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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): June 30, 1996
HEALTH POWER, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23220 31-1145640
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1209 Orange Street, Wilmington, Delaware 43017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 461-9900
No Change
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS.
On June 30, 1996, Health Power HMO, Inc., an Ohio corporation ("Health
Power HMO"), and a wholly owned subsidiary of Health Power, Inc., a Delaware
corporation ("HPI"), acquired by assignment from ChoiceCare Health Plans, Inc.,
an Ohio corporation ("ChoiceCare"), certain contract rights with respect to
ChoiceCare's provider agreement with the Ohio Department of Human Services.
Under that provider agreement, ChoiceCare previously provided health care
services to Medicaid recipients residing in Hamilton County, Ohio, enrolled in
the Aid to Families with Dependent Children and Healthy Start programs (the "ADC
Medicaid Recipients"). Health Power HMO intends to continue to provide these
services to the ADC Medicaid Recipients, and through its acquisition of such
contract rights, approximately 12,000 ADC Medicaid Recipients previously
served by ChoiceCare were automatically enrolled in Health Power HMO's health
maintenance organization effective as of July 1, 1996.
The purchase price for the contract rights assigned to Health Power HMO
was $5.0 million. The purchase price was paid in cash at the closing by wire
transfer. A portion of the net proceeds from HPI's 1994 public offering was the
source of funds for the purchase price. The purchase price was determined by
negotiations between Health Power HMO and ChoiceCare. ChoiceCare does not have
any relationship with HPI or any of HPI's subsidiaries or affiliates, including
any relationship with any officer or director of HPI or any associate of any
such officer or director.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
Exhibit
No. Description of Exhibit
- ------- ----------------------
2(a) Purchase Agreement dated as of April 9, 1996, between
ChoiceCare Health Plans, Inc. and Health Power HMO,
Inc.
2(b) Amendment to Purchase Agreement dated as of June 28,
1996, between ChoiceCare Health Plans, Inc. and Health
Power HMO, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTH POWER, INC.
Date: July 10, 1996 By /s/ Thomas E. Beaty, Jr.
---------------------------
Thomas E. Beaty, Jr.,
President
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EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
2(a) Purchase Agreement dated as of April 9, 1996, between
ChoiceCare Health Plans, Inc. and Health Power HMO,
Inc.
2(b) Amendment to Purchase Agreement dated as of June 28,
1996, between ChoiceCare Health Plans, Inc. and Health
Power HMO, Inc.
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Exhibit 2(a)
PURCHASE AGREEMENT
This agreement is made as of April 9, 1996, between ChoiceCare Health
Plans, Inc., an Ohio corporation ("Seller"), and Health Power HMO, Inc., an Ohio
corporation ("Buyer").
Background Information
A. Seller owns and operates a health maintenance organization licensed
by the Ohio Department of Insurance ("Seller's HMO"). Seller's HMO operates in,
among other places, Hamilton County, Ohio. Seller's HMO provides health care
services to, among others, members who are Medicaid recipients residing in
Hamilton County, Ohio, enrolled in the Aid to Families with Dependent Children
and Healthy Start Programs (the "ADC Medicaid Members") pursuant to the terms of
a Provider Agreement dated as of December 29, 1994, as amended (the "ODHS
Provider Agreement"), with the Ohio Department of Human Services ("ODHS").
B. Buyer owns and operates a health maintenance organization licensed
by the Ohio Department of Insurance ("Buyer's HMO"). Buyer's HMO operates in,
among other places, Hamilton County, Ohio.
C. Seller desires to sell and assign to Buyer certain of Seller's
rights and interests in the ODHS Provider Agreement, and Buyer desires to
purchase such rights and interests from Seller and to assume the performance of
certain obligations of Seller under the ODHS Provider Agreement, all in
accordance with the terms and conditions of this agreement.
Statement of Agreement
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
Section 1. Assignment of Agreement. On the terms and subject to the
conditions described in this agreement, Seller shall assign to Buyer all of
Seller's rights and interests in the ODHS Provider Agreement (the "Assets"),
except for the right to receive payments relating to any period prior to the
Closing (as defined in Section 5, below) for which Seller is responsible to
provide health care services to the ADC Medicaid Members; provided that, Seller
shall be entitled to receive full payment from ODHS for all ADC Medicaid Members
enrolled in Seller's HMO prior to Closing. Any reporting obligations for any
period prior the Closing shall remain the responsibility of Seller.
