broker's and Other Fees. Neither Buyer nor its shareholders, directors
or officers has employed any broker or finder or incurred any liability for any
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement.
5.6 Compliance with Laws. As of the date of this Agreement, (a) Buyer has
all Governmental Authorizations necessary to permit it to operate Buyer's
Medicaid Plan, (b) Buyer has not received or entered into any citations,
complaints, consent orders, compliance schedules or other similar enforcement
orders that would adversely affect Buyer's ability to consummate the
transactions contemplated hereby, (c) no proceeding is pending or, to the
knowledge of Buyer, threatened to modify, suspend or revoke, withdraw, terminate
or otherwise limit any Governmental Authorization of Buyer which is necessary
for the operation of Buyer's Medicaid Plan, and (d) no violations of Buyer's
Governmental Authorizations related to Buyer's Medicaid Plan have occurred that
remain uncured, unwaived or otherwise unresolved, except for violations which
would not have a material adverse effect on Buyer's Governmental Authorizations
or Buyer's ability to consummate the transactions contemplated by this
Agreement.
5.7 Availability of Funds. Buyer has the ability to obtain sufficient cash
to pay the Purchase Price and consummate the transactions contemplated hereby.
5.8 Scope of Representations and Warranties; Misstatements and Omissions.
(a) Except for the representations and warranties made in this
Agreement and in the certificates, statements, exhibits, schedules or other
documents furnished to Seller pursuant hereto, Buyer does not make any other
representations or warranties to Seller or Seller's Parent, whether express,
implied or statutory, in connection with the transactions contemplated by this
Agreement.
(b) No representation or warranty made by Buyer in this Agreement or
in any certificate, statement, exhibit, schedule, or other document furnished to
Seller pursuant hereto, or in connection with the transactions contemplated by
this Agreement, contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or therein not
misleading.
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ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions of Each Party's Obligations Under this Agreement. The
respective obligations of each Party to consummate the transactions to be
performed by it in connection with the Closing are subject to the satisfaction,
or, where permissible under applicable law, waiver by each Party at or prior to
the Closing Date, of the following conditions:
(a) Governmental Approvals.
(i) All governmental licenses, franchises, permits, privileges,
immunities, approvals and other governmental authorizations (including, without
limitation, approvals of CMS, DFS and AHCA) which are required to be obtained by
Buyer and Seller (the "Closing Governmental Authorizations") in connection with
the transactions contemplated by this Agreement and which are necessary for the
ownership by Buyer of the Special Intangible Medicaid Assets and the transfer of
the Members to Buyer's Medicaid Plan shall have been obtained without any term
or condition (including, without limitation, a limited effective period for
Buyer's Florida Medicaid Contract under which Buyer has the right to provide
services to the Transferred Members) which would materially impair the value of
the Medicaid Business or the Special Intangible Medicaid Assets or impair
Buyer's ability to succeed to the Medicaid Business, or which would subject
Buyer to a material burden or obligation that is inconsistent with the terms of
this Agreement or the manner in which the Medicaid Business has been operated
prior to Closing (it being acknowledged that any requirement that a Member
Notice be disseminated prior to Closing shall not be deemed a requirement that
would materially impair the value of the Medicaid Business so long as such
notice does not offer Members a right to disenroll or opt-out of Buyer's
Medicaid Plan after the Effective Date or otherwise address such a
post-Effective Date right). All conditions required to be satisfied prior to the
Closing Date by the terms of such Closing Governmental Authorizations shall have
been satisfied, such as the delivery of member notices and the passage of time
related to any opt-out rights of Members, and any statutory waiting periods in
respect thereof shall have expired (collectively, the "Pre-Closing Conditions
Related to the Closing Governmental Authorizations").
(ii) In addition to any Closing Governmental Authorizations
required by law, rule, regulation or order, the Closing Governmental
Authorizations shall include a written approval from AHCA which authorizes,
approves and effects the following (unless Buyer waives any such requirement and
such requirement is not required by applicable law, rule, regulation or order):
(A) the increase in Buyer's maximum enrollment levels to suitable levels to
allow for the enrollment and associated capitation of the Members transferred to
Buyer on the Effective Date; (B) the enrollment of all Members in Buyer's
Medicaid Plan on the Effective Date (other than Members who prior to such time
lose eligibility or are validly disenrolled) and AHCA's assurance that neither
they nor CMS will require or send any notice to Members advising them of any
right to disenroll or opt-out of Buyer's Medicaid Plan on or after the Effective
Date; (C) the determination and administration of all rights and obligations of
Buyer with respect to the Transferred Members under Buyer's Florida Medicaid
Contract (by way of example and without limiting the foregoing, Buyer shall be
entitled to receive all post-Closing capitation payments with respect to the
Transferred Members and all obligations imposed on Buyer with respect to the
Transferred Members, including
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the scope of covered services, shall not exceed the obligations included within
the Assumed Liabilities), and (D) the termination of Seller's Florida Medicaid
Contract immediately prior to the Effective Date (other than any obligations,
such as close-out obligations, which are specifically intended to survive
termination, which shall be performed by AHCA or Seller, as applicable) such
that all rights of Seller to receive post-Closing capitation payments with
respect to the Transferred Members shall terminate.
(iii) In addition to any Closing Governmental Authorizations
required by law, rule, regulation or order, the Closing Governmental
Authorizations shall include the following (unless Seller waives any such
requirement): AHCA's acknowledgment that if the scope of covered services under
Buyer's Florida Medicaid Contract is less comprehensive than the scope of
covered services under Seller's Florida Medicaid Contract, Seller shall not have
any responsibility to provide Transferred Members with any services not covered
under Buyer's Florida Medicaid Contract.
6.2 Conditions to Closing of Buyer. The obligation of Buyer to consummate
the transactions to be performed by it in connection with the Closing is subject
to the following additional conditions precedent:
(a) Representations and Warranties. The representations and warranties
of Seller and Seller's Parent contained in ARTICLE 4 (i) shall be true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality qualification) at
and as of the date hereof, and (ii) shall be repeated and shall, without giving
effect to any supplement to the disclosure schedules (except to the extent the
applicable representation or warranty expressly indicates that an update as of
another date is required), be true and correct in all respects (in the case of
any representation or warranty containing any materiality qualification) or in
all material respects (in the case of any representation or warranty without any
materiality qualification) on and as of the Closing Date with the same effect as
though made on and as of the Closing Date;
(b) Performance. Each of Seller and Seller's Parent shall have duly
performed and complied in all material respects with all covenants, agreements
and conditions required to be performed or complied with by them prior to or on
the Closing Date;
(c) No Objecting Litigation. No action, suit or proceeding shall be
pending or threatened before any court, governmental agency or other regulatory
or administrative agency or commission, which seeks to restrain, prevent or
change the transactions contemplated hereby, questions the validity of such
transactions, or which would negatively impact the Florida Medicaid Program, the
terms upon which Buyer participates in such Program or Buyer's rights with
respect to the Transferred Members (including, without limitation, any action,
suit or proceeding wherein an unfavorable judgment or order would cause the
transactions contemplated hereby to be rescinded);
(d) Closing Certificate. Each of Seller and Seller's Parent shall have
delivered to Buyer a certificate to the effect that each of the conditions
specified above in Section 6.2(a) through 6.2(c) that are applicable to it has
been satisfied in all respects;
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(e) Good Standing Certificates. Delivery to Buyer of certificates,
executed by the proper state official, as to the good standing of each of Seller
and Seller's Parent in the jurisdiction of their incorporation as of a date not
more than ten (10) days prior to Closing;
(f) Secretary's Certificates. Delivery to Buyer of a certificate from
the secretary or assistant secretary of each of Seller and Seller's Parent (i)
attaching copies of its Articles of Incorporation, Bylaws and Board of Director
and member resolutions authorizing the execution, delivery and performance of
this Agreement and all other documents and the taking of all action required
thereunder or in connection therewith on behalf of each of Seller and Seller's
Parent, and (ii) certifying the incumbency of officers of each of Seller and
Seller's Parent and their genuine signatures, with a cross certification of such
secretary's or assistant secretary's incumbency and genuine signature;
(g) Third Party Approvals and Consents. Delivery to Buyer of all such
written approvals, consents and waivers (including the passage of time for
objection) of third parties which are required to be obtained in connection with
the transactions contemplated by this Agreement and which are necessary for the
ownership by Buyer of any of the Special Intangible Medicaid Assets, free and
clear of all Liens, other than delivery of the consents related to the
assignment for the Contingent Provider Contracts, which shall not be a condition
to Closing after the dissemination of the Member Notice pursuant to Section
7.1(b);
(h) Instruments of Transfer. Execution and delivery to Buyer by Seller
on the Closing Date of a Bill of Sale and Assignment in the form attached hereto
as Exhibit B and such other endorsements, assignments, and other good and
sufficient instruments of conveyance and transfer as are provided for herein,
and any other instruments in form and substance reasonably satisfactory to Buyer
and its counsel as shall be effective to vest in Buyer all of the right, title
and interest of Seller in, to and under the Special Intangible Medicaid Assets,
free and clear of all Liens;
(i) Escrow Agreement. Execution and delivery to Buyer by Seller and
the Escrow Agent of the Escrow Agreement;
(j) Non-Competition Agreement. Execution and delivery to Buyer by
Seller and Seller's Parent of a Non-Competition Agreement in substantially the
form attached hereto as Exhibit C;
(k) No Adverse Regulatory Change. There shall not have occurred or
been initiated any regulatory change that is reasonably likely to have an
adverse effect on the Special Intangible Medicaid Assets, the Medicaid Business
or Buyer's Florida Medicaid Contract following the Closing Date;
(l) Opinion. Buyer shall have received from McDermott, Will & Emery,
counsel to Seller and Seller's Parent, an opinion in substantially the form and
substance as set forth in Exhibit D attached hereto, dated as of the Closing
Date;
(m) No Change in Business. Except as expressly permitted under Section
7.2(b)(v) below, Seller shall not have authorized or made any material change in
the terms and
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conditions upon which it does business with respect to the Medicaid Business,
including, without limitation, any modifications to its provider compensation
(excluding increases required under the present terms of contracts or decreases
effected in consultation with Buyer) or accounting methodologies (e.g., manner
of setting IBNR reserves), unless required for regulatory or statutory
compliance;
(n) Minimum Membership. The Closing Transferred Membership shall not
be less than twenty-five thousand (25,000) Members; and
(o) Parent Financial Certification. Delivery to Buyer of a certificate
from the Chief Financial Officer of Seller's Parent certifying that since
December 31, 2002, Seller's Parent has not suffered a material adverse effect in
its business, assets or financial condition, excluding: (i) the effects of
changes that are generally applicable to (x) the United States economy or local
economy in which the Medicaid Business is operated (as opposed to changes
relating to the Medicaid Program) or (y) the United States securities markets
and (ii) the impact of writing off its goodwill associated with the acquisition
of St. Augustine Medicaid Plan.
6.3 Conditions to Closing of Seller. The obligation of Seller to consummate
the transactions to be performed by it in connection with the Closing is subject
to the following additional conditions precedent:
(a) Representations and Warranties True and Correct. The
representations and warranties of Buyer contained in ARTICLE 5 (i) shall be true
and correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality qualification) at
and as of the date hereof, and (ii) shall be repeated and shall, without giving
effect to any supplement to the disclosure schedules, be true and correct in all
respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date;
(b) Performance. Buyer shall have duly performed and complied in all
material respects with all covenants, agreements and conditions required to be
performed or complied with by it prior to or on the Closing Date;
(c) Closing Certificate. Buyer shall have delivered to Seller a
certificate to the effect that each of the conditions specified above in Section
6.3(a) through (b) has been satisfied in all respects;
(d) Good Standing Certificates. Delivery to Seller from Buyer of a
certificate, executed by the proper state official, as to the good standing of
Buyer in the jurisdiction of its incorporation as of a date not more than ten
(10) days prior to Closing;
(e) Secretary's Certificates. Delivery to Seller of a certificate from
the secretary or assistant secretary of Buyer (i) attaching copies of its
Articles of Incorporation, Bylaws and resolutions authorizing the execution,
delivery and performance of this Agreement and all other
23
documents and the taking of all action required thereunder or in connection
therewith on behalf of Buyer, and (ii) certifying the incumbency of officers of
Buyer and their genuine signatures, with a cross certification of such
secretary's or assistant secretary's incumbency and genuine signature;
(f) Instruments of Assumption. Execution and delivery to Seller by
Buyer on the Closing Date of an Assignment and Assumption Agreement, in the form
attached hereto as Exhibit E;
(g) Escrow Agreement. Execution and delivery to Seller by Buyer and
the Escrow Agent of the Escrow Agreement; and
(h) Opinion. The Selling Parties shall have received from Willcox &
Savage, P.C., counsel to Buyer, an opinion in substantially the form and
substance attached hereto as Exhibit F.
6.4 Waiver of Conditions. At the Closing, any Party may waive, in writing,
fulfillment of any of the conditions precedent set forth in this ARTICLE 6 to
such Party's obligations hereunder, but the waiver of any such condition shall
not, unless it expressly so provides, constitute a waiver of any other rights or
remedies that such Party may have hereunder, including without limitation, those
provided under ARTICLE 8 hereof.
ARTICLE 7
COVENANTS OF THE PARTIES
7.1 Covenants Related to Closing.
(a) Regulatory and Other Approvals and Consents; Cooperation.
(i) Promptly after the execution of this Agreement each Party
shall use commercially reasonable efforts to: (A) file or submit, and diligently
prosecute, any and all applications to or notices with public authorities,
federal, state or local, and requests for such Closing Governmental
Authorizations which may be necessary or appropriate for a particular Party or
are reasonably deemed necessary or appropriate by a particular Party's counsel
for the consummation of the Transaction (in connection therewith, Seller shall
use commercially reasonable efforts to prevent AHCA from terminating Seller's
right to receive default enrollments/auto-assignments prior to Closing); (B)
keep the other Parties current and fully informed of the status of such
applications; and (C) take such steps that are within its power to cause to be
satisfied the conditions precedent to its obligations or the other Parties'
obligations to close that are dependent upon its actions. Seller consents to
Buyer contacting such regulatory and accrediting body officials and such
Designated Medicaid Providers as Buyer deems necessary in connection with the
foregoing and to discuss Seller's standing, performance, and condition and
issues related to the consummation of the Transaction.
(ii) Seller acknowledges that (A) the Closing Governmental
Authorizations will be based, among other things, on the adequacy of Buyer's
provider network, (B) attached hereto as Schedule 7.1 is a list prepared by
Buyer which indicates the Seller Medicaid
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Providers whose contracts are to be assigned to Buyer at Closing (Buyer shall be
entitled to (i) delete providers and their contracts from such Schedule at any
time prior to Closing, and (ii) add providers and their contracts to such
Schedule at any time prior to ten (10) days prior to Closing) (the contracts
determined from such Schedule as so revised, the "Designated Provider
Contracts"), and (C) Buyer intends to rely upon the ability of Seller to
effectively assign the Designated Provider Contracts. Seller acknowledges and
agrees to promptly supply to Buyer, when requested, all information and
materials (including, without limitation, specific answers or responses)
required in connection with Buyer's Closing Governmental Authorizations which
relate to the provider network, its adequacy, accessibility or otherwise, the
Designated Provider Contracts and the continuity of services (such information
and materials to be in such form as may reasonably be requested for purposes of
filings with the applicable regulatory authorities). With respect to any
Designated Provider Contract which cannot be assigned without the provider's
consent (including any contracts involving multiple product lines where consent
to partial assignment will be required) (the "Contingent Provider Contracts"),
(A) this Agreement shall not constitute an agreement to assign or transfer any
right, benefit or obligation arising thereunder if an assignment or transfer
without the consent of the provider would constitute a breach or violation
thereof or adversely affect the rights of Seller or Buyer thereunder (however,
the foregoing shall not excuse or waive any breach of any representation or
warranty contained herein), and (B) prior to Closing, Seller shall use its best
efforts to cause the provider contract to be assigned with consent (as
contemplated by Section 7.1(b)), and if such consent cannot be obtained, Seller
shall use its best efforts to (1) assist Buyer to obtain its own direct contract
on terms acceptable to Buyer or (2) effect an arrangement, with Buyer's consent,
whereby Buyer will be able to enjoy the benefits of the Contingent Provider
Contract (solely with respect to the Medicaid product) from and after the
Effective Date.
(b) Notices to Providers and Members.
(i) Unless otherwise required by AHCA, not more than five (5)
days after the execution of this Agreement, Seller shall send a notice (in a
form mutually acceptable to Seller and Buyer and in accordance with AHCA
requirements) (the "Provider Notice") to all providers subject to a Designated
Provider Contract, which (A) advises such providers that their contract may be
assigned to Buyer at Closing, (B) specifies the obligations and liabilities
under such contract that would be retained by Seller and assumed by Buyer and
the anticipated Closing date, and (C) with respect to each Contingent Provider
Contract, requests the provider's consent to the (partial, where applicable)
assignment of such contract. If Buyer amends Schedule 7.1 to add a Designated
Provider Contract, then within two (2) days of receipt of the amended schedule,
Seller shall send a similar notice to each provider whose contract was so added.
(ii) Until the thirtieth (30th) day after the Effective Date,
Seller shall monitor responses from all providers who have a Contingent Provider
Contract and use commercially reasonable follow-up contacts to secure the
requested consents to assignment.
(iii) As soon as Seller and Buyer mutually agree is practicable
(based on Seller having received consents to assignment of a substantial number
of the Contingent Provider Contracts), but in no event later than April 28,
2003, Seller and Buyer shall meet with AHCA and provide them with a list of the
Members who are assigned to a primary care physician whose Contingent Provider
Contract is not as of such time assignable to Buyer (the "Affected Member").
25
(iv) Promptly after advising AHCA of the Affected Members, Seller
shall request permission from AHCA to send any notice to the Members required by
the Pre-Closing Conditions Related to the Closing Governmental Authorizations
(the "Member Notice") and upon receipt of AHCA's permission, Seller shall,
subject to Section 7.1(b)(v) below, take such action as may be necessary to
disseminate and mail the Member Notice to all Members that AHCA requires receive
notification (in a form mutually acceptable to Seller and Buyer and in
accordance with AHCA requirements) (Seller shall promptly provide AHCA and Buyer
with such certifications concerning the discharge of such obligation as may
reasonably be requested).
(v) Immediately prior to the dissemination of the first Member
Notice, (A) the Closing Governmental Authorizations shall have been obtained
(subject only to the Pre-Closing Conditions Related to the Closing Governmental
Authorizations), (B) Seller and Seller's Parent shall certify in writing to
Buyer that as of such date they are not in breach of their respective
representations, warranties or covenants hereunder and (C) Buyer shall certify
in writing to Seller that as of such date Buyer is not in breach of its
representations, warranties or covenants hereunder.
(vi) After the dissemination of the Member Notice and until the
thirtieth (30th) day after the Effective Date, Seller shall continue to use best
efforts to obtain the consent to assignment of any Contingent Provider Contract
which Buyer continues to request; however, the receipt of such consents shall
not be a condition to Closing.
