SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT ("Settlement Agreement") among Horizon Healthcare
of New Jersey, Inc. ("Horizon") f/k/a Medigroup of New Jersey, Inc.
("Medigroup"); Allied Specialty Care Services, Inc. ("Allied"), successor in
interest to Allied Health Group, Inc. ("AHG") now d/b/a Magellan Specialty
Health ("MSH"); and CareAdvantage, Inc. ("CareAdvantage"). Horizon, MSH, and
CareAdvantage collectively shall be referred to as the "Parties."
W I T N E S S E T H :
WHEREAS, Horizon has operated a health maintenance organization
(commonly referred to as an "HMO") in New Jersey, which arranged for medical
services for its enrollees through contracts with family and general practice
physicians, hospitals and other providers;
WHEREAS, on or about January 2, 1997, Horizon's predecessor, Medigroup,
and AHG entered into an Administrative Services Agreement, pursuant to which AHG
agreed, inter alia, to provide Horizon with certain utilization management and
administrative services in connection with the review, processing and payment of
claims for services rendered submitted by certain specialist physicians for the
enrollees in the HMO and point of service ("POS") plans operated or administered
by Medigroup;
WHEREAS, the foregoing Administrative Service Agreement was modified by
a Letter Agreement dated March 1, 1997 between Medigroup, AHG, and
CareAdvantage;
WHEREAS, on or about October 16, 1997, AHG assigned substantially all
of its right, title and interest in and to its agreement with Medigroup to
Allied, and Allied assumed substantially all of AHG's obligations thereunder;
WHEREAS, Horizon instituted suit against Allied in the United States
District Court for the District of New Jersey, entitled Horizon Healthcare of
New Jersey, Inc. vs. Allied Specialty Care Services, Inc., Civil Action Xx. 00
Xxx. 0000 (XXX), to which action Allied joined CareAdvantage as Third-Party
Defendant;
WHEREAS, the Parties have asserted claims between and among themselves
with respect to alleged breaches of the Administrative Service Agreement;
WHEREAS, the Parties now seek to resolve the claims among and between
them as more fully set forth in the form of Release attached hereto as Exhibit A
and in this Settlement Agreement; and
WHEREAS, the parties further recognize the commercial advantages
accruing to the parties from the continuing relationship between Horizon and
MHS, and seek to resolve the claims among and between them in the context of
continuing contractual relations;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Settlement Payments. MSH and CareAdvantage agree, severally and not
jointly, as follows:
(a) MSH agrees to pay the sum of $722,611.28 to Horizon pursuant to
the payment schedule annexed hereto as Exhibit C;
(b) CareAdvantage (i) upon execution of this Settlement Agreement,
shall execute and deliver to Horizon a promissory note in the
amount of $419,500, payable to the order of Horizon and
otherwise in the form annexed hereto as Exhibit D (the "CAI
Note"), and (ii) agrees to pay to Horizon, in addition to any
amounts due under the CAI Note, the sum of $419,500 within six
months following execution of this Settlement Agreement;
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(c) MSH agrees to pay an additional sum to Horizon not to exceed
$425,000, following implementation of services under agreements
between Horizon, or any of its affiliates, and MSH, which
agreements shall include and be subject to the following
provisions:
o The services shall include any combination of provider
profiling, patient profiling, call center, disease management
and DXM;
o The services shall be provided at market rates;
o The agreements for the provision of such services shall not
be subject to termination without cause during the first two
years of contract term;
(d) The additional sum set forth in subparagraph "c" above shall
be calculated on the basis of:
o $1 for each $2 of projected annualized revenue; with respect
to the first $250,000 of such revenues; and
o $1 for each $3 of projected annualized revenue, with respect
to the next $900,000 of such revenues calculated in each case
according to the terms of the executed agreement(s).
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2. Releases. In the form attached hereto as Exhibit A, Horizon, Allied
and CareAdvantage will execute Releases which will be effective upon receipt of
a fully executed version of this Settlement Agreement.
3. Dismissal of the Settled Claims. Promptly after execution of this
Settlement Agreement by all Parties, and the Releases by Horizon, CareAdvantage
and Allied, Horizon shall file in the federal court action a Consent Order
dismissing with prejudice the Settled Claims. The Consent Order is attached as
Exhibit B.
4. No Admission of Liability. The Parties recognize that this is a
commercial settlement of disputed matters and that this settlement does not
constitute (and shall not be argued to constitute) an admission by any of the
Parties, or evidence of any kind concerning any of the positions taken by any of
the Parties or the relationships between or among the Parties.
5. Representation by Counsel; Construction of Settlement Agreement. The
Parties represent and warrant that they have been represented by legal counsel
with respect to the negotiation of this Settlement Agreement; that each has been
advised by legal counsel as to its respective rights and obligations with
respect to this Settlement Agreement; and that each has participated in the
review and drafting of this Settlement Agreement such that no construction of
the terms or effect of this Settlement Agreement shall be made against any Party
as principal drafter of this Settlement Agreement.
6. Press Release. Horizon and MSH shall jointly develop a press release
or other public announcement regarding the new business between them.
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7. Confidentiality.
A. Other than the press release referenced in Paragraph 6, this
Settlement Agreement, all matters relating to the terms and negotiation of this
Settlement Agreement, and the implementation of any and all of its terms
(collectively referred to in this Paragraph as the "Agreement") are and shall
remain confidential; provided however, the fact that the Parties have entered
into a settlement, without disclosing any of the other details of the Agreement,
may be disclosed by the Parties. Notwithstanding the foregoing, (i) MSH or
Horizon may disclose the Agreement to related or affiliated corporate entities,
and its attorneys, general counsel, corporate counsel, accountants and
actuaries, auditors, lending institutions, and investment bankers; (ii)
CareAdvantage may disclose the Agreement to (x) related or affiliated corporate
entities, and its attorneys, general counsel, corporate counsel, accountants and
actuaries, auditors, lending institutions, and investment bankers and (y) any
state, federal, or governmental authority, including but not limited to
disclosures in SEC filed documents and/or their state or local equivalent, to
which CareAdvantage upon advice of counsel reasonably believes it has a legal or
contractual obligation to report or disclose its terms.
B. In the event any Party believes disclosure of the Agreement is
required by operation of law (other than, in the case of CareAdvantage,
disclosure permitted pursuant to subparagraph (A)(ii) above), or that MSH or
Horizon believes disclosure of the Agreement is permitted pursuant to
subparagraph (A)(i) above,
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(i) the Party receiving any such request or demand for disclosure
shall give the other Parties written notice at least twenty (20) days prior to
disclosing the information, unless the receiving Party is required by law or
court order to disclose such information at an earlier date, in which case the
receiving Party shall give the other Parties as much notice as is possible under
the circumstances. Such notice shall set forth all information which the Party
intends to disclose, the identity of each person to whom the information is to
be disclosed, the statute or other legal authority purportedly requiring the
disclosure, and the circumstances pursuant to which disclosure is proposed to be
made, and
(ii) the Parties each agree to assert objections to such disclosure
based on confidentiality, Rule 408 of the New Jersey and/or Federal Rules of
Evidence and similar state and foreign jurisdiction legal provisions regarding
settlements. In the event disclosure is required by operation of law, the
receiving Party shall request the court requiring disclosure to order that any
such disclosure be made in camera and sealed from the public record.
8. Notice Provision. All notices to be given hereunder shall be in
writing and given by hand delivery, telecopy, facsimile transmission, telegram
or registered or certified mail, postage prepaid, return receipt requested to
the respective Parties as follows:
If to Horizon:
Xxxxxx X. Xxxxxxxxxxxx
Vice President, General Counsel and Secretary
Horizon Blue Cross Blue Shield of New Jersey
0 Xxxx Xxxxx, Xxxx, XX-00X
Xxxxxx, Xxx Xxxxxx 00000
cc: None
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If to MHS:
Xxxxx X. Xxxxxx, Esq.
Executive Vice President & General Counsel
0000 Xxxxxxxx Xxxxxxx Xx.
Xxxxx 000
Xxxxxxxx, XX. 00000
Fax: 000-000-0000
cc: Xxxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxx Xxxxxxxxx Edelman & Dicker LLP
Gateway Two
Xxxxxx, XX 00000
If to CareAdvantage:
Xxxxxxx Xxxxxxx, M.D.
President & Chief Operating Officer
CareAdvantage, Inc.
000-X Xxxxx Xxx Xxxxx
cc: Xxxxxx Xxxxxxx, Esq.
General Counsel
0000 Xxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Fax: 000-000-0000
Any notice given in accordance with this Paragraph 8, shall be deemed given and
received within three (3) days after mailing (in the case of notice sent by
registered or certified mail) or upon receipt (in the case of notice given by
hand delivery, telecopy, facsimile transmission, or telegram).
9. Waiver of Compliance. The failure of any Party to comply with any
obligation, covenant, agreement or condition herein may be expressly waived in
writing by the other Parties, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
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10. Binding Nature of Terms and Representations of the Parties. Each of
the terms of this Settlement Agreement is binding upon each of the signatories
hereto, their respective successors, transferees, assigns, representatives,
principals, agents, officers, directors and employees; provided however, that no
Party may assign its rights under this Settlement Agreement without the consent
of the other Parties, which consent shall not be unreasonably withheld.
11. Representations of Parties. Each of the Parties hereto hereby
represents and warrants to the other to the extent applicable that:
A. Such party has all power and authority, and all or any
necessary regulatory consents, to enter and perform this
Agreement;
B. Such party has taken all necessary actions to authorize the
execution of this Agreement in accordance with its terms; and
C. Such party, without further consideration, shall execute and
deliver such other documents and take such other action as may
be necessary to give full force and effect to this Agreement.
12. Headings. The headings contained in this Settlement Agreement are
merely for convenience of reference and shall not under any circumstances affect
the meaning or interpretation of this Settlement Agreement.
13. Counterparts. This Settlement Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. Signatures may
be delivered via telecopy.
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14. Governing Law. This Settlement Agreement shall be governed by the
laws of the State of New Jersey, without giving effect to New Jersey choice of
law principles.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed by their authorized representatives as of the date and
year set forth below:
HORIZON HEALTHCARE OF NEW JERSEY, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Dated: August 9, 2000
ALLIED SPECIALTY CARE SERVICES, INC.
d/b/a MAGELLAN SPECIALTY HEALTH
By: /s/
----------------------------------
Dated: August 9, 2000
CAREADVANTAGE, INC.
By: /s/ R. Xxxxxxxxxxx Xxxxx
----------------------------------
Dated: August 9, 2000
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RELEASE
This Release dated August 9, 2000, is given and exchanged by and among
Horizon Healthcare of New Jersey, Inc.("Horizon"), f/k/a Medigroup of New
Jersey, Inc. ("Medigroup"); Allied Specialty Care Services, Inc. ("Allied"),
successor in interest to Allied Health Group, Inc. ("AHG"), now d/b/a Magellan
Specialty Health ("MSH"); and CareAdvantage, Inc., ("CareAdvantage") and all of
their successors, predecessors and affiliate companies; as Releasors, to and in
favor of each other, as Releasees, each party hereby releasing the other
parties, pursuant to the terms of this Release.
Each party hereby irrevocably releases and forever discharges each of
the other parties from the following claims:
A. All claims for, or relating, to the Administrative Service Agreement
dated January 2, 1997, by and between Medigroup and AHG, and the Letter
Agreement dated March 1, 1997 by and among Medigroup, AHG and CareAdvantage; and
These include, but are not limited to, all claims for breach of the
foregoing agreements by any party thereto, or by their successors or assigns.
B. All claims which have been or which could have been made in
connection with either of the foregoing agreements in either of the following
proceedings:
(1) The action entitled Horizon HealthCare of New Jersey, Inc. v.
Allied Specialty Care Services, Inc., Civil Action Xx. 00-XXX. 0000
(XXX), pending in the United States District Court for the District of
New Jersey;
The consideration for the Release exchanged is as set forth in the
Settlement Agreement, and further includes the mutual release and discharge of
the parties' respective claims for breach of the foregoing agreements.
IN WITNESS WHEREOF, the parties have caused this Release to be executed
by their authorized representatives as of the date and year set forth below:
HORIZON HEALTHCARE OF NEW JERSEY, INC.
By:/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Dated: August 9, 2000
ALLIED SPECIALTY CARE SERVICES, INC.
d/b/a MAGELLAN SPECIALTY HEALTH
By:/s/
-----------------------------------
Dated: August 9, 2000
CAREADVANTAGE, INC.
By:/s/ R. Xxxxxxxxxxx Xxxxx
-----------------------------------
Dated: August 9, 2000
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XXXXXX, XXXXX XXXXXXXXX, XXXXXXX & XXXXXX LLP
TFQ-3063
00 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Tel: (000) 000-0000 Fax: (000) 000-0000
Attorneys for Defendant Counterclaimant/Third-Party Plaintiff
Allied Specialty Care Services, Inc..
--------------------------------------------------
HORIZON HEALTHCARE OF NEW UNITED STATES DISTRICT COURT FOR THE DISTRICT
JERSEY, INC., THE DISTRICT
OF NEW JERSEY
Plaintiff,
Civil No. 99-W2819 (AJL)
v.
ALLIED SPECIALTY CARE SERVICES, INC.,
Defendant Counter-
claimant/Third-Party CONSENT ORDER OF
Plaintiff, DISMISSAL
v.
CAREADVANTAGE, INC.,
Third-Party Defendant.
--------------------------------------------------
This matter having been opened to the Court by Horizon Healthcare of
New Jersey, Inc. and Allied Specialty Care Services, Inc., now d/b/a Magellan
Specialty Health; and this Court having considered the matter, and for good
cause shown:
It is on this ____ day of November, 2000;
ORDERED, that this action be and hereby is dismissed in its entirety
with prejudice and without costs; and it is;
ORDERED that a copy of this Order be served on all counsel of record
within 7 days.
---------------------------------
XXXXXX X. XXXXXXX, XX., U.S.D.J.
CONSENTED TO:
Horizon Health Care of New Jersey, Inc.
By:
------------------------------------
Allied Specialty Care Services, Inc.
d/b/a Magellan Specialty Health
By:
------------------------------------
CAREADVANTAGE, INC.
By:
------------------------------------
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The following is the payment schedule from MSH to Horizon of the $722,611.28,
payable quarterly, over two(2) years:
Due Date Amount
-------- ------
8/1/00 $90,326.41
11/1/00 $90,326.41
2/1/01 $90,326.41
5/1/01 $90,326.41
8/1/01 $90,326.41
11/1/01 $90,326.41
2/01/02 $90,326.41
5/1/02 $90,326.41
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OF SUCH LAWS.
CAREADVANTAGE, INC.
PROMISSORY NOTE
$419,500.00 Newark, New Jersey
August 9, 2000
FOR VALUE RECEIVED, the undersigned, CAREADVANTAGE, INC., a Delaware corporation
with its principal place of business at 000-X Xxxxx 0 Xxxxx, Xxxxxx, Xxx Xxxxxx
00000 (the "Payor"), promises to pay to the order of HORIZON HEALTHCARE OF NEW
JERSEY, INC., a New Jersey corporation with its principal place of business at
Three Xxxx Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx 00000 (the "Payee"), by wire transfer
or in same day funds at its above-stated address, as the Payee shall direct the
Payor in writing, the principal sum of FOUR HUNDRED NINETEEN THOUSAND, FIVE
HUNDRED DOLLARS ($419,500.00), together with all interest on the outstanding
principal balance and other expenses, payable as set forth below in lawful money
of the United States of America.
This Promissory Note (this "Promissory Note") is the promissory note
referred to in Section 1(b) of the Settlement Agreement dated as of August 9,
2000 (the "Agreement") by and among the Payor, the Payee and Allied Specialty
Care Services, Inc., successor in interest to Allied Health Group, Inc. (now
d/b/a Magellan Specialty Health), a Delaware corporation.
The outstanding principal amount of this Promissory Note shall bear interest
daily from August 9, 2000 until payment in full of all of amounts due and owing
hereunder at the rate of six and sixteen hundredths percent (6.16%) per annum;
provided, however, that the rate shall be adjusted on each November 1, February
1, May 1 and August 1 as of which any principal hereof remains outstanding so
that, following each such adjustment, the interest rate is equal to the rate
most recently then reported in The Wall Street Journal for five-year U.S.
Treasury notes.
Subject to the right of the Payee to accelerate the maturity of this Promissory
Note as hereinafter provided, the entire principal amount of and interest on
this Promissory Note shall be November 1, 2000 (the "Maturity Date").
An "Event of Default" shall occur if:
(a) the Payor defaults in the payment of principal or interest of this
Promissory Note when the same becomes due and payable;
(b) the Payor fails to comply with any other provision of this
Promissory Note and such failure continues for a period of five (5) days
following notice to the Payor of such failure;
(c) the Payor pursuant to or within the meaning of any bankruptcy law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
(iii) consents to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar
official (a "Custodian") of it or for all or substantially
all of its property; or
(iv) makes a general assignment for the benefit of its creditors;
or
(d) a court of competent jurisdiction enters an order or decree under
any bankruptcy law that:
(i) is for relief against the Payor in an involuntary case;
(ii) appoints a Custodian of the Payor or for all or substantially
all of its property; or
(iii) orders the winding up or liquidation of the Payor and the
order or decree remains unstayed and in effect for sixty (60)
days.
If an Event of Default occurs as described above, then the principal of and the
accrued interest on this Promissory Note shall become due and payable
immediately, whether or not notice of such Event of Default shall have been
given by any holder of this Promissory Note. The holder of this Promissory Note
may rescind an acceleration and its consequences if all existing Events of
Default (other than nonpayment of principal or interest that has become due
solely because of the acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree.
If an Event of Default occurs and is continuing, the holder of this Promissory
Note may pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of or interest on this Promissory Note or to
enforce the performance of any provision of this Promissory Note.
Except as otherwise provided by law, a delay or omission by the holder of this
Promissory Note in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No waiver of any right shall be effective
unless in writing and signed by the Payee, and no waiver on one (1) or more
occasions shall be conclusive as a bar to or waiver of any right on any other
occasion. No remedy is exclusive of any other remedy. All available remedies are
cumulative.
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The principal amount of this Promissory Note may be prepaid at the option of the
Payor upon five (5) days' prior written notice to the Payee, in whole or in
part, at any time or from time to time without premium or penalty; provided,
however, that any such prepayment shall be accompanied by accrued interest on
the principal amount so prepaid.
The Payor represents that it has taken all corporate actions necessary to
authorize it to issue this Promissory Note and to perform its obligations
hereunder.
The Payor waives diligence, protest, presentment of any instrument, demand for
payment, notice of nonpayment and acceleration and any and all other notices and
demands whatsoever in connection with the delivery, acceptance, performance,
default or enforcement of this Promissory Note.
All notices and other communications hereunder shall be in writing and shall be
made in accordance with Section 8 of the Agreement.
The obligations of the Payor under this Promissory Note may not be transferred
or assigned by the Payor without the prior written consent of the Payee. This
Promissory Note shall be binding upon the permitted assigns and successors of
the Payor and shall inure to the benefit of and be enforceable by the Payee, its
successors and assigns.
The Payor agrees to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses, incurred by the Payee in connection
with the collection and/or enforcement of this Promissory Note.
This Promissory Note shall be governed by and construed in accordance with the
internal laws of the State of New Jersey.
IN WITNESS WHEREOF, the undersigned has caused this Promissory Note to be duly
executed as of the date first above written.
CAREADVANTAGE, INC.
By:/s/ R. Xxxxxxxxxxx Xxxxx
------------------------------------
Name:
Title:
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