CLOSING AGREEMENT
Agreement made as of the 27th day of January, 1999 between HEALTH RISK
MANAGEMENT, INCL ("HRM") of Minneapolis, Minnesota and OXFORD HEALTH PLANS, INC.
("Oxford") of Norwalk, Connecticut. This Agreement is made in contemplation of
the Closing under the Stock Purchase Agreement dated as of October 14, 1998
between the parties ("Stock Purchase Agreement") i.e., whereby HRM has purchased
the stock of Oxford Health Plans (PA), Inc. ("PLAN") to be renamed HRM Health
Plans (PA), Inc. All capitalized terms are as defined in the Stock Purchase
Agreement unless otherwise defined herein.
The parties hereto agree as follows:
1. Leased Space; Consolidation. Oxford agrees that HRM and PLAN may
continue to occupy the existing subleased space at the ▇▇▇▇▇▇ Center
until March 31, 1999 on the same terms and conditions as now exist for
such occupancy. Notwithstanding any prior arrangement by which PLAN
occupied space at the ▇▇▇▇▇▇ Center, within 30 days of Closing HRM
shall cause PLAN to withdraw all of PLAN's employees (if any),
furniture, equipment and files to the HRM subleased area (or at most to
not more than 2000 SF contiguous to such HRM leased area), leaving the
remainder of the floor (except for the existing computer room and
telephone system which may be left in their current locations, but no
later than March 31, 1999) available to Oxford to sublease to others.
2. Price Reduction; Surplus Note Partial Assignment; Risk Assumption.
Notwithstanding anything to the contrary in the Stock Purchase
Agreement, the parties agree that HRM shall purchase only one-half of
the Notes and Oxford shall retain ownership of one-half of the Notes.
The Purchase Price shall be restated to $7,087,500 ($10,400,000
adjusted by $2,500,000 to reflect that Oxford is retaining $2,500,000
of the Notes, and $812,500 to reflect agreed upon adjustments for
accounts receivable and dual product allocations). The Purchase Price
shall be paid as follows: 1) $1,000,000 by application of the Deposit,
and 2) $6,087,500 in cash as of Closing. Buyer has investigated the
PLAN's accounts receivable and accepts the inherent risk of collection
and lack of documentation and will be responsible for creating the
PLAN's financial statements for both statutory and GAAP after Closing.
HRM represents that it has investigated the claims of Omnia, Inc. and
accepts all risks inherent in the contractual relationship Omnia, Inc.
has with the PLAN. HRM specifically acknowledges that the warranties of
Section 5.03 and 5.18 of the Stock Purchase Agreement are canceled.
3. Records. Oxford currently administers all of PLAN's commercial products
and has stored in the ordinary course in its computer systems in
Connecticut reserve information, claims history, billing and other
related member information concerning PLAN's members ("Member
Information"). Oxford agrees to continue to store the Member
Information and to make the same available from time to time upon
reasonable notice to HRM or PLAN (or their auditors and actuaries) for
a period of up to five years from the date of Closing or such longer
period of time as PLAN is required by applicable law to cause such
information to be maintained. Oxford shall also cooperate with Peat
Marwick to provide available information to enable Peat Marwick to
audit PLAN financials on a GAAP basis for years prior to 1998. HRM
shall be responsible for preparing and filing the 1998 PLAN tax returns
and audit. Oxford shall turn over to HRM all the accounting records of
the Plan or make the records available to HRM to satisfy audit,
regulatory, tax and legal requirements as required from time to time.
HRM will provide Oxford journal entries required for the year ended
December 31, 1998 financial statements and Oxford will post to the
general ledger and make all 1998 information available to HRM not
turned over to HRM at Closing. All equipment has been inventoried and
no further equipment transfers (excluding Oxford-On-Call equipment
already tagged by the parties which is in the process of being moved)
shall be made from the Philadelphia location without mutual agreement
between the parties.
4. Agreements. PLAN agrees to honor all of the agreements listed on
Schedule 5.14 insofar as they relate to services for the benefit of
PLAN, whether or not such agreements are, in whole or in part, with
Oxford entities other than PLAN, and PLAN further agrees to indemnify
and hold Oxford and its affiliates harmless from any liability or
expense (including reasonable counsel fees) under such agreements
related to services for the benefit of PLAN.
5. Membership Information. As soon as possible after Closing Oxford shall
deliver to HRM a list of all PLAN commercial groups, including total
membership by group and renewal rate.
6. Drug Rebates. To the extent Oxford receives future rebates from PCS for
prescription costs allocable to PLAN's business, Oxford shall promptly
remit such rebates to PLAN.
7. Negative Balances. Oxford shall provide to HRM promptly after Closing
all detail which it has concerning all negative provider balances
related to PLAN.
8. Common Provider Agreements. The parties recognize that certain
physician and hospital provider agreements used for the benefit of both
PLAN and Oxford's PPO and out-of-network POS businesses may be in
either party's name and both parties agree to allow both PLAN and
Oxford to use such contracts for each of their respective businesses
after Closing.
9. Termination of Agreements. The parties hereto agree that all tax
sharing agreements and all other agreements and understandings, whether
oral or written, which may exist between Oxford Health Plans (PA),
Inc., on the one hand, and Oxford Health Plans, Inc., or any of its
affiliates, on the other hand are herewith terminated as of January 1,
1999 without further liability of any party thereto. This termination
shall not affect any agreement delivered at the Closing under the Stock
Purchase Agreement.
10. Additional Deposit; Effective Dates. An additional deposit of $300,000
has been previously delivered to Oxford by HRM. The effective date for
the Dual Product Agreement and the Administrative Services Agreement
shall be January 1, 1999. Oxford shall be compensated under the terms
of those agreements after January 1, 1999 as well as by payments
permitted under Section 8.05 of the Stock Purchase Agreement through
the Closing Date; provided, however, that the compensation for January
for administrative and management services is agreed to be a total of
$294,778.
11. Cash, Investments and Affiliate Accounts. Attached as Exhibit B is a
listing of bank accounts and investments balances per the bank and per
the PLAN's books as of December 31, 1998 and January 15, 1999 and
detail of payments made through the affiliate accounts (net) from
November 1, 1998 through January 15, 1999 to affiliates of the PLAN and
the total payments issued for claims for Medicaid, HMO and Dual Product
for the same period. No additional transactions (other than payment of
health claims in the ordinary course of business and the assignment of
the advance to New Jersey providers to Oxford (NJ) in return for
Oxford's payment of $250,0000 to PLAN) shall be made until Closing
unless HRM has authorized such transactions. Banks shall be notified on
the Closing Date that ownership has changed and accounts authorized
signers have changed. Notwithstanding the foregoing, Oxford is
authorized to draw Medicaid claims checks on PLAN's bank accounts in
accordance with claim payment authorizations from PLAN delivered to
Oxford prior to Closing.
12. Reinsurance Treaty. Oxford shall cause the PLAN to enter into a
reinsurance treaty prior to Closing effective January 1, 1999
conditioned upon HRM acquiring the PLAN which shall cause $5 million
advance ceding allowance to flow into the PLAN prior to Closing.
13. Re-Payment of Surplus Notes. PLAN will promptly issue replacement Notes
to HRM and Oxford representing the $2,500,000 participation held by
each. As soon as PLAN's 1998 financial statements are prepared and
filed with the Pennsylvania DOI, PLAN agrees to use best efforts to
seek permission for PLAN to repay the $2,500,000 of the Notes held by
Oxford as soon as possible and prior to any payment on the $2,500,000
of the Notes held by HRM. PLAN also agrees to book interest from the
Date of Closing on the $2,500,000 of the Notes held by Oxford, but not
the $2,500,000 of the Notes held by HRM, in order that interest may be
repaid to Oxford when approval is finally granted by the Pennsylvania
DOI. In the event payment in full cannot be obtained, PLAN agrees to
seek permission every six months for the repayment of the balance of
the $2,500,000 of the Notes held by Oxford until they are repaid in
full together with accrued interest.
In witness whereof the parties hereto have executed this Closing
Agreement as of the date first above written.
OXFORD HEALTH PLANS, INC.
By:
Director, Services Development
HEALTH RISK MANAGEMENT, INC.
By:
HRM HEALTH PLANS (PA), INC.
By:
