SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) January 27, 1999
Health Risk Management, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
(State of Other Jurisdiction of Incorporation)
0-18902 41-1407407
(Commission File Number) (I.R.S. Employer Identification No.)
10900 Hampshire Avenue S.
Minneapolis, Minnesota 55438
(Address of Principal Executive Offices) (Zip Code)
(612) 829-3500
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 27, 1999, Health Risk Management, Inc. (the "Registrant")
acquired from Oxford Health Plans, Inc. ("Seller") for $7,087,500 in cash, all
of the outstanding stock of Oxford Health Plans (PA), Inc. (OXPA) and a surplus
note of OXPA in the amount of $2.5 million. The amount of the consideration was
determined by negotiation between the Registrant and Seller. Funds for the
acquisition were obtained from the Registrant's cash on hand and from an
increase in the Registrant's borrowings from U.S. Bank National Association.
OXPA is a Pennsylvania HMO that has both Medicaid and commercial HMO
licenses. Since April 1998, the Registrant has been assuming the full financial
risk for approximately 96% of the premium for OXPA's 65,000 Pennsylvania
Medicaid members under the Registrant's management services agreement with OXPA.
As a result of the acquisition, the Registrant now owns 100% of the stock of the
OXPA entity that has the Medicaid members as well as approximately 5,000
commercial HMO members.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired:
The financial statements for the business acquired that are
required by this Report will be filed as an amendment to this
Report by April 12, 1999 (the 60th day after the date this
initial Report was due).
(b) Pro Forma Financial Information:
The pro forma financial information for the business acquired
that is required by this Report will be filed as an amendment
to this Report by April 12, 1999 (the 60th day after the date
this initial Report was due).
(c) Exhibits:
See Exhibit Index on page following Signatures.
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 RISK MANAGEMENT, INC.
Date: February 11, 1999 By /s/ Thomas P. Clark
Thomas P. Clark
Senior Vice President, Finance
and Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBIT INDEX
to
FORM 8-K
HEALTH RISK MANAGEMENT, INC.
Exhibit
Number Exhibit Description
2.1 Stock Purchase Agreement dated as of October 14, 1998 between Health
Risk Management, Inc. and Oxford Health Plans, Inc. Pursuant to Item
601(b)(2) of Regulation S-K, upon the request of the Commission, the
Registrant undertakes to furnish supplementally to the Commission a
copy of any schedule to the Stock Purchase Agreement, which are listed
in such Agreement.
2.2 Closing Agreement dated as of January 27, 1999 between Health Risk
Management, Inc. and Oxford Health Plans, Inc.
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
FOR SECURITIES OF OXFORD HEALTH PLANS (PA), INC.
Between
OXFORD HEALTH PLANS, INC.
and
HEALTH RISK MANAGEMENT, INC.
- --------------------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of the 14th day of October, 1998, by
and among OXFORD HEALTH PLANS, INC., a Delaware corporation with a principal
office at 800 Connecticut Avenue, Norwalk, Connecticut ("Seller"), and HEALTH
RISK MANAGEMENT, INC., a Minnesota corporation with a principal office at 10900
Hampshire Avenue South, Minneapolis, Minnesota 55438 ("Buyer").
WHEREAS, Seller is the beneficial owner (through an intermediate
holding company) of (i) an aggregate of 1000 shares of the Common Stock, of
Oxford Health Plans (PA), Inc. (the "PLAN"), a Pennsylvania HMO corporation with
a principal place of business at The Curtis Center, Suite 900, Independence
Square West, 601 Walnut Street, Philadelphia, Pennsylvania 19106 (such stock
being called the "Shares"); and (ii) Surplus Subordinated Notes of PLAN in an
aggregate face amount of $5,000,000 which counts as regulatory capital (the
"Notes").
WHEREAS, Seller desires to sell the Shares and Notes and Buyer desires
to purchase same; and
NOW, THEREFORE, in consideration of the mutual promises herein set
forth, and subject to the terms and conditions hereof, the parties agree as
follows:
1. Definitions. As used in this Agreement, terms defined in the
preamble and' recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below:
(a) "Agreement" shall mean this Stock Purchase Agreement
and all Schedules and Exhibits hereto, as the same
may from time to time be amended.
(b) "Closing" shall mean the closing of the purchase of
the Shares and Notes contemplated by this Agreement
in Philadelphia, Pennsylvania on the Closing Date.
(c) "Closing Date" shall mean the date on which the
Closing takes place, which is scheduled to be on or
before November 30, 1998.
2. Sale of Shares. At the Closing, the Seller shall sell, transfer,
assign, and convey to Buyer the Shares and Notes, and the Buyer shall purchase,
accept, and acquire from the Seller the Shares and Notes.
3. Purchase Price; Deposit, Method of Payment.
3.01 Purchase Price. The purchase price for the Shares to
be transferred by Seller at the Closing shall be Five
Million Dollars ($5,000,000) and Four Hundred
Thousand Dollars ($400,000) as reimbursement of
severance obligations to PLAN employees; the purchase
price for the Notes shall be Five Million Dollars
($5,000,000) (collectively hereinafter the "Purchase
Price"). Between the parties the Purchase Price shall
be allocated amongst the underlying business activity
$9,900,000 to the Medicaid line of business operated
by PLAN and $500,000 for remaining PLAN business.
3.02 Deposit. Buyer has delivered the sum of $500,000 to
Seller as a deposit to be credited to the Purchase
Price at Closing; the deposit may be retained by
Seller if the Transaction does not close for any
reason (other than failure of Seller's deliveries in
12.01, failure of Seller to provide requested
documents in a timely fashion, breach by Seller of a
material representation or covenant made herein or
failure of the condition in Section 11.03) on or
before the date specified in Section 10.02. The
balance of the Purchase Price shall be paid to Seller
by the Buyer at the Closing in immediately available
funds by wire transfer to Seller's account.
4. Curtis Center Lease; Surplus Notes.
4.01 Curtis Center Lease. Seller will hold Buyer harmless
from any expenses under the office lease for space at
the Curtis Center, except for the following space to
be subleased by PLAN or Buyer. At Closing PLAN and
Buyer may continue to occupy existing space on the
terms of Buyer's existing sublease through December
31, 1998 and thereafter subject to termination of
such tenancy on 30 days notice with the earliest
effective date of termination to be January 31, 1999.
In addition Buyer may terminate its existing sublease
at any time prior to December 31, 1998 in order to
move to another location.
4.02 Surplus Notes. Seller agrees not to infuse any
additional money to PLAN in return for Surplus Notes
without Buyer's consent.
4.03 Additional Capital Infusion. If, for any reason,
Seller is required to infuse additional capital into
PLAN to maintain regulatory compliance, the amount of
such capital infusion shall be added to the Purchase
Price; Seller shall not make any such capital
infusion without notice to Buyer and permitting Buyer
an opportunity to convince regulatory authorities
that no such capital infusion is required. Any such
capital infusion shall be made in a manner reasonably
acceptable to Buyer, subject to regulatory
requirements.
5. Representations and Warranties of the Seller. Seller represents and
warrants to Buyer as follows:
5.01 Organization; Good Standing. PLAN is a corporation,
duly organized and incorporated, validly existing,
and in good standing under the laws of Pennsylvania,
with all requisite power and authority, corporate or
otherwise, and legal right to own, operate, and lease
its properties, to carry on its business as now being
conducted. The PLAN has no subsidiary or any other
equity interest in any other corporation, company,
firm, association, trust, partnership, joint venture,
enterprise, or other entity.
5.02 Capitalization and Share Ownership. The number of
authorized shares, stated value, and number of issued
and outstanding shares of PLAN are set forth in
Schedule 5.02 hereto. All of such issued and
outstanding shares are (i) owned, beneficially and of
record, by the Seller, (ii) have been duly authorized
and validly issued and are fully paid and
non-assessable, and are owned by Seller free and
clear of any options, liens, trusts, encumbrances,
security interests, charges, or claims of any kind.
Except for Buyer's rights under this Agreement, no
person has any agreement, subscription, option, or
warrant, or any other right or commitment, entitling
it to acquire from the Seller or PLAN any shares of
capital stock of any class of PLAN. All of the
officers and directors of PLAN are listed on Schedule
5.02.
5.03 Absence of Undisclosed Liabilities. To Seller's
knowledge, the PLAN has no material indebtedness or
other liability required to be reflected on the
Financial Statements (as hereinafter defined) which
are not reflected thereon. The PLAN has not
guaranteed or assumed any debt or obligation of any
person, partnership, corporation, or other entity.
Any reference in this Agreement to the "Seller's
knowledge," or to the "knowledge of Seller," shall
mean to the knowledge of Peter Haytaian, Mitchell
Truwit, Jon S. Richardson, Beth Edward, Robert Azelby
or any other senior executive or officer of the
Seller involved in or working on the transactions
contemplated herein.
5.04 Corporate Record Books, etc. The PLAN minute books,
copies of all of which have been made available to
the Buyer, are in all material respects in reasonably
good order. Complete and correct copies of the
Certificate or Articles of Incorporation of PLAN, as
amended to the date hereof, have been delivered to
the Buyer by the Seller.
5.05 Title to Property and Assets; Liens. Except as. set
forth in Schedule 5.05, PLAN owns all equipment and
personal property as reflected on the Financial
Statements, has good and marketable title to all its
owned properties and assets, real, personal, and
intangible, including all property and assets
reflected in the Financial Statements, except as
disposed of after July 31, 1998, in the ordinary
course of business, and such property and assets are
subject to no mortgage, pledge, lien, security
interest, lease, charge, easement, encumbrance,
conditional sale, or other title retention agreement.
PLAN has rights to all the equipment and personal
property necessary to operate its business.
5.06 Leases of Real and Personal Property. A true,
correct, and complete list of all leases of real
property, and leases of any personal property, to
which PLAN is a party, either as lessor or lessee, is
set forth in Schedule 5.06 hereto, except that leases
cancelable on not more than 120 days notice or
without penalty or not involving more than $2,500
annual rent (except to the extent the aggregate rent
under all such leases through the date of earliest
termination exceeds $10,000) may be excluded
therefrom. All such leases are valid and effective in
accordance with their respective terms. Seller has
furnished to Buyer complete and correct copies of
each such lease.
5.07 AS-IS Condition of Property. Buyer agrees to accept
all real and personal property of PLAN at Closing in
AS-IS condition, without representation or warranty,
express or implied, as to the condition thereof. PLAN
owns no real property.
5.08 Insurance. PLAN policies of fire, liability, title,
malpractice, directors and officers, workmen's
compensation, and other forms of insurance have all
been provided as a part of blanket policies held by
Seller. All such policies will be canceled at Closing
and Buyer will substitute its own coverage.
5.09 Licenses, Franchises, and Permits. A true, correct,
and complete list of the material licenses,
franchises, permits, and other authorizations
necessary for the conduct of PLAN business as
presently being conducted are set forth in Schedule
5.09 hereto. Except as set forth on Schedule 5.09,
which may be updated from time to time as required
disclosures come to the knowledge of Seller, the PLAN
is not in violation of such licenses, franchises,
permits and other authorizations.
5.10 Employees. Set forth in Schedule 5.10 is a complete
payroll roster of all employees of the PLAN as of-the
date-of this Agreement, showing the rate of pay,
bonus or commission for the PLAN's last fiscal-year
and all accrued benefits for each such person
entitled to receive compensation from the PLAN. PLAN
is not a party to any employment agreement,
incentive/retention payment agreement, severance
agreement, deferred compensation agreement or other
agreement requiring payments to past, present or
future employees except as noted in Schedule 5.10.
PLAN is not subject to any union or collective
bargaining agreements.
5.11 Litigation. Except to the extent set forth in
Schedule 5.11 hereto, there is no material litigation
or arbitration proceeding pending or, to Seller's
knowledge, threatened, which might adversely affect.
the financial condition of PLAN.
5.12 Authority. The Seller has and will have, at Closing
the legal right, corporate power, authority, and
capacity to assign, sell, and transfer the Shares
owned by it at Closing. This Agreement when executed
win constitute the legal, valid, and binding
obligation of the Seller enforceable in accordance
with its terms. The delivery to the Buyer of the
Shares by the Seller pursuant to the provisions of
this Agreement will transfer valid title thereto,
free and clear of any options, liens, trusts,
encumbrances, security interests, charges, and claims
of any kind.
5.13 Compliance with other Instruments, etc. Subject to
obtaining the consents listed in Schedule 5.13 hereto
neither the execution nor the delivery of this
Agreement nor the consummation of the transactions
contemplated hereby, will (i) conflict with or result
in any violation of or constitute a default under any
term of the Certificate of Incorporation or By-Laws
of PLAN, or any material agreement, by which Seller
or PLAN is bound; or (ii) result in the creation or
imposition of any lien, security interest, charge,'
encumbrance or restriction upon any of the properties
or assets of PLAN; or (iii) conflict with any
judgment, order, decree or ruling to which Seller or
PLAN are subject or require any consent or approval
thereunder.
5.14 Agreements, etc. Except for leases listed on Schedule
5.06, set forth in Schedule 5.14, is a true, correct
and complete list of all written agreements,
contracts, or arrangements to which PLAN is a party
other than those cancelable on 90 days notice or less
without penalty or not involving more than $2,500 in
annual payments except to the extent the aggregate
payments under all such agreements through the date
of earliest termination exceeds $10,000. Except as
set forth in Schedule 5.14, to Seller's knowledge,
there is no material default on the part of any party
in the performance of any material obligation to be
performed or paid from any party under any such
agreements or contracts. Notwithstanding the
foregoing, the parties agree and acknowledge that
Schedule 5.14 does not list those subscriber
agreements, provider agreements, payor agreements and
similar health care agreements entered into by PLAN
for the provision of health care services or for the
arrangement of the provision of health care services
(collectively the "Health Care Services Agreements").
5.15 ERISA. Schedule 5.15 contains a true, correct, and
complete list of employee pension benefit plans" (as
defined in the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and "employee
welfare benefit plans" (as defined in Section 3(l) of
ERISA) (all the foregoing being herein called
"Employee Benefit Plans") maintained or contributed
to by PLAN. Each Employee Benefit Plan has been
administered in all material respects in accordance
with its terms and is in compliance in all material
respects with the currently applicable provisions of
ERISA and the Code. No funding deficiency exists with
respect to any of such Employee Benefit Plans, all
required tax filings and other filings have been made
with respect thereto and any amounts payable in
connection therewith have been paid.
5.16 Tax Returns and Payments. PLAN has duly filed all
foreign, federal, state and local tax returns and
reports required to be filed as of the date of this
Agreement and have duly paid or established adequate
reserves for the proper payment of all taxes and
other governmental charges upon each of them and its
properties, assets, income, franchises, licenses, or
sales. No powers of attorney have been granted and no
waivers of applicable statutes of limitation have
been made by Seller or PLAN. Neither Seller nor PLAN
have received any notice of a deficiency or that it
will be audited or subject to any examination within
the prior three years. However, PLAN is preparing a
filing to account for Pennsylvania use taxes which
have not been paid on personal property purchased
from out-of-state vendors.
5.17 Books and Records. All of the corporate, financial
and business records of PLAN are reasonably complete
and accurate and they are located at its principal
offices at The Curtis Center, Suite 900, Independence
Square West, 601 Walnut Street, Philadelphia,
Pennsylvania 19106.
5.18 Financial Statements. Attached hereto as Schedule
5.18 are the statutory balance sheet and income
statements for PLAN for the period ended July 31,
1998 which are unaudited statements prepared by PLAN
in the normal course of its monthly accounting (the
"Financial Statements"). The Financial Statements may
not contain end of period adjustments nor all of the
accruals normally required in audited financial
statements meeting GAAP or statutory accounting
standards. The Financial Statements reflect
substantial operating losses year-to-date.
Specifically, the accrual for IBNR on PLAN's balance
sheet is not warranted and Buyer understands that
actual experience subsequent to Closing may cause
such IBNR reserve to be increased. Buyer further
acknowledges that the Deferred Tax Receivable of
$5,957,507 is without warranty, is limited by
change-of-control provisions, PLAN net income in
future periods and other federal tax constraints and
specifically does not represent any claim by PLAN
against Seller, Oaktree or any other affiliate of
Seller. PLAN has been operated in the ordinary cause
of business since July 31, 1998 subject to the
exceptions noted in Section 8.04. Seller has made no
investments in PLAN after July 31, 1998 in return for
the issuance of Surplus Notes.
5.19 Bank Account. Schedule 5.19 contains a complete list
of all bank and investment accounts of PLAN and all
signatories thereon.
6. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller as follows:
6.01 Organization; Good Standing. The Buyer is a
corporation duly organized, validly existing, and in
good standing under the laws of the State of
Minnesota.
6.02 Authority. The Buyer has full corporate and other
authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered
by the Buyer and constitutes the legal, valid, and
binding obligation of the Buyer enforceable in
accordance with its terms.
6.03 Financing. Buyer understands that financing is not a
condition to its obligation to close and consummate
the transactions contemplated herein. Buyer has
received the consent from all of its creditors
required to so consent to the Closing and the
transactions contemplated herein.
6.04 Compliance with Other Instruments, etc. Subject to
obtaining the consents listed in Schedule 6.04 hereto
neither the execution nor the delivery of this
Agreement nor the consummation of the transactions
contemplated hereby, will (i) conflict with or result
in any violation of or constitute a default under any
term of the Articles of Incorporation or By-Laws of
Buyer, or any material agreement by which Buyer is
bound; or (ii) conflict with any judgment, order,
decree or ruling to which Buyer is subject or require
any consent or approval thereunder.
7. Buyer's Investigation; Disclaimer.
7.01 Buyer's Investigation. Buyer has conducted such
investigation of PLAN as it has deemed necessary in
order to make an informed decision concerning the
transactions contemplated hereby. Buyer represents
that it is sufficiently experienced and qualified in
the business of operating managed care businesses to
enable it to make an informed investigation of any
and all matters material and relevant to an
investment in the stock of PLAN. Buyer has reviewed
all of the documents, records, reports and other
materials identified in the Schedules hereto, and is
familiar with the content thereof and has had an
opportunity to investigate the condition, business
and future prospects of PLAN and to ask all questions
Buyer has deemed relevant. For the purpose of
conducting these investigations, Buyer has employed
the services of its own agents, representatives,
experts, and consultants. Buyer further represents
that it understands and is capable of bearing the
risks inherent in acquiring the stock of PLAN and
operating PLAN's business after Closing and
specifically the risks that continued operating
losses through and after Closing may require
substantial infusions of capital.
7.02 Disclaimer/Exclusion of Implied Warranties. Buyer
understands that Seller only recently acquired the
PLAN from a third party in July 1995 and has no
knowledge of PLAN's operations prior to such
acquisition. Except as expressly set forth in Section
5 of this Agreement, Seller (including its respective
legal and accounting advisors) has not made any
further representations or warranties of any kind,
either express or implied, concerning PLAN, the
subject matter of this Agreement, or any other matter
whatsoever, and the Buyer has not relied on an such
further representations or warranties in entering
into this Agreement and consummating the transactions
contemplated hereby. Buyer acknowledges and affirms
that prior to the date hereof and through the date of
the Closing it has and will continue to conduct its
own independent investigation, analysis and
evaluation of PLAN and its business operations and
prospects, and any-other matters Buyer and its
advisors have deemed relevant. EXCEPT AS SPECIFICALLY
MADE IN SECTION 5, THE SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED AND SELLER EXCLUDES AND DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, OF ANY TYPE OR NATURE
AND WITH RESPECT TO ANY AND ALL MATTERS WHATSOEVER
NOT OTHERWISE MADE IN SECTION 5.
8. Covenants of the Seller. Seller agrees that from the date of this
Agreement:
8.01 Cooperation. Seller shall use its best efforts to
cause the sale contemplated by this Agreement to be
consummated and to otherwise satisfy all of the
conditions set forth in Section 11 hereof, and
without limited the generality of the foregoing, to
obtain all necessary consents and authorizations of
third parties required by Seller or PLAN, make all
filings with and give all notices to third parties
required by Seller or PLAN and to take all actions
which may be necessary or reasonably in to effect the
transactions contemplated hereby.
8.02 Maintenance of Properties, etc. Seller shall cause
PLAN to maintain all of its properties in customary
repair, order, and condition, reasonable wear
excepted, and shall maintain insurance upon all of
its properties in such amounts and of such kinds and
against such risks as previously maintained and
insured against by PLAN.
8.03 Access to Properties, etc.; Notice of Major Events.
Seller shall give or cause to be given to the Buyer
and to Buyer's counsel, accountants, investment
advisors, and other representatives fun access,
consistent with Section 15, during normal business
hours on reasonable notice, to all of the properties,
books, tax returns, contracts, commitments, and
records of PLAN. It is expected that Buyer will have
a representative in residence at PLAN prior to
Closing for the purpose of monitoring all
developments in PLAN's business. In order for Buyer
to preserve and build the business of PLAN and avoid
actions which will adversely affect Buyer after
Closing, material decisions affecting the operation
of PLAN shall be subject to Buyer's reasonable
consent, which shall not be unreasonably withheld.
Seller shall promptly give Buyer copies of all
notices and communications PLAN receives from
governmental and other authorities and invite to
Buyer to join in all communications with governmental
and other authorities. Seller shall promptly deliver
to Buyer copies of all financial statements of PLAN
as the same are completed prior to the Closing Date.
However, PLAN shall remain in control of PLAN's
business.
8.04 Certain Prohibited Transactions. PLAN shall be
operated in the ordinary course of business through
the Closing, provided that PLAN may continue to
decrease the volume of PLAN's commercial HMO
business, may further reduce PLAN staff and may cease
marketing the insured PPO business underwritten by
Seller's New York insurance affiliate; and provided
further that Seller shall not, except with the prior
written consent of Buyer, permit PLAN to (i)
negotiate with respect to, or enter into, any
contract to merge or consolidate with any other
corporation, (ii) negotiate with respect to, or
change in any material manner, the character of its
business, or sell, transfer, or otherwise dispose of
or encumber any of its assets, except in the ordinary
course of business, (iii) negotiate with respect to,
or enter into, any joint venture or partnership, (iv)
declare or pay any dividend or other distribution in
respect to shares of its capital stock, (v) negotiate
with respect to, or make, any purchase, redemption,
or other acquisition, directly or indirectly, of any
outstanding shares of its capital stock, or purchase
stock or any other equity interest in any other
corporation or entity, (vi) adopt any plan of
liquidation, or (vii) directly or indirectly encumber
any of its assets.
8.05 Affiliate Obligations. The inter-company payable of
$3,706,909 due from PLAN to Seller (or affiliates of
Seller) reflected on the Financial Statements shall
be paid in full on or before the Closing Date;
otherwise after July 31, 1998 PLAN shall not make any
payments to, nor purchase services from Seller (or
any affiliate of Seller) prior to Closing except for
monthly reimbursement of taxes (other than payroll)
paid on PLAN's behalf, (ii) reconciliation of
premiums from common groups to reflect actual PLAN
premium versus premium owed to OHI for POS Coverages
or to other of Seller's affiliates; (iii)
reimbursement to OHI for all health care claims paid
on PLAN's commercial business; (iv) a management fee
after July 31 of $400,000 per month (to be prorated
in the month of Closing) to cover salary of PLAN
employees and all other services to PLAN; (v)
reimbursement for pharmacy and other health care
expense paid or payable on PLAN's behalf, (vi)
reimbursement brokerage commissions; and (vii) an
accounting true-up of any misapplied revenue or
expense items. Seller and PLAN shall reconcile and
pay all inter-company items periodically until
Closing and finally within 75 days after Closing.
8.06 Oxford Relationships; General Releases. On or prior
to Closing Seller shall cause (i) all contractual
relationships (except those specifically to be
continued under Section 9.03) between PLAN and Seller
or Oaktree Health Plans, Inc., ("Oaktree") or any
other affiliate of Seller to be terminated, including
specifically, without limitation, any tax sharing
agreement between PLAN and Seller, and (ii) mutual
general releases between Seller and Oaktree (and
their affiliates) and PLAN to be delivered.
8.07 SEC Financial Statements. To the extent audited
financial statements for PLAN are required in any
required 8-K or other SEC filing relating to this
transaction, Seller shall provide copies of audited
statutory financial statements for PLAN which are
presently available; Buyer shall negotiate with, pay
and obtain the consent from each auditor to the use
of such financials in a SEC filing, if required.
Seller shall cooperate and provide reasonable
assistance to Buyer and the auditor in order to
permit Buyer to obtain GAAP audited statements for
PLAN's three prior fiscal years.
8.08 Post-Closing Transition. After Closing Buyer intends
to create or obtain from third parties claims paying
and billing capability for all PLAN products and to
find a replacement carrier to write the
out-of-network coverage written by Seller's
affiliate, OHI. Buyer shall use its reasonable
commercial efforts to ensure that the total
membership in all PLAN commercial products does not
increase over current levels.
(a) POS Claims Processing. PLAN currently markets a
commercial HMO - POS product with out-of-network
coverages written by Seller's affiliate, Oxford
Health Insurance, Inc. ("OHI"), (the "POS
Coverages"). The POS Coverages covered approximately
6500 members on July 31, 1998 and had a reserve for
unpaid claims of $934,204 as of that date. Seller
agrees to cause OHI to continue to write after
Closing the POS Coverages executed by Plan (and to
process and pay all claims thereunder, maintain
enrollment data, to bill and account for all premiums
thereunder and respond to member inquiries to the
extent now done outside of Philadelphia) until the
earlier of (i) the expiration of all existing POS
policies or (ii) December 31, 1999, provided that
Buyer causes PLAN to allocate sufficient premium
weekly during each month to OHI with respect to the
POS Coverages (or Buyer makes up any deficiency with
respect thereto) to cover the following:
(x) all of the health care expenses incurred
or accrued by OHI with respect to the POS
Coverages for each month (the base
allocation under this clause (x) to be no
less than 25% of PLAN premium on POS
products),
(y) an amount equal to 10% of total PLAN
commercial premium for the preceding month
to pay OHI's cost of administering such
health care claims and associated accounting
and regulatory costs with respect to the POS
Coverages (provided further that such
reimbursement under this clause (y) shall
not be less than $20,722 per month through
the third month after Closing and $31,000
per month thereafter) and
(z) an amount (plus or minus) equal to the
change in the level of the health care
claims reserve for the POS Coverages as
reasonably established by OHI from month to
month.
Upon the date of final termination of the POS
Coverages OHI will use the then remaining health care
reserve ("Final Reserve") to pay all health care
expenses arising under the POS Coverages through such
date of termination. PLAN and Buyer shall guaranty
the level of the Final Reserve for a run-out period
of two years such that OHI shall have no exposure for
additional health care costs on the POS Coverages in
excess of the Final Reserve. The provisions of this
paragraph shall be placed in a premium allocation
agreement and, if necessary, filed with the
Pennsylvania DOI prior to Closing. PLAN may cancel
the premium allocation agreement and OHI's duty to
write the POS Coverages at any time by substitution
of another licensed carrier pursuant to Pennsylvania
law so long as OHI is paid in full and, subject to
paying over to the new carrier the Final Reserve,
relieved of any further liability thereunder.
(b) Commercial HMO Claims Processing. PLAN does not
process any claims under its commercial HMO products
(being both traditional HMO policies and the
in-network portion of the POS policies) and Seller
now processes all such HMO claims at locations in
Connecticut or elsewhere. Seller or OHI shall
continue to process such commercial HMO Claims after
Closing through December 31, 1999 as a third party
administrator for PLAN, provided that PLAN (i) pays
OHI monthly 10% of PLAN HMO premiums for the
preceding month (provided further that reimbursement
under this clause (i) shall not be less than $63,595
per month through the third month after Closing and
$96,000 per month thereafter) as the cost of
administering such claims and (ii) that PLAN funds
the PLAN commercial claim bank account with the cash
necessary to cover all such claims paid by Seller
from the PLAN commercial claim account. The
provisions of this paragraph shall be placed in a
third party administrator agreement ("TPA Agreement")
and, if necessary, filed with the Pennsylvania DOI
prior to Closing. PLAN may cancel the TPA Agreement
on ten (10) days notice consistent with Pennsylvania
law so long as OHI is paid in full and has no further
liability thereunder.
(c) Underwriting. Seller shall cause OHI to make its
actuarial reserving data available for use by Buyer's
actuaries in establishing rates for all of PLAN's
products, including the POS Coverages. Buyer shall be
exclusively responsible for the establishment and
filing of all rates.
8.09 Pharmacy Agreement. To the extent legally permitted,
Seller shall permit PLAN to have the benefit of the
Pharmacy Agreement with PCS or any successor
provider.
8.10 Compliance with Laws. PLAN will use its best efforts
to comply with all applicable laws, rules,
regulations and contracts and notify Buyer in writing
of any actual or anticipated circumstances which, to
Seller's' knowledge, will result in a material
violation, breach or default. Seller will cooperate
with Buyer to avoid such material violation, breach
or default.
8.11 Benefit Termination, COBRA; Employee Termination.
PLAN's existing health and dental insurance, life
insurance, disability insurance and 401-k Plan are
provided through Seller's programs and PLAN employee
participation in such benefit plans shall be
terminated at Closing. PLAN and Seller shall
terminate (and Seller alone shall pay all retention,
bonus and severance amounts due to) all employees on
the day of Closing; in connection with such payments
Seller shall obtain from each terminated employee a
release of all claims in accordance with the
appropriate procedure under Federal and Pennsylvania
law (provided no guaranty is otherwise made as to the
effectiveness of such releases). Buyer shall
separately arrange for the services of any PLAN
employees it wishes to hire. Seller shall provide
COBRA coverage at its expense to all terminated
employees as well as any benefits guaranteed after
Closing as a part of any severance arrangement.
8.12 Outstanding Checks. While Seller has agreed to
transfer legal title to certain predecessor operating
accounts (with 7/31/98 balances of $952,036) at First
Union Bank to PLAN prior to Closing, Buyer
acknowledges that checks on those accounts totaling
$360,297 are still outstanding and that Seller will
retain cash in such amount to cover such checks when
presented or to escheat same to the Commonwealth of
Pennsylvania.
9. Covenants of Buyer. Buyer agrees that:
9.01 Cooperation. Buyer shall use its best efforts to
cause the sale contemplated by this Agreement to be
consummated, and without limiting the generality of
the foregoing, to obtain all necessary consents and
authorizations of third parties, make all filings
with and give all notices to third parties required
by Buyer and to take all actions which may be
necessary or reasonably required in order to effect
the transactions contemplated hereby and to fully
implement the principles and agreements set forth
herein.
9.02 Name Change. Buyer shall cause PLAN's name to be
changed at Closing to one not including "Oxford" and
further shall only use documents with the Oxford name
in conjunction with the new name as soon as possible
and no later than 15 days after Closing. Buyer should
cease using the "Oxford" name entirely within six
months of Closing or the date all commercial POS
policies expire, whichever is later.
9.03 Continuing Service Agreements. Seller shall cause OHI
to honor the agreements required from OHI under
Section 8.08 to enable PLAN's commercial products to
function.
10. Conditions Precedent to the Obligations of the Seller. All
obligations of the Seller under this Agreement are subject to the fulfillment,
at or prior to the Closing Date, of each of the following conditions:
10.01 Buyer's Representations, Warranties and Covenants.
The representations and warranties of the Buyer
herein contained shall be true in all material
respects on and as of the Closing Date with the same
force and effect as though made on and as of said
date except as affected by transactions contemplated
hereby. The Buyer shall have performed in all
material respects all of its obligations and
agreements and complied in all material respects with
all its covenants contained in this Agreement to be
performed and complied with by it prior to the
Closing Date.
10.02 Closing Date. The Closing shall have unconditionally
occurred on or before January 15, 1999.
10.03 Termination. Documents in form satisfactory to Seller
shall have been received from PLAN terminating all
contractual relationships between PLAN and Seller (or
its affiliates) except those noted in Section 9.03.
10.04 Regulatory Approvals. The Pennsylvania DOI, DPW and
FTC (Hart-Scott-Rodino) have approved (i) the
transfer of control to Buyer in all respects with no
conditions imposing any obligation upon Seller except
for conditions imposing a monetary obligation on
Seller which Buyer either pays at Closing (if due
currently) or indemnities Seller from the cost
thereof and (ii) the termination of all services
agreements and replacement of POS agreements between
PLAN and Seller.
10.05 Buyer Deliveries. Buyer shall have made the
deliveries required by Section 12.02 at Closing.
11. Conditions Precedent to the Obligations of the Buyer. All
obligations of the Buyer under this Agreement are subject to the fulfillment, at
or prior to the Closing Date, of each of the following conditions:
11.01 Seller's Representations, Warranties and Covenants.
The representations and warranties of the Seller
herein contained shall be true in all material
respects as of the Closing Date with the same force
and effect as though made on and as of said date
except for any changes occurring in the ordinary
course of business of PLAN or as otherwise permitted
under this Agreement and as affected by transactions
contemplated hereby. Seller shall have performed in
all material respects all of its obligations and
agreements and complied in all material respects with
all of its covenants in this Agreement to be
performed and complied with by it prior to the
Closing Date.
11.02 Regulatory Approvals. Buyer shall have received
approval from the Pennsylvania DOI, DPW and FTC
(Hart-Scott-Rodino) for the change-in-control
contemplated hereby and all other regulatory
approvals necessary for Closing, with no conditions
which would have the effect of imposing any material
obligations whatsoever on Buyer.
11.03 PLAN Audit. PLAN shall have filed its 1997 financial
statement (with an audit opinion from Ernst & Young)
with the Pennsylvania DPW, the cost of which audit
shall be borne by PLAN, including any late filing
penalties.
12. Seller's or Buyer's Deliveries; Further Assurances.
12.01 Seller's Deliveries. At the Closing Seller shall
deliver to Buyer:
(a) original stock certificates for the Shares
and the original Notes;
(b) certificates issued by appropriate
governmental authorities evidencing the
corporate existence and good standing of
PLAN as a corporation in the State of
Pennsylvania;
(c) opinion dated the Closing Date from the
General Counsel to the Seller in the form of
Exhibit A: and
(d) if not previously filed, financial
statements for PLAN as of September 30, 1998
in form to be filed with the Pennsylvania
Departments of Insurance and Public Welfare.
(e) the original corporate records and all books
and records of the business.
12.02 Buyer's Deliveries. At the Closing, the Buyer shall
deliver to Seller:
(a) evidence of a wire transfer to Seller's
account in immediately available funds in
the amount of the balance of the Purchase
Price due in accordance with Section 3
hereof;
(b) an opinion dated the Closing Date from the
General Counsel to' Buyer, in the form of
Exhibit B; and
(c) evidence of the regulatory approvals as
required in Section 11.02.
(d) documents appropriate to change PLAN's name
per the requirements of Section 9.02.
12.03 Further Assurances. Following the Closing, at the
request of Buyer, Seller shall deliver to Buyer such
further reasonably necessary documents executed by
Seller and take such reasonable action as may be
necessary or appropriate: (i) to confirm the sale,
transfer, assignment, conveyance, and delivery of the
Shares purchased by Buyer pursuant to this Agreement,
and (ii) to vest in the Buyer all the right, title,
and interest in and to the Shares. In addition,
Seller shall make available such of its records which
relate to the business of PLAN for review and copying
by Buyer.
13. Seller's Indemnification.
13.01 Indemnification. The Seller agrees to indemnify and
hold harmless the Buyer against any and all loss,
liability, claim, damage, and expense whatsoever
(including reasonable legal fees and disbursements)
arising out of: (i) any material breach or material
inaccuracy of any material representation, warranty,
covenant, or agreement made by the Seller set forth
in this Agreement; or (ii) any material failure by
the Seller to perform any of its covenants or
obligations pursuant to this Agreement.
13.02 Management of Claims. If any action, suit, or
proceeding shall be commenced against, or any claim
or demand be asserted against, the Buyer in respect
of which the Buyer proposes to demand indemnification
hereunder, the Buyer shall notify Seller to that
effect and shall consult in good faith with the
Seller with respect thereto. Seller may, at its
option, participate with the Buyer, at its own
expense, in the defense of any such action, suit, or
proceeding, but such defense, an any settlement of
any such action, suit, or proceeding, shall at all
times be under the sole discretion and control of the
Buyer, which shall proceed in good faith at all
times.
13.03 Limitations of Seller's Liability. Seller's liability
to Buyer for indemnification under this Section 13
for breach of any representation, warranty, or
covenant of this Agreement or otherwise arising from
the transactions contemplated in this Agreement shall
in all cases be limited to a maximum of the Purchase
Price. Any claim by Buyer against Seller must be made
in writing within three (3) months after the
applicable period of limitation of survival as
provided in Section 14. Moreover, except in the case
of intentional deceit or actual fraud, Seller shall
be liable' for any claim of Buyer only in the event
and to the extent that the aggregate amount of
liability of Seller to Buyer exceeds Two Hundred
Thousand Dollars ($200,000) (the "Deductible") and
then only for the ,amount of liability in excess of
such Deductible. Subject to the Deductible, time
limits and maximum liability described herein, Seller
shall be liable to Buyer as provided in this
Agreement only on a dollar for dollar basis for the
actual direct damage suffered by Buyer and Seller
shall in no event be liable for consequential damages
or damages in any way computed on the basis of a
multiple or in any other way taking into account the
Purchase Price, Buyer's method of determination of
the Purchase Price, or Buyer's valuation as a public
company.
14. Nature and Survival of Representations and Warranties. All
representations, warranties, and covenants made by Seller or by Buyer in this
Agreement are true and correct as of both the date hereof and the Closing Date
and shall survive the Closing Date for a period of six (6) months; the
representations and warranties contained in Sections 5.01, 5.05, 5.11, 5.15 and
5.16 shall survive the Closing Date for a period of two (2) years; and the
representations and warranties contained in Sections 5.02, 5.12 and claims
arising from Seller's intentional deceit or actual fraud shall survive for the
applicable statute of limitations.
15. Brokerage. Seller agrees to indemnify the Buyer and to hold it
harmless from and against any and all claims for any broker's or finder's fee or
commission arising out of or based on any act of the Seller. The Buyer agrees to
indemnify the Seller and to hold it harmless from and against any and all claims
for any broker's or finder's fee or commission arising out of or based on any
act of the Buyer or its affiliates.
16. Arbitration. Any controversy or claim arising out of, or relating
to this Agreement, the breach hereof, or coverage of this arbitration provision,
shall be settled by arbitration which shall be in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in Philadelphia as
such rules shall be in effect on the date of delivery of demand for arbitration.
Any such arbitration shall be heard and conducted in Philadelphia" Pennsylvania.
All conclusions of law reached by the arbitrators shall be made in accordance
with the substantive law of the State of Pennsylvania. Any award rendered by the
arbitrator(s) shall be accompanied by a written opinion setting forth the
findings of fact and conclusions of law relied upon in reaching their decision.
The award by the arbitrator shall include recovery of costs and expenses
(including reasonable attorney's fees) by the prevailing party as may be
determined appropriate by the arbitrator. Either party may obtain judicial
review of the arbitrators' decision, but only as to conclusions of law.
17. Payment of Expenses. Except as provided in Section 16, Buyer and
Seller shall each pay all of their own expenses in connection with this
Agreement and the transactions contemplated hereby.
18. Publicity. All notices, press releases or other publicity
concerning this transaction shall be approved by both parties prior to issuance,
unless otherwise required by law or applicable stock exchange rules.
19. Extension of Closing Date. In the event that the Closing does not
occur on or before November 30, 1998 solely by reason of the failure of Buyer to
obtain all of the regulatory approvals required under Section 11.02, then Buyer
may elect to postpone the Closing date until December 31, 1998, provided Buyer
delivers to Seller simultaneously on or before November 30, 1998 (i) a notice of
extension under this Section 19 specifying an Extended Closing Date no later
than December 31, 1998 and (ii) payment of an extension fee to Seller by a wire
transfer of the Extension Amount to a bank account previously specified by
Seller. The Extension Amount shall be $200,000 and shall be treated as an
additional deposit under Section 3.02. In addition, and provided that Seller has
no reasonable basis to believe that Buyer's regulatory approvals will not be
granted within two weeks, Buyer may further elect to extend the Closing to
January 15, 1999 by written notice to Seller delivered on or before December 31,
1998. Buyer may not extend the Closing Date hereunder beyond January 15, 1999.
If the Closing has not occurred by any scheduled Closing Date (or if the same
has not been extended hereunder), then Seller may retain Buyer's deposit given
under Section 3 as liquidated damages under this Agreement and this Agreement
shall thereupon terminate with no further liability of either party hereunder.
20. Miscellaneous.
20.01 Waivers. The waiver by any of the parties of a breach
of any provision of this Agreement shall not operate
or be construed as a waiver or a breach of any other
provision of this Agreement.
20.02 Amendments, Supplements, Termination, etc. Subject to
applicable law, this Agreement may be amended,.
modified, and supplemented, only by written agreement
of the Buyer, and the Seller, at any time prior to
the Closing Date with respect to any of the terms
contained herein.
20.03 Notices. All notices, consents, demands, requests,
approvals, and other communications which are
required or may be given hereunder shall be in
writing and shall be deemed to have been duly given
if hand-delivered or delivered by overnight courier
service. Notice shall be deemed effective on the date
of such delivery:
(a) If to the Seller:
Mitchell Truwit
Director, Business Development
Oxford Health Plan, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Phone: 203-851-1986
Fax: 203-851-1444
and
with a copy to:
Jon S. Richardson, Esq.
Special Counsel to the CEO
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Phone: 203-851-2709
Fax: 203-851-2465
(b) If to the Buyer:
Thomas Clark, CFO
Health Risk Management, Inc.
10900 Hampshire, Avenue South
Minneapolis, Minnesota 55438
Phone: 612-829-3525
Fax: 612-829-3578
with a copy to:
Thomas Archbold, Esq.
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3397
Phone: 612-347-7142
Fax: 612-347-7077
or to such other person or persons at such address or
addresses as may be designated by written notice to
the other parties hereunder.
20.04 Entire Agreement. This Agreement, together with the
other writings delivered in connection herewith,
embodies the entire agreement and understanding of
the parties hereto with respect to the subject
matters hereof and thereof and supersedes any prior
agreement and understanding between the parties.
20.05 Pronouns. All pronouns and any variations thereof
shall be deemed to refer-to masculine, feminine,
neuter, singular, or plural, as the identity of the
person or persons may require.
20.06 Governing Law and Binding Effect. This Agreement
shall be governed by the laws of the State of
Pennsylvania without regard to principles of
conflicts of law thereof and shall be binding upon
and shall inure to the benefit of the parties hereto
and their respective successors and assigns.
20.07 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render
unenforceable such provision in any other
jurisdiction, provided such prohibited or
unenforceable provision does not affect the essence
of this Agreement.
20.08 Counterparts. This Agreement may be executed in one
or more counterparts, each of which together shall
constitute one and the same instrument.
20.09 Captions. The captions and headings throughout this
Agreement are for convenience and reference only, and
shall in no way be deemed to define, modify, or add
to the construction of any provision of, or to the
scope or intent of, this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Witness: OXFORD HEALTH PLANS, INC.
By:
HEALTH RISK MANAGEMENT, INC.
By:
<PAGE>
Schedule 5.02 - Capitalization, Directors and Officers
Schedule 5.05 - Title
Schedule 5.06 - Leases
Schedule 5.09 - Licenses
Schedule 5.10 - Payroll Roster
Schedule 5.11 - Litigation
Schedule 5.13 - Compliance
Schedule 5.14 - Agreements
Schedule 5.15 - ERISA Plan
Schedule 5.18 - Financial Statement
Schedule 5.19 - Bank Accounts
Schedule 6.04 - Buyer's Consents
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 Curtis 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 Curtis 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:
