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EXHIBIT 10.10
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement"), made this 31st day of
December, 1997, is entered into by and among Xxxxx HealthPlan Services, Inc., a
Florida corporation (the "Parent"), SHPS Acquisition Corp., a Florida
corporation (the "Purchaser"), and OMS Holding Corporation ("OMS Holding"), Xxxx
XxXxxxx ("XxXxxxx"), Xxxxxxx Xxxxxxx, M.D. ("Holland"), Xxxx Xxxxxxx ("Xxxxxxx")
(the "Current Shareholders"), Xxxxxx X. Xxxxxx, M.D. and Xxxxx X. Xxxxx, M.D.
(the "Current Option Holders") (collectively, the "Selling Shareholders") and
OMS Incorporated, a Massachusetts corporation (the "Acquired Company").
W I T N E S S E T H :
WHEREAS, the parties desire to enter into this Acquisition Agreement
pursuant to which Purchaser will purchase and the Selling Shareholders will sell
all of the outstanding capital stock of the Acquired Company from the Selling
Shareholders.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:
I. DEFINITIONS. The capitalized terms used herein will have the
meanings ascribed to them in Exhibit 1.1 hereto. Unless the context otherwise
requires, such capitalized terms will include the singular and plural and the
term "including" shall mean "including but not limited to." Wherever in this
Agreement reference is made to the knowledge of the Acquired Company it means
the individual knowledge of the Acquired Company's officers, directors and
employees.
II. COVENANTS AND UNDERTAKINGS.
II.1 Purchase and Sale of Stock. Subject to the terms and conditions
hereinafter set forth, at the Closing, the Selling Shareholders shall sell,
assign, transfer, convey and deliver to Purchaser, free and clear of all liens,
claims, charges, security interests and other encumbrances of any nature
whatsoever, and Purchaser shall purchase, Nine Hundred Seventy-Nine Thousand
Nine Hundred Ninety-Eight (979,998) shares of the common capital stock of the
Acquired Company (collectively, the "Shares") which represent all of the issued
and outstanding shares of capital stock of the Acquired Company. Such sale,
transfer, conveyance and delivery shall be evidenced by the delivery to
Purchaser of share certificates duly endorsed in blank or share certificates
accompanied by duly executed stock powers (with signatures guaranteed and with
all necessary transfer taxes, if any, paid or
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other revenue stamps affixed thereto) together with such other documents of
transfer as Purchaser shall reasonably request.
II.2 Purchase Price.
II.2.1 Consideration. Purchaser, in full payment for the Shares
shall pay the Purchase Price as follows:
II.2.1.1 The Cash Purchase Price Amount less the Escrow
Amount shall be paid in cash, or by wire transfer of immediately available funds
at Closing, to the Selling Shareholders (and/or the Selling Shareholders'
Representative on behalf of the Selling Shareholders, as directed by the Selling
Shareholders' Representative as evidenced by Exhibit 2.2.1 attached hereto),
such amount to be allocated among the Selling Shareholders based on their
ownership of the preferred and the common capital stock as set forth on Exhibit
2.2.1 under the heading of "Cash Payable at Closing;"
II.2.1.2 The Escrow Amount shall be paid in cash or other
immediately available funds at Closing to the Escrow Agent to be held in escrow
pursuant to the terms of the Escrow Agreement; and
II.2.1.3 The Downward Purchase Price Adjustment Amount, if
any, shall be paid in cash, or by other immediately available funds, to the
Purchaser by the Selling Shareholders (such amount to be allocated among the
Selling Shareholders in relationship to the purchase price allocated to each at
Closing to the total purchase price as set forth on Exhibit 2.2.1 under the
heading "Allocation of Adjustment Payment Amount"), as required by Section 2.2.2
below, within 10 days of the determination of the Final Closing Balance Sheet.
II.2.1.4 The Upward Purchase Price Adjustment Amount, if
any, shall be paid in cash, or by other immediately available funds, by the
Purchaser to the Selling Shareholders (such amount to be allocated among the
Selling Shareholders in relationship to the purchase price allocated to each at
Closing to the total purchase price as set forth on Exhibit 2.2.1 under the
heading "Allocation of Adjustment Payment Amount"), as required by Section 2.2.2
below, within 10 days of the determination of the Final Closing Balance Sheet.
II.2.2 Post-Closing Adjustment Procedures and Determination of
the Adjustment Payment Amount.
II.2.2.1 Within 90 days of the Closing Date, Purchaser
will use its best efforts to deliver to the Selling Shareholders the Closing
Balance Sheet. Thereafter, each of Purchaser and the Selling Shareholders'
Representative shall give
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the other and any independent auditors and authorized representatives of such
party full access at all reasonable times to the properties, books, records and
personnel of the Acquired Company relating to periods prior to the Closing Date
for purposes of preparing, reviewing and resolving any disputes concerning the
Closing Balance Sheet. The Selling Shareholders shall have 30 days following
delivery to the Selling Shareholders of the Closing Balance Sheet during which
to notify Purchaser of any dispute of any item contained therein, which notice
shall set forth in reasonable detail the basis for such dispute. If the Selling
Shareholders fail to notify Purchaser of any such dispute within such 30-day
period, the Closing Balance Sheet provided by the Purchaser shall be final,
conclusive and binding and shall be deemed to be the "Final Closing Balance
Sheet." In the event that the Selling Shareholders shall so notify Purchaser of
any dispute, the undisputed portion of Adjustment Payments shall be paid and
Purchaser and the Selling Shareholders shall cooperate in good faith to resolve
such dispute as promptly as practicable. If Purchaser and the Selling
Shareholders are unable to resolve any such dispute within 15 days of the
Selling Shareholders' delivery of such notice, such dispute shall be resolved by
a Settlement Auditor. The Settlement Auditor shall make such revisions to the
Closing Balance Sheet and Closing Income Statement as it deems appropriate in
order to make a determination of the disputed items as promptly as practicable
provided that the amount of the disputed item as so determined must be between
(or equal to one of) the amounts proposed by the Selling Shareholders and
Purchaser in the dispute. Such determination shall be final, conclusive and
binding on the parties and shall be deemed a final arbitration award that is
enforceable pursuant to all terms of the Federal Arbitration Act, 9 U.S.C.
xx.xx. 1 et seq. (the "Federal Arbitration Act"). The expenses relating to the
engagement of the Settlement Auditor shall be shared equally by Purchaser and
the Selling Shareholders. In the event of a dispute, the Closing Balance Sheet
and Closing Income Statement, as modified by the Settlement Auditor shall be the
"Final Closing Balance Sheet."
II.2.2.2 Upon determination of the Final Closing Balance
Sheet (i) the Purchaser may withdraw from the Escrow Fund the amount by which
the book value net worth of the Acquired Company as of the Closing Date was less
than $3,224,957 (the "Downward Purchase Price Adjustment Amount"), less any
undisputed portion previously paid pursuant to Section 2.2.2.1, provided that
the maximum amount that can be withdrawn from the Escrow Fund by the Downward
Purchase Price Adjustment shall not exceed $250,000, and if such withdrawal is
insufficient to cover the Downward Purchase Price Adjustment Amount, the Selling
Shareholders shall pay to the Purchaser the deficit promptly following receipt
of written notice of the deficit; or (ii) the Purchaser shall pay to the Selling
Shareholders one-half (1/2) of the amount by which the book value net worth of
the Acquired Company as of the Closing
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Date was greater than $3,224,957 (the "Upward Purchase Price Adjustment
Amount"), less any undisputed portion previously paid pursuant to Section
2.2.2.1.
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II.3 Conduct of the Business of the Acquired Company Prior to Closing.
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II.3.1 Except (i) with the prior consent in writing of Parent, (ii) as
provided otherwise in this Agreement or (iii) as set forth on Schedule 2.3.1 of
the Disclosure Letter, the Selling Shareholders and the Acquired Company
covenant that, between the date of this Agreement and the Closing Date, the
Acquired Company will conduct its business only in the ordinary course, and that
it will: (a) use its best efforts to preserve the organization of the Acquired
Company intact and to preserve the goodwill of clients, customers and others
having business relations with the Acquired Company; (b) maintain the properties
of the Acquired Company in the same working order and condition as such
properties are in as of the date of this Agreement, reasonable wear and tear
excepted; (c) keep in force at no less than the present limits of all existing
bonds, letters of credit and policies of insurance insuring the Acquired
Company, its performance and its respective properties; (d) not enter into any
contract, commitment, arrangement or transaction of the type required to be
listed on Schedules 3.4, 3.7, 3.11, 3.14.1, 3.14.2(i), 3.14.2(ii), 3.17 or 3.20
of the Disclosure Letter or suffer, permit or incur any of the transactions or
events described in Section 3.10 hereof (except for (i) the payment of any
health, disability and life insurance premiums which may become due, (ii)
contributions or distributions required to be made (and not discretionary)
pursuant to the terms of any Benefit Plans, including the payment prior to
Closing of the Acquired Company's portion of 401(k) plan contributions on behalf
of its employees in an amount not to exceed $55,000, which payment is not
discretionary but would normally be made in March of 1998 and (iii) payment of
employee bonuses other than to the Selling Shareholders, which bonuses shall not
exceed in the aggregate $110,000 (such items (i) through (iii) hereinafter
referred to as "Permitted Employee Distributions")) to the extent such events or
transactions are within the control of the Acquired Company; (e) not make or
permit any change in the Acquired Company's Certificate of Incorporation or
Bylaws, or in its authorized, issued or outstanding securities; (f) not issue
any security except as contemplated by Section 2.13 hereof, or grant any stock
option or right to purchase any security of the Acquired Company, issue any
security convertible into such securities, purchase, redeem, retire or otherwise
acquire any of such securities, or agree to do any of the foregoing or declare,
set aside or pay any dividend or other distribution in respect of such
securities; (g) not make any contribution to or distribution on behalf of or to
any employee of the Acquired Company (except Permitted Employee Distributions);
(h) not make any capital expenditure which when aggregated with all other
capital expenditures for the period exceeds the sum of $100,000; and (i)
promptly advise Parent in writing of any matters arising or discovered after the
date of this Agreement which, if existing or known at the date hereof, would be
required to be set forth or described in this Agreement or the Disclosure
Letter.
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II.3.2 Except after prior notification to, and with the prior
written consent of, Parent, the Acquired Company will not make, between the date
of this Agreement and the Closing Date, any material change in its respective
banking or safe deposit arrangements or grant any powers of attorney. A list of
all bank accounts, safe deposit boxes (and the contents thereof) and powers of
attorney of the Acquired Company and of all persons authorized to act with
respect thereto is set forth in Schedule 2.3.2 of the Disclosure Letter.
II.3.3 Except with the prior consent in writing of Parent or as
otherwise required by GAAP, the Acquired Company will not make, between the date
of this Agreement and the Closing Date, any changes in its accounting methods or
practices.
II.4 Intercompany Accounts and Services. Prior to or at the Closing,
the Acquired Company will take all actions necessary to settle as of the
Closing all cash overdrafts, loans, advances, intercompany payables or
receivables, indebtedness and other accounts between the Acquired Company, on
the one hand, and any employee or any Affiliate of any employee.
II.5 Examination of Property and Records. Between the date of this
Agreement and the Closing Date, the Acquired Company will allow Parent, its
counsel and other representatives full access to all the books, records, files,
documents, assets, properties, contracts and agreements of the Acquired Company
which may be reasonably requested, and shall furnish Parent, its officers and
representatives during such period with all information concerning the affairs
of the Acquired Company which may be reasonably requested. Parent will conduct
any investigation in a manner which will not unreasonably interfere with the
business of the Acquired Company.
II.6 Employment and Noncompete Agreements. The Acquired Company will
cause those employees identified on Exhibit 2.6(a) to enter into, at the
Closing, Employment Agreements substantially in the form set forth in Exhibit
2.6(b).
II.7 Consents and Approvals. The Acquired Company will use its best
efforts to obtain the waiver, consent and approval of all persons whose waiver,
consent or approval (i) is required or advisable in order to consummate the
transactions contemplated by this Agreement or (ii) is required by any material
agreement, lease, instrument, arrangement, judgment, decree, order or license to
which the Acquired Company or any Affiliate of the Acquired Company is a party
or subject to on the Closing Date and (a) which would prohibit, or require the
waiver, consent or approval of any person to such transactions or (b) under
which, without such waiver, consent or approval, such transactions would
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constitute an occurrence of default under the provisions thereof, result in the
acceleration of any obligation thereunder or give rise to a right of any party
thereto to terminate its obligations thereunder. All required written notices,
waivers, consents and approvals from persons other than governmental authorities
are listed on Schedule 3.9 of the Disclosure Letter and except as waived by the
Parent in writing, at or prior to Closing, the consents shall be produced at
Closing in form and content reasonably satisfactory to Parent.
II.8 Access to Business Records. Prior to Closing, the Acquired Company
shall cause any Selling Shareholder or any Affiliates thereof, who possess
documents required to the performance of the Acquired Company's businesses to
transfer such documents to the Acquired Company. Such Selling Shareholders may
make copies or extracts from such books and records prior to transfer at their
sole expense.
II.9 Employee Matters.
II.9.1 After the Closing until such date as the Acquired Company's
employees commence participation in Parent's employee benefit plans, as
described in the next sentence (the "Plan Transfer Date"), Parent shall cause
the Purchaser to take whatever action is necessary or appropriate to cause the
Acquired Company to maintain the participation, sponsorship and/or maintenance
of all of the Acquired Company's employee benefit plans except those identified
on Exhibit 2.9.1. From and after the Plan Transfer Date, all employees of the
Acquired Company shall become participants in the employee benefit plans and
programs maintained by the Parent for similarly situated employees of the
Parent, which plans shall be substantially comparable to those of the Acquired
Company, except as otherwise mutually agreed by the Acquired Company and the
Parent. Such employee benefit plans that are health benefit plans shall (i)
recognize expenses and claims that were incurred by such employees in the year
in which the Closing Date occurs and recognized for similar purposes under the
Acquired Company's plans as of the Closing Date and (ii) provide coverage
(without any required waiting period) for pre-existing health conditions to the
extent covered under the applicable plans or benefit programs of the Acquired
Company as of the Closing Date. In addition, such employee benefit plans and
programs shall credit such employees with years of service with the Acquired
Company for all plan purposes, provided that no such crediting shall be required
to the extent that it would result in a duplication of benefits or require
contributions for years prior to the Closing Date.
II.9.2 The Selling Shareholders and the Acquired Company shall
provide Parent with any information which Parent shall reasonably request
concerning the employees of the Acquired
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Company (the "Employees"), and shall cooperate with, and assist, Parent with
respect to the commencement of participation of any Employee in the Parent's
benefit plans or arrangements.
II.10 Affiliated Contracts. At or prior to Closing, the Acquired
Company shall cause the Selling Shareholders and their Affiliates to transfer to
the Acquired Company any contracts the revenues from which are included in the
revenues of the Acquired Company but which are in the name of the Selling
Shareholders or their Affiliates and any assets which have been paid for by the
Acquired Company but which are owned by the Selling Shareholders or their
Affiliates, as opposed to the Acquired Company. All such assets and contracts
are listed on Schedule 2.10 of the Disclosure Letter.
II.11 Alternative Proposals. Prior to the Closing Date, the Selling
Shareholders and the Acquired Company agree that the Acquired Company will not,
nor shall it permit its officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it) to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its shareholders)
with respect to a merger, acquisition, consolidation or similar transaction
involving, or purchase of (i) all or any significant portion of the assets of
the Acquired Company, or (ii) 25% or more of the outstanding shares of Acquired
Company Preferred Stock and/or Common Stock (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Alternative Proposal
(excluding the transactions contemplated by this Agreement), or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal.
Nothing in this Section 2.11 shall (x) permit the Acquired Company to terminate
this Agreement, (y) permit the Acquired Company to enter into any agreement with
respect to an Alternative Proposal for as long as this Agreement remains in
effect (it being agreed that for as long as this Agreement remains in effect,
the Acquired Company shall not enter into any agreement with any person that
provides for, or in any way facilitates, an Alternative Proposal), or (z) affect
any other obligation of the Acquired Company under this Agreement.
II.12 Shareholder Consent. Each Selling Shareholder shall execute and
deliver a Selling Shareholder Consent and Power of Attorney (the "Selling
Shareholder Consent") appointing Xxxx XxXxxxx to act as his, her or its
attorney-in-fact for purposes of this Agreement and the obligations and
covenants of such Selling Shareholder hereunder. In such capacity Xxxx XxXxxxx
(and any successor of Xxxx XxXxxxx in such capacity as provided in the
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Selling Shareholder Consent) is referred to in this Agreement as the "Selling
Shareholders' Representative." The Parent and the Purchaser shall be entitled to
rely on the acts of the Selling Shareholders' Representative as the acts of the
Selling Shareholders without any obligation to inquire of the Selling
Shareholders as to the authority of the Selling Shareholders' Representative to
take any action taken by him as Agent or Selling Shareholders' Representative
and the actions of the Selling Shareholders' Representative shall be binding on
the Selling Shareholders as between them and the Parent and the Purchaser.
II.13 Acquired Company Options. Prior to the Closing, the Selling
Shareholders and the Acquired Company will take such action as is legally
required to amend any Acquired Company stock option plans and the terms of all
Acquired Company options outstanding at the Effective Time such that: (i) all
outstanding Acquired Company options are immediately vested and exercisable in
full at or before the Effective Time, (ii) no further options will be grantable
under such plans after the date of this Agreement, and (iii) all
change-of-control provisions contained in such plans and outstanding Acquired
Company options will not apply to any Acquired Company options outstanding as of
the date of this Agreement. In addition, at or prior to the Closing, the Current
Option Holders shall exercise all of their options to acquire the common stock
of the Acquired Company. All proceeds from the exercise of the Acquired Company
options shall remain in the Acquired Company and reflected as an asset on the
Closing Balance Sheet.
II.14 Resignations. The Acquired Company and the Selling Shareholders
covenant to cause to be delivered at the Closing the resignation of each of the
directors of the Acquired Company, such resignations to be effective immediately
following the Closing.
II.15 Restrictions on OMS Holding Corporation Distributions. OMS
Holding will not distribute or otherwise transfer any of the proceeds received
by it from the sale of its Acquired Company Stock to any of its shareholders or
affiliates unless and until it shall deliver to Parent a guarantee by Anthem
Blue Cross Blue Shield of Connecticut (the "Anthem Guaranty") guaranteeing
Holdings' obligations under this Agreement which guarantee shall be in form and
substance acceptable to the Parent. OMS Holding will use its best efforts to
deliver such guarantee to the parent within 30 days of the Closing.
II.16 Delivery of Legal Opinion of Massachusetts Counsel. Within thirty
(30) days of the Closing, the Selling Shareholders shall deliver to the Parent
and the Purchaser a legal opinion under Massachusetts law covering items listed
on Exhibit 2.16, which shall be in form and content acceptable to the Parent and
the Purchaser.
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III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY AND THE
SELLING SHAREHOLDERS.
Subject to the indemnity limitations set forth in Article VII, OMS
Holding, severally but not jointly, and the Selling Shareholders other than OMS
Holding jointly and severally represent and warrant to the Parent and the
Purchaser as follows:
III.1 Residency, Organization, Standing and Foreign Qualification.
III.1.1 The Acquired Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has full corporate power and authority to carry on its
business as it is now being conducted and to own and lease the properties and
assets which it now owns or leases.
III.1.2 The Acquired Company is now, and will be at Closing, duly
qualified and/or licensed to transact business and in good standing as a foreign
corporation in the jurisdictions listed in Schedule 3.1.2 of the Disclosure
Letter, and the character of the property owned or leased by the Acquired
Company and the nature of the business conducted by them do not require such
qualification and/or licensing in any other jurisdiction, except where the
failure to be so qualified or licensed would not have an Acquired Company
Material Adverse Effect.
III.1.3 The Acquired Company has no Subsidiaries.
III.1.4 Each Selling Shareholder is a resident of the state set
forth opposite their name on Schedule 3.1.4 of the Disclosure Letter and has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other person whomsoever.
III.2 Authority and Status/Ownership of Capital Stock.
III.2.1 The Acquired Company has the capacity and authority to
execute and deliver this Agreement, to perform hereunder without the necessity
of any act or consent of any other person whomsoever. The execution, delivery
and performance by the Acquired Company of this Agreement and each and every
agreement, document and instrument provided for herein have been duly authorized
and approved by the Board of Directors of the Acquired Company. This Agreement
and each and every agreement, document and instrument to be executed, delivered
and performed by the Acquired Company and the Selling Shareholders in connection
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herewith constitute or will, when executed and delivered, constitute the valid
and legally binding obligations of such party enforceable against such party in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally. Attached as Schedule 3.2 of the
Disclosure Letter are true, correct and complete copies of the Certificate of
Incorporation and Bylaws of the Acquired Company.
III.2.2 Each Current Shareholder owns and each Current Option
Holder will own at Closing the shares of capital stock of the Acquired Company
set forth opposite his name on Exhibit 2.2.1 free and clear of any lien, charge
or encumbrance whatsoever, and the Shares set forth thereon represent all of the
shares of capital stock of the Acquired Company which will be issued and
outstanding as of the Closing Date.
III.3 Capitalization. The authorized capital stock of the Acquired
Company consists of 1,100,000 shares of common stock, par value $.01 per share,
of which 439,998 are issued and outstanding as of the date of this Agreement,
and 510,000 shares of preferred stock, par value $2.55 per share, of which
510,000 are issued and outstanding as of the date of this Agreement. All of the
outstanding shares of the Acquired Company are duly authorized, validly issued,
fully paid, nonassessable and free of any preemptive rights. The authorization
or consent of no other person or entity is required in order to consummate the
transactions contemplated herein by virtue of any such person or entity having
an equitable or beneficial interest in the Acquired Company or the capital stock
of the Acquired Company. Except as set forth on Schedule 3.3 of the Disclosure
Letter or as contemplated herein, there are no outstanding options, warrants,
calls, commitments or plans by the Acquired Company to issue any additional
shares of its capital stock, to pay any dividends on such shares or to purchase,
redeem, or retire any outstanding shares of its capital stock, nor are there
outstanding any securities or obligations which are convertible into or
exchangeable for any shares of capital stock of the Acquired Company. Concurrent
with the Closing, OMS Holding will exercise its right to convert its 510,000
shares of preferred stock into 510,000 shares of common stock in accordance with
Article 4, Section 3 of the Acquired Company's Restated Articles of
Organization. In addition, the Current Option Holders will exercise their
respective options and acquire 30,000 shares of common stock (Xxxxx - 20,000
shares; Xxxxxx - 10,000 shares) in accordance with their respective
Non-Qualified Stock Option Agreements, as amended. Accordingly, as of the
Closing, there be 979,998 shares of common stock, par value $0.01 per share
issued and outstanding.
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III.4 Absence of Equity Investments. Except as described in Schedule
3.4 of the Disclosure Letter, the Acquired Company does not, either directly or
indirectly, own of record or beneficially any shares or other equity interests
in any corporation, partnership, limited partnership, joint venture, trust or
other business entity. No officer or director of the Acquired Company or other
Affiliate of such person, directly or indirectly, owns of record or beneficially
any shares or other equity interests in any corporation (except as a shareholder
holding less than one percent (1%) interest in a corporation whose shares are
traded on a national or regional securities exchange or in the
over-the-counter-market), partnership, limited partnership, joint venture, trust
or other business entity, all or any portion of the business of which is
competitive with that of the Acquired Company.
III.5 Liabilities and Obligations of the Acquired Company.
III.5.1 Attached as Schedule 3.5.1(a) are true, correct and
complete copies of the Acquired Company's audited balance sheets as of December
31, 1994, 1995 and 1996 and the related statements of operations and cash flows
for the fiscal years ending on December 31, 1994, 1995 and 1996 (the "Financial
Statements"). Also attached as Schedule 3.5.1(a) are true, correct and complete
copies of the Acquired Company's unaudited balance sheet as of August 31, 1997
and the related unaudited statement of operations and cash flows for the
eight-month period then ended (the "Interim Financial Statements"). Except as
specifically described in Schedule 3.5.1(b), the Financial Statements and the
Interim Financial Statements fairly present the Acquired Company's current
operations and financial condition as of the dates thereof, except to the extent
that the Interim Financial Statements lack footnotes and do not reflect normal
year-end adjustments, none of which would materially and adversely change the
results reported therein.
III.5.2 Except as described in Schedule 3.5.1(a) and 3.5.1(b),
the Acquired Company has no liability or obligation related to its assets or
business (whether accrued, absolute, contingent or otherwise), except for (i)
the liabilities and obligations of the Acquired Company that are disclosed or
reserved against in the Interim Financial Statements, to the extent and in the
amounts so disclosed or reserved against, (ii) liabilities that were incurred or
accrued in the ordinary course of the Acquired Company's business since the date
of the Interim Financial Statements, (iii) the liabilities and obligations of
the Acquired Company under the Material Agreements, and (iv) those nonmaterial
liabilities and obligations of the Acquired Company under all contracts and
agreements other than the Material Agreements.
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III.6 Taxes. The Acquired Company has duly filed all federal, and
material state, local and foreign income, franchise, excise, real and personal
property and other tax returns and reports (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by the Acquired Company prior to the date hereof. All of the foregoing returns
and reports are true and correct in all material respects, and the Acquired
Company has paid or, prior to the Closing Date, will pay all taxes, interest and
penalties required to be paid in respect of the periods covered by such returns
or reports to any federal, state, foreign, local or other taxing authority. The
Acquired Company will pay or make adequate provision in the Final Closing
Balance Sheet for all taxes payable in respect of all periods ending on or prior
to the Closing Date. The Acquired Company at Closing will have no material
liability for any taxes in excess of the amounts so paid or reserves so
established and the Acquired Company will not be delinquent in the payment of
any material tax, assessment or governmental charge that is due and payable and
has not requested any extension of time within which to file any returns in
respect of any fiscal year which have not since been filed. No deficiencies for
any tax, assessment or governmental charge have been proposed in writing,
asserted or assessed (tentatively or definitely), in each case, by any taxing
authority, against the Acquired Company for which there are not adequate
reserves. The Acquired Company is not the subject of any Tax audit. As of the
date of this Agreement, there are no pending requests for waivers of the time to
assess any such tax, other than those made in the ordinary course and for which
payment has been made or there are adequate reserves. For the purposes of this
Agreement, the term "Tax" shall include all federal, state, local and foreign
taxes including interest and penalties thereon. The Acquired Company has not
filed an election under Section 341(f) of the Code to be treated as a consenting
corporation.
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III.7 Ownership of Assets and Leases.
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III.7.1 Real Estate and Personal Property. Schedule 3.7 of the
Disclosure Letter is a complete and correct list and brief description as of the
date of this Agreement of all real property and items of personal property which
are owned and have a book value in excess of $100,000 net of the reserve for
depreciation, and all real property and all material items of personal property
which are leased or licensed by the Acquired Company under leases relating to
assets which are material to the operation of the Acquired Company or which
provide for payments throughout the lease term of more than $25,000. The
Acquired Company has good and marketable title to all of its property and
assets, other than leased or licensed property, including those listed and
described in Schedule 3.7 of the Disclosure Letter as owned property and assets,
in each case free and clear of any liens, security interests, claims, charges,
options, rights of tenants or other encumbrances, except as disclosed or
reserved against in Schedule 3.7 of the Disclosure Letter (to the extent and in
the amounts so disclosed or reserved against) and except for liens arising from
current taxes not yet due and payable. Each of the leases, licenses and
agreements described in Schedule 3.7 of the Disclosure Letter is in full force
and effect and constitutes a legal, valid and binding obligation of the Acquired
Company and, to the knowledge of the Acquired Company and the Selling
Shareholders, the other respective parties thereto and, to the knowledge of the
Acquired Company and the Selling Shareholders, is enforceable in accordance with
its terms, except as enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws from time to time in effect affecting the enforcement of creditors' rights
generally, and there is not under any of such leases, licenses or agreements
existing any default of the Acquired Company or, to the knowledge of the
Acquired Company and the Selling Shareholders, any other parties thereto.
Neither the Acquired Company nor any Selling Shareholder has received any
payment from a lessor or licensee in connection with or as inducement for
entering into a lease or license under which it is a lessee or a licensee. All
buildings, machinery and equipment owned or leased by the Acquired Company are
in good operating condition and reasonable state of repair, subject only to
ordinary wear and tear. The Acquired Company has not received any notice of a
violation of any applicable zoning regulation, ordinance or other law,
regulation or requirement relating to its operations and properties, whether
owned or leased, and there is no such violation by the Acquired Company or
grounds therefor which could have an Acquired Company Material Adverse Effect.
Except pursuant to this Agreement, neither the Acquired Company nor any Selling
Shareholder is a party to any contract or obligation whereby there has been
granted to anyone an absolute or contingent right to purchase, obtain or acquire
any rights in any of the assets, properties or operations which are owned by the
Acquired Company or which are used in connection with the business
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of the Acquired Company.
