Exhibit 10.39.1
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is entered
into as of the 21st day of May, 2003, by and among AMERIGROUP FLORIDA, INC., a
Florida corporation ("Buyer"), AVMED, INC., a Florida not-for-profit corporation
("Seller"), and SANTAFE HEALTHCARE, INC., a Florida not-for-profit corporation
("Seller's Parent"). (Capitalized terms not defined when used herein shall have
the respective meanings ascribed to such terms under the Asset Purchase
Agreement described below.)
RECITALS:
A. The parties hereto have entered into an Asset Purchase Agreement dated
as of March 15, 2003 (the "Asset Purchase Agreement"), pursuant to which Seller
has agreed to sell to Buyer, and Buyer has agreed to buy from Seller, all of
Seller's rights in and to the Special Intangible Medicaid Assets.
B. Under the Asset Purchase Agreement, the Purchase Price is determined
preliminarily at Closing based on the Closing Transferred Membership and then
definitively adjusted based on the Reconciled Transferred Membership (the
"Reconciliation Mechanism").
C. The Reconciliation Mechanism assumed that the rights of the Members to
disenroll or opt-out of Buyer's health plan after Closing would not be expanded
as a result of the terms of the Closing Governmental Authorizations and,
therefore, the conditions to Closing included, among other things, the
following: (1) the absence of any Closing Governmental Authorization which would
require notice to Members advising them of any right to disenroll from or
opt-out of Buyer's Medicaid Plan on or after the Effective Date (a "Notice
Regarding Post-Effective Date Opt-Out Rights"), and (2) AHCA's delivery of a
written approval which includes, among other things, an assurance that neither
AHCA nor CMS will require or send any Notice Regarding Post-Effective Date
Opt-Out Rights (the "Assurance").
D. AHCA has not delivered the Assurance with the approvals given to date
because the notices that it is requiring (the "AHCA Required Notices") are not
being pre-approved by CMS.
E. Buyer will waive the condition related to the delivery of the Assurance
if the Reconciliation Mechanism is modified to address any Notice Regarding
Post-Effective Date Opt-Out Rights that may be required by CMS.
F. The parties desire to amend the Asset Purchase Agreement to include such
modifications to the Reconciliation Mechanism and to address certain additional
issues related to the Transaction, all on the terms set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein and Ten Dollars ($10.00) cash in hand
paid, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
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1. (a) Subject to Section 1(c) below, if on or before the date Buyer
delivers to Seller Buyer's Adjustment Statement, CMS requires or sends a Notice
Regarding Post-Effective Date Opt-Out Rights, the Reconciliation Month shall be
amended hereby to be the later of the fourth month after Closing in which
capitation is paid, and (ii) the first month in which capitation is paid after
the expiration of the post-Effective Date disenrollment/opt-out period required
by CMS in the Notice Regarding Post-Effective Date Opt-Out Rights, and the
reconciliation process required by Section 3.2(e) of the Asset Purchase
Agreement will be deferred until such new Reconciliation Month.
(b) Subject to Section 1(c) below:
(i) If after Buyer delivers to Seller Buyer's Adjustment
Statement but prior to the one hundred eightieth (180th) day after the Effective
Date CMS requires or sends a Notice Regarding Post-Effective Date Opt-Out Rights
(the "Special CMS Notice"), the reconciliation process required by Section
3.2(e) of the Asset Purchase Agreement and the settlements required by Sections
3.2 and 3.3 of the Asset Purchase Agreement shall be effected; however, an
additional reconciliation shall thereafter be performed as described below to
determine the Members who were included in the Reconciled Transferred Membership
but who voluntarily disenrolled from or opted-out of Buyer's Medicaid Plan
during the period between the date that the Special CMS Notice was sent and the
end of the post-Effective Date disenrollment/opt-out period (the "Special
Voluntary Opt-Out Members").
(ii) Within ten (10) business days of receipt of the enrollment
tape for the first month in which capitation is paid after the expiration of the
post-Effective Date disenrollment/opt-out period specified in the Special CMS
Notice (the "Special Reconciliation Month"), Buyer shall deliver to Seller a
statement identifying the Special Voluntary Opt-Out Members (the "Buyer's
Special Reconciliation Statement"), together with a list of the Reconciled
Transferred Membership and the enrollment tape for the Special Reconciliation
Month. Buyer's Special Reconciliation Statement 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 Buyer's Special Reconciliation
Statement and provides a written statement identifying the Special Voluntary
Opt-Out Members (the "Seller's Special Reconciliation Statement"). Failing
timely objection in accordance with the preceding sentence, the Buyer's Special
Reconciliation Statement shall be deemed the Definitive Adjustment Statement
(defined below). If Seller submits a timely objection (including Seller's
Special Reconciliation Statement), Seller and Buyer shall work in good faith to
resolve the dispute, and any mutual agreement of Buyer and Seller with respect
to the Special Voluntary Opt-Out Members and the Purchase Price shall be deemed
the Definitive Adjustment Statement. If Seller and Buyer cannot agree on a final
and binding calculation of the Special Voluntary Opt-Out Members within ten (10)
days of Seller's delivery to Buyer of a timely objection with Seller's Special
Reconciliation Statement, Seller and Buyer shall submit the list of the
Reconciled Transferred Membership and the enrollment tape for the Special
Reconciliation Month and Buyer's Special Reconciliation Statement and Seller's
Special Reconciliation Statement to PricewaterhouseCoopers or other mutually
acceptable nationally-qualified accounting firm (the "Independent Accounting
Firm") for preparation of the Definitive Adjustment Statement. The Independent
Accounting Firm's preparation of the Definitive Adjustment Statement shall
consist solely and exclusively of (A)
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reviewing the list of the Reconciled Transferred Members and the enrollment tape
for the Special Reconciliation Month and (B) identifying the Special Voluntary
Opt-Out Members solely based on its review of such list and tape. Within fifteen
(15) days after the Parties' submission of the dispute, the Independent
Accounting Firm shall complete the preparation of the Definitive Adjustment
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
Adjustment Statement shall be paid by the Party (Buyer or Seller, as the case
may be) whose calculation of the number of Special Voluntary Opt-Out Members is
furthest from the number set forth in the Definitive Adjustment Statement. The
"Definitive Adjustment Statement" shall be the statement of the definitively
determined and final and binding calculation of the Special Voluntary Opt-Out
Members, whether determined by (1) Seller's failure to timely object to Buyer's
Special Reconciliation Statement, (2) the parties' mutual agreement if Seller
submits a timely objection to Buyer's Special Reconciliation Statement, or (3)
the Independent Accounting Firm.
(iii) Within five (5) days after the Definitive Adjustment
Statement is final and binding, Seller shall return to Buyer a cash amount equal
to the product determined by multiplying (x) $322.58 by (y) the number of
Special Voluntary Opt-Out Members set forth in the Definitive Adjustment
Statement. The Purchase Price shall be adjusted to take into account any amount
so returned to Buyer.
(c) If any of the conditions set forth below are satisfied and prior
to the satisfaction of such conditions CMS has not required or sent a Notice
Regarding Post-Effective Date Opt-Out Rights, then the amendments made by
Sections 1(a) and 1(b) above shall be null, void and of no further force or
effect:
(i) CMS notifies Seller and Buyer in writing that no notices to
Members (other than the AHCA Required Notices) will be required in connection
with the consummation of the transaction or the enrollment of the Members with
Buyer's Medicaid Plan on the Effective Date;
(ii) AHCA delivers a letter to Seller and Buyer with the
Assurance; or
(iii) (A) the letter that AHCA is required to deliver to CMS in
connection with the approval process is delivered to CMS and identifies the
principal conditions that AHCA has required in connection with the consummation
of the transaction (including the AHCA Required Notices), describes the AHCA
Required Notices and includes copies of them, and indicates that it is AHCA's
understanding that CMS will not require that the Members be given any additional
notices in connection with the consummation of the transaction or the enrollment
of the Members in Buyer's Medicaid Plan, and (B) in response, CMS acknowledges
in writing that the conditions imposed by AHCA were sufficient or confirms that
AHCA's understanding was correct.
2. The parties acknowledge and agree that Seller desires to have the
marketing personnel set forth on Schedule 1 attached hereto (the "Seller's
Marketing Representatives") become employees of Buyer as of June 19, 2003,
instead of on the Effective Date, and Buyer intends to hire such employees as of
June 19, 2003. Without waiving any conditions to Closing
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or Buyer's hiring prerogatives, the parties hereby agree that the language in
the third sentence of Section 7.3(g) of the Asset Purchase Agreement is hereby
amended by inserting the following at the end of such sentence:
"provided, the foregoing notwithstanding, Seller shall accept the
resignation of Seller's Marketing Representatives as of June 18, 2003,
and such employees may become employed with Buyer from and after such
date."
3. Except as modified by the provisions of this Amendment, all of the terms
of the Asset Purchase Agreement shall remain in full force and effect.
4. This Amendment 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.
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SIGNATURE PAGE(S) FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
AMERIGROUP FLORIDA, INC.
By: (SEAL)
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Name:
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Title:
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AVMED, INC.
By: (SEAL)
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Name:
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Title:
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SANTAFE HEALTHCARE, INC.
By: (SEAL)
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Name:
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Title:
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