(c) Preparation for Transfer and Transition. To ensure an effective
transition and transfer of the Members into Buyer's Medicaid Plan, at all times
prior to the Closing Date Seller shall:
(i) Cooperate and work with Buyer in transition planning;
(ii) Orient, educate and otherwise train Buyer and Buyer's
employees (and permit Buyer's employees to work with Seller's employees in an
observer capacity) regarding (and make information available to Buyer and
Buyer's employees concerning) (A) Seller's current operating and medical
management policies and procedures (to ensure continuity of administration)
associated with the Medicaid Business (including, without limitation, medical
management policies and procedures used by Seller's outsourced vendors and
information concerning Seller's sales practices, policies, data and personnel),
(B) the health plan benefits and services offered by Seller to the Members,
including, without limitation, member services, member outreach and education,
and preventative medicine programs, and (C) the Seller Medicaid Providers and
provider contracts, provided, such activities shall be conducted at Seller's
principal place of business and shall be conducted in a manner that will not
unreasonably interfere with Seller's business operations;
(iii) (A) grant Buyer access to and use of a reasonable amount of
its office space for purposes of transition planning, (B) assist Buyer to
interface with the phone and information networks used by Seller in connection
with the Medicaid Business, and (C) make available to Buyer, in all media
reasonably available, such information as may prepare Buyer to pay claims
arising under the Assumed Provider Contracts from and after the Effective Date,
including provider numbers and compensation terms, provided, such activities
shall be conducted in a manner that will not unreasonably interfere with
Seller's business operations;
26
(iv) Use commercially reasonable efforts to assist Buyer in its
preparation for the implementation of the Medicaid Business medical management
policies and procedures (e.g., case management and discharge planning) of Buyer
and such other Medicaid Business operational policies and procedures that Buyer
may reasonably request (Seller shall be solely responsible for its operations
prior to Closing, and shall keep Buyer duly informed in respect of all such
operations);
(v) Within three (3) business days following a request by Buyer,
identify for Buyer any then pending or unresolved provider or member complaints
or grievances and grant Buyer with access to such complaint and grievance logs
as may be reasonably requested;
(vi) Participate, in an observer capacity, with Seller's line
staff in certain day to day matters, provided, such activities shall be
coordinated between Seller and Buyer and shall be conducted in a manner that
will not unreasonably interfere with Seller's business operations; and
(vii) Within five (5) days after the execution of this Agreement,
provide Buyer with an electronic extract of all of Seller's AMISYS data as of
the date of this Agreement for the Designated Medicaid Providers, including the
data elements listed on Schedule 1.1(d).
7.2 Additional Covenants of Seller. Seller further covenants and agrees
with Buyer as follows:
(a) Affirmative Business Covenants. Except with the prior written
consent of Buyer in its reasonable discretion, prior to the Closing Date, Seller
shall conduct the Medicaid Business only in the ordinary course as heretofore
conducted and shall do the following:
(i) Preserve the Special Intangible Medicaid Assets and the other
assets required for the Medicaid Business and maintain the operations of the
Medicaid Business;
(ii) Preserve the goodwill of its relationships with Members,
Seller Medicaid Providers, AHCA and other regulatory bodies, suppliers,
employees and others having business relations with it related to the Medicaid
Business;
(iii) Maintain the Designated Provider Contracts (other than any
contracts which are validly terminated by a provider without cause or which
Seller elects to terminate in order to best serve the interests of the Medicaid
Business) (absent urgent circumstances related to patient safety, Seller agrees
to use reasonable efforts to confer with Buyer in advance of effecting any such
termination) and ensure that each such contract contains all terms and
provisions required by Seller's Florida Medicaid Contract, AHCA or any other
applicable governmental authority and/or under any applicable statute, rule or
regulation (including, without limitation, HIPAA);
(iv) Comply in all material respects with all regulations and
laws applicable to it in the conduct of the Medicaid Business;
(v) Maintain, in accordance with past practice, its network of
Seller Medicaid Providers, and cause the credentialing and re-credentialing of
such providers in accordance with AHCA, AAAHC and NCQA requirements;
27
(vi) Cause its medical management policies and procedures
(including utilization review and pre-authorization procedures) to be applied
and conducted consistent with past practice and in accordance with Seller's
Florida Medicaid Contract and all applicable laws, rules and regulations; and
(vii) Use best efforts to cause, subject to AHCA's policies and
procedures then in effect, all involuntary disenrollment submissions to be made
for each month prior to the Effective Month and for the Effective Month,
notwithstanding whether as of Closing the submission for the Effective Month is
then due.
(b) Negative Business Covenants. On and after the date hereof and
prior to Closing, Seller shall not take any of the following actions, or agree
to take any such actions, except with the prior written consent of Buyer in its
sole discretion:
(i) Merge or consolidate with any other corporation or other
entity or permit any other entity to merge into it (unless the surviving entity
has an equal or better net worth than Seller and is bound by the terms of this
Agreement and prepared to perform its obligations hereunder) (no such merger or
consolidation shall release Seller's Parent from its obligations hereunder);
(ii) Authorize or make any material change in the operation of
the Medicaid Business; lease, license, sell or dispose of any part of the
Special Intangible Medicaid Assets; or otherwise enter into any contract,
transaction or commitment related to the Medicaid Business, other than in the
ordinary course of business, consistent with past practice;
(iii) Take or omit to take any action, or permit the occurrence
of any change or event, which would render any of its representations and
warranties contained herein untrue in any material respect at and as of the
Closing Date with the same effect as though such representations and warranties
had been made at and as of the Closing Date;
(iv) Authorize or make any material change in the customary terms
and conditions upon which it does business with respect to the Medicaid
Business, including, without limitation, modifications to its provider
compensation or accounting methodologies (e.g., manner of setting IBNR
reserves);
(v) Terminate or amend in any material respect any Designated
Provider Contract or enter into any material provider contract with a Seller
Medicaid Provider (other than any contracts which are validly terminated by a
provider without cause or which Seller elects to terminate in order to best
serve the interests of the Medicaid Business) (absent urgent circumstances
related to patient safety, Seller agrees to use reasonable efforts to confer
with Buyer in advance of effecting any such termination);
(vi) Fail to pay any material medical claim liability when due
(other than medical claims which are pended in the ordinary course of business
consistent with past practice); and
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(vii) Unless otherwise expressly permitted under the terms of
this Agreement, take or omit to take any action which would adversely affect the
ability of any Party to obtain the Closing Governmental Authorizations or
consents of private parties required for this Transaction or which would
adversely affect its ability to perform its covenants and agreements contained
herein.
(c) Notification. Seller shall promptly advise Buyer in writing of any
material adverse change, known or threatened, in (i) the financial condition,
business or affairs of the Medicaid Business, or (ii) the accuracy of the
representations and warranties of Seller made herein.
(d) Other Offers. On and after the date hereof and prior to Closing,
neither Seller nor Seller's Parent shall (nor permit any of their respective
officers, directors, employees, or agents to), directly or indirectly, solicit,
encourage, facilitate, entertain, or accept, including by way of furnishing
information, any inquiries or proposals for the sale of the Medicaid Business or
any of the Special Intangible Medicaid Assets (or any inquiries or proposals
concerning the sale of the equity in Seller, by merger, consolidation, share
exchange, stock sale or other transaction, to the extent the consummation of the
Transaction would be proscribed or impaired in any material manner) or the
termination of Seller's Florida Medicaid Contract. Each Party acknowledges and
agrees that any remedy at law for breach of the foregoing covenant shall be
inadequate and, in addition to any other relief which may be available, the
non-breaching Party shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages, posting bond or
providing surety, and without regard to the adequacy of any remedy at law.
Seller represents and warrants that as of the date hereof there is no stand-by
agreement or back-up contract with respect to the sale of the Medicaid Business
and it has terminated all discussions with third parties with respect to such
proposed sale.
(e) Change in Accounting Policies. Prior to Closing, Seller will not
make any material change in its present accounting policies or its present
fiscal year, as they relate to the Medicaid Business, except as may be required
by GAAP or SAP (and provided Buyer is promptly notified in writing of the nature
of and reason for the change and Seller provides Buyer with such information as
may reasonably be requested concerning the pro forma effect of such change on
the Financial Statements attached hereto).
(f) Additional Financial Information. Within three (3) days of receipt
from their auditor, each of Seller and Seller's Parent shall deliver to Buyer a
copy of such party's audited balance sheet as of December 31, 2002 and the
related audited income statement for the twelve (12) month period ended December
31, 2002, all prepared in accordance with GAAP (the "Audited Year-End
Statements"). Seller shall use commercially reasonable efforts to furnish to
Buyer, within thirty (30) days (or, solely in the case of the delivery required
under clause (v) below, thirty-five (35) days) of the end of each month prior to
Closing, copies of the following for each such month: (i) Seller's unaudited
consolidated balance sheet and income statements prepared in accordance with
SAP, (ii) Seller's unaudited income statement for the Medicaid Business prepared
in accordance with GAAP and detail of key Medicaid line of business balance
sheet accounts (including, without limitation, claims payable and accounts
receivable), (iii) Seller's Medicaid Data Warehouse Lag Reports (detailed by
physician, inpatient and all other), (iv) Seller's statement of accrued IBNR for
the Medicaid Business, (v) Seller's Parent's combined consolidating balance
sheet prepared in
29
accordance with GAAP, and (vi) such other financial reports as Buyer may
reasonably request (based on a bona fide stated purpose and use), provided
Seller will not be required to incur an unreasonable expense or cost in
connection with such additional requested reports (the foregoing audited and
unaudited statements and reports are collectively, the "Interim Monthly
Reports").
