EXHIBIT 10.1
CLOSING AGREEMENT
This Closing Agreement, dated as of January 28, 1998, is by and among UNIVERSAL
SELF CARE, INC., a Delaware corporation ("UNIVERSAL"), each of its wholly owned
subsidiaries, CLINISHARE DIABETES CENTERS, INC., a California corporation,
PHYSICIANS SUPPORT SERVICES, INC., a California corporation, USC-MICHIGAN, INC.,
a Michigan corporation, its wholly owned subsidiary, PCS, INC. - WEST, a
Michigan corporation, DIABETES SELF CARE, INC., a Virginia corporation, USCI
HEALTHCARE MANAGEMENT SOLUTIONS, INC., a Delaware corporation, and certain of
the stockholders of Universal, XXXXX X. XXXXXXXXX, XXXXXX X. XXXXXXXX, XXXXXXX
X. XXXXXXX, and XXXX X. XXXXX (individually, each a "STOCKHOLDER" and
collectively, the "STOCKHOLDERS"), on the one hand, and XXXXXX MEDICAL
MANAGEMENT, LLC ("XXXXXX MANAGEMENT"), a Georgia limited liability company, and
its subsidiary XXXXXX MEDICAL ACQUISITION COMPANY, a Georgia corporation
("XXXXXX ACQUISITION", and collectively with Xxxxxx Management, "XXXXXX"), on
the other hand. The parties named above entered into an Asset Purchase Agreement
on November 14, 1997, as amended by the First Amendment to the Asset Purchase
Agreement dated November 24, 1997 (the "ASSET PURCHASE AGREEMENT"). In order to
consummate the Asset Purchase Agreement, the parties thereto hereby agree as
follows. (References to "Sections" are references to sections of the Asset
Purchase Agreement, and references to "paragraphs" are references to paragraphs
of this Agreement. Capitalized terms used but not defined herein are defined in
the Asset Purchase Agreement.)
1. Notwithstanding the first sentence of Section 2.3(a), at the Closing,
Xxxxxx Acquisition shall make a cash payment by wire transfer of
immediately available funds to the bank account of Universal's choice equal
to $17 million plus the Closing Net Asset Value, less the amount paid under
paragraph 3 below.
2. The principal amount of the Note referred to in the first sentence of
Section 2.3(b) shall be $17 Million.
3. In connection with the condition stated in Section 8.9 Xxxxxx shall deliver
to the State of California Board of Equalization on the Closing Date, as an
accommodation to Universal, a Xxxxxx Management check payable to the Board
of Equalization in the amount of $391,230.00, the amount stated in the
pay-off letter dated on or about January 27, 1998 from the Board of
Equalization delivered to Xxxxxx by Universal; and prior to Closing Xxxxxx
shall have received adequate of the Board of Equalization's receipt of such
check.
4. In addition to those documents to be delivered to Xxxxxx by Universal
pursuant to Section 2.4(b), Universal shall also deliver to Xxxxxx the
following:
(i) Termination Agreement executed by Xxx Xxxxxxxx releasing Diabetes Self
Care, Inc. from any and all obligations to him under his employment
agreement with that Purchased Company; and
(ii) Termination Agreement executed by Xxxxxx Xxxxxxxx releasing USCI
Healthcare Management Solutions, Inc. from any and all obligations to
him under his employment agreement with that Purchased Company.
5. Notwithstanding the first sentence of Section 2.5(b), if 75% of the Post
Closing Revenue, as defined in Section 2.5(b), is less than $17 million,
then the Note shall be adjusted by reducing the principal amount of the
Note by the amount of the shortfall, following the procedure set forth in
Section 2.7 of the Asset Purchase Agreement.
6. The following are added to the list of occurrences stated in Section 6.9(a)
as a result of which or in connection with which the Selling Companies
shall indemnify, reimburse and hold harmless Xxxxxx, the Purchased
Companies, and any of their Affiliates, any successors or assigns, none of
which shall be subject to the claim threshold in Section 6.9(e):
(a) any Loss in connection with any claim, action, lawsuit or other
proceeding by or on behalf of Xxxxx Xxxxxx based on any actions taken or
failed to have been taken by a Selling Company or a Purchased Company prior
to the Closing; (b) any Loss in connection with a claim, audit,
investigation, or enforcement action by, or proceeding before, Medicare,
any Medicaid agency of any state, MediCal, or any intermediary or agent of
any state or local governmental entity, or any other healthcare regulatory
body, against a Selling Company or a Purchased Company based on any actions
taken or failed to have been taken by any Selling Company or Purchased
Company prior to the Closing and either identified in the California
Department of Health Services review of Physicians Support Services, Inc.
for the period November 1, 1994 to April 30, 1996, or not disclosed in the
Disclosure Memorandum; or (c) any Loss in connection with any claim,
action, lawsuit or other proceeding based on a claim of ownership of
certificate number 1, 2, 3 or 4 representing Diabetes Self Care, Inc.
common stock issued before the Closing Date, or a claim of ownership of
such common stock.
7. Notwithstanding the provisions of Section 6.20, Xxxxxx shall not be
required to use any efforts to collect any accounts receivable in the
Sandata system. In addition, during the first month after the Closing
Xxxxxx shall commit to the collection of other Universal trade accounts
receivable all the employees of the Purchased Companies committed to the
collection of trade accounts receivable after the initial termination of
employees of the Purchased Companies after the Closing; during the next
month after the Closing, Xxxxxx shall commit at least six employees to the
collection of other Universal trade accounts receivable; after the first
two months after the Closing, Xxxxxx shall not be required to commit more
than three employees to the collection of other Universal trade accounts
receivable; and the efforts of such employees shall be at least as diligent
as those used by Universal employees prior to the Closing.
8. Notwithstanding the provisions of Section 6.25, prior to Closing Xxxxxx
shall designate the employees of the Purchased Companies who are to be
terminated after Closing. Universal shall not be required to hire such
employees but Universal shall be responsible for any liabilities incurred
by Xxxxxx or the Purchased Companies in connection with such terminations
by the Purchased Companies, except for liabilities incurred by Xxxxxx or
the Purchased Companies due to any tortious act committed by Xxxxxx or a
Purchased Company in connection with such terminations, such as assault or
slander.
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9. Before the Closing, Xxxxxx advanced to the Purchased Companies
$1,083,312.46 to pay all federal and state payroll and withholding taxes
accrued and unpaid by the Purchased Companies as of January 25, 1998. In
consideration of such advance, $1,299,974.80 shall be a treated as a
liability of the Purchased Companies to be shown on the Closing Balance
Sheets and included in the calculation set out in Section 2.2(a)(iii)(3)
and 2.3(a), thereby reducing the cash to be paid at Closing.
10. Notwithstanding anything in this Agreement or the Asset Purchase Agreement
to the contrary, and without limiting the generality of any provision of
either such agreement which is not contrary to the following, (i) as of the
Closing, no Purchased Company shall sponsor any Benefit Plan or Applicable
Benefit Plan (defined hereinafter); (ii) as of the Closing, no Purchased
Company shall have any liability, or responsibility to act or omit to act
in any regard, in relation to any Benefit Plan or Applicable Benefit Plan;
(iii) Xxxxxx shall not assume or have any liability at any time in relation
to any Applicable Benefit Plan (unless such liability is expressly assumed
by Xxxxxx); and (iv) as of the Closing, there shall be no liability, or
responsibility to act or omit to act in any regard, in relation to the
Assumed Plan (defined hereinafter), except with respect to insurance
premiums and claims for benefits in the ordinary and customary course of
administration of the Assumed Plan. To the extent that work in relation to
the Assumed Plan (with respect to any and all matters occurring up to the
Closing) or in relation to any Applicable Benefit Plan must be accomplished
after the Closing, competent counsel and other consultants engaged by
Universal prior to Closing shall be responsible for all such work; and,
without limiting any other provision of this Agreement or the Asset
Purchase Agreement, Universal shall be solely responsible for the payment
of all fees, costs, expenses and other charges incurred by one or more of
Xxxxxx, Diabetes Self Care, Inc., or USCI Health Care Management Solutions,
Inc. prior to and after Closing in relation to the Assumed Plan (with
respect to any and all matters occurring up to the Closing) or in relation
to any Applicable Benefit Plan. Universal shall be solely responsible for
the payment of all administrative and other fees, costs, expenses and other
charges incurred in relation to the Assumed Plan after the Closing with
respect to coverage required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, for employees of any Purchased
Company prior to the Closing whose employment is terminated, for any reason
or no reason, at any time before the sixth month after the Closing. Xxxxxx
and its legal counsel shall be entitled to obtain any and all documents and
other information (whether written or unwritten), from any and all persons
and entities, relating to one or more of the Applicable Benefit Plans and
the Assumed Plan. For purposes of this paragraph 10, the phrase "Benefit
Plan" shall include, without limitation, (i) each pension, retirement,
profit-sharing, cash or deferred, deferred compensation, stock option,
phantom stock, stock appreciation rights, employee stock ownership,
severance pay, vacation, paid time off, education-reimbursement, bonus,
incentive, and other or similar plan, program or other arrangement, (ii)
each written or unwritten employee or other or similar program,
arrangement, agreement or understanding, whether arrived at through
collective bargaining or otherwise, (iii) each cafeteria, Section 125,
medical, vision, dental, disability, death benefit, life insurance, health
and/or accident plan, program or other arrangement, and (iv) each other
employee benefit plan, voluntary employees' beneficiary association, fringe
benefit plan, and other or similar plan, program or other arrangement,
agreement or understanding, including, without limitation, each "employee
benefit plan," as that term is defined in Section 3(3) of the
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Employee Retirement Income Security Act of 1974, as amended. The phrases
"Applicable Benefit Plan" and "Applicable Benefit Plans" shall include,
without limitation, (i) each and every Benefit Plan which, at any time up
to the Closing, was sponsored by, was contributed to or required to be
contributed to by, or was otherwise connected with, one or more of
Universal, Clinishare Diabetes Centers, Inc., Physicians Support Services,
Inc., USC-Michigan, Inc., PCS, Inc.-West, Diabetes Self Care, Inc., and
USCI Health Care Management Solutions, Inc. (each, a "Target Company"), and
(ii) the Diabetes Self Care, Inc. 401(k) Plan, and each Target Company-
related life insurance, health coverage, disability coverage, flexible
benefits, and other or similar plan, program or arrangement. The phrases
"Benefit Plan," "Applicable Benefit Plan" and "Applicable Benefit Plans"
shall exclude only the fully-insured health and accident plan sponsored
for only the eligible employees of Diabetes Self Care, Inc. (the benefits
under which are underwritten by Allmerica Health Insurance Company); and
such excluded plan is referred to in this paragraph 10 as the "Assumed
Plan."
11. The list of Accepted Contracts contained on Schedule A to the Asset
Purchase Agreement shall be expanded to include that certain Equipment
Lease between Target Equipment Leasing, Inc. and Universal Self Care, Inc.
dated February 23, 1996 for specified computers and computer hardware
located at 00000 Xxxxxxxxxx Xxxx, Xxxxxxx, XX.
12. With reference to Section 6.30, because of the failure of Diabetes Self
Care, Inc. to obtain assignments of benefits for all patients and customers
billed under the PCS, Inc. - West ("PCS") provider numbers (the "PCS
customers"):
(i) the parties agree that Xxxxxx and Diabetes Self Care, Inc. shall
continue reasonable efforts after the Closing to obtain such
assignments of benefits; and Xxxxxx, Diabetes Self Care, Inc. and
their agents and representatives shall be entitled to communicate with
the PCS customers for the purposes thereof and to take such other
steps as shall be reasonably necessary to obtain such assignments of
benefits. In addition, as to all PCS customers for which Diabetes
Self Care, Inc. has not obtained such assignments of benefits within
six months after the Closing, the Note shall be adjusted by reducing
the principal amount of the Note by an amount equal to $600 times the
number of such PCS customers (up to $2.0 million), following the
procedure set forth in Section 2.7.
(ii) PCS has entered into a Billing Agency Agreement dated the date hereof
with Xxxxxx Medical Direct, L.L.C., a Georgia limited liability
company ("Xxxxxx Direct"), under which PCS has appointed Xxxxxx Direct
as its agent to furnish billing, claims, check negotiation and
collection services as to payments receivable from or on behalf of the
PCS customers, a copy of which Agency Agreement is attached hereto as
Exhibit A. The parties further agree that Xxxxxx Direct shall pay
over to Xxxxxx all money received by Xxxxxx Direct in regard to the
PCS Customers, less any money payable to Xxxxxx Direct as compensation
under the Agency Agreement, and Xxxxxx shall be entitled to keep all
such money received from Xxxxxx Direct or PCS, as applicable. In
addition, the Note shall be immediately adjusted by reducing the
principal amount of the Note by $2.0 million, following the procedure
set forth in Section 2.7, if within six months after the Closing
either (A) PCS, its affiliates, successors or assigns
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terminate, revoke or modify or attempt to terminate, revoke or modify
the Agency Agreement or any part thereof except at the written request
or with the written consent of Xxxxxx, or (B) Xxxxxx Direct shall
otherwise be prevented by law or under an order or ruling of any court
or governmental agency (a "Legal Impediment") from performing under
the Billing Agency Agreement or from receiving and keeping the amounts
which it otherwise would be entitled to receive and keep under this
paragraph 12(ii), and PCS fails within 30 days after the occurrence of
such Legal Impediment to implement procedures reasonably satisfactory
to Xxxxxx that insure that Xxxxxx may receive and keep all payments to
or on behalf of PCS or its customers, and all fees payable under the
Billing Agency Agreement, it would have received for such six month
period had such Legal Impediment not occurred.
13. Diabetes Self Care, Inc. has entered into an agreement with MCI for the
provision of certain telephone services. If after the Closing Xxxxxx or
Diabetes Self Care, Inc. desires to terminate such agreement and is not
able to terminate on 30 days' notice or less, Diabetes Self Care, Inc.
shall have the right to assign such agreement to Universal, and Universal
thereupon shall accept such agreement and assume all obligations under such
agreement as if such agreement were an Assigned Agreement under the Asset
Purchase Agreement.
14. In consideration of Xxxxxx'x relinquishment of the Selling Companies'
rights in certain furniture and equipment located at 000 Xxxxxxxx Xxxxx,
Xxxxxx Xxxxx, Xxxxxxxxxx, the cash to be paid at Closing shall be reduced
$3,000.
15. After the Closing, Universal shall continue to use its best efforts to
secure the consent to the assignment of the following equipment leases
covering certain computers, computer hardware and computer software:
Equipment Lease between Target Equipment Leasing, Inc. and Universal Self
Care, Inc. dated February 23, 1996
Equipment Lease between Target Equipment Leasing, Inc. and Universal Self
Care, Inc. dated February 27, 1996
Equipment Lease between Target Equipment Leasing, Inc. and Universal Self
Care, Inc. dated March 12, 1996.
16. Attached hereto as Exhibit B is the allocation of the Purchase Price
pursuant to Section 6.7(e)(iii).
17. Concerning the assumption by Xxxxxx Acquisition of the Xxxxxx Assumed
Liabilities, and the accounting for certain items to be shown on the
Closing Balance Sheet, the parties agree that Xxxxxx Acquisition shall not
assume the accounts payable to Greenberg, Traurig, Hoffman, Lipoff, Xxxxx &
Quentel and to Xxxxxxx Xxxxx & Co., P.C., in the aggregate amount of
$260,486, and vendor rebates payable in the amount of $470,000 for products
supplied by the Purchased Companies to Medicare and Medicaid patients shall
be treated as accounts receivable instead of a reduction of accounts
payable. In connection therewith, notwithstanding the provisions of
Section 2.5(c), twelve months following the Closing, the principal amount
of the Note shall be reduced (following the procedure set forth in Section
2.7) in the event and to the extent that the amount by which collections of
the trade accounts
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receivable shown on the Closing Balance Sheet shall be less than $5.75
million during that 12 month period.
18. Attached hereto as Exhibit C is a copy of the Preliminary Balance Sheets,
signed separately by a representative of each of the parties and annotated
concerning certain liabilities of certain Selling Companies to be assumed
by Xxxxxx Acquisition and treated as Xxxxxx Assumed Liabilities, with a
corresponding reduction in the cash to be paid at Closing, and certain
liabilities of certain Purchased Companies not to be assumed by Xxxxxx
Acquisition and treated as Xxxxxx Assumed Liabilities, with a corresponding
increase in the cash to be paid at Closing.
Each of the parties hereto has caused this Closing Agreement to be duly executed
on its behalf as of the date indicated on the first page hereof. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
XXXXXX:
XXXXXX MEDICAL MANAGEMENT, LLC XXXXXX MEDICAL ACQUISITION
COMPANY
By: By:
------------------------- --------------------------
Xxxx X. Xxxxxx Xxxx X. Xxxxxx
President President
UNIVERSAL:
UNIVERSAL SELF CARE, INC. CLINISHARE DIABETES CENTERS, INC.
By: By:
------------------------ -------------------------
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
---------------------------- -----------------------------
Print Name Print Name
PRESIDENT VICE PRESIDENT
---------------------------- -----------------------------
Print Title Print Title
PHYSICIANS SUPPORT SERVICES, INC. USC-MICHIGAN, INC.
By: By:
------------------------ ---------------------------
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
---------------------------- ------------------------------
Print Name Print Name
VICE PRESIDENT VICE PRESIDENT
---------------------------- ------------------------------
Print Title Print Title
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PCS, INC. - WEST DIABETES SELF CARE, INC.
By: By:
---------------------- --------------------------
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
-------------------------- -------------------------------
Print Name Print Name
VICE PRESIDENT VICE PRESIDENT
-------------------------- -------------------------------
Print Title Print Title
USCI HEALTHCARE MANAGEMENT
SOLUTIONS, INC.
By:
-------------------------
Xxxxx X. Xxxxxxxxx
------------------------------
Print Name
VICE PRESIDENT
------------------------------
Print Title
STOCKHOLDERS:
------------------------ -----------------------------
XXXXX X. XXXXXXXXX XXXXXX X. XXXXXXXX
------------------------ -----------------------------
XXXXXXX X. XXXXXXX XXXX X. XXXXX
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EXHIBIT A
BILLING AGENCY AGREEMENT
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EXHIBIT B
PURCHASE PRICE ALLOCATION
Accounts Receivable $ 9,108,272
Inventories 1,118,398
Property and equipment 822,528
Cost in Excess of Net Assets Acquired 22,950,802
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$34,000,000
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EXHIBIT C
PRELIMINARY BALANCE SHEETS
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