FIRST AMENDMENT TO MASTER SERVICES AGREEMENT
This First Amendment (this "Amendment") to the Master Service Agreement is made
and entered into as of the 4th day of December, 1997, by and among Aetna U.S.
Healthcare Inc., on behalf of itself and all of its applicable affiliates
("Aetna USHC")(other than Human Affairs International, Incorporated ("HAI") and
its subsidiaries), Magellan Health Services, Inc. ("Magellan") and HAI.
WITNESSETH:
WHEREAS, Aetna USHC, Magellan and HAI have entered into a Master Service
Agreement dated as of August 5, 1997 (the "Agreement"); and
WHEREAS, Aetna USHC, Magellan and HAI desire to amend the Agreement in the
manner set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Amendment to Subsection 7.B(ii) of the Agreement.
Subsection 7.B(ii) of the Agreement is hereby amended to read, in its entirety,
as follows:
(ii) "Base Members" shall mean (a) with respect to Tranche 1 Members, the
Tranche 1 Members as of September 30, 1997 and (b) with respect to Tranche
2 Members, the Tranche 2 Members as of September 30, 1997; provided,
however, that with respect to Members whose Plan requires the selection of
primary care physicians but who have not done so ("1111 Members"), all 1111
Members in a Plan being serviced by Contractor as of September 30, 1997,
except for 1111 Members in a Plan written on the U.S. Healthcare platform
in Georgia, will be included as Base Members with respect to Tranche 1
Members or Tranche 2 Members, as applicable, and all other 1111 Members
will not be included as Base Members with respect to either Tranche 1
Members or Tranche 2 Members.
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2. Amendment to Subsections 7.B(xi) and (xii) of the Agreement.
Subsections 7.B(xi) and (xii) of the Agreement are hereby amended to read, in
their entirety, as follows:
(xi) Tranche 1 Members" shall mean Members for whom Contractor provides services
in any of the following categories of products or services: Managed Choice,
Managed Behavioral Health, and HMO (including conversions of individuals who are
serviced only in the category referred to by Contractor as "Network" Members
into Managed Choice, Managed Behavioral Health, and HMO Members, and including
conversions of FPR, CHA or CHI Members (who were not FPR, CHA or CHI Members as
of the Effective Date) into Managed Choice, Managed Behavioral Health or HMO
Members, but not conversions of individuals who were FPR, CHA or CHI Members as
of the Effective Date into such categories). Notwithstanding the foregoing, the
first two hundred fifty thousand (250,000) individuals who were FPR, CHA or CHI
Members as of the Effective Date who convert to Managed Choice, Managed
Behavioral Health or HMO Members shall be counted as Tranche 1 Members but
discounted at the rate of 75% for the first Contract Year of this Agreement and
50% thereafter (so that each such Member is deemed as only one-quarter or
one-half Tranche 1 Member, respectively). After the first two hundred fifty
thousand (250,000) such conversions from FPR, CHA or CHI Members to Managed
Choice, Managed Behavioral Health or HMO Members, no further conversions from
individuals who were FPR, CHA or CHI Members as of the Effective Date to Managed
Choice, Managed Behavioral Health or HMO Members shall be included or deemed as
Tranche 1 Members. In the event the names of any of the above service or product
categories included in Tranche 1 Members are changed or any of the above
services or products included in Tranche 1 Members are amended, changed or
subdivided, the Member for whom Contractor provides such changed, amended or
subdivided service or product shall continue to be a Tranche 1 Member if such
Member would have otherwise continued to be a Tranche 1 Member notwithstanding
the change, amendment or subdivision of such product or service.