III.8 Accounts Receivable. All of the accounts receivable of the
Acquired Company as of the date of the Interim Financial Statements are and as
of the Closing Date will have arisen in the ordinary course of business and
represent valid accounts which are not subject to offset or dispute except as
otherwise disclosed to Parent in the Disclosure Letter. The accounts receivables
reserves reflected on the Interim Financial Statements are as of such date
established in accordance with GAAP consistently applied and any reserves
established after such date and prior to the Closing Date will likewise be
established in accordance with GAAP consistently applied. An aged list of the
Accounts Receivable of the Acquired Company as of the end of the last month
preceding the date of this Agreement is set forth on Schedule 3.8(a) of the
Disclosure Letter. To the best knowledge of the Acquired Company, the accounts
receivable of the Acquired Company are collectible in full net of any reserves
thereon. Except as set forth on Schedule 3.8(b), no accounts payable of the
Acquired Company are, as of the date of this Agreement, over thirty (30) days
old.
III.9 Required Filings and Absence of Conflicts. Except as listed in
Schedule 3.9 of the Disclosure Letter, the execution and delivery of this
Agreement by the Acquired Company and the Selling Shareholders does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation, as amended, or Bylaws, as
amended, of the Acquired Company or violate or constitute an occurrence of
default under any provision of, or conflict with, or result in acceleration of
any obligation under, or give rise to a right by any party to terminate its
obligations under, any material mortgage, deed of trust, conveyance to secure
debt, note, loan, lien, lease, agreement, instrument, or any order, judgment,
decree or other material arrangement to which the Acquired Company is a party or
is bound or by which the Acquired Company's assets are affected. Except as
listed or described on Schedule 3.9 of the Disclosure Letter, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental entity is required to be obtained or made by or with
respect to the Acquired Company, any Selling Shareholder or any assets,
properties or operations of the Acquired Company or any Selling Shareholder, in
connection with the execution and delivery by the Acquired Company of this
Agreement or the consummation of the transactions contemplated hereby.
III.10 Absence of Changes. Since August 31, 1997, the Acquired Company
has not, nor has anyone on its behalf, except as disclosed on Schedule 3.10 of
the Disclosure Letter or as permitted by Section 2.3 hereof:
III.10.1 Transferred, assigned, conveyed or liquidated
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into current assets any of its assets or business or entered into any
transaction or incurred any liability or obligation, other than in the ordinary
course of its business;
III.10.2 Suffered any Acquired Company Material Adverse Effect or
become aware of any event or state of facts which may result in any an Acquired
Company Material Adverse Effect;
III.10.3 Suffered any destruction, damage or loss to a material
asset or a group of assets that are in the aggregate material to the business,
whether or not covered by insurance;
III.10.4 Suffered, permitted or incurred the imposition of any
lien, charge, encumbrance (which as used herein includes, without limitation,
any mortgage, deed of trust, conveyance to secure debt or security interest) or
claim upon any of its assets, except for any current year lien with respect to
Taxes not yet due and payable;
III.10.5 Committed, suffered, permitted or incurred any default
in any liability or obligation;
III.10.6 Made or agreed to any adverse change in the terms of any
material contract or instrument to which it is a party;
III.10.7 Waived, canceled, sold or otherwise disposed of, for
less than the face amount thereof, any material claim or right which it has
against others or accelerated its collections or its efforts to collect accounts
receivable or otherwise deviated from its normal collection activities
consistent with historic practice in any material respect;
III.10.8 Declared, promised or made any dividend payment,
distribution or other payment to its shareholders (other than the payment of
reasonable compensation for services actually rendered) or issued any additional
shares or rights, options or calls with respect to the Acquired Company's
shares, or redeemed, purchased or otherwise acquired the Acquired Company's
shares except in accordance with Section 2.13 hereof, or made any change
whatsoever in the Acquired Company's capital structure;
III.10.9 Except for Permitted Employee Distributions, paid,
agreed to pay or incurred any obligation for any payment for, any contribution
or other amount to, or with respect to, any employee benefit plan, or paid or
agreed to pay any bonus to, or granted or agreed to grant any increase in the
compensation of, the Acquired Company's directors, officers, agents or
employees, or made any increase in the pension, retirement or other benefits of
its directors, officers, agents or other employees.
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III.10.10 Committed, suffered, permitted or incurred any
transaction or event which would materially increase its Tax liability for any
prior taxable year;
III.10.11 Incurred any other material liability or obligation or
entered into any transaction other than in the ordinary course of business and
other than the obligation to pay broker's fees and expenses pursuant to Section
9.2 and 9.4 (for purposes of this Section, the incurrence of term debt, debt
incurred pursuant to promissory notes and capital leases shall not be considered
as incurred in the ordinary course of business);
III.10.12 Received any notices, or had reason to believe, that
any material customer has taken or contemplates any steps which could materially
disrupt the business relationship of the Acquired Company with said person or
could result in the material diminution in the value of the Acquired Company as
a going concern;
III.10.13 Paid, agreed to pay or incurred any material
obligation for any payment of any indebtedness except current liabilities
incurred in the ordinary course of business, broker's fees and expenses pursuant
to Sections 9.2 and 9.4, and except for payments as they become due pursuant to
governing agreements as such agreements existed on August 31, 1997;
III.10.14 Delayed or postponed the payment of any liabilities,
whether current or long term, or failed to pay in the ordinary course of
business any material liability on a timely basis consistent with prior
practice;
III.10.15 Suffered or experienced any material adverse change in
the equipment, other assets or liability accounts; or
III.10.16 Acquired or agreed to acquire any capital items with
an aggregate value of more than $100,000.
III.11 Litigation. Except as otherwise set forth in Schedule 3.11 of
the Disclosure Letter, there is no suit, action, proceeding, claim or
investigation pending or, to the knowledge of the Acquired Company, threatened
against or affecting the Acquired Company and, to the knowledge the Acquired
Company, there exists no basis or grounds for any such suit, action, proceeding,
claim or investigation. None of the items described in Schedule 3.11 of the
Disclosure Letter, individually or in the aggregate, if pursued and/or resulting
in a judgment, would have an Acquired Company Material Adverse Effect or
adversely affect the right of the Acquired Company or the Selling Shareholders
to consummate the transactions contemplated hereby.
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III.12 Licenses and Permits; Compliance With Law. Any disclosures on
Schedule 3.12 notwithstanding, the Acquired Company holds all licenses,
certificates, permits, franchises and rights from all appropriate federal, state
or other public authorities necessary for the conduct of its business and the
use of its assets. All such licenses, certificates, permits, franchises and
rights are listed in Schedule 3.12 of the Disclosure Letter. Except as noted in
Schedule 3.12 of the Disclosure Letter, the Acquired Company is presently
conducting its business so as to comply with all applicable statutes,
ordinances, rules, regulations and orders of any governmental authority, except
to the extent such failure to comply would not have an Acquired Company Material
Adverse Effect. Further, the Acquired Company is not presently charged with, or,
to the knowledge of the Acquired Company, under governmental investigation with
respect to, any actual or alleged violation of any statute, ordinance, rule or
regulation, nor presently the subject of any pending or, to the knowledge of the
Acquired Company, threatened material adverse proceeding by any regulatory
authority having jurisdiction over its business, properties or operations.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any material
license, certificate, permit, franchise or right held by the Acquired Company.
III.13 Contracts, Etc. Schedule 3.13 of the Disclosure Letter sets
forth a true and complete list of all contracts, agreements and other
instruments to which the Acquired Company is a party which are not listed on
Schedules 3.7, 3.14.2(ii), 3.17 or 3.20 of the Disclosure Letter and which
involve the payment by or to the Acquired Company of more than $100,000 over the
term of the agreement, and contemporaneously with the delivery of the Disclosure
Letter, the Acquired Company has delivered a true and complete copy of each
contract, agreement or instrument listed in Schedules 3.7, 3.13, 3.14.2(ii),
3.17 and 3.20 of the Disclosure Letter which is written and a summary of the
terms of each such contract or agreement which is oral, certified as such by a
duly authorized officer of the Acquired Company. Schedule 3.13 of the Disclosure
Letter includes the following:
III.13.1 Any contract or commitment which requires services in
excess of $100,000 to be provided or performed by the Acquired Company or which
authorizes others to perform services for a third party for, through or on
behalf of the Acquired Company, other than those services performed for
customers and clients set forth on Schedule 3.18 of the Disclosure Letter;
III.13.2 Any contract or commitment involving an obligation in
excess of $100,000 which cannot, or in reasonable probability will not, be
performed or terminated within one year from the dates as of which these
representations are made;
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III.13.3 Any note receivable;
III.13.4 Any contract or commitment providing for payments
based in any manner upon the sales, purchases, receipts, income or profits of
the Acquired Company;
III.13.5. Any franchise agreement, marketing agreement or
royalty agreement (and with respect to each such agreement Schedule 3.13 of the
Disclosure Letter sets forth the aggregate royalties or similar payment paid or
payable hereunder by the Acquired Company as of the date hereof);
III.13.6 Any contract or agreement with a creditor not made in
the ordinary course of business;
III.13.7 Any employment contract or arrangement regarding an
employee or independent contractors which is not terminable by the Acquired
Company within thirty (30) days without payment of any amount for any reason
whatsoever, or without any continuing payment of any type or nature, including,
without limitation, any bonuses and vested commissions;
III.13.8 Any contract, agreement, understanding or arrangement
materially restricting the Acquired Company from carrying on its business
anywhere in the world;
III.13.9 Any material instrument or arrangement evidencing or
related to indebtedness for money borrowed or to be borrowed, whether directly
or indirectly, by way of purchase money obligation, guaranty, subordination,
conditional sale, lease-purchase or otherwise;
III.13.10 Any contract with any labor organization; and
III.13.11 Any material bond, suretyship arrangement, guarantee,
letter of credit or other performance guarantee document pursuant to which any
obligation of the Acquired Company is guaranteed or secured or pursuant to which
the Acquired Company has guaranteed or secured the performance or obligation of
another person.
All of the contracts, agreements, policies of insurance or instruments
described in Schedules 3.4, 3.7, 3.13, 3.14.2(i), 3.14.2(ii), 3.17 or 3.20 of
the Disclosure Letter (collectively, the "Material Agreements") are valid and
binding upon the Acquired Company and, to the knowledge of the Acquired Company,
the other parties thereto and are in full force and effect. Neither the Acquired
Company nor, to the knowledge of the Acquired Company, any other party to any
such contract, commitment or arrangement has breached any material provision of,
or is in default under,
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the terms thereof. The credentialling Application(s) submitted by the Acquired
Company to BCBSC and incorporated by reference into the Utilization/Quality
Management Consulting Services Agreement is true and correct in all material
respects and as of the Closing Date, there exist no circumstances which would
cause or give a right of termination of such contract to BCBSC.
III.14 Intellectual Property; Computer Software.
III.14.1 Schedule 3.14.1 of the Disclosure Letter sets forth a
complete and correct list and summary description of all material trademarks,
trade names, service marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefor, applicable to or used in the
business of the Acquired Company, together with a complete list of all licenses
granted by or to the Acquired Company with respect to any of the above. All such
trademarks, trade names, service marks, service names, brand names, copyrights
and patents are owned by the Acquired Company, free and clear of all liens,
claims, security interests and encumbrances of any nature whatsoever. The
Acquired Company is not currently in receipt of any notice claiming any
violation of, and, to the knowledge of the Acquired Company, it is not
violating, the rights of others in any trademark, trade name, service xxxx,
copyright, patent, trade secret, know-how or other intangible asset. The
disclosures on Schedule 3.14.1 notwithstanding, the Company is not violating or
infringing upon any patent of Health Risk Management Incorporated.
III.14.2 (i) Schedule 3.14.2(i) of the Disclosure Letter
contains a complete and accurate list of all material computer software owned by
the Acquired Company (the "Owned Software"). Except as set forth on Schedule
3.14.2(i) of the Disclosure Letter, the Acquired Company has exclusive title to
the Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, customers, licensees or other parties involved
in the development, creation, marketing, maintenance, enhancement or licensing
of such computer software. Except as set forth on Schedule 3.14.2(i) of the
Disclosure Letter, the Owned Software is not dependent on any Licensed Software
(as defined in subsection (ii) below) in order to fully operate in the manner in
which it is intended. No Owned Software has been published or disclosed to any
other parties, except as set forth on Schedule 3.14.2(i) of the Disclosure
Letter, and except pursuant to contracts requiring such other parties to keep
the Owned Software confidential. To the knowledge of the Acquired Company, no
such other party has breached any such obligation of confidentiality.
(ii) Schedule 3.14.2(ii) of the Disclosure Letter
contains a complete and accurate list of all software (other than Shrinkwrap
Software) under which the Acquired Company
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is a licensee, lessee or otherwise has obtained the right to use software (the
"Licensed Software"). Schedule 3.14.2(ii) of the Disclosure Letter also sets
forth a list of all license fees, rents, royalties or other charges that the
Acquired Company is required or obligated to pay with respect to Licensed
Software. The Acquired Company has the right and license to use, sublicense,
modify and copy Licensed Software, free and clear of any limitations or
encumbrances except as may be set forth in any license agreements listed in
Schedule 3.14.2(ii) of the Disclosure Letter or contained in any license for
Shrinkwrap Software. The Acquired Company is in full compliance with all
material provisions of any license, lease or other similar agreement pursuant to
which it has rights to use the Licensed Software. Except as disclosed on
Schedule 3.14.2(ii) of the Disclosure Letter, none of the Licensed Software has
been incorporated into or made a part of any Owned Software or any other
Licensed Software. The Acquired Company has not published or disclosed any
Licensed Software to any other party.
(iii) The Owned Software and Licensed Software
constitute all software currently used in or necessary for the conduct of the
businesses of the Acquired Company as currently conducted (the "Acquired Company
Software"). Schedule 3.14.2(iii) of the Disclosure Letter sets forth a list of
all contract programmers, independent contractors, nonemployee agents and
persons or other entities (other than employees) who have performed material
computer programming services for the Acquired Company (provided, however, that
if such services were performed by another company, the schedule need not list
the employees of the company performing such services) and identifies all
material contracts and agreements pursuant to which such services were
performed. The transactions contemplated herein will not cause a material breach
or default under any licenses, leases or similar agreements relating to the
Acquired Company Software or materially impair the Parent's or the Purchaser's
ability to use the Acquired Company Software in the same manner as such computer
software is currently used by the Acquired Company. The Acquired Company is not
infringing any intellectual property rights of any other person or entity with
respect to the Acquired Company Software, and to the knowledge of the Acquired
Company, no other person or entity is infringing any intellectual property
rights of the Acquired Company with respect to the Acquired Company Software or
is claiming any right, title or interest in the Acquired Company Software or any
infringement by the Acquired Company of any intellectual property right which
such other person may possess.
(iv) Schedule 3.14.2(iv)(a) of the Disclosure Letter
lists and separately identifies all agreements pursuant to which the Acquired
Company has been granted rights to market software owned by third parties, and
Schedule 3.14.2(iv)(b) of the Disclosure Letter lists and separately identifies
all agreements
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pursuant to which the Acquired Company has granted marketing rights in the
Acquired Company Software to third parties.
(v) To the knowledge of the Acquired Company, the
Acquired Company has not taken or failed to take any actions under the law of
any applicable foreign jurisdictions where the Acquired Company has marketed or
licensed Acquired Company Software that would restrict or limit the ability of
the Acquired Company to protect, or prevent it from protecting, its ownership
interests in, confidentiality rights of, and rights to market, license, modify
or enhance, the Acquired Company Software.
(vi) Except as set forth in Schedule 3.14.2(i) of the
Disclosure Letter, the Owned Software and Licensed Software (a) includes Year
2000 date data century recognition; calculations which accommodate same century
and multi-century formulas and date values; correct sort ordering; and date data
interface values that reflect the century; (b) will not cause an abnormal abend
or abort within the application on account of date data properly entered into
the application or result in the generation of incorrect values or invalid
outputs involving such date; and (c) provides that all date related user
interface functionalities and data fields include the indication of the correct
century. Except as set forth in Schedule 3.14.2(i), all date processing by Owned
Software and Licensed Software will include four digit year format and recognize
and correctly process dates for leap years.
III.15 Product Warranties and Liabilities. Except as listed on Schedule
3.15 of the Disclosure Letter, the Acquired Company has no forms of warranties
or guarantees of its products and services that are in effect or proposed to be
used by it. Schedule 3.15 of the Disclosure Letter sets forth a description of
each pending or, to the knowledge of the Acquired Company, threatened material
action under any warranty or guaranty against the Acquired Company. The Acquired
Company has not incurred, nor does the Acquired Company know or have any reason
to believe there is any basis for alleging, any material liability, damage,
loss, cost or expense as a result of any material defect or other deficiency
(whether of design, materials, workmanship, labeling instructions or otherwise)
("Product Liability") with respect to any product sold or services rendered by
or on behalf of the Acquired Company (including any lessee thereof) prior to the
Closing Date, whether such Product Liability is incurred by reason of any
express or implied warranty (including, without limitation, any warranty of
merchantability or fitness), any doctrine of common law (tort, contract or
other), any statutory provision or otherwise and irrespective of whether such
Product Liability is covered by insurance.
III.16 Labor Matters. Schedule 3.16 of the Disclosure
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Letter sets forth a list of all employees, consultants and independent
contractors of the Acquired Company whose compensation for 1997 or expected
compensation for 1998 exceeds $75,000 per annum and lists the compensation per
annum for such persons. Except as set forth on Schedule 3.16 of the Disclosure
Letter, within the last three (3) years, the Acquired Company has not been the
subject of any union activity or labor dispute, nor has there been any strike of
any kind called or threatened to be called, against the Acquired Company. Except
as set forth on Schedule 3.16 of the Disclosure Letter, the Acquired Company has
not violated any applicable federal or state law or regulation relating to
labor, labor practices or immigration matters. The Acquired Company has no
knowledge that there will be any adverse change in relations with employees and
independent contractors of the Acquired Company as a result of the transactions
contemplated by this Agreement.
III.17 Benefit Plans.
III.17.1 Schedule 3.17 of the Disclosure Letter, lists every
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or other incentive
plan, any other material written or unwritten employee program, arrangement,
agreement or understanding, (whether arrived at through collective bargaining or
otherwise), any medical, vision, dental or other health plan, any life insurance
plan or any other employee benefit plan or fringe benefit plan, including,
without limitation, any "employee benefit plan," as that term is defined in
Section 3(3) of ERISA, or any other plan, program, agreement, arrangement,
commitment and/or method of compensation, whether funded or unfunded, whether
legally binding or not, currently or previously adopted, maintained, sponsored
in whole or in part or contributed to by the Acquired Company or any Affiliate
of the Acquired Company for the benefit of employees, retirees, dependents,
spouses, directors, officers, independent contractors or other beneficiaries of
the Acquired Company or an Affiliate of the Acquired Company and under which
employees, retirees, dependents, spouses, directors, officers, independent
contractors or other beneficiaries of the Acquired Company or an Affiliate of
the Acquired Company are eligible to participate or under or in connection with
which the Acquired Company may have any contingent or noncontingent liability of
any kind whether or not probable of assertion (collectively, the "Benefit
Plans"). Any of the Benefit Plans which is an "employee pension benefit plan,"
as that term is defined in Section 3(2) of ERISA, or an "employee welfare
benefit plan" as that term is defined in Section 3(1) of ERISA, is referred to
herein as an "ERISA Plan." No Benefit Plan is or has been a "multiemployer plan"
within the meaning of Section 3(37) of ERISA. The Acquired Company has never
contributed to or had an obligation to contribute to any multiemployer plan.
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III.17.2 Schedule 3.17 of the Disclosure Letter also lists:
(a) where applicable, with respect to any such plans or plan amendments, the
most recent determination letters issued by the United States Internal Revenue
Service, (b) all rulings, opinion letters, information letters or advisory
opinions issued by the United States Department of Labor, the United States
Internal Revenue Service or the Pension Benefit Guaranty Corporation after
December 31, 1974, with respect to such Benefit Plan, (c) annual reports or
Returns and audited or unaudited financial statements for the most recent three
plan years and any amendments thereto, and (d) the most recent summary plan
descriptions and any material modifications thereto, and any other material
written communications to employees or to any governmental agency with respect
to such Benefit Plans during the three most recent plan years. Contemporaneous
with the delivery of the Disclosure Letter, the Acquired Company has delivered a
true and complete copy of each such Benefit Plan or summary description if such
Benefit Plan is not in writing, agreements, letters, rulings, opinions, letters,
reports, Returns, financial statements and summary plan descriptions described
in Sections 3.17.1 or 3.17.2 hereof, certified as such by a duly authorized
officer of the Acquired Company.
III.17.3 Except to the extent that it would not have an Acquired
Company Material Adverse Effect, all the Benefit Plans and the related trusts
subject to ERISA comply with and have been administered in compliance with the
provisions of ERISA, all provisions of the Code relating to qualification and
tax exemption under Code Sections 401(a) and 501(a) or otherwise applicable to
secure intended Tax consequences, all applicable state or federal securities
laws and all other applicable laws, rules and regulations and collective
bargaining agreements, and neither the Acquired Company nor any Affiliate has
received any notice from any governmental agency or instrumentality questioning
or challenging such compliance. All available governmental approvals for the
Benefit Plans have been obtained, including, but not limited to, timely
determination letters on the qualification of the ERISA Plans and tax exemption
of related trusts, as applicable, under the Code and timely registration and
disclosure under applicable securities laws, and all such governmental approvals
continue in full force and effect. No event has occurred which will or could
give rise to disqualification of any such plan under sections 401(a) or 501(a)
of the Code, adversely affect the qualified status of the Plan of any such plan
under Sections 401(a) or 501(a) of the Code or to a tax under Section 511 of the
Code. All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each Benefit
Plan and have been paid on a timely basis.
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III.17.4 Neither the Acquired Company, any Affiliate nor any
administrator or fiduciary of any such Benefit Plan (or agent or delegate of any
of the foregoing) has engaged in any transaction or acted or failed to act in
any manner which could subject the Acquired Company to any direct or indirect
liability (by indemnity or otherwise) for a breach of any fiduciary,
co-fiduciary or other duty under ERISA. No oral or written representation or
communication with respect to any aspect of the Benefit Plans has been or will
be made to employees of the Acquired Company prior to the Closing Date which is
not in accordance with the written or otherwise pre-existing terms and
provisions of such Benefit Plans in effect immediately prior to the Closing
Date. There are no unresolved claims or disputes under the terms of, or in
connection with, the Benefit Plans, and no action, legal or otherwise, has been
commenced with respect to any claim.
III.17.5 All annual reports or Returns, audited or unaudited
financial statements, actuarial valuations, summary annual reports and summary
plan descriptions issued with respect to the Benefit Plans are correct and
accurate in all material respects as of the dates thereof, and have been timely
filed or disseminated, as appropriate or required by applicable law, and there
have been no amendments filed to any of such reports, returns, statements,
valuations or descriptions or required to make the information therein true and
accurate.
III.17.6 No "party in interest" (as defined in Section 3(14) of
ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of the Code)
of any Benefit Plan has engaged in any "prohibited transaction" (within the
meaning of Section 4975(c) of the Code or Section 406 of ERISA). There has been
no (a) "reportable event" (as defined in Section 4043 of ERISA), or event
described in Section 4062(f) or Section 4063(a) of ERISA or (b) termination or
partial termination, withdrawal or partial withdrawal with respect to any of the
ERISA Plans which the Acquired Company or an Affiliate of the Acquired Company
maintains or contributes to or has maintained or contributed to or was required
to maintain or contribute to or for the benefit of employees of the Acquired
Company or any Affiliate of the Acquired Company now or formerly in existence.
III.17.7 Except as set forth on Schedule 3.17.8 of the
Disclosure Letter, the Acquired Company did not have any current or future
liability under any Benefit Plan that was not reflected in such filing, and the
liability of the Acquired Company in connection with any Benefit Plan as of
Closing will not exceed the amount recorded therefor on the books of the
Acquired Company.
III.17.8 The Acquired Company has not maintained a Benefit Plan
providing welfare benefits (as defined in ERISA
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Section 3(1)) to employees after retirement or other separation of service
except to the extent required under Part 6 of Title I of ERISA and Code Section
4980B, or except as set forth on Schedule 3.17.10 of the Disclosure Letter.
III.17.9 The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee of the
Acquired Company to severance pay, unemployment compensation or any payment
contingent upon a change in control or ownership of the Acquired Company, or
(ii) accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such employee or former employee.
III.17.10 All Benefit Plans subject to section 4980B of the Code
as amended from time to time or Part 6 of Title I of ERISA or both have been
maintained in material compliance with the requirements of such laws and any
regulations (proposed or otherwise) issued thereunder except to the extent that
such noncompliance would not cause an Acquired Company Material Adverse Effect.
III.18 Customers and Clients. Schedule 3.18 of the Disclosure Letter
consists of a true and correct list of all of the customers and clients of the
Acquired Company within the preceding twenty-four months who generated revenues
of more than $100,000 within a twelve-month period, setting forth as to each
customer or client its name and address. Except as set forth on Schedule 3.18 of
the Disclosure Letter, neither the Acquired Company nor any Selling Shareholder
has received any notice, or has knowledge that any such customer or client has
taken or contemplates taking any steps which could materially disrupt the
business relationship of the Acquired Company with such customer or client, or
could result in the material diminution in the value of the business of the
Acquired Company as a going concern.
III.19 Environmental Matters. Except as set forth in Schedule 3.19 of
the Disclosure Letter, no real property now or previously used by the Acquired
Company or now or previously owned or leased by the Acquired Company (the "Real
Property") has been used by the Acquired Company for the handling, treatment,
storage or disposal of any Hazardous Substance (as hereinafter defined). Except
as set forth in Schedule 3.19 of the Disclosure Letter, the Acquired Company has
not released, discharged, spilled or disposed into the environment any Hazardous
Substance and the Acquired Company has not caused soil, water or air
contamination by any Hazardous Substance in, from or on the Real Property.
Except as set forth in Schedule 3.19 of the Disclosure Letter, the Acquired
Company has complied with all reporting requirements under any applicable
federal, state or local environmental laws and permits, and there are no
existing violations by the Acquired Company of any such environmental laws or
permits, except to the
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extent that such violation would not have an Acquired Company Material Adverse
Effect. There are no claims, actions, suits, proceedings or investigations
pending, or to the knowledge of the Acquired Company, threatened against the
Acquired Company related to the presence, release, production, handling,
discharge, spillage, transportation or disposal of any Hazardous Substance or
ambient air conditions or contamination of soil, water or air by any Hazardous
Substance with respect to the Real Property. To the knowledge of the Acquired
Company and the Selling Shareholders, no building or other improvement included
in any Real Property which is or was owned by the Acquired Company or is
presently leased by the Acquired Company contains any asbestos or has radon
contamination. For the purposes of this Agreement, "Hazardous Substance" shall
mean any hazardous or toxic substance or waste as those terms are defined by any
applicable federal, state or local law, ordinance, regulation, policy, judgment,
decision, order or decree, including, without limitation, the Comprehensive
Environmental Recovery Compensation and Liability Act, 42 U.S.C. 9601 et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et. seq. and the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., and petroleum,
petroleum products and oil, but shall not include normal cleaning or office
supply products in limited quantities customary to an office environment.
III.20 Insurance. Set forth in Schedule 3.20 of the Disclosure Letter
is a complete list of all insurance policies which the Acquired Company
maintained, or was an insured party under, with respect to its businesses,
properties or employees which are currently in force and effect together with a
list of all such policies which have been in effect during the last 36 months
but have expired. Schedule 3.20 of the Disclosure Letter lists the annual
premium and renewal date of all such insurance policies. Except as set forth in
Schedule 3.20 of the Disclosure Letter, since January 1, 1997, there has not
been any change in the Acquired Company's relationship with its insurers or in
the premiums payable pursuant to such policies.
III.21 Related Party Relationships. Except as set forth in Schedule
3.21 of the Disclosure Letter or as may be contained in the investment portfolio
of BCBSC, to the Acquired Company's knowledge, no Selling Shareholder, or
Affiliate of any Selling Shareholder nor any officer or director of the Acquired
Company possesses, directly or indirectly, any beneficial interest in, or is a
director, officer or employee of, any corporation, partnership, firm,
association or business organization which is a client, supplier, customer,
lessor, lessee, lender, creditor, borrower, debtor or contracting party with or
of the Acquired Company (except as a shareholder holding less than a five
percent interest in a corporation whose shares are traded on a national or
regional securities exchange or in the over-the-counter market).
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III.22 Schedules. All Schedules set forth in the Disclosure Letter are
true, correct and complete in all material respects as of the date of this
Agreement and will be true, correct and complete in all material respects as of
the Closing, except to the extent that such Schedules may be untrue, incorrect
or incomplete due to changes occurring due to the operation of the Acquired
Company in the ordinary course. Matters disclosed on each Schedule in the
Disclosure Letter shall be deemed disclosed only for purposes of the matters to
be disclosed on such Schedule and shall not be deemed to be disclosed for any
other purpose unless expressly provided therein.
III.23 Disclosure and Absence of Undisclosed Liabilities. No statement
contained herein or in any certificate, Schedule of the Disclosure Letter, list,
Exhibit or other instrument furnished to Parent pursuant to the provisions
hereof contains or will contain any untrue statement of any material fact.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE Purchaser.
Parent and the Purchaser represent and warrant to the Acquired Company
for the benefit of the Selling Shareholders as follows:
IV.1 Organization and Standing. The Parent and the Purchaser are duly
organized and validly existing corporations in good standing under the laws of
the State of Florida.
IV.2 Corporate Power and Authority. The Parent and the Purchaser have
the capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other Person whomsoever. The execution,
delivery and performance by the Parent and the Purchaser of this Agreement and
each and every agreement, document and instrument provided for herein have been
duly authorized and approved by the respective Board of Directors of the Parent
and Purchaser. This Agreement and each and every other agreement, document and
instrument to be executed, delivered and performed by Parent or the Purchaser in
connection herewith, constitute or will, when executed and delivered, constitute
the valid and legally binding obligation of Parent or Purchaser (whichever is
applicable) enforceable against it in accordance with their respective terms,
except as enforceability may be limited by applicable equitable principles, or
by bankruptcy, insolvency, reorganization, moratorium, or similar laws from time
to time in effect affecting the enforcement of creditors' rights generally.
IV.3 Agreement Does Not Violate Other Instruments. The
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execution and delivery of this Agreement by the Parent and Purchaser do not, and
the consummation of the transactions contemplated hereby will not, violate any
provisions of the Certificate of Incorporation, or Bylaws, of Parent or
Purchaser.
IV.4 Required Filings and Absence of Conflicts. Except as listed in
Schedule 4.4 of the Disclosure Letter, the execution and delivery of this
Agreement by the Purchaser and the Parent does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of the
Purchaser and the Parent or violate or constitute an occurrence of default under
any provision of, or conflict with, or result in acceleration of any obligation
under, or give rise to a right by any party to terminate its obligations under,
any material mortgage, deed of trust, conveyance to secure debt, note, loan,
lien, lease, agreement, instrument, or any order, judgment, decree or other
material arrangement to which the Purchaser or the Parent is a party or is bound
or by which any of the Purchaser's or the Parent's material assets are affected.
Except as listed or described on Schedule 4.4 of the Disclosure Letter, no
consent, approval, order to authorization of, or registration, declaration or
filing with, any governmental entity is required to be obtained or made by or
with respect to the Purchaser or the Parent or any assets, properties or
operations of the Purchaser or the Parent, in connection with the execution and
delivery by the Purchaser or the Parent of this Agreement or the consummation of
the transactions contemplated hereby.
IV.5 Neither the Purchaser nor the Parent is subject to any suit,
action, proceeding, claim or investigation which if adversely determined would
affect the right of the Purchaser or the Parent to consummate the transactions
contemplated hereby.
V. CONDITIONS .
VI.1 Conditions to Each Party's Obligation to Effect the Transactions.
The respective obligation of each party to effect the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
VI.1.1 Neither of the parties hereto shall be subject to any order
or injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the event
any such order or injunction shall have been issued, each party agrees to use
its reasonable efforts to have any such injunction lifted.
VI.1.2 All consents, authorizations, orders and approvals
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of (or filings or registrations with) any governmental commission, board or
other regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the transactions contemplated by this Agreement and
any other documents required to be filed after the Closing Date and except where
the failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not adversely effect the Acquired Company
or its business.
V.2 Conditions to Obligations of Parent and Purchaser to Effect the
Transactions Contemplated by this Agreement. All of the obligations of Parent
and the Purchaser to consummate the transactions contemplated by this Agreement
are contingent upon and subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or any of which may
be waived, in whole or in part, by Parent for purposes of consummating such
transactions, but without prejudice to any other right or remedy which Parent
may have hereunder:
V.2.1 Representations True at Closing. The representations and
warranties made by the Acquired Company to Parent in this Agreement, the
Schedules contained in the Disclosure Letter or any document or instrument
delivered to Parent hereunder shall be true and correct in all material respects
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such time, except for
changes contemplated by this Agreement and changes occurring in the ordinary
course of the Acquired Company's business.
V.2.2 Covenants of the Acquired Company . The Acquired Company
shall have duly performed in all material respects all of the covenants, acts
and undertakings to be performed by it on or prior to the Closing Date, and the
President of the Acquired Company shall deliver to Parent a certificate dated as
of the Closing Date certifying to the fulfillment of this condition and the
condition set forth in Section 5.2.1 hereof in substantially the form attached
hereto as Exhibit 5.2.2.
V.2.3 Opinion of Counsel. An opinion of Xxxxxxx & Xxxxxxx LLP,
counsel for the Acquired Company, shall have been delivered to Parent dated as
of the Closing Date, substantially in form and substance of the opinion attached
hereto as Exhibit 5.2.3.
V.2.4 Consents, Approvals, and Waivers. Parent shall have
received a true and correct copy of each and every consent, approval and waiver
(a) referred to in Section 2.7 hereof, or (b) otherwise required for the
execution of this Agreement and the consummation of the transactions
contemplated
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hereby.
V.2.5 Absence of Adverse Changes. Since August 31, 1997 the
Acquired Company shall not have suffered an Acquired Company Material Adverse
Event or any series of events which when taken in the aggregate have an Acquired
Company Material Adverse Effect.
V.2.6 Employment Agreements. Each individual listed in
Exhibit 2.6(a) shall have executed or agreed to execute an Employment Agreement,
substantially in forms set forth in Exhibit 2.6(b).
V.2.7 Acquired Company Options. The Current Option Holders
shall have exercised all company options held by them and after the Closing
Date, no person shall have any right under any sock option plan (or any option
granted thereunder) or other plan, program or arrangement to acquire any equity
securities of the Acquired Company.
V.2.8 Escrow Agreement. The Selling Shareholders and the
Escrow Agent shall have executed the Escrow Agreement in substantially the form
of Exhibit 5.2.8 of this Agreement and the Escrow Amount shall have been
deposited with the Escrow Agent.
V.2.9 Resignations. The Acquired Company and the Selling
Shareholders shall deliver to the Purchaser and the Parent the resignations of
each director of the Acquired Company, effective immediately after the Closing.
V.2.10 BCBSC Contracts. BCBSC shall have entered into
contracts with the Acquired Company containing substantially the terms and
conditions set forth in Exhibits 5.2.10(a) (License Agreement) and 5.2.10(b)
(Consulting Agreement) attached hereto.
V.2.11 Termination of Deferred Compensation and Split Dollar
Agreements. At or prior to the Closing, the Company and the Current Shareholders
shall terminate those certain Deferred Compensation and Split Dollar Agreements
between the Company and each of the Current Shareholders dated November 8, 1996
and the Company shall be released of all liability thereunder subject to the
payment to each of the Current Shareholders of an amount equal to the cash
surrender value of the underlying life insurance policy on their respective
lives, which policy is owned by the Company, the aggregate amount of which is
represented to be $266,853.00 for all three policies.
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V.3 Conditions Precedent To The Obligations Of The Acquired Company and
the Selling Shareholders To Close. All of the obligations of the Acquired
Company to consummate the transactions contemplated by this Agreement shall be
contingent upon and subject to the satisfaction, on or before the Closing Date,
of each and every one of the following conditions, all or any of which may be
waived, in whole or in part, by the Acquired Company and the Selling
Shareholders for purposes of consummating such transactions, but without
prejudice to any other right or remedy which they may have hereunder:
V.3.1 Representations True at Closing. The representations and
warranties made by Parent and the Purchaser to the Acquired Company in this
Agreement or any document or instrument delivered to the Acquired Company
hereunder shall be true and correct in all material respects on the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of such date, except for changes contemplated by this
Agreement.
V.3.2 Covenants of Parent and Purchaser. Parent and the Purchaser
shall have duly performed in all material respects all of the covenants, acts
and undertakings to be performed by it on or prior to the Closing Date, and a
duly authorized officer of Parent shall deliver, in substantially the form
attached hereto as Exhibit 5.3.2, a certificate dated as of the Closing Date
certifying to the fulfillment of this condition and the condition set forth
under Section 5.3.1 above.
V.3.3 Opinion of Counsel. An opinion of Fowler, White, Gillen,
Boggs, Xxxxxxxxx and Banker, P.A. counsel for the Parent and Purchaser, shall
have been delivered to the Acquired Company dated as of the Closing Date,
substantially in form and substance of the opinion attached hereto as Exhibit
5.3.3.
V.3.4 Employment Agreements. The Parent, Purchaser and/or the
Acquired Company shall have executed an Employment Agreement with each
individual listed in Exhibit 2.6(a), substantially in forms set forth in Exhibit
2.6(b) and executed and delivered to such individuals all agreements ancillary
thereto and contemplated thereby, including option agreements. Purchaser and
Parent, if not the principal obligors, shall have also executed such Employment
Agreements and ancillary agreements, fully and unconditionally guaranteeing the
performance of such agreements and payment of all obligations thereunder as they
come due to the respective employee.
V.3.5 Escrow Agreement. The Parent, Purchaser and the Escrow Agent
shall have executed the Escrow Agreement in substantially the form of Exhibit
5.2.8 of this Agreement and the Escrow Amount shall have been deposited with the
Escrow Agent.
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VI. CLOSING.
VI. 1 Time and Place of Closing. The Closing shall be held at the
offices of Fowler, White, Gillen, Boggs, Xxxxxxxxx and Banker, P.A., 000 Xxxx
Xxxxxxx Xxxx., Xxxxx, Xxxxxxx, commencing at 10:00 a.m. Eastern Daylight Time,
on the later of (i) the business day after the last to be fulfilled or waived of
the conditions set forth in Article V shall be fulfilled or waived in accordance
with the provisions hereof but in no event later than December 31, 1997 or such
other date, time and place as the parties shall mutually agree.
VI.2 Transactions at Closing. At the Closing, each of the parties
shall deliver to the others such certificates and other documents as called for
by the terms of this agreement or as otherwise reasonably requested by such
parties and their respective counsel.
VII. INDEMNITY AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES,
AGREEMENTS AND COVENANTS AFTER CLOSING.
VII.1 Survival of Representations and Warranties of the Selling
Shareholders, Parent and Purchaser, and Indemnity.
VII.1.1 All representations, warranties, agreements,
covenants and obligations made or undertaken by the Parent, Purchaser and the
Selling Shareholders in this Agreement or in any document or instrument executed
and delivered pursuant hereto shall not merge in the performance of any
obligation by any party hereto but shall survive the Closing hereunder for the
period of time that a claim for indemnification can be made for a breach thereof
as set forth in Section 7.6.2 hereof; provided, however, that from and after the
Closing, all representations of the Acquired Company shall be deemed to be
representations of the Selling Shareholders only and the Acquired Company shall
have no liability, whether directly or indirectly by way of contribution, to the
Selling Shareholders for a breach thereof asserted by the Parent and/or the
Purchaser.
VII.1.2 Subject to the provisions of this Article VII, OMS
Holding, severally but not jointly, and each other Selling Shareholder, jointly
and severally, agrees to indemnify and hold Parent and/or Purchaser harmless
from and against all liability, loss, damages or injury and all reasonable costs
and expenses (including reasonable counsel fees and costs of any suit related
thereto) suffered or incurred by Purchaser, or Parent or the Acquired Company,
and not compensated by insurance, arising from any misrepresentation by, or
breach of any covenant or
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warranty of, the Acquired Company or any Selling Shareholder contained in this
Agreement, or any misrepresentation in any certificate or other instrument
furnished or to be furnished by the Acquired Company or any Selling Shareholder
hereunder.
VII.1.3 Subject to the provisions of this Article VII,
Parent and Purchaser agree to indemnify and hold each Selling Shareholder
harmless from and against all liability, loss, damage or injury and all
reasonable costs and expenses (including reasonable counsel fees and costs of
any suit related thereto) suffered or incurred by such Selling Shareholder
arising from any misrepresentation by, or breach of any covenant or warranty of,
Parent or Purchaser contained in this Agreement or any misrepresentation in or
omission from any certificate or instrument furnished or to be furnished by
Purchaser hereunder.
VII.2 Notice of Asserted Liability. Promptly after receipt by an
indemnified party hereunder of notice of any demand, claim or circumstances
which, with or without the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a loss subject to
indemnification under this Agreement, such indemnified party shall give notice
thereof (the "Claims Notice") to the indemnifying party. The Claims Notice shall
describe the Asserted Liability in reasonable detail and shall indicate the
amount (estimated, if necessary) of the loss that has been or may be suffered by
such indemnified party.
VII.3 Opportunity to Defend. The indemnifying party may elect (with the
Selling Shareholders being deemed one indemnifying party that acts through the
Selling Shareholders' Representative in making such election and taking all
other actions specified in this Article VII) to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability; provided, however, that
the indemnifying party may not compromise or settle any Asserted Liability
without the consent of the indemnified party unless such compromise or
settlement requires no more than a monetary payment for which the indemnified
party hereunder is fully indemnified or involves other matters not binding upon
the indemnified party and such compromise or settlement includes an
unconditional release of the indemnified party. If the indemnifying party elects
to compromise or defend such Asserted Liability, the Selling Shareholders'
Representative or Parent or Purchaser, as the case may be, shall within ten (10)
ten business days after receipt of notice thereof (or sooner, if the nature of
the Asserted Liability so requires) notify the indemnified party of his or its
intent to do so, and the indemnified party shall cooperate, at the expense of
the indemnifying party with respect to out-of-pocket expenses of the indemnified
party, in the compromise of or defense against such Asserted Liability. The
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assumption of the defense of a matter by an indemnifying party shall be deemed
an admission by such indemnifying party of its obligation to indemnify the
indemnified party hereunder with respect to such claim. If the indemnifying
party elects not to compromise or defend the Asserted Liability, fails to notify
the indemnified party of its election as herein provided or contests its
obligation to indemnify, the indemnified party or parties may pay, compromise or
defend such Asserted Liability in respect of any Asserted Liability for which
the indemnifying party may have an indemnification obligation. In any event, the
indemnified party and the indemnifying party may participate in the defense of
such Asserted Liability in respect of any Asserted Liability for which the
indemnifying party may have an indemnification obligation; provided that if the
indemnifying party assumes the defense and compromise of such Asserted Liability
as provided above, then the indemnified party shall bear any expenses incurred
in participating in such defense from and after the assumption of the defense
thereof by the indemnifying party.
VII.4 No Claim Against Acquired Company. Since following the Closing
the Acquired Company will be owned by Purchaser, the parties agree that the
Selling Shareholders will have no right of reimbursement or contribution against
the Acquired Company on account of any indemnified loss hereunder, and any
liability, loss, damage or injury suffered or incurred by the Acquired Company
against which Parent or Purchaser are indemnified and held harmless as provided
in Section 7.1 of this Agreement shall be deemed suffered by Parent and
Purchaser, which shall, either independently or jointly with the Acquired
Company, be entitled to enforce such indemnity.
VII.5 Indemnification Payments. Without limiting the rights of Parent
and Purchaser hereunder, any indemnification payment due, as determined by
either (i) a written agreement between the Parent, Purchaser and the Selling
Shareholders, or (ii) a final non-appealable order of a court of competent
jurisdiction, to the Selling Shareholders under this Article VII, may be
collected from the Escrow Fund pursuant to the terms of the Escrow Agreement so
long as the Escrow is in existence.
VII.6 Limitations.
VII.6.1 Notwithstanding the provisions of Section 7.1.2 above,
The Selling Shareholders shall not be required to make any indemnification
payments under Section 7.1.2 until the aggregate amount of losses suffered by
Purchaser that are subject to indemnification under such Section exceed $100,000
(the "Minimum Indemnity Amount"), at which time claims may be asserted for all
amounts up to and in excess of the Minimum Indemnity Amount. All claims for
indemnity shall be asserted first against the Escrow until the Escrow Claims
Termination Date. To the
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extent that the Escrow Fund is not sufficient to cover all indemnity claims or
such arises after the Escrow Claims Termination Date, the excess of such claims
(an "Escrow Fund Deficiency Claim") shall be paid by the Selling Shareholders
subject to the following limitations:
(a) OMS Holding shall not be required to make any indemnification
payments under Section 7.1.2 for an Escrow Fund Deficiency Claim resulting from
a breach of the Limited Representations and Warranties unless OMS Holding or its
parent had knowledge of the underlying facts and circumstances giving rise to
the misrepresentation or breach of warranty which cause such indemnity claim.
This shall not, however, prohibit the Parent from seeking indemnification in
full from the Selling Shareholders other than OMS Holding for an Escrow Fund
Deficiency Claim related to the breach of a Limited Representation and Warranty,
whether or not such other Selling Shareholders had knowledge of the facts and
circumstances giving rise to the breach of the Limited Representation and
Warranty.
(b) Neither Selling Shareholders nor the Escrow Fund shall be
required to make any indemnification payments under Section 7.1.2 above to the
extent that the loss, damage, cost or expense underlying the indemnification
claim by Parent or Purchaser has been taken into account by a reduction in the
book value net worth of the Acquired Company as of the Closing Date as provided
in the Final Closing Balance Sheet.
(c) The liability of any Selling Shareholder hereunder shall not
exceed the Cash Purchase Price Amount less any Upward or Downward Purchase Price
Adjustment Amount received by such Selling Shareholder (the "Maximum Liability
Amount").
(d) Indemnification under the provisions of this Article VII
shall be Parent's and Purchaser's exclusive remedy with respect to any loss,
damage, injury, cost, expense, liability, or other obligation incurred or
suffered arising out of, or relating to this Agreement, or any of the
transactions contemplated hereby, or Selling Stockholders' and the Acquired
Company's performance, non-performance, or breach of its or their duties,
covenants, or obligations, or any misrepresentation under the representations or
warranties made or given in this Agreement; except a claim for a Downward
Purchase Price Adjustment pursuant to Section 2.2.2.2 above, or for fraud or
intentional material misrepresentation or omission.
VII.2 Notwithstanding the provisions of Section 7.1 above, no
claim for indemnification under this Agreement may be made after March 31, 1999,
unless notice of such claim or the facts underlying it is given to the
indemnifying party prior to March 31, 1999; provided, however, that the
foregoing restriction
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shall not apply with respect to (i) any liability, loss, damage, injury or claim
by Parent or Purchaser resulting from a breach of the covenants, representations
and warranties set forth in Sections 2.1, 2.2.2, 3.2, 3.3, 3.6, 9.2 or 9.4 or
from a breach of the covenants contained in Section 2.3.1 to the extent they
pertain to the making of a payment described in subparagraph (f) thereof or in
Section 3.10.8 and 3.10.9 or resulting from fraud or intentional material
misrepresentation or omission on the part of the Selling Shareholders or the
Acquired Company, and (ii) any liability, loss, damage, injury or claim by the
Selling Shareholders resulting from a breach of the covenants, representations
and warranties set forth in Sections 2.2.2, 4.1, 4.2, 9.2 or 9.4; provided
further that any claim based upon any of the matters described in subsection (i)
or (ii) may be brought at any time, subject to any applicable statutes of
limitation.
VIII. TERMINATION.
VIII.1 Termination by Mutual Consent. This Agreement may be terminated
and the transactions contemplated by this Agreement may be abandoned at any time
prior to the Closing Date, by the mutual consent of the Parent and the Acquired
Company.
VIII.2 Termination by Either Parent or Acquired Company. This Agreement
may be terminated and the transactions contemplated by this Agreement may be
abandoned by action of the Board of Directors of either the Parent or the
Acquired Company if (a) the Closing shall not have been consummated by December
31, 1997 or (b) a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling, or
other action shall have become final and non-appealable; provided that the party
seeking to terminate this Agreement pursuant to this clause (b) shall have used
all reasonable efforts to remove such injunction, order or decree; and provided
further, in the case of a termination pursuant to clause (a) above, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Closing by the close of business on
December 31, 1997.
VIII.3 Termination by Selling Shareholders' Representative. This
Agreement may be terminated and the transactions contemplated by this Agreement
may be abandoned at any time prior to the Closing Date, by action of the Selling
Shareholders' Representative, if there has been a material breach
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by the Purchaser or the Parent of any of the covenants or agreements of the
Purchaser or the Parent set forth in this Agreement.
VIII.4 Termination by Parent. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing Date, by action of the Board of Directors of the Parent, if (a)
there