7.3 Other General Covenants.
(a) Confidentiality. Except as otherwise required in the performance
by the Parties of their respective obligations hereunder and otherwise required
by law, any non-public information Seller, on the one hand, and Buyer, on the
other hand, shall receive from the other during the course of the investigation
contemplated pursuant hereto shall remain and be kept as confidential
information by them and all copies thereof will be returned promptly at the
request of the Party furnishing such information in the event of the termination
of this Agreement. Each of the Parties may disclose such information to their
respective Affiliates, counsel, accountants, representatives, professional
advisors and consultants, as each Party deems necessary to perform its
obligations hereunder. Notwithstanding anything to the contrary set forth
herein, Seller hereby acknowledges and consents to the use of its name, a
description of the Special Intangible Medicaid Assets, the Medicaid Business and
this Transaction, in any securities filings which may be distributed from time
to time.
(b) Public Announcements. Buyer may issue a press release at any time,
subject to Seller's prior approval, which shall not be unreasonably withheld or
delayed; provided, no such approval shall be required if Buyer and its
Affiliates believe in good faith that a public disclosure is required by
applicable law or regulation, court process or by any listing or trading
agreement concerning its publicly-traded securities. Neither Seller nor Seller's
Parent (or any of their Affiliates) shall at any time whether prior to or after
Closing issue any press release or any other public statement or other
communication with respect to the subject matter of this Agreement or the
transactions contemplated hereby or Seller's reasons for selling the Medicaid
Business without the prior written consent of Buyer, which shall not be
unreasonably withheld or delayed.
(c) Access to Information Prior to the Closing Date; Supplements to
Schedules.
(i) Between the date of execution of this Agreement and the
Closing Date, Seller shall provide the authorized representatives of Buyer with
access at all reasonable times to the offices, books and records of Seller
(including, without limitation, the policies, procedures and manuals used by
Seller in connection with the Medicaid Business), to permit Buyer to make such
inspections and/or copies of such books and records as it may reasonably require
and will cause its officers to furnish Buyer with such financial and operating
data and other information with respect to the Medicaid Business and the Special
Intangible Medicaid Assets as Buyer may from time to time reasonably request.
Buyer's right of access and inspection shall be exercised in such a manner as to
not interfere unreasonably with Seller's operations. Within five (5) days of the
execution of this Agreement (and prior to commencing such visits, inspections
and contacts), the parties shall identify their respective transition teams and
shall establish protocols so that the transition teams may coordinate their
efforts and the manner in which visits, inspections and contacts are to be
conducted. Each transition team will have a lead person with in-depth knowledge
of operations who will be available on a daily basis.
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(ii) Between the date of execution of this Agreement and the
Closing Date, Seller shall provide Buyer with supplemental information on any
matters previously disclosed on the schedules hereto or otherwise reported to
Buyer (including, without limitation, providing Buyer with information
concerning any Designated Medicaid Provider that has terminated, or indicated an
intent to terminate, a Designated Provider Contract), and Seller hereby
represents and warrants that such supplements shall be true, correct and
complete in all material respects as of the date or dates thereof. Such
supplements shall not in any way be deemed or construed to modify any
representations or warranties previously made, all of which shall continue in
full force and effect, nor shall the provision of such supplements be deemed or
construed to cure or otherwise excuse any breach of a representation or warranty
by Seller under ARTICLE 4.
(iii) Prior to Closing, Seller shall provide to Buyer on a weekly
basis all such information as Buyer may reasonably request regarding (A)
services which are pending because they are subject to an open authorization
(including, without limitation, open authorizations related to any outsourced
vendor, such as behavioral health, vision, dental, that performs medical
management) and (B) pre-authorization requests which have been denied in the
sixty (60) days prior to the date Buyer requests such information.
(d) Access to Information After the Closing Date.
(i) From and after the Closing Date, Seller shall (A) for so long
as Seller is required by law or the terms of Seller's Florida Medicaid Contract
after the termination of such contract (but in no event less than two (2)
years), maintain and, upon Buyer's prior written request, provide the authorized
representatives of Buyer with access at such place, date and time as Seller may
reasonably designate (such date to be within five (5) business days of the
request) to, the books, records, information and contracts included within the
Special Intangible Medicaid Assets, as well as books and records of Seller with
respect to the operation of the Medicaid Business prior to the Effective Date
and the fulfillment of Seller's obligations under Seller's Medicaid Contract and
(B) for so long as Seller is continuing to pay and run-out the medical claim
liabilities included in the Excluded Liabilities and otherwise discharge its
obligations under Seller's Florida Medicaid Contract, continue to compile,
generate and update such management, cost and utilization reports (including
claims lag and experience reports) for pre-Effective Date services as it would
prepare in the normal course of business, or as Buyer may reasonably request
(based on a bona fide stated purpose and use) (provided Seller will not be
required to incur an unreasonable expense or cost in connection with such
additional requested reports), and promptly forward such reports to Buyer. If
after Closing Buyer is required to file any reports related to the Members, the
Designated Medicaid Providers party to an Assumed Provider Contract or the
services provided to the Members and the periods covered by such reports include
any period prior to the Effective Date, Seller shall, upon Buyer's request,
supply the required information and provide Buyer with such certifications
regarding the information as may be required in connection with Buyer's filings.
(ii) Buyer shall maintain the confidentiality of the confidential
member information that it receives from Seller in the same manner as it
maintains the confidentiality of all other member information that it has or
generates, all in accordance with applicable law. Such information shall be
maintained for so long as Buyer is required to maintain it under the terms of
Buyer's Florida Medicaid Contract and applicable law. After Closing, upon
Seller's prior written
31
request, Buyer shall provide the authorized representatives of Seller with
access at such place, date and time as Buyer may reasonably designate (such date
to be within five (5) business days of the request) to the member records
transferred to Buyer at Closing, provided, Seller has a bona fide need for such
access (such as defending litigation with a former member) and Buyer receives
appropriate consents and authorizations. During such inspections, Seller shall
be entitled, at Seller's sole risk and expense, to obtain copies of such patient
records, but only for purposes of pending litigation involving a former Member
to whom such records refer, as certified in writing by Seller's counsel prior to
obtaining such copies. Following their use, Seller shall promptly return all
copies so obtained. Any such access to the records or Buyer's personnel shall be
upon the condition that such access not materially interfere with the business
operations of Buyer.
(e) Further Assurances. Each Party shall, at any time and from time to
time after the Closing Date, upon request of any other Party, do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, all such further acts, instruments, assignments, transfers, powers of
attorney and assurances as may be reasonably required in order to carry out the
intent of this Agreement.
(f) Payment of Excluded Liabilities; Discharge of Pre-Effective Date
Medical Claim Liabilities. Seller shall pay, perform and discharge in due course
all of its obligations with respect to Seller's Florida Medicaid Contract for
periods prior to the Effective Date (and the termination and close-out of such
contract) and any of the Excluded Liabilities. Without limiting the foregoing,
Seller shall specifically administer, pay and run out all of its medical claim
liabilities related to dates of service prior to the Effective Date and all
Excluded Claims and perform all reporting obligations under Seller's Florida
Medicaid Contract (or imposed as part of the Closing Governmental
Authorizations) in connection with the performance by Seller of its obligations
with respect to the Medicaid Business for periods prior to the Effective Date.
In connection with the discharge of such claims, to the extent any of the claims
payment information for such claims is received by Buyer after the Effective
Date, Buyer shall use commercially reasonable efforts to forward such
information to Seller within five (5) business days. Seller shall on or before
the Closing Date provide Buyer with such information as may be reasonably
required by Buyer to identify the Excluded Claims and to refer them to Seller.
Buyer shall use commercially reasonable efforts to apply its medical management
protocols and procedures related to Members covered under a Span Admission in
the same manner in which Buyer applies its medical management protocols and
procedures to its members generally.
(g) Employee Interviews. During the period prior to Closing, Seller
shall, upon Buyer's written request, provide Buyer with a list of personnel who
provide services to the Medicaid Business and make available (including
providing reasonable access to Buyer) for interviews and post-Closing employment
by Buyer all employees who perform most of their services for the Medicaid
Business (including the marketing staff) and such other employees, if any, as
Seller and Buyer may mutually agree. Buyer shall not be obligated to interview
or hire any of such employees, and in the event Buyer hires any of such
employees, the terms of such employment shall be determined by Buyer in its sole
discretion and without any assumption of Seller's obligations or liabilities to
such employees. Prior to Closing, Buyer shall identify which of the available
employees Buyer intends to hire at Closing, and Seller shall accept the
resignation of such employees, contingent upon Closing, so that they may become
"new hires, at-will" of Buyer as of the Effective
32
Date or such later date as Buyer and the employee shall agree. Except as
expressly permitted in this Section 7.3(g), between the date hereof and the
Closing Date Buyer shall not solicit for employment any employees of Seller who
perform most of their services for the Medicaid Business without the consent of
Seller.