(xii) "Tranche 2 Members" shall mean Members for whom Contractor provides
products or services in the category of HMO (including conversions of
individuals who are serviced only in the category referred to by Contractor as
"Network" Members and including conversions of FPR, CHA, CHI, Managed Choice or
Managed Behavioral Health Members (who were not FPR, CHA, CHI, Managed Choice or
Managed Behavioral Health Members as of the Effective Date) into HMO Members,
but not conversions of individuals who were FPR , Managed Choice, Managed
Behavioral Health, CHA or CHI Members as of the Effective Date into HMO
Members). Notwithstanding the foregoing, the first one million five hundred
thousand (1,500,000) individuals who were FPR, CHA or CHI Members as of the
Effective Date and who
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convert to HMO Members shall be counted as Tranche 2 Members but discounted at
the rate of 50% (so that each such Member is deemed as only one-half Tranche 2
Member). Upon the first one million five hundred thousand (1,500,000) such
conversions from FPR, CHA or CHI Members to HMO Members, no further conversions
from individuals who were FPR, CHA or CHI Members as of the Effective Date to
HMO Members shall be included or deemed as Tranche 2 Members. In the event the
names of any of the above service or product categories included in Tranche 2
Members are changed or any of the above services or products included in Tranche
2 Members are amended, changed or subdivided, the Members for whom Contractor
provides such changed, amended or subdivided services or products shall continue
to be a Tranche 2 Member if such Member would have otherwise continued to be a
Tranche 2 Member notwithstanding the change, amendment or subdivision of such
product or service
3. Amendment to Subsection 7.B of the Agreement.
Subsection 7.B is hereby amended by adding new Subsections 7.B(xiii) and (xiv)
as follows:
(xiii) "CHA" shall mean the provision to Members of one or more of the products
or services described in Schedule F-1 hereto, regardless of the name of
such product or service and regardless of the identity of the affiliate of
Contractor offering or providing such product or service.
(xiv)"CHI" shall mean the provision to Members of one or more of the products
or services described in Schedule F-1 hereto, regardless of the name of
such product or service and regardless of the identity of the affiliate of
Contractor offering or providing such product or service.
4. Amendment to Subsection 7.E of the Agreement.
The second sentence of Subsection 7.E of the Agreement is hereby amended to
read, in its entirety, as follows:
During the 60-day period following expiration of each Contract Year, the
Operating Committee shall endeavor to agree upon and submit to Aetna USHC and
Contractor a proposed Tranche 1 Statement and Tranche 2 Statement.
5. Amendment to Subsection 7.G of the Agreement.
Subsection 7.G of the Agreement is hereby amended to read, in its entirety, as
follows:
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G. Except pursuant to Section 7.H of this Agreement, from the Effective
Date until the end of Contract Year ending 2002, Aetna USHC agrees not
to utilize any vendor for servicing of any FPR Members serviced by
Contractor (other than any FPR Members covered by Plans acquired by
Aetna USHC or one of its affiliates through purchase of stocks or
assets, or merger, consolidation or joint venture with another entity,
or any other similar transaction). Except pursuant to Section 7.H of
this Agreement, from the Effective Date until the end of the Contract
Year ending 2002, Aetna USHC agrees not to utilize any vendorfor
servicing HMO Members or Managed Choice Members until such time as
Contractor (including any of its Affiliates) has been paid the first
two and one-half million New Members (as defined below) under the
applicable Vendor Contracts. Notwithstanding the foregoing, the
Parties agree that this Section G shall not prohibit Aetna USHC from
having any Member (as defined in Section 19.B of this Agreement)
serviced by any vendor pursuant to any provider arrangements with
integrated delivery systems or any existing contractual commitment of
Aetna USHC as of the Effective Date. "New Member" shall mean as of any
relevant date of determination, the sum of (i) the number of HMO
Members as of such date of determination minus the number of HMO
Members as of September 30, 1997 (as determined under Subsection
7B(ii), as amended), whether positive or negative and (ii) the number
of Managed Choice Members as of such date of determination minus the
number of Managed Choice Members as of September 30, 1997 (as
determined under Subsection 7.B(ii), as amended), whether positive or
negative. Notwithstanding the foregoing, (a) each FPR, CHA or CHI
Member as of September 30, 1997 who converts to a HMO or Managed
Choice Member shall be discounted at the rate of 55% (so that each
such Member is deemed as only 45% of one New Member), (b) Managed
Behavioral Health Members as of September 30, 1997 who convert into
HMO or Managed Choice Members shall not be counted as "New Members"
and (c) each FPR, Managed Behavioral Health, CHA or CHI Member (who
was not a FPR, Managed Behavioral Health, CHA or CHI Member as of
September 30, 1997) who converts to a HMO or Managed Choice Member
shall be counted as a New Member. This Section G shall not apply to
any market in which Contractor is unable to serve Members (whether due
to contractual, licensure, legal or regulatory restrictions or any
other reason). Promptly following the expiration of each Contract
Year, Aetna USHC will provide Contractor with a statement detailing
the number of New Members as of the end of such Contract Year. In
addition, when and if Aetna USHC knows that it has achieved 2,500,000
New Members (as described herein), Aetna USHC will so inform
Contractor. During the exclusivity period described above, Aetna USHC
agrees to use commercially reasonable best efforts to encourage its
customers to be served by Contractor for Managed Behavioral Health
services.
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6. Amendment to Subsection 7.H of the Agreement.
Subsection 7.H of the Agreement is hereby amended to read, in its entirety, as
follows:
H. Acquisitions/Right of First Offer
(i) For purposes of this Subsection H, the following terms shall have the
following meanings:
a. Acquired Healthcare Entity means the acquisition by Aetna USHC of
all or any portion of an HMO, health insurer or other managed
care entity offering health care benefits.
b. Behavioral Healthcare Business means an entity which is engaged,
in whole or in part, in the provision or management of Behavioral
Healthcare Services, including the ownership, leasing, operation,
administration or management of an entity or facility which is
engaged, in whole or in part, in the provision or management of
Behavioral Healthcare Services.
c. Behavioral Healthcare Services means the provision of mental
health and substance abuse utilization management, network
management, care management or EAP services for and on behalf of
an entity or healthcare plan (including self-insured plans) for a
fee (or other direct or indirect financial benefit).
(ii) Within twenty (20) days following the closing of an acquisition by
Aetna USHC or any of its Affiliates of an Acquired Healthcare Entity
(whether through an acquisition of assets or stock, merger or
consolidation, joint venture or other similar transaction) (or such
later date as such information may be reasonably obtained or
developed), Aetna USHC shall provide Contractor with written notice of
such acquisition, which notice shall state whether the provision of
Behavioral Healthcare Services for the Plans of the Acquired
Healthcare Entity are performed, as of the acquisition date, by a
vendor that is not an affiliate of the Acquired Healthcare Entity
(including by a provider) (a "Third Party Vendor") or by a component
of the Acquired Healthcare Entity itself or a combination thereof (in
the latter case, the notice shall set forth in reasonable detail which
categories of members covered by Plans of the Acquired Healthcare
Entity are serviced by a Third Party Vendor and which members are
serviced internally and the number of such members). If the number of
members covered by the
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Plans of the Acquired Healthcare Entity are less than 750,000 as of
the acquisition date or if more than (50%) of the members (as of the
acquisition date) covered by the Plans of the Acquired Healthcare
Entity which receive provision of Behavioral Healthcare Services do so
through a Third Party Vendor, the provisions of Subsection X below
shall apply; in all other cases, the provisions of Subsection Y below
shall apply.
(iii)The provisions of this Subsection H shall supersede the provisions of
Subsection 7.G of this Agreement with respect to members of Plans of
an Acquired Healthcare Entity.