Section 2. Liabilities. Except as otherwise set forth in this section,
Buyer shall not assume any liabilities or obligations of Seller, whether
accruing on, before, or after the Closing. From and after the Closing, Buyer
shall assume Seller's obligations
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under the ODHS Provider Agreement and shall be responsible to provide health
care services to those ADC Medicaid Members who are members of Seller's HMO as
of the Closing, until such time as such members disenroll in Buyer's HMO;
provided, however, that Seller shall remain liable for inpatient and
professional fees related to inpatient care incurred by any ADC Medicaid Member
who had inpatient status as of the Closing for a period not to exceed 14 days
following the Closing, and subject further to a maximum liability of $250,000.
Except as set forth in the preceding sentence, Seller shall be held harmless by
Buyer from any and all claims under the ODHS Provider Agreement and relating to
the Assets, with respect to the use and operation thereof on and after the
Closing. Seller shall remain liable for the payment of all claim expenses
incurred for dates of service prior to the date of the Closing. Except with
respect to inpatient care for 14 days following the Closing, as described above,
Buyer shall be solely responsible for all claim expenses incurred for dates of
service on or after the date of the Closing. Beginning June 15, 1996, Seller
shall provide Buyer with notice of all subsequent inpatient stays, proposed
organ transplants, and referrals of health care services, for ADC Medicaid
Members enrolled in Seller's HMO. Buyer agrees to provide, as of the Closing,
health care services to the ADC Medicaid Members, without exception and without
underwriting restrictions.
Section 3. Purchase Price and Method of Payment. The purchase price for
the Assets shall be $5,000,000 (the "Purchase Price"), $500,000 of which shall
be paid by Buyer upon the execution hereof, and $4,500,000 of which shall be
paid at the Closing. The $500,000 payment is a deposit which shall not be
refundable except if: (a) this agreement, as reasonably modified by ODHS or the
Ohio Department of Insurance ("ODI"), is not approved by ODHS or ODI, or (b) the
contingencies of Section 4, below, are not met due solely to the default or
non-performance of Seller. All payments hereunder shall be made by certified or
bank cashier's check, bank wire transfer, or other means reasonably acceptable
to Seller.
Section 4. Contingencies. The obligations of Buyer and Seller to
consummate the transactions contemplated by this agreement shall
be contingent upon the following:
(a) Buyer's and Seller's receipt of all governmental approvals
and third party consents necessary to consummate the transactions
contemplated by this agreement, including without limitation the
receipt of approval from ODHS with respect to the assignment of the
ODHS Provider Agreement from Seller to Buyer and the receipt of any
necessary approvals from ODI;
(b) Buyer's reasonable satisfaction with the results of its
due diligence review of Seller's operations as such operations relate
to the Assets and the ADC Medicaid Members, as specified in Section 7,
below, which due diligence review shall be completed on or before April
14, 1996;
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(c) All representations and warranties of Buyer and Seller
contained in this agreement being true, substantially complete, and
substantially accurate as of the Closing;
(d) Buyer and Seller having each fully performed and
observed all of their respective obligations under this
agreement;
(e) Seller being free from any agreements, restrictions, or
conditions which, in the reasonable opinion of Buyer, may have a
material adverse effect upon the Assets (or their value);
(f) No material adverse change in the Assets, the ADC Medicaid
Members, or the operations of Seller as such operations relate to the
Assets or the ADC Medicaid Members having occurred after the date of
this agreement and prior to the Closing; provided, however, Buyer
acknowledges that a decrease in the number of ADC Medicaid Members
shall not be a material adverse change for the purposes of this
agreement;
(g) The receipt on or before the Closing of an opinion letter
from Seller's counsel confirming those matters set forth in items (1),
(2), and (5) of Exhibit B; and
(h) This agreement and all related agreements or other
transaction documents having been approved by the Boards of Directors
of Buyer and Seller and their respective parent corporations on or
before April 14, 1996.
Each party will use its reasonable best efforts to cause the above
contingencies to be satisfied as soon as reasonably practicable after the date
of this agreement. If any contingency has not been satisfied or waived by the
party receiving the benefit of such contingency on or prior to the date set
forth for satisfying such contingency, or if no date is specified, then as of
the Closing, then the party receiving the benefit of such contingency may
terminate this agreement, and the parties shall have no further obligations or
liabilities under this agreement, except to the extent provided to the contrary
in this agreement; and provided that the provisions of the Confidentiality
Agreement dated March 5, 1996 (the "Confidentiality Agreement") shall survive
any such termination.