(h) Credentialing. At Closing, Seller shall deliver to Buyer a
schedule which lists on a month-by-month basis all Designated Medicaid Providers
under Assumed Provider Contracts who are scheduled for recredentialing following
the Effective Date. Seller shall also provide to Buyer at Closing a copy, in
Microsoft Access, of its entire credentialing database with respect to
Designated Medicaid Providers under Assumed Provider Contracts. To the extent
Buyer deems it reasonably necessary, Seller and Buyer shall negotiate in good
faith the terms of a commercially standard delegation agreement pursuant to
which Buyer would be deemed to have delegated to Seller and Seller would be
deemed to have accepted (at no charge) the credentialing duties related to such
Designated Medicaid Providers under Assumed Provider Contracts until the earlier
of each such provider's recredentialing date or Buyer's revocation of the
delegation; provided, the discharge of such duties shall be based solely on the
information compiled by Seller prior to Closing; and, provided, further, such
agreement shall have customary limitations on Seller's liability (such as
limitations on liability to the extent of errors related to fraud or material
misrepresentations by third parties). After execution of this Agreement and
until the thirtieth (30th) day after the Effective Date, Buyer shall be provided
with such access as may be necessary to audit at least fifty (50) of Seller's
redacted/blinded credentialing files in respect of Designated Provider Contracts
(as Buyer may randomly select) and to generally audit Seller's credentialing
policies and procedures.
(i) Termination of Bonus Pools/Funds. Seller shall ensure in
connection with the assignment of the Assumed Provider Contracts that all
periodic bonus payments from a shared risk or referral services pool/fund in
respect of the Medicaid Business, if any, are closed on an interim basis such
that Seller shall be responsible to reconcile and settle such pools through
Closing and shall pay any required bonuses, and Buyer shall be responsible to
reconcile and settle pools related to periods of service from and after the
Effective Date in respect of the Medicaid Business.
(j) Regulatory Updates. Seller shall promptly advise Buyer of any
regulatory changes which are reasonably likely to have a material impact on the
Special Intangible Medicaid Assets or Medicaid Business following the Closing
Date.
(k) Rate Adjustment/Assessments. Seller acknowledges that there may be
certain reductions in payments made by AHCA to Buyer after the Effective Date
(by way of offset or recoupment) as a result of a determination by AHCA that
Seller was overpaid for services rendered by Seller prior to the Effective Date
or that Seller was not otherwise entitled to receive payment at the capitation
rates used (an "Overpayment"). Seller hereby agrees that in the event AHCA seeks
to collect an Overpayment from Buyer by way of offset, recoupment, assessment or
otherwise, Seller shall promptly reimburse Buyer for all such Overpayments.
Buyer shall notify Seller of any efforts initiated by AHCA to collect an
Overpayment so that Seller may take such legal action as Seller deems
appropriate related to such effort. If Seller is able to enjoin AHCA's action or
otherwise obtain a stay of AHCA's collection efforts which excuses Buyer from
any present obligation, Buyer agrees to not voluntarily pay AHCA any amounts on
account of the Overpayment through the duration of such injunction or stay.
33
(l) Covenant Not to Use Name. In order that Buyer may have and enjoy
the full benefit of the Special Intangible Medicaid Assets and the Medicaid
Business, Seller agrees that it will not use or permit any Person under its
joint or individual control to use the name "St. Augustine Medicaid" or any logo
associated therewith, or any confusingly similar copyright, trademark, trade
name, service mark, service name, slogan or assumed name or logo in any manner
whatsoever in connection with any business, including, without limitation, the
use of any such copyright, trademark, trade name, service mark, service name,
slogan or assumed name or logo in promotional materials, except to the extent
necessary to discharge Seller's obligations hereunder, including, without
limitation, the payment of all Excluded Liabilities.
(m) Post-Closing Cooperation. In addition to the obligations otherwise
provided herein, each of the parties hereto agrees that after Closing the
parties shall cooperate with each other in providing information reasonably
required by the other party in connection with the preparation of required
reports, audits, responses to member inquiries and similar matters where access
to records is needed; provided, the out-of-pocket costs of providing information
shall be borne by the party requesting such information.
(n) Special Notices.
(i) After the date of this Agreement and prior to Closing, Seller
and Seller's Parent shall give prompt written notice to Buyer of (A) the
occurrence, or failure to occur, of any event that has caused any representation
or warranty of Seller or Seller's Parent, as applicable, contained in this
Agreement to be untrue in any material respect, and (B) any failure of Seller or
Seller's Parent, as applicable, to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. Such notification shall not in any way be deemed or
construed to modify any representations, warranties or covenants previously made
by Seller or Seller's Parent, all of which shall continue in full force and
effect, nor shall such notification be deemed or construed to cure or excuse the
breach so disclosed, limit Buyer's recourse with respect thereto or affect the
applicability of the condition that would not be satisfied as a result of such
breach.
(ii) After the date of this Agreement and prior to Closing, Buyer
shall give prompt written notice to Seller and Seller's Parent of (A) the
occurrence, or failure to occur, of any event that has caused any representation
or warranty of Buyer contained in this Agreement to be untrue in any material
respect, and (B) any failure of Buyer to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. Such notification shall not in any way be deemed or
construed to modify any representations, warranties or covenants previously made
by Buyer, all of which shall continue in full force and effect, nor shall such
notification be deemed or construed to cure or excuse the breach so disclosed,
limit the recourse of Seller or Seller's Parent with respect thereto or affect
the applicability of the condition that would not be satisfied as a result of
such breach.
(o) Confidentiality.
(i) After Closing, Seller and Seller's Parent agree to comply
with all confidentiality covenants set forth in the Noncompetition Agreement.
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(ii) After Closing, Buyer agrees that it will keep confidential
and not disclose to any third party any confidential information disclosed by
Seller or Seller's Parent pursuant to that certain Confidentiality Agreement
dated November 6, 2002 which is related to Seller or Seller's Parent, unless and
to the extent (i) such confidential information is part of Special Intangible
Medicaid Assets or (ii) disclosure is (x) required by law, (y) required to
enforce Buyer's rights under this Agreement or (z) such information is or
becomes generally known to and available for use by the public other than as a
result of the fault of Buyer or the fault of any other person known to Buyer to
be bound by a duty of confidentiality to Seller or Seller's Parent.
(iii) With respect to information that is included in the Special
Intangible Medicaid Assets and relates to Seller's operation of the Medicaid
Business (the "Acquired Information Concerning Operations"), Buyer agrees to use
commercially reasonable efforts to protect the confidentiality of such
information with the same degree of care used to protect its own confidential
and proprietary information. In the event Buyer receives a request or demand for
Acquired Information Concerning Operations pursuant to interrogatories, requests
for information, subpoena, civil investigative demand or similar process
involving an action against Seller, Buyer shall use commercially reasonable
efforts to (i) give notice thereof to Seller so that Seller may, at its sole
cost and expense, seek an appropriate protective order, and (ii) consult with
Seller on the advisability of taking legally available steps to resist or narrow
such request. If, in the absence of a protective order obtained by Seller, Buyer
is, in the opinion of its counsel, required to disclose such Acquired
Information Concerning Operations or should disclose such information to avoid
prejudicing Buyer's legal position, Buyer may disclose such information. The
foregoing notwithstanding, nothing herein shall be deemed or construed as
limiting Buyer's ownership interest in the Acquired Information Concerning
Operations (which shall be absolute and exclusive of any rights of Seller) or as
limiting Buyer's right to use or transfer the Acquired Information Concerning
Operations for such business purposes as Buyer may determine in its sole
discretion, including, without limitation, in connection with any asset sale by
Buyer.
ARTICLE 8
EXPENSES, INDEMNITY AND SURVIVAL
8.1 Expenses.
(a) Except as expressly set forth in Sections 8.1(b) and 8.1(c) below
or as otherwise provided in this Agreement, Seller, on the one hand, and Buyer,
on the other hand, shall be responsible for their own costs and expenses
incurred in connection with the transactions contemplated hereby, including the
fees and expenses of counsel, accountants, brokers, finders and consultants.
(For the avoidance of doubt, Seller or its Affiliates shall be solely
responsible for and shall pay any and all fees and expenses of Cain Brothers &
Company, LLC.)
(b) All applicable state sales taxes and transfer taxes, if any, in
respect of the transactions contemplated hereby shall be borne by Seller.
35
(c) All out-of-pocket costs and expenses related to effecting all
provider and member communications required in connection with this Transaction
shall be equally shared by Seller and Buyer.
8.2 Indemnification by Seller and Seller's Parent. (a) Subject to Section
8.2(b), Seller and Seller's Parent, jointly and severally, shall indemnify,
defend and hold harmless Buyer and its Affiliates from and against, and will
reimburse Buyer and its Affiliates the amount of, any damage, expense,
liability, claim or loss (including, without limitation, reasonable attorneys'
fees and other reasonable costs and expenses incident to, and amounts paid or
required to be paid in settlement of, any claim, suit, action or proceeding,
including, without limitation, claims, suits, actions or proceedings to enforce
this indemnity obligation), whether or not involving a Third Party Claim
(collectively "Losses"), suffered, sustained, incurred, paid or required to be
paid by Buyer which arises out of, results from or is related to:
(i) the breach by Seller or Seller's Parent of any
representation, warranty, covenant or agreement contained in this Agreement
(without giving effect to any supplement or bring down to the disclosure
schedules prior to or at Closing) (for avoidance of doubt, Seller and Seller's
Parent shall be jointly and severally liable for breaches of representations,
warranties and covenants under this ARTICLE 8 notwithstanding any other term or
provision of this Agreement in which such representations, warranties or
covenants are made severally by the parties);
(ii) any of the Excluded Assets or the Excluded Liabilities,
including, without limitation (A) any liabilities of Seller and/or Seller's
Parent not related to the Medicaid Business, (B) any liabilities of Seller
and/or Seller's Parent related to the Medicaid Business for periods prior to the
Effective Date (including, without limitation, medical claim liabilities with
dates of service prior to the Effective Date for all Members or the Excluded
Provider Contracts), (C) all Taxes imposed on the Medicaid Business, the Special
Intangible Medicaid Assets or the Assumed Liabilities as a result of operations
relating to the Medicaid Business conducted prior to the Effective Date, and (D)
any obligations and liabilities related to employees of Seller (including
obligations and liabilities related to any such employees who are employed by
Buyer following Closing for periods prior to the Effective Date) and the
Excluded Benefit Plans;
(iii) any of the Excluded Claims;
(iv) any claim (known or unknown, contingent or otherwise,
whether arising in contract, contribution, indemnity, tort or otherwise), suit,
action or proceeding that relates to Seller, Seller's Parent, the Assumed
Provider Contracts or the Medicaid Business in which the principal event giving
rise thereto occurred prior to the Effective Date or which arises out of or
results from any action or inaction prior to the Effective Date by Seller,
Seller's Parent or any director, officer, employee or agent of Seller or
Seller's Parent; or
(v) the matters described in item numbers 2 and 7 on Schedule
4.13.
Buyer acknowledges that for any claim for indemnification where Seller and
Seller's Parent are jointly and severally liable, all notices shall be sent to
Seller prior to or concurrently with notices to Seller's Parent as required
pursuant to Section 11.5.
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(b) The obligations of Seller and Seller's Parent set forth in this
ARTICLE 8 shall be subject to the following limitations and restrictions:
(i) (A) neither Seller nor Seller's Parent shall be obligated to
indemnify Buyer until such time as the total Losses Buyer has suffered,
sustained, incurred, paid or is required to pay by reason of all breaches are in
excess of a $50,000 aggregate threshold (at which point Seller and Seller's
Parent shall jointly and severally indemnify Buyer from and against all Losses
relating back to the first dollar) and (B) there will be an aggregate ceiling on
the obligation of Seller and Seller's Parent to indemnify Buyer equal to
$10,000,000; provided, however, that these limitations shall not apply with
respect to any Losses arising from or in connection with (x) any intentional
misrepresentation or fraud, (y) any breach of representation or warranty
contained in Sections 4.1, 4.2, 4.10 or 4.11, or (z) any breach of any covenant
or agreement, all of which shall be indemnified on a dollar-for-dollar basis.
(ii) Seller and Seller's Parent shall have no liability with
respect to any claim or other assertion of a right to recover Losses for any
breach of the representations, warranties and covenants of Seller and Seller's
Parent contained in this Agreement unless Buyer delivers to Seller notice of
such matter within two (2) years after the Closing Date, except for (x) any
breach of an agreement or covenant by either Seller and Seller's Parent for
which indemnification shall be required if Buyer delivers notice to Seller at
any time prior to expiration of the applicable period under the statute of
limitations therefor, (y) any breach of a representation or warranty contained
in Sections 4.1, 4.2 or 4.10, for which there shall be no time limitations in
which Buyer must deliver notice to Seller to be entitled to indemnification
hereunder, and (z) any breach of a representation and warranty contained in
Section 4.11 for which indemnification shall be required if Buyer delivers
notice of such matter to Seller prior to expiration of the statute of
limitations applicable to assessments of taxes by governmental authorities with
respect to each period prior to the Closing Date.
8.3 Indemnification by Buyer.
(a) Subject to Section 8.3 below, Buyer shall indemnify, defend and
hold harmless Seller and its Affiliates from and against, and will reimburse
Seller and its Affiliates the amount of, any Losses suffered, sustained,
incurred, paid or required to be paid by Seller which arises out of, results
from or is related to:
(i) the breach by Buyer of any representation, warranty, covenant
or agreement contained in this Agreement (without giving effect to any
supplement or bring down to the disclosure schedules prior to or at Closing);
(ii) any of the Assumed Liabilities; or
(iii) any claim made by a third party that relates to Buyer, the
Assumed Provider Contracts or Buyer's operation of the Medicaid Business after
the Effective Date in which the principal event giving rise thereto occurred on
or subsequent to the Effective Date or which arises out of or results from any
action or inaction on or after the Effective Date by Buyer or any officer,
director, employee or agent of Buyer, except to the extent such Losses arise out
of, result from or are
37
related to the Excluded Liabilities or constitute Losses for which Seller and
Seller's Parent are required to indemnify Buyer under Section 8.2 above.
(b) Buyer's obligations set forth in ARTICLE 8 shall be subject to the
following limitations and restrictions:
(i) (A) Buyer shall not be obligated to indemnify Seller and its
Affiliates until such time as the total Losses Seller or its Affiliates have
suffered, sustained, incurred, paid or are required to pay by reason of all
breaches are in excess of a $50,000 aggregate threshold (at which time Buyer
shall indemnify Seller and its Affiliates from and against all Losses relating
back to the first dollar); and (B) there will be an aggregate ceiling on the
obligation of Buyer to indemnify Seller and its Affiliates equal to $10,000,000;
provided, however, that these limitations shall not apply with respect to any
Losses arising from or in connection with any intentional misrepresentation or
fraud.
(ii) Buyer shall have no liability with respect to any claim or
other assertion of a right to recover Losses for any breach of the
representations, warranties and covenants of Buyer contained in this Agreement,
unless Seller delivers to Buyer notice of such matter within two (2) years after
the Closing Date, except for (x) any breach of a representation or warranty
contained in Sections 5.1 or 5.2 for which there shall be no time limitations in
which Seller must deliver notice to Buyer to be entitled to indemnification
hereunder, and (y) any breach of an agreement or covenant for which
indemnification shall be required if Seller delivers notice to Buyer at any time
prior to expiration of the applicable period under the statute of limitations
therefor.
8.4 No Offsets. Neither Seller nor Buyer shall have the right to offset
amounts payable to the other Party under this Agreement because of outstanding
claims, liabilities or obligations asserted by Seller or Buyer, as applicable,
against such other Party under any other provision of this Agreement.
8.5 Indemnification Procedure--Third Party Claims.
(a) Promptly after receipt by an indemnified party of notice of a
claim from a third party (a "Third Party Claim") which may give rise to a claim
for indemnification hereunder, such indemnified party shall, if a claim is to be
made against an indemnifying party, give notice to the indemnifying party of
such Third Party Claim. Notwithstanding the foregoing, the failure to notify the
indemnifying party will not relieve the indemnifying party of any liability that
it may have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is materially prejudiced by
the indemnified party's failure to give such notice, and then only to the extent
of such prejudice.
(b) Any indemnifying party will have the right to defend the
indemnified party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the indemnified party so long as (i) the indemnifying
party notifies the indemnified party in writing within ten (10) days after the
indemnified party has given notice of the Third Party Claim that the
indemnifying party will indemnify the indemnified party from and against the
entirety of any Loss the indemnified party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
the indemnifying party provides the indemnified party with evidence reasonably
38
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the indemnified party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the indemnified party, and (v) the indemnifying party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the indemnifying party is conducting the defense of the
Third Party Claim in accordance with Section 8.5(b) above, (i) the indemnified
party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the indemnified party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
indemnifying party (not to be withheld or delayed unreasonably), and (iii) the
indemnifying party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the indemnified party (not to be withheld or delayed unreasonably)
unless the judgment or proposed settlement involves only the payment of money
damages by the indemnifying party and does not impose an injunction or other
equitable relief on the indemnified party.
(d) In the event any of the conditions in Section 8.5(b) above is or
becomes unsatisfied in any material respect, however, (i) the indemnified party
may defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the indemnified party need not consult with, or obtain
any consent from, any indemnifying party in connection therewith), (ii) the
indemnifying parties will reimburse the indemnified party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the indemnifying parties
will remain responsible for any Loss the indemnified party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this ARTICLE 8.
(e) With respect to any Third Party Claim subject to indemnification:
(i) both the indemnified person and the indemnifying person, as the case may be,
shall keep the other fully informed of the status of such Third Party Claims and
any related proceedings where such other person is not represented by its own
counsel, and (ii) the parties agree to render to each other such assistance as
they may reasonably require of each other (provided the indemnified party shall
be entitled to reimbursement of its reasonable costs and expenses) and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Third Party Claim.
8.6 Indemnification Procedure-Other Claims. A claim for indemnification for
any matter not involving a Third Party Claim may be asserted by notice to the
party from whom indemnification is sought.
8.7 Survival. All representations, warranties, covenants and obligations in
this Agreement and any other certificate or document delivered pursuant to this
Agreement shall survive the Closing and the consummation of the Transaction for
the periods set forth in this ARTICLE 8. The right to indemnification,
reimbursement, or other remedy based on the breach of such
39
representations, warranties, covenants and obligations shall not be affected by
any due diligence or other investigation conducted by the Party seeking relief.
The waiver of any condition based on the accuracy of any representations or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement, or
other remedy based on the breach of such representations, warranties, covenants
and obligations.
8.8 Exclusive Remedy; Mitigation; No Double Recovery.
(a) Except in the case of intentional misrepresentation or fraud, and
except for claims of injunctive or other equitable relief for which monetary
damages covered by an indemnity set forth herein are not adequate, the sole and
exclusive remedy for any breach or inaccuracy, or alleged breach or inaccuracy,
of any representation or warranty made by Seller, Seller's Parent or Buyer shall
be the remedies provided by this ARTICLE 8.
(b) Each indemnified party shall use reasonable efforts (as it shall
determine in good faith) to mitigate to the extent practical the amount of any
Losses for which it is entitled to seek indemnification hereunder.
(c) Notwithstanding anything herein to the contrary, no party shall be
entitled to indemnification or reimbursement under any provision of this
Agreement for any amount to the extent such party has been indemnified or
reimbursed for such amount under any other provision of this Agreement.
(d) All payments under this ARTICLE 8 shall be treated as adjustments
to the Purchase Price.
ARTICLE 9
TERMINATION
9.1 Termination of Agreement. This Agreement may be terminated prior to
Closing as follows:
(a) By Buyer, by giving written notice to Seller prior to Closing, (i)
in the event Seller has breached any representation, warranty or covenant
contained in this Agreement in any material respect, Buyer has notified Seller
of the breach, and the breach has continued without cure for a period of thirty
(30) days after the notice of breach, or (ii) if any condition in Section 6.1 or
6.2 has not been satisfied as of September 30, 2003 (or if satisfaction of such
condition by such date is or becomes impossible) (other than through failure of
Buyer to fully comply with its obligations under this Agreement) and Buyer has
not waived such condition on or before such date;
(b) By Seller, by giving written notice to Buyer prior to Closing, (i)
in the event Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material respect, Seller has notified Buyer
of the breach, and the breach has continued without cure for a period of thirty
(30) days after the notice of breach, or (ii) if any condition in Section 6.1 or
6.3 has not been satisfied as of September 30, 2003 (or if satisfaction of such
condition by such date is or
40
becomes impossible) (other than through failure of Seller to fully comply with
its obligations under this Agreement) and Seller has not waived such condition
on or before such date; or
(c) By mutual written consent of Seller and Buyer.
9.2 Effect of Termination. Each Party's right of termination under Section
9.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of such right of termination will not constitute an
election of remedies. If this Agreement is terminated pursuant to Section 9.1,
all rights and obligations of the Parties under this Agreement will terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach), except that the obligations of the Parties in this
Section 9.2 and Section 7.3(a) and ARTICLE 11 will survive.
ARTICLE 10
DEFINITIONS
10.1 Certain Defined Terms. Unless the context otherwise specifies or
requires, the following terms have the meanings specified below:
"Acquired Information Concerning Operations" shall have the meaning
given in Section 7.3(o).
"Affected Members" shall have the meaning given in Section
7.1(b)(iii).
"Affiliate" means (i) any Person directly or indirectly controlling,
controlled by or under common control with another Person; (ii) any Person
owning or controlling ten percent (10%) or more of the outstanding voting
securities of such other Person; (iii) any officer, director or partner of such
Person; and (iv) if such Person is an officer, director or partner, any such
company for which such Person acts in such capacity.
"Agreement" means this Asset Purchase Agreement, as originally
executed, as amended, supplemented or otherwise modified from time to time.
"AHCA" shall have the meaning given in the Recitals.
"Ancillary Agreements and Instruments" means those agreements and
instruments required to be executed in accordance with this Agreement by Seller
or Buyer as the context so requires.
"Assumed Liabilities" shall have the meaning given in Section 2.1.
"Assumed Provider Contracts" shall have the meaning given in Section
1.1(b).
"Audited Year End Statements" shall have the meaning given in Section
7.2(f).
"Bankruptcy" means with respect to any Party: (i) the filing of an
application by such Party for, or its consent to, the appointment of a trustee,
receiver or custodian of its assets; (ii) the
41
entry of an order for relief with respect to such Party in proceedings under the
United States Bankruptcy Code, as amended or superseded from time to time; (iii)
the making by such Party of a general assignment for the benefit of creditors;
(iv) the entry of an order, judgment or decree by any court of competent
jurisdiction appointing a trustee, receiver or custodian of the assets of such
Party; (v) the failure by such Party generally to pay its debts as the debts
become due within the meaning of Section 303(h)(1) of the United States
Bankruptcy Code or the admission in writing of its inability to pay its debts as
they become due.
"Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan, or (d) Employee Welfare Benefit Plan or material fringe benefit or
other retirement, bonus or incentive plan or program.
"Business Day" means a day on which commercial banking institutions in
Norfolk, Virginia are open for the transaction of substantially all of their
banking business.
"Buyer" means AMERIGROUP Florida, Inc.
"Buyer's Adjustment Statement" shall have the meaning given in Section
3.2(e).
"Buyer's Florida Medicaid Contract" shall have the meaning given in
the Recitals.
"Buyer's Medicaid Plan" shall have the meaning given in the Recitals.
"Closing" shall have the meaning given in Section 3.4.
"Closing Date" means the date of Closing, as determined pursuant to
Section 3.4.
"Closing Governmental Authorizations" shall have the meaning given in
Section 6.1(a).
"Closing Transferred Membership" shall have the meaning given in
Section 3.2(c).
"CMS" means Centers for Medicare & Medicaid Services.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Contingent Provider Contracts" shall have the meaning given in
Section 7.1(a)(ii).
"Definitive Statement" shall have the meaning given in Section 3.2(e).
"Designated Medicaid Provider" means the providers with whom Seller
has contracted through a Designated Provider Contract.
"Designated Provider Contracts" shall have the meaning given in
Section 7.1(a)(i).
42
"DFS" means the Florida Department of Financial Services.
"Dual Product Provider Contract" shall have the meaning given in
Section 1.1(b).
"Effective Date" shall have the meaning given in Section 3.4.
"Effective Month" shall have the meaning given in Section 3.2(c).
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder, as in effect from time to time.
"Escrow Account" shall have the meaning given in Section 3.3(a).
"Escrow Agreement" shall have the meaning given in Section 3.3(a).
"Escrow Deposit" shall have the meaning given in Section 3.3(a).
"Excess Amount" shall have the meaning given in Section 3.3(b)(iii).
"Excluded Assets" shall have the meaning given in Section 1.2.
"Excluded Claims" shall have the meaning given in Section 2.2(b).
"Excluded Benefit Plans" shall have the meaning given in Section
2.2(e).
"Excluded Liabilities" shall have the meaning given in Section 2.2.
"Excluded Provider Contracts" shall have the meaning given in Section
1.2(b).
"Financial Statements" shall have the meaning given in Section 4.4(a).
"Florida Medicaid Program" shall have the meaning given in the
Recitals.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time, consistently applied.
"Governmental Authorizations" means the governmental licenses,
franchises, permits, privileges, immunities, approvals and other governmental
authorizations that a Party needs to own its assets and operate its business as
it is now being operated.
"HMO" shall have the meaning given in the Recitals.
"IBNR" means incurred but not reported claims and incurred but not
paid claims.
43
"Independent Accounting Firm" shall have the meaning given in Section
3.2(e)."Interim Monthly Reports" shall have the meaning given in Section 7.2(f).
"Knowledge", when used with respect to a representation or warranty by
Seller, shall mean the actual knowledge of the officers of Seller (and any
officers of Seller's Parent rendering services to Seller) who hold the position
of vice president or any senior position thereto, provided such persons shall be
deemed to have knowledge of a fact or matter if a prudent individual could be
expected to discover or otherwise become aware of such fact or matter in the
course of discharging their duties or conducting a reasonable investigation for
purposes of making a representation or warranty. For avoidance of doubt, the
vice presidents of Seller include the persons listed on Schedule 10.1.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the lien or security interest arising from a mortgage, charge,
pledge, assignment, hypothecation, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes or other
encumbrance of any nature whatsoever on or with respect to any cash, property,
right to receive income or other assets of any nature whatsoever.
"Loss" or "Losses" shall have the meaning given in Section 8.2.
"Medicaid Business" shall have the meaning given in the Recitals.
"Member Notice" shall have the meaning given in Section 7.1(b)(iv).
"Members" shall have the meaning given in the Recitals.
"NCQA" means National Committee for Quality Assurance.
"Overpayment" shall have the meaning given in Section 7.3(k)
"Party" or "Parties" has the meaning given in the Preamble.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization, association, a government or any
agency, authority or political subdivision thereof.
"PIP Regulation" shall have the meaning given in Section 4.7(f).
"Pre-Closing Conditions Related to the Closing Governmental
Authorizations" shall have the meaning given in Section 6.1.
"Preliminary Purchase Price" shall have the meaning given in Section
3.1.
"Provider Notice" shall have the meaning given in Section 7.1(b)(i).
"Purchase Price" shall have the meaning given in Section 3.1.
44
"Reconciliation Month" shall have the meaning given in Section 3.2(d)
"Reconciled Transferred Membership" shall have the meaning given in
Section 3.2(d).
"RTE Files" shall have the meaning given in Section 3.2(d).
"SAP" means statutory accounting principles as prescribed by NAIC
Accounting Practices and Procedures Manual and consistently applied.
"Seller" means AvMed, Inc., a Florida not-for-profit corporation.
"Seller's Adjustment Statement" shall have the meaning given in
Section 3.2(e).
"Seller's Enrolled RTEs" shall have the meaning given in Section
3.2(d).
"Seller's Florida Medicaid Contract" shall have the meaning given in
the Recitals.
"Seller's Medicaid Plan" shall have the meaning given in the Recitals.
"Seller Medicaid Provider" shall have the meaning given in the
Recitals.
"Seller's Parent" means SantaFe HealthCare, Inc., a Florida
not-for-profit corporation.
"Seller's Parent's Representations and Warranties" shall mean all
representations and warranties under Sections 4.1, 4.2, 4.3, 4.4, 4.17, 4.18 and
4.19 that relate to Seller's Parent, as specifically identified.
"Seller's Representations and Warranties" shall mean all
representations and warranties in ARTICLE 4.
"Shortfall Amount" shall have the meaning given in Section 3.3(b)(ii).
"Span Admission" shall have the meaning given in Section 2.2(b).
"Special Intangible Medicaid Assets" shall have the meaning given in
Section 1.1.
"Statement of Restated Members" shall have the meaning given in
Section 3.2(d).
"Taxes" means all federal, state, local and foreign income,
employment, franchise, capital stock, premium taxes, excise, gross receipts,
sales, use, personal property (including, without limitation, Florida
intangible), escheat, real estate and stamp taxes, payments in lieu of taxes,
levies, duties, assessments and fees of any nature, together with all related
penalties, fines or additions to tax or interest thereon.
"Tax Returns" shall have the meaning given in Section 4.11.
"Third Party Claim" shall have the meaning given in Section 8.5(a).
45
"Transaction" means the transactions described under ARTICLE 1,
ARTICLE 2, and ARTICLE 3 hereof.
"Transferred Members" shall be those Members who are enrolled in
Buyer's Medicaid Plan as a result of consummation of the Transaction.
10.2 Accounting Terms. All terms of an accounting nature not specifically
defined herein shall have the respective meanings given to them under GAAP.
10.3 Other Definition Provisions. The masculine form of words includes the
feminine and the neuter and vice versa, and, unless the context otherwise
requires, the singular form of words includes the plural and vice versa and "or"
is used in the sense of "and/or." The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular section or subsection.
ARTICLE 11
GENERAL PROVISIONS
The following shall be applicable throughout the term of this Agreement:
11.1 Amendments and Waivers; Construction. No amendment, modification,
termination or waiver of any provision of this Agreement shall be effective
unless the same shall be set forth in a writing signed by each Party, and then
only to the extent specifically set forth therein. This Agreement shall not be
construed more strictly against one Party than the other by virtue of the fact
that it may have been prepared by counsel for one of the Parties, it being
recognized that each Party has contributed substantially and materially to the
preparation of this Agreement.
11.2 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of each of Seller and Buyer and their respective successors and
assigns. No Party may assign or transfer any of its rights under this Agreement
or any interest herein without the prior written consent of the other party
hereto and any such assignment without such consent shall be null and void;
provided, however, Buyer shall be entitled to assign this Agreement to a party
acquiring all or substantially all of its assets.
11.3 Counterparts. This Agreement and any amendment hereof may be executed
in any number of counterparts and by each party on a separate counterpart, each
of which, when so executed and delivered, shall be deemed to be an original and
all of which taken together shall constitute one and the same instrument. In
producing this Agreement, it shall not be necessary to produce or account for
more than one such counterpart signed by the Party against whom enforcement is
sought.
11.4 No Waivers by Implication. No course of dealing on the part of any
Party or its respective officers, directors, employees, consultants or agents,
nor any failure or delay by any Party with respect to exercising any of its
respective rights, powers or privileges under this Agreement or law shall
operate as a waiver thereof. No waiver by any Party of any condition or the
breach of any term, covenant, representation or warranty contained in this
Agreement, whether by conduct or
46
otherwise, in any one or more instances shall be deemed a further or continuing
waiver of any condition or covenant, representation or warranty of this
Agreement.
11.5 Notices. Unless otherwise specified herein, all notices, requests and
other communications to any Party hereunder (i) shall be in writing (ii) shall
be given to such Party at its address set forth below or such other address as
such Party may hereafter specify for that purpose by notice to the other Parties
and (iii) shall be delivered by hand or certified mail, postage prepaid, return
receipt requested, or nationally-recognized overnight courier service.
If to Seller:
AvMed, Inc.
4300 N.W. 89th Boulevard
Gainesville, Florida 32606
Attention: Mr. Robert C. Hudson, Chief Executive
If to Seller's Parent:
SantaFe HealthCare, Inc.
4300 N.W. 89th Boulevard
Gainesville, Florida 32606
Attention: Mr. Robert C. Hudson, President and
Chief Executive Officer
With Copies (in each case) to:
Stephen J. DeMontmollin, Esquire
Senior Vice President & General Counsel
4300 N.W. 89th Boulevard
Gainesville, Florida 32606
Gary Scott Davis, P.A.
McDermott, Will & Emery
201 South Biscayne Boulevard
Miami, Florida 33131
If to Buyer (or Buyer ):
AMERIGROUP Corporation
4425 Corporation Lane, Suite 300
Virginia Beach, Virginia 23462
Attention: Stanley F. Baldwin, Esquire, Senior Vice President
and General Counsel
47
With a Copy to:
Thomas C. Inglima, Esquire
Willcox & Savage, P.C.
1800 Bank of America Center
Norfolk, Virginia 23510
Each such notice, request or other communication shall be effective (a) if
delivered by hand, on the date of such delivery, (b) if given by certified mail,
upon receipt, or (c) if given by overnight courier, when delivered at the
address specified in this Section.
11.6 Reproductions. This Agreement and all other documents, instruments and
agreements in the possession of any Party which relate hereto or thereto may be
reproduced by such Party, and any such reproduction shall be admissible in
evidence, with the same effect as the original itself, in any judicial or other
administrative proceeding, whether the original is in existence or not. No Party
will object to the admission in evidence of any such reproduction, unless the
objecting Party reasonably believes that the reproduction does not accurately
reflect the contents of the original and objects on that basis.
11.7 Entire Agreement. This Agreement, together with the exhibits and
schedules to this Agreement, embodies the entire agreement and understanding
between the Parties with respect to the subject matter hereof, and supersedes
all prior agreements and understandings between such Parties relating to the
subject matter hereof and thereof, including, without limitation, that certain
Letter of Intent between AMERIGROUP Corporation and Seller dated December 27,
2002. If there is a conflict between the terms, conditions, representations,
warranties and covenants contained in this Agreement and any other document,
then the provisions in this Agreement shall control.
11.8 Exhibits, Schedules and Attachments. The exhibits, schedules and
attachments attached to this Agreement are incorporated herein and shall be
considered a part of this Agreement for the purposes stated herein, except that
in the event of any conflict between any of the provisions of such exhibits,
schedules and attachments and the provisions of this Agreement, the provisions
in this Agreement shall control. Each Party is responsible for the accuracy of
its respective schedules regardless of any assistance provided by the other
Party in connection with the preparation of the schedules. After the date of
this Agreement, Seller (a) may update Schedule 4.7(a) to reflect providers that
have been added or terminated after the date of this Agreement, and (b) may
update Schedules 4.7(b), 4.7(c), 4.7(e), 4.7(f), 4.7(g), and 4.7(h) to reflect
changes caused by additions or deletions made by Buyer to Schedule 7.1. Such
updates shall be delivered as soon as practicable, but in no event later than
five (5) days prior to Closing. Any disclosure made in one schedule may be
incorporated by reference into one or more other schedules so long as such other
schedules expressly identify the disclosure to be incorporated and the purpose
for which it is being incorporated is clear.
11.9 Rights Cumulative. Except as set forth herein, all rights, powers and
remedies herein given to each Party are cumulative and not alternative, and are
in addition to all statutes or rules of law; any forbearance or delay by such
Party in exercising the same shall not be deemed to be a waiver thereof, and the
exercise of any right or partial exercise thereof shall not preclude the further
48
exercise thereof, and the same shall continue in full force and effect until
specifically waived by an instrument in writing executed by such Party.
11.10 Governing Law, Waiver of Jury Trial, etc.. This Agreement, and the
rights and obligations of the Parties hereunder, shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed entirely within Florida. EACH OF THE PARTIES
HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
11.11 Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid, such invalidity shall not
affect any other provision which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable.
11.12 Captions. The captions of and sections in this Agreement are for
convenience of reference only, shall not define or limit the provisions hereof
and shall not have any legal or other significance whatsoever.
11.13 Third Party Rights. It is the intention of the parties that nothing
in this Agreement shall be deemed to create any right with respect to any Person
or entity not a party to this Agreement or the successor or assign thereof.
11.14 Time of Essence. TIME IS OF THE ESSENCE in the performance of this
Agreement.
11.15 Written Agreement Required/No Oral Modification. Notwithstanding any
negotiations or discussions between Seller and/or Buyer, or any statements made
in connection therewith, there shall be no legally binding agreement with regard
to the transactions contemplated by and the subject matter of this Agreement,
unless and until Seller and Buyer have each duly executed and delivered to each
other a final agreement among them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
AMERIGROUP FLORIDA, INC., a Florida
corporation
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
AVMED, INC., a Florida not-for-profit
corporation
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
SANTAFE HEALTHCARE, INC., a Florida
not-for-profit corporation
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
50
EXHIBIT A
FORM OF ESCROW AGREEMENT
EXHIBIT B
FORM OF BILL OF SALE AND ASSIGNMENT
EXHIBIT C
FORM OF NONCOMPETITION AGREEMENT
EXHIBIT D
FORM OF SELLER'S OPINION
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT F
FORM OF BUYER'S OPINION
SCHEDULE 1.1(d)
Provider Database Elements
1. Name (with first name broken out from last name, and with name suffixes
(Jr., Sr.)) - if the provider is a facility or ancillary, full name only is
necessary
2. Degree
3. Specialties (and whether practicing as a PCP or specialist in each)
4. Foreign language capabilities (or confirmation that there are none)
5. All hospital affiliations
6. Gender
7. Ethnicity
8. Social Security Number
9. Date of Birth
10. Tax Numbers; for each tax number:
. Office addresses including street, city, state, zip, county, phone
number, fax number (or confirmation that there is no fax), PCP office
hours
. Billing address (if different from office address)
. Group name, if any, and whether payment is to the group or to the
individual (Group TIN and Billing address info if payment is to the
group)
. Age restrictions
. Reimbursement schedule for this tax number (i.e., capitation of FFS
data)
. PCP age restrictions
. Whether or not each provider's practice is closed to new members
. Panel Status (open vs. closed)
11. License Number
12. Medicaid number
13. AvMed's provider or affiliation number
14. DEA Number
15. Credentialing Status codes
16. Provider professional education data (medical schools, residency, etc.)