X. (i) Within twenty (20) days of the closing of an applicable
acquisition by Aetna USHC or any of its Affiliates of an Acquired
Healthcare Entity (or such later date as such information
required in connection with Subsection (ii) above may be
reasonably obtained or developed), Aetna USHC shall provide
Contractor with written notice of its election either (a) to
cause the Behavioral Healthcare Services that are currently
performed by or for the Acquired Healthcare Entity to be
performed by Contractor pursuant to the terms of this Agreement
at rates determined in accordance with the methodology provided
for in Section 6 hereof (as if such services constituted a "new
Plan" under subparagraph (a) of Subsection 6.C of this Agreement)
as further described in Subsection (ii) below (the "Status Quo
Election"); or (b) to conduct an auction for such services in the
manner set forth in Subsections (iii) and (iv) below (the
"Auction Election"). Aetna USHC shall have the option of either
(x) making a single Status Quo Election or Auction Election for
the entire Acquired Healthcare Entity or (y) subject to the
proviso below, making separate Status Quo Elections or Auction
Elections for individual divisions, units or legal entities
within the Acquired Healthcare Entity or (z) subject to the
proviso below, making separate Status Quo Elections or Auction
Elections for the individual Plans of the Acquired Healthcare
Entity; provided, however, in the event that Aetna USHC intends
to make separate elections under either subsection (y) or (z)
above, and as a result of such election not all members of any
product category (e.g., HMO or Managed Choice) of the Acquired
Healthcare Entity would be wholly within either the Status Quo
Election or the Auction Election (any such product category shall
be referred to as a "Divided Product Category"), then the
following sentence shall apply. With respect to each Divided
Product Category (i) Aetna
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USHC shall have the right to designate the number of members to
be included in the Status Quo Election and (ii) the parties shall
in good faith mutually agree on the apportionment (based upon the
number determined in (i)) of the Divided Product Category so that
the members included within the Status Quo Election represent a
reasonable cross-section (considering factors such as historic
utilization rates, historic care costs, historic revenue per
member, contract terms, term and termination provisions, among
other relevant factors) of the Divided Product Category. In the
event the parties do not reach agreement of the matter referred
to within subsection (ii) in the preceding sentence within 15
days following delivery of notice of the applicable Election, the
matter shall be resolved in accordance with Section 13 of this
Agreement, provided that the 60 day period referred to in the
first sentence of Subsection 13.C shall be 10 business days for
purposes of this provision. Notwithstanding the foregoing, Aetna
USHC shall not be obligated to exercise either a Status Quo
Election or an Auction Election with respect to any of the
activities described in the Excluded Activities Schedule attached
hereto (the "Excluded Activities"). Consistent with the
Non-Competition Covenant dated as of December 4,1997, Aetna USHC
and the Acquired Healthcare Entity shall be free to conduct the
Excluded Activities in any manner they deem appropriate following
the closing of the acquisition of the Acquired Healthcare Entity.
(ii) In the event Aetna USHC makes a Status Quo Election, the parties
shall cooperate to ensure that the Behavioral Healthcare Services
are provided by Contractor to the Acquired Healthcare Entity as
soon as reasonably practicable, consistent with existing
contractual obligations of the Acquired Healthcare Entity or
Aetna USHC and subject to any necessary regulatory approvals.
Contractor may defer implementation of the provision of such
services up to ninety (90) days from the date of such election
notice if it has operational constraints on its ability to
perform the Behavioral Healthcare Services for the new Acquired
Healthcare Entity. All members of Plans for which Behavioral
Healthcare Services are performed as a result of a Status Quo
Election shall be treated as new "Members" for purposes of
Section 7 of this Agreement; provided, however, it is understood
that this provision is not intended to modify the provisions of
Section 7, including the annual and aggregate
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maximum payment amounts set forth therein for Tranche 1 and
Tranche 2 Payments.
(iii)Within thirty (30) days of the date Aetna USHC makes an Auction
Election, it shall provide Contractor with an offer (the "Offer")
of proposed rates for providing the Behavioral Healthcare
Services to all Members of Plans of the Acquired Healthcare
Entity with respect to which the Auction Election is being made,
consistent with existing contractual obligations of the Acquired
Healthcare Entity and subject to any necessary regulatory
approvals. The offer shall remain open for a period of not less
than thirty (30) days (the "Offer Period"). During the Offer
Period, Contractor and its representatives and agents shall be
given reasonable access (subject to a confidentiality agreement
between Aetna USHC and Contractor and subject to compliance with
any confidentiality obligations of Aetna USHC or any of its
Affiliates with entities other than the Acquired Healthcare
Entity or the seller of the Acquired Healthcare Entity, provided
that Aetna USHC shall exercise commercially reasonable best
efforts to obtain a waiver of any such confidentiality
obligations for this purpose) to the relevant books and records
and personnel of the Acquired Healthcare Entity to review the
relevant information on the Behavioral Healthcare Services. If,
prior to the expiration of the Offer Period, Contractor notifies
Aetna USHC in writing that it desires to accept the Offer, the
parties shall, as promptly as practicable, negotiate in good
faith a definitive agreement for the provision of such services.