Section 5. Closing. The closing of the transactions contemplated by
this agreement (the "Closing") shall be held at such time and place as may be
mutually acceptable to Buyer and Seller, provided that the Closing shall be held
no later than June 30, 1996. The parties shall use their reasonable best efforts
to close the transaction contemplated by this agreement by June 30, 1996. In the
event that the Closing takes place on any date which is not the first or last
day of any given month, the parties hereby agree to prorate premiums as of such
date based on the number of days involved.
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Section 6. Conduct of Business. From the date of this agreement until
the Closing, Seller shall conduct the operations of Seller's HMO as such
operations relate to the provision of health care services to the ADC Medicaid
Members as presently conducted and shall not, without the written consent of
Buyer, engage in any transaction with respect to such operations not in the
ordinary and usual course of business. Seller shall also give notice to ODHS to
the effect to keep ChoiceCare in the ADC Medicaid county-wide marketing pool for
Hamilton County at all times prior to the Closing, subject to any regulatory
approval.
Section 7. Due Diligence Review. Seller acknowledges that between the
date Seller receives from Buyer the $500,000 payment required under Section 3,
above, and April 15, 1996, inclusive (the "Due Diligence Period"), Buyer and its
representatives shall have the right, upon reasonable notice and at reasonable
times, to examine the assets, business, and records of Seller as such assets,
business, and records relate to the Assets and ADC Medicaid Members enrolled in
Seller's HMO. During the Due Diligence Period, Seller also may interview
personnel of Seller who are involved in servicing ADC Medicaid Members or who
can provide information relevant to the Assets, and providers who provide
services to ADC Medicaid Members enrolled in Seller's HMO, but only to the
extent Buyer: (a) provides advance notice indicating who Buyer is interviewing,
(b) provides Seller the opportunity to participate in any such interviews, and
(c) limits such interviews to due diligence purposes and does not involve,
directly or indirectly, recruiting efforts. The results of Buyer's due diligence
review must be reasonably satisfactory to Buyer. Due diligence is limited to the
business considerations with regard to:
- Asset demographics such as age/sex
- Financial performance measures which relate
directly to the Assets and the ADC Medicaid
Members
- Special Health plan benefit structure
- Criteria for determining medical necessity
- Credentialing criteria for physicians
- Access to member/provider services
Section 8. Pre-Closing Communications with Providers. Contemporaneously
with the announcement of the execution of this agreement, or at such other time
as requested by Buyer, Seller and Buyer shall jointly send a written
communication to the primary care physicians, specialists, hospitals, and
ancillary providers in Seller's network providing them with notice of, and a
summary with respect to, the transactions contemplated by this agreement. Such
communication shall not contain a recommendation from Seller that such providers
contract with Buyer. Subject to the foregoing, such communication shall contain
such other information as either of the parties may reasonably request. Such
communication shall be
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mutually acceptable to both parties, subject to regulatory approval and
Section 29, below, and shall be so indicated in writing. Seller shall be
responsible to distribute such communication. Buyer shall offer to contract with
all physicians who are currently in contract with Seller to serve ADC Medicaid
Members, but not with Buyer, and such physicians shall be offered terms which
are no less favorable than Seller currently provides such physicians for a
period of 12 months from the Closing.
Section 9. Pre-Closing Communications with Members. Contemporaneously
with the announcement of the execution of this agreement, or at such other time
as requested by Buyer, Seller and Buyer shall jointly send a written
communication to the ADC Medicaid Members providing them with notice of, and a
summary with respect to, the transactions contemplated by this agreement. Such
communication shall not contain a recommendation from Seller that such members
continue to receive their health care benefits from Buyer after the Closing.
Subject to the foregoing, such communication shall contain such other
information as either of the parties may reasonably request. Such communication
shall be mutually acceptable to both parties, subject to regulatory approval and
Section 29, below, and shall be so indicated in writing. Seller shall be
responsible to distribute such communication.
Section 10. Employment Matters. Buyer shall not be obligated to employ
any employees presently employed by Seller. Except for those employees of Seller
identified on Exhibit A (which exhibit may be modified and updated from time to
time prior to the Closing), for one year following the Closing, Buyer shall not
offer to employ nor solicit for employment any persons employed by Seller as of
the Closing. No employee of Seller may be employed by Buyer without Seller's
consent.
Section 11. Warranties of Seller. Seller represents and warrants to
Buyer that all representations and warranties contained in the attached Exhibit
B are correct and complete as of the date of this agreement and will be correct
and complete as of the Closing. Seller shall notify Buyer at the Closing if the
representations and warranties are not correct and complete at that time. Seller
acknowledges that these representations and warranties are made as an inducement
for Buyer to enter into and perform this agreement, that each representation and
warranty is material to Buyer, and that Buyer is entering into and performing
this agreement in reliance upon these representations and warranties.
Section 12. Warranties of Buyer. Buyer represents and warrants to
Seller that all representations and warranties contained in the attached Exhibit
C are correct and complete as of the date of this agreement and will be correct
and complete as of the Closing. Buyer shall notify Seller at the Closing if the
representations and warranties are not correct and complete at that time. Buyer
acknowledges that these representations and warranties are made as an inducement
for Seller to enter into and perform this agreement, that each representation
and warranty is material to Seller, and
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that Seller is entering into and performing this agreement in reliance upon
these representations and warranties.
Section 13. Noncompetition. For a period commencing on the date of the
Closing and continuing until the first anniversary thereof, neither Seller nor
any of its affiliates shall, directly or indirectly, engage in, own any interest
in, loan money or extend credit to, or otherwise participate in a business that
operates a health maintenance organization which provides health care services
to ADC Medicaid recipients in Hamilton County, Ohio; and for a like period,
neither Buyer nor any of its affiliates shall, directly or indirectly, engage
in, own any interest in, loan money or extend credit to, or otherwise
participate in a business that operates a health maintenance organization which
provides health care services to non-ADC Medicaid recipients in those counties
constituting Seller's Cincinnati Service Area (as defined below), except as
reasonably necessary for Buyer to maintain its non-ADC Medicaid membership, in
the aggregate, at approximately 30% of its total membership in those counties
constituting Seller's Cincinnati Service Area.
For purposes of this section: (a) "directly or indirectly" means for
its own account, or as an agent, employee, director, partner, joint venturer,
shareholder, or other owner, or as a creditor, or any other participation or
interest; and (b) "Seller's Cincinnati Service Area" means the six Ohio counties
of Brown, Butler, Clermont, Clinton, Hamilton, and Warren, the six Kentucky
counties of Boone, Campbell, Gallatin, Grant, Kenton, and Pendleton, and the
five Indiana counties of Dearborn, Franklin, Ohio, Ripley, and Union.
Seller and Buyer understand that this section is an essential element
of this agreement and that each party would not have entered into this agreement
without including this section. Seller and Buyer each have consulted with its
legal counsel and has been fully advised concerning the reasonableness and
propriety of this section in the specific context of this transaction, and each
party acknowledges that this section is reasonable and appropriate in all
respects. In the event of any violation or attempted violation of this section,
each party shall be entitled to a temporary restraining order and other
temporary or permanent injunctive relief, without any showing of irreparable
harm or posting of any bond, in addition to any other rights or remedies which
may then be available to it.
In the event a court of competent jurisdiction determines this section
to be unenforceable, in whole or in part, then such court shall have
jurisdiction to reform this section so that it is enforceable to the maximum
extent permitted by law, and the parties shall abide by such court's
determination.
Section 14. Nondisparagement. Neither Seller nor Buyer nor any of
their respective affiliates shall take any action which would impair the value
of the Assets, including without limitation any
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action which would tend to disparage or diminish the reputation of the other.
Section 15. Indemnification by Seller. Seller shall indemnify and save
harmless Buyer against and from any and all losses, damages, liabilities,
claims, costs, or expenses (including reasonable legal fees) directly or
indirectly arising out of or relating to:
(a) Any failure of any representation or warranty of Seller
to be correct and complete when made or as of the
Closing;
(b) Any failure by Seller to perform and observe fully all
obligations and conditions to be performed or observed by
Seller under this agreement, whether any such failure is
innocent, negligent, or intentional; or
(c) Any liabilities relating to Seller's conduct of Seller's HMO
or to the Assets or the ADC Medicaid Members, directly or
indirectly, which are not specifically assumed by Buyer
pursuant to this agreement.
All rights and remedies under this section are cumulative and in
addition to all other rights or remedies under this agreement or any applicable
laws.
Section 16. Indemnification by Buyer. Buyer shall indemnify and save
harmless Seller against and from any and all losses, damages, liabilities,
claims, costs, or expenses (including reasonable legal fees) directly or
indirectly arising out of or relating to:
(a) Any failure of any representation or warranty of Buyer
to be correct and complete when made or as of the
Closing;
(b) Any failure by Buyer to perform and observe fully all
obligations and conditions to be performed or observed by
Buyer under this agreement, whether any such failure is
innocent, negligent, or intentional; or
(c) Any liabilities relating to the Assets or the ADC Medicaid
Members which are specifically assumed by Buyer pursuant to
this agreement.
All rights and remedies under this section are cumulative and in
addition to all other rights or remedies under this agreement or any applicable
laws.
Section 17. Notices. All notices or other communications required or
desired to be given to any party under this agreement shall be in writing and
shall be deemed given when: (a) delivered personally to that party; (b)
telecopied to that party (which is confirmed); (b) mailed by registered or
certified mail (return receipt requested) to that party at the following address
or at any other address hereafter designated by that party in writing to the
party giving notice; or (d) delivered to Federal Express or any similar
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express delivery service for delivery to that party at that address.
Notice to Buyer: Notice to Seller:
Health Power HMO, Inc. ChoiceCare Health Plans, Inc.
560 East Town Street 655 Eden Park Drive
Columbus, Ohio 43215 Cincinnati, Ohio 45202
Attn: Bernard F. Master, D.O. Attn: Daniel A. Gregorie, M.D.
Telecopy No.: (614) 461-0960 Telecopy No.: (513) 784-5300
With copies to: With copies to:
Baker & Hostetler ChoiceCare Health Plans, Inc.
65 East State Street 655 Eden Park Drive
Suite 2100 Cincinnati, Ohio 45202
Columbus, Ohio 43215 Attn: Thomas D. Anthony, Esq.
Attn: Alec Wightman, Esq. Telecopy No.: (513) 784-5300
Telecopy No.: (614) 462-2616
And to:
Frost and Jacobs
201 East 5th Street
Suite 2500
Cincinnati, Ohio 45202
Attn: Mark Longenecker, Esq.
Telecopy No.: (513) 651-6981
Section 18. Announcements. After the execution of this agreement, the
parties shall expeditiously issue a joint announcement of this agreement and the
transactions contemplated by this agreement, in form and content mutually
satisfactory to both parties, subject to regulatory approval and Section 29,
below, and shall be so indicated in writing. Thereafter, no announcement of the
transactions contemplated by this agreement shall be made by either party except
with the mutual consent of the other party; provided, however, that either party
shall be permitted to make such announcements and disclose such information as
may be required, in the opinion of its counsel, under federal and state
securities laws.
Section 19. Governing Law. All questions concerning the validity or
meaning of this agreement or relating to the rights and obligations of the
parties with respect to performance under this agreement shall be construed and
resolved under the laws of the State of Ohio.
Section 20. Expenses. Each party shall pay all costs and expenses
incurred by it in connection with this agreement and the transactions
contemplated thereby, including without limitation the fees and expenses of its
counsel.
Section 21. Execution of Documents. Each party to this agreement and
its successors and assigns shall execute, acknowledge or verify, and deliver any
and all documents which from time to time may
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reasonably be requested by any other party to this agreement to carry out the
purposes and intent of this agreement.
Section 22. Severability. The intention of the parties to this
agreement is to comply with all laws and public policies to the fullest extent
possible. If any court of competent jurisdiction determines that it is
impossible to construe any provision of this agreement consistently with any law
or public policy and consequently holds that provision to be invalid, such
holding shall in no way affect the validity of the other provisions of this
agreement, which shall remain in full force and effect.
Section 23. Nonwaiver. No failure by any party to insist upon
compliance with any term of this agreement, to exercise any option, enforce any
right, or seek any remedy upon any default of any other party shall affect, or
constitute a waiver of, such party's right to insist upon such strict
compliance, exercise that option, enforce that right, or seek that remedy with
respect to that default or any prior, contemporaneous, or subsequent default;
nor shall any custom or practice of the parties at variance with any provision
of this agreement affect, or constitute a waiver of, any party's right to demand
strict compliance with all provisions of this agreement.
Section 24. No Third Party Benefit. This agreement is intended for the
exclusive benefit of the parties to this agreement and their respective
successors and assigns, and nothing contained in this agreement shall be
construed as creating any rights or benefits in or to any third party.
Section 25. Exhibits. Each exhibit referred to in this agreement is
hereby incorporated in this agreement by reference. All obligations of Buyer or
Seller under any such exhibit shall be considered as obligations under this
agreement.
Section 26. Captions. The captions of the various sections of this
agreement are not part of the context of this agreement, but are only labels to
assist in locating those sections and shall be ignored in construing this
agreement.
Section 27. Complete Agreement. This document (including its exhibits)
contains the entire agreement between the parties and supersedes all prior or
contemporaneous discussions, negotiations, representations, or agreements
relating to the subject matter of this agreement. No changes to this agreement
shall be made or be binding on any party unless made in writing and signed by
each party to this agreement.
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Section 28. Successors. This agreement shall be binding upon, inure to
the benefit of, and be enforceable by and against the respective heirs, personal
representatives, successors and assigns of each party to this agreement.
Section 29. Regulatory Approval of Communications. To the extent any
communication, contemplated under this agreement and all related agreements,
requires approval or review by a regulatory agency, such as ODHS or ODI, such
approval shall be secured prior to making any such communication. To the extent
such a regulatory agency requires any modification to a communication, the
parties shall agree to the required change.
Section 30. ODHS or ODI Requirements. The parties agree to make any
reasonable changes to this agreement which are required by ODHS or ODI.
HEALTH POWER HMO, INC. CHOICECARE HEALTH PLANS, INC.
By /s/ Bernard F. Master, D.O. By /s/ Daniel A. Gregorie, M.D.
------------------------------- -------------------------------
Bernard F. Master, D.O. Daniel A. Gregorie, M.D.,
Chairman Chairman
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EXHIBIT A
EMPLOYEES OF SELLER WHO MAY BE OFFERED EMPLOYMENT BY BUYER
Tony Bates
Sandy Bryant
Kim Dorn
Heather Haugon
Larry James
Essie Matthews
Deborah Muhammed
Sharon Mirlenbrink
Yolawnda Rogers
Liz Sena
Cynthia Turnbow
Tiffany Whitaker
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF SELLER
(1) Organization and Standing. Seller is a corporation duly organized, legally
existing, and in good standing under the laws of the State of Ohio. Seller
has the capacity and authority to own and operate its properties and
conduct its business where and as now owned, operated, and conducted.
(2) Validity of Agreement. Except to the extent it is limited by the terms of
the ODHS Provider Agreement, Seller has full capacity, power, and authority
to enter into and perform this agreement in accordance with its provisions
as written without the approval or consent of anyone who is not a party to
this agreement. The execution and performance of this agreement by Seller
has been duly authorized by all necessary corporate action. Neither the
execution nor delivery of this agreement nor the performance, observance,
or compliance with all terms, conditions, or other provisions of this
agreement will violate any law, any order of any court or other
governmental agency or authority, the articles of incorporation or code of
regulations of Seller, or any agreement or other document to which Seller
is a party or otherwise bound. This agreement and all its provisions are
legally enforceable and binding fully in accordance with its terms and
tenor.
(3) Title to Assets. Seller has good title to the Assets, free and clear of all
security interests, liens, encumbrances, or other claims, except as
otherwise described in this agreement; Seller has good right to sell and
convey the Assets to Buyer; and Seller shall defend the title to the Assets
for the benefit of Buyer against any and all claims of all persons and
entities.
(4) ODHS Provider Agreement. The ODHS Provider Agreement is in full force and
effect and all amounts required to be paid thereunder have been paid in
full. No default or breach exists on the part of ODHS or Seller under the
ODHS Provider Agreement, nor does any circumstance currently exist that,
but for the giving of notice or the passage of time, or both, would
constitute such a breach or default or permit termination or modification
of the ODHS Provider Agreement.
(5) Legal Proceedings or Claims. There is no pending or threatened litigation,
administrative or executive proceedings, investigations, or claims against
Seller with respect to consummation of the transactions contemplated by the
agreement or effecting any of the Assets.
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(6) Legal Authority. Seller has been and is duly authorized and approved by
ODHS and ODI to provide health care services to Medicaid recipients
residing in Hamilton County, Ohio, who are enrolled in the Aid to Families
with Dependent Children and Healthy Start Programs.
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EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF BUYER
(1) Organization and Standing. Buyer is a corporation duly organized, legally
existing, and in good standing under the laws of the State of Ohio. Buyer
has the capacity and authority to own and operate its properties and
conduct its business where and as now owned, operated, and conducted.
(2) Validity of Agreement. Buyer has full capacity, power, and authority to
enter into and perform this agreement in accordance with its provisions as
written without the approval or consent of anyone who is not a party to
this agreement. The execution and performance of this agreement by Buyer
has been duly authorized by all necessary corporate action. Neither the
execution nor delivery of this agreement nor the performance, observance,
or compliance with all terms, conditions, or other provisions of this
agreement will violate any law, any order of any court or other
governmental agency or authority, the articles of incorporation or code of
regulations of Buyer, or any agreement or other document to which Buyer is
a party or otherwise bound. This agreement and all its provisions are
legally enforceable and binding fully in accordance with its terms and
tenor.
(3) Legal Proceedings or Claims. There is no pending or threatened litigation,
administrative or executive proceedings, investigations, or claims against
Buyer with respect to consummation of the transactions contemplated by the
agreement.
(4) Legal Authority. Buyer has been and is duly authorized and approved by ODHS
and ODI to provide health care services to Medicaid recipients residing in
Hamilton County, Ohio, who are enrolled in the Aid to Families with
Dependent Children and Healthy Start Programs.
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Exhibit 2(b)
AMENDMENT TO PURCHASE AGREEMENT
This amendment is made as of June 28, 1996, between ChoiceCare Health
Plans, Inc., an Ohio corporation ("Seller"), and Health Power HMO, Inc., an Ohio
corporation ("Buyer").
Background Information
(a) Seller and Buyer are parties to a Purchase Agreement dated as of
April 9, 1996 (the "Purchase Agreement"), pursuant to which Seller has agreed to
sell, and Buyer has agreed to purchase, certain of Seller's rights and interests
in a Provider Agreement dated as of December 29, 1994, as amended (the "ODHS
Provider Agreement"), between Seller and the Ohio Department of Human Services
("ODHS"), all as further described in the Purchase Agreement.
(b) Pursuant to a letter dated April 19, 1996 (the "ODHS Comment
Letter"), from William T. Ryan, the Deputy Director of the Office of Medicaid
for ODHS, to Dr. Daniel A. Gregorie, the president and chief executive officer
of Seller, and Thomas E. Beaty, Jr., the president of Buyer, ODHS has
conditioned its approval of the assignment of the ODHS Provider Agreement from
Seller to Buyer upon the completion of certain actions, all as further described
in the ODHS Comment Letter.
(c) Seller and Buyer desire to modify certain terms and provisions of
the Purchase Agreement in satisfaction of the conditions set forth in the ODHS
Comment Letter, and the parties intend that this amendment shall evidence such
modifications.
Statement of Agreement
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
1. Except as otherwise set forth in this amendment, all capitalized
terms used in this amendment but not otherwise defined herein shall have the
respective meanings given those terms in the Purchase Agreement.
2. In no event shall the effective date for the purchase and sale of
the Assets be after June 30, 1996.
3. The last sentence of Section 1 of the Purchase AgreemenT is hereby
deleted in its entirety and replaced with the following language:
Seller shall be responsible to provide Buyer with accurate and complete
utilization review reports (semi- annual/annual), cost reports
(quarterly/annual), and the disclosure report (annual)
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required to be filed with ODHS pursuant to the ODHS Provider Agreement
(collectively, the "Reports") which relate to periods prior to the
Closing but are due for filing after the Closing, for a total of five
Reports. Buyer shall be responsible to file the Reports with ODHS on or
prior to their respective filing dates. The Reports shall be provided
to Buyer at least two business days prior to their respective filing
dates. As between Buyer and Seller, Buyer shall have no responsibility
for the accuracy of any information contained in the Reports. In the
event Seller fails to provide the Reports to Buyer by the
above-referenced two business day period of time so as to enable Buyer
to timely file the Reports, Seller shall be obligated to pay $2,000 to
Buyer as damages for each such failure, not to exceed a total of
$10,000, in addition to any other rights or remedies which then may be
available to Buyer under this agreement or any applicable law.
4. Section 2 of the Purchase Agreement is hereby amended
in its entirety to read as follows:
Except as otherwise set forth in this section, Buyer shall not assume
any liabilities or obligations of Seller, whether accruing on, before,
or after the Closing. From and after the Closing, Buyer shall assume
Seller's obligations under the ODHS Provider Agreement and shall be
responsible to provide health care services to those ADC Medicaid
Members who are members of Seller's HMO as of the Closing, until such
time as such members disenroll in Buyer's HMO.
Seller shall be financially responsible for inpatient and professional
fees related to inpatient care (the "Inpatient Fees") incurred by any
ADC Medicaid Member who had inpatient status as of the Closing (an
"Inpatient Member") for a period not to exceed 14 days following the
Closing (the "14- Day Period"). However, Seller's maximum liability for
Inpatient Fees shall not exceed an aggregate of $250,000 for all
Inpatient Members (the "Maximum Amount"). Seller's liability under this
paragraph shall be satisfied through Seller's payment of Inpatient Fees
incurred by Inpatient Members during the 14-Day Period up to, but not
exceeding, the Maximum Amount. Buyer shall be financially responsible
for the Inpatient Fees incurred by the Inpatient Members during the
14-Day Period in excess of the Maximum Amount and for the Inpatient
Fees incurred by any Inpatient Member after the 14-Day Period. Except
with respect to the Inpatient Fees incurred by Inpatient Members during
the 14- Day Period up to, but not exceeding, the Maximum Amount, Seller
shall not have financial responsibility for any claims submitted by the
Inpatient Members' providers for dates of service after the Closing.
Buyer and Seller shall implement appropriate claim payment procedures
with respect to the claims submitted by the Inpatient Members'
providers, and if one of the parties pays any such claim for which the
other party is financially responsible pursuant to the provisions of
this paragraph, the
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party paying such claim shall be reimbursed by the other party. The
party from whom reimbursement was sought shall have the right to engage
an independent auditor of its choice to review the documentation
supporting the reimbursed amount. The expense of such review shall be
borne by the party from whom reimbursement was sought, unless the
review determines that the reimbursed amount paid exceeded the correct
reimbursable amount, in which case the expense of the review, not to
exceed $5,000 in the aggregate, shall be borne by the party who sought
the reimbursement. In all cases, any proprietary information made
available to the independent auditors in connection with their review
shall be kept strictly confidential by the auditors and shall not be
disclosed to any other party.
None of the Inpatient Members shall be required to change their
inpatient facility during the duration of their stay. Furthermore,
reimbursement to any provider with respect to any Inpatient Member
shall be based upon the agreed-upon reimbursement rate between such
provider and Seller in place at the time of the Inpatient Member's
admission to the inpatient facility.
Except for the Inpatient Fees incurred during the 14-Day Period, Seller
shall be held harmless by Buyer from any and all claims under the ODHS
Provider Agreement and relating to the Assets, with respect to the use
and operation thereof on and after the Closing. Seller shall remain
liable for the payment of all claim expenses incurred for dates of
service prior to the date of the Closing, and Seller shall have a right
to collect or receive payment from ODHS any receivables or monies due
for periods of service prior to the Closing. Buyer acknowledges
Seller's interest in such monies and, to the extent Buyer receives any
such monies due Seller for such pre-Closing period, Buyer shall
immediately forward such monies directly to Seller. Except with respect
to the Inpatient Fees incurred by Inpatient Members during the 14-Day
Period up to, but not exceeding, the Maximum Amount, Buyer shall be
solely responsible for all claim expenses incurred for dates of service
on or after the date of the Closing. To the extent permitted by ODHS
and applicable law, beginning June 15, 1996, Seller shall provide Buyer
with notice of all subsequent inpatient stays, proposed organ
transplants, and referrals of health care services for ADC Medicaid
Members enrolled in Seller's HMO. Buyer agrees to provide, as of the
Closing, health care services to the ADC Medicaid Members, without
exception and without underwriting restrictions.
5. Notwithstanding any language in Section 6 to the contrary, Buyer and
Seller acknowledge that ODHS has stopped further ADC Medicaid Member enrollment
for Seller's HMO as of May 1, 1996.
6. In accordance with program requirements, Buyer and Seller
acknowledge that any mailings to ADC Medicaid Members must be approved in
advance by ODHS.
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7. Buyer and Seller acknowledge that notification will be sent by ODHS
to ADC Medicaid Members allowing such members sufficient time for disenrollment
in Seller's HMO and selection of another HMO prior to their automatic enrollment
in Buyer's HMO.
The notification to be sent by Seller pursuant to Section 9 of the
Purchase Agreement was sent on May 1, 1996.
Buyer acknowledges that the ADC Medicaid Members who are automatically
enrolled in Buyer's HMO as of the Closing will continue to have the monthly
option to select another HMO until the open enrollment process is implemented in
early 1997.
8. Exhibit A of the Purchase Agreement is hereby amended to add the
name of Judy Stewart.
9. In the event of any inconsistency between the provisions of the
Purchase Agreement and this amendment, the provisions of this amendment shall
control. Except as amended hereby, the Purchase Agreement shall remain in full
force and effect without change to any of its provisions.
HEALTH POWER HMO, INC. CHOICECARE HEALTH PLANS, INC.
By /s/ Thomas E. Beaty, Jr. By /s/ Daniel A. Gregorie, M.D.
------------------------------ -----------------------------
Thomas E. Beaty, Jr., Daniel A. Gregorie, M.D.,
President President and Chief
Executive Officer
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