With the exception of the contingent payment provisions under
this Section 7 (which shall not pertain) and the rate provisions
(which shall reflect the Offer), the terms and conditions of the
definitive agreement shall be substantially similar to the
existing applicable Vendor Contract between Contractor and Aetna
USHC.
(iv) In the event the Offer Period expires for any Offer without
Contractor notifying Aetna USHC that it desire to accept such
Offer, Aetna USHC shall be free to solicit bids from third
parties for the provision of Behavioral Healthcare Services for
Plans of the Acquired Healthcare Entity. Contractor shall be
entitled to participate in the bidding process. Aetna USHC shall
otherwise be entitled to operate the bidding process in any
manner it deems appropriate (including, without limitation, the
ability to conduct
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separate auctions for individual divisions, units or legal
entities with the Acquired Healthcare Entity or by Plan type or
by geographical area) and for such period of time as it deems
appropriate. Except as provided below in the penultimate sentence
of this paragraph, in the event the terms of Contractor's final
bid (if any) are in aggregate, better for Aetna USHC than all
other bona fide bids, then Aetna USHC shall be obligated to
choose Contractor as the winning bidder, and the parties shall,
as promptly as practicable, negotiate in good faith a definitive
agreement for the provision of such services. With the exception
of the contingent payment provisions of this Section 7 (which
shall not pertain) and the term and rate provisions (which shall
reflect the Contractor's bid), the terms and conditions to the
definitive agreement shall be substantially similar to the
existing Vendor Contract between Contractor and Aetna USHC. In
the event the terms of Contractor's final bid (if any) are not in
aggregate better for Aetna USHC than all other bona fide bids,
then Aetna USHC shall be free to enter into a contract for the
provision of such services with any bidder on terms that are in
the aggregate, better for Aetna USHC than Contractor's final bid.
In the event Aetna USHC completes a bona fide auction and
concludes, in good faith, that no bidder (including Contractor)
has made a commercially reasonable offer for the services,
consistent with then current market conditions, then Aetna USHC
may provide such services internally until such time as it is
able to obtain a commercially reasonable offer; provided, if
Contractor believes in good faith that it has made a commercially
reasonable offer for the services (notwithstanding Aetna USHC's
conclusion otherwise), the matter shall, at Contractor's written
request, be resolved in accordance with Section 13 of this
Agreement. Other than as required by law, Contractor shall be
prohibited from disclosing to any third parties the terms of this
subsection H and the fact that it is participating in the bidding
process.
(v) It is understood and agreed that Aetna USHC may not be able to
cause all customers of an Acquired Healthcare Entity who have
elected Managed Behavioral Health carve-out services (or who
elect to convert to such services) to enter into a business
relationship with Contractor. In the event Aetna USHC makes a
Status Quo Election or Contractor accepts an Offer or is the
winning bidder in an Auction Election, Aetna USHC agrees to
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make commercially reasonable best efforts to persuade such
customers to engage with Contractor.
(vi) All members of Plans for which Behavioral Healthcare Services are
performed as a result of an Auction election shall not be treated
as "Members" for purposes of Section 7 of the Agreement.
Y. (i) Within seventy-five (75) days following the closing of any
applicable acquisition of an Acquired Healthcare Entity, Aetna USHC
shall take or cause to be taken, all reasonably necessary action
(consistent with existing contractual obligations of the Acquired
Healthcare Entity and subject to any necessary regulatory approvals)
to segregate (unless already segregated) the Behavioral Healthcare
Business operations of the Acquired Healthcare Entity into a separate
and distinct division or subsidiary (as segregated, the "BHB
Component"). In segregating the BHB Component, Aetna USHC shall have
the option (the "Put Option") of notifying Contractor that it intends
to (a) discontinue certain services which were previously provided by
the Acquired Healthcare Entity or by Third Party Vendors prior to the
closing of the acquisition of the Acquired Healthcare Entity and (b)
causing those services to be performed by Contractor pursuant to the
terms of this Agreement at the rates determined in accordance with the
methodology provided for in Section 6 hereof (as if such services
constituted a "new plan" under subparagraph (a) of Subsection 6.C of
this Agreement) as further described in Subsection (ii) below;
provided, however, if as a result of such Put Option, not all Members
of any product category (e.g., HMO or Managed Choice) of the Acquired
Healthcare Entity would be wholly subject to the Put Option (any such
product category shall be referred to as a "Divided Product
Category"), then the following sentence shall apply. With respect to
each Divided Product Category (i) Aetna USHC shall have the right to
designate the number of Members to be included in the Put Option and
(ii) the parties shall in good faith mutually agree on the
apportionment (based upon the number determined in (i)) of the Divided
Product Category so that the Members included within the Put Option
represent a reasonable cross-section (considering factors such as
historic utilization rates, historic care costs, historic revenue per
member, contract terms, term and termination provisions, among other
relevant factors) of the Divided Product Category. In the event the
parties do not reach agreement of the
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matter referred to within subsection (ii) in the preceding sentence
within 15 days following delivery of notice of the Put Option, the
matter shall be resolved in accordance with Section 13 of this
Agreement, provided that the 60 days period referred to in the first
sentence of Subsection 13.C shall be 10 business days for purposes of
this provision. Notwithstanding the foregoing, Aetna USHC shall not be
obligated to segregate (or exercise its Put Option) with respect to
any of the Excluded Activities. Consistent with the Non-Competition
Covenant, Aetna USHC and the Acquired Healthcare Entity shall be free
to conduct the Excluded Activities in any manner they deem appropriate
following the closing of the acquisition of the Acquired Healthcare
Entity.
(ii) In the event Aetna USHC desires to exercise its Put Option, it shall
provide Contractor with written notice of such intent within twenty
(20) days following the closing of the acquisition of the Acquired
Healthcare Entity, which notice shall specify in reasonable detail the
services to be performed by Contractor, the Plans affected and the
number of members involved. The parties shall then cooperate to ensure
that the relevant services are provided by Contractor to the Acquired
Healthcare Entity as soon as reasonably practicable, consistent with
existing contractual obligations of the Acquired Healthcare Entity and
subject to any necessary regulatory approvals. Contractor may defer
implementation of that provision up to ninety (90) days from the date
of the election notice if it has operational constraints on its
ability to perform the Behavioral Healthcare Services for the Acquired
Healthcare Entity. All members of Plans for which Behavioral
Healthcare Services are performed as a result of a Put Option shall be
treated as new "Members" for purposes of Section 7 of this Agreement;
provided, however, it is understood that this provision is not
intended to affect the payment methodology, including the annual and
aggregate maximum payment amounts set forth in Section 7 for Tranche 1
and Tranche 2 Payments.
(iii)Within seventy-five (75) days following the closing of an acquisition
of an Acquired Healthcare Entity, Aetna USHC shall prepare (or cause
to be prepared) a pro forma income statement (the "Pro Forma Income
Statement") for the BHB Component for the twelve month period ending
on the later of (a) the closing date of the acquisition and (b) the
month end for which a pro forma
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income statement can reasonably be prepared.. The Pro Forma Income
Statement shall be prepared on a basis which assumes that the BHB
Component had operated separately over this twelve month period with
separate contracts on such terms as Aetna USHC would be willing to put
into place, including term and rates for providing or arranging the
provision of Behavioral Healthcare Services to all Members covered by
Plans of such Entity for the assumed term (the "Applicable Contract
Rates"), which term and rates shall be clearly indicated as
assumptions in the Pro Forma Income Statement. The Pro Forma Income
Statement shall include customary income and expense categories
(including allocations of indirect services and overhead costs, which
are intended to present the operations as if they operated on a
stand-alone basis), and including Earnings Before Interest, Taxes,
Depreciation & Amortization ("EBITDA").
(iv) Within seventy-five (75) days following the closing of an acquisition
of an Acquired Healthcare Entity, Aetna USHC shall offer (an "Offer"),
or cause to be offered, to Contractor the right to purchase the BHB
Component of the Acquired Healthcare Entity. The Offer shall include
all material terms of the proposed sale including the purchase price
and Applicable Contract Rates. Each Offer shall remain open for a
period of not less than forty-five (45) days (the "Offer Period").
(v) During the Offer Period, Contractor and its representatives and agents
shall be entitled to conduct a due diligence review of the BHB
Component and the Acquired Healthcare Entity, in order to evaluate the
Offer, and shall be given reasonable access (subject to a
confidentiality agreement between Contractor and Aetna USHC and
subject to compliance with any confidentiality obligations of Aetna
USHC or any of its Affiliates with entities other than the Acquired
Healthcare Entity or the seller of the Acquired Healthcare Entity,
provided that Aetna USHC shall exercise commercially reasonable best
efforts to obtain a waiver of any such confidentiality obligations for
this purpose) to the books and records and personnel of the Qualifying
Entity and BHB Component, including the supporting information
utilized to prepare the Pro Forma Income Statement of the BHB
Component.
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(vi) If, prior to the expiration of the Offer Period, Contractor notifies
Aetna USHC in writing that it desires to accept the Offer, the parties
shall, as promptly as practicable, negotiate in good faith a
definitive purchase agreement (which, other than the Applicable
Contract Rates and other economic terms, shall contain substantially
the same terms and conditions contained in the definitive purchase
agreement pursuant to which Magellan acquired Contractor from Aetna
USHC) and a definitive vendor contract, on substantially the same
terms and conditions (other than the rates which shall be the
Applicable Contract Rates) as those contained in the existing
applicable Vendor Contracts between Contractor and Aetna USHC.
(vii)In the event that Contractor notifies (the "Non-acceptance Notice")
Aetna USHC that it does not accept the Offer or the Offer Period
expires for any Offer without Contractor notifying Aetna USHC that it
desires to accept such Offer, Aetna USHC shall take, or cause to be
taken, all commercially reasonable efforts to sell the BHB Component
to a non-affiliate of Aetna USHC, provided, however, that the purchase
price, rates for services and other material terms of any sale to a
non-affiliate shall not be more favorable (viewed on an aggregate
basis) to the third party than the purchase price, Applicable Contract
Rates and other material terms set forth in the Offer to the
Contractor (viewed on an aggregate basis). Magellan shall have the
right to submit a bid in connection with any auction conducted to sell
the BHB Component. If Aetna USHC (or its Affiliate, as applicable)
does not enter into a definitive agreement with a third party with
respect to the sale of the BHB Component by the end of the "Selling
Period" (as defined below), then for a period of 45 days following the
expiration of the Selling Period (the "Option Period"),Contractor
shall have the option (the "Purchaser Option") to purchase the BHB
Component on terms equal to the more favorable to Aetna USHC of (a) a
purchase price equal to the fair market value of the BHB Component
(assuming the Applicable Contract Rates and other material terms of
the Offer apply), as determined by a mutually acceptable independent
investment banking firm or (b) on terms equal to the most favorable
terms to Aetna USHC (viewed on an aggregate basis) received during the
Selling Period by Aetna USHC from a bona fide third party making a
bona fide offer (the "Bona fide Offer") to purchase the BHB Component
(an offer shall
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be considered a Bona fide Offer only if, among other things, the third
party was willing to consummate the offer pursuant to its terms and
that the information received from Aetna USHC upon which the offer was
based was true and correct in all material respects). During the
Option Period, Contractor and its representatives and agents shall be
entitled to conduct confirmatory due diligence of the BHB Component
subject to a confidentiality agreement. In the event Contractor
notifies Aetna USHC in writing before the expiration of the Option
Period that it desires to exercise its Purchaser Option, the parties
shall negotiate in good faith a definitive purchase agreement (which
shall contain substantially the same terms and conditions (other than
with respect to rates and other economic terms) as contained in the
definitive purchase agreement pursuant to which Magellan acquired
Contractor from Aetna USHC) and a vendor contract charging the
Applicable Contract Rates and for the term specified in the Offer (or,
in the event there is a Bone Fide Offer that is more favorable to
Aetna USHC than the fair market valuation, at the rates and for the
term applicable to the Bona fide Offer) and including all Members
covered by any Plan of the Acquired Healthcare Entity. For purposes of
this Subsection (vi), the term "Selling Period" shall mean the period
commencing upon the earlier of the receipt of the Non-acceptance
Notice or the expiration of the Offer Period (the "Commencement Date")
and continuing for 120 days following the Commencement Date, provided
that the Selling Period shall continue for 150 days following the
Commencement Date if Aetna USHC (or its Affiliate, as applicable) has
entered into a letter of intent with a third party with respect to the
sale of the BHB Component within 120 days following the Commencement
Date.
(viii) In the event that Aetna USHC (or its Affiliate, as applicable)
enters into a definitive agreement during the Selling Period, for any
BHB Component, and the purchase and sale contemplated by such
definitive agreement is not consummated within six months of the date
such agreement was executed (or for such longer period as any federal
or state regulatory or antitrust approvals may be pending), then
Contractor shall have a Purchase Option with respect to such BHB
Component for 45 days following the expiration of such six month
period (or longer) on the same terms as described above in Subsection
(vii).
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(ix) In the event any state or federal regulatory or governmental entity
prevents the sale to Contractor of the BHB Component (or any part
thereof) or the sale of the BHB Component is not consummated because
the conditions to closing set forth in the definitive purchase
agreement are not satisfied or waived (other than the nonsatisfaction
of a condition as a result of a breach by Aetna USHC of the purchase
agreement), after reasonable good faith efforts to obtain such
approvals or satisfy such conditions, then Aetna USHC shall be free to
dispose of the BHB Component (or the relevant part thereof) or
continue its operations in any manner Aetna USHC deems appropriate.
7. Amendment to Section 12 of the Agreement.
Section 12 is hereby amended by adding a new Subsection 12.C as follows:
C. HAI and Aetna USHC shall each have the right to audit and inspect at any time
during normal business hours upon reasonable notice, (a) documents or
information pertaining to verification of membership, in the possession of the
other party, covered under this Agreement and the Vendor Contracts and (b) any
documentation or information relevant to determinations under Subsection 6.C of
this Agreement, in each case subject to a confidentiality agreement to be
entered into between the parties.
8. Miscellaneous.
a. All references in the Agreement to the "Agreement" and any other references
of similar import shall henceforth mean the Agreement as amended by this
Amendment. All capitalized terms used but not otherwise defined herein
shall have the meaning ascribed to them in the Agreement as amended by this
Amendment.
b. Except to the extent specifically amended by this Amendment, all of the
terms and conditions contained in the Agreement shall be and remain in full
force and effect.
c. This Amendment shall be binding upon and inure to the benefit of Aetna
USHC, Magellan and HAI and their respective successors and assigns.
d. In the event of any inconsistency or conflict between this Amendment and
the Agreement, the terms, provisions and conditions of this Amendment shall
govern and control.
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e. This Amendment shall be governed by and construed in accordance with the
internal laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first written above.
AETNA U.S. HEALTHCARE INC. MAGELLAN HEALTH SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. XxXxxxxx
----------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxx X. XxXxxxxx
Title: Deputy CFO Title: Executive Vice President & CFO
Date: December 4, 1997 Date: December 4, 1997
HUMAN AFFAIRS INTERNATIONAL,
INCORPORATED
By: /s/ Xxxxxx X. Bendoratis
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Vice President & CFO
Date: December 4, 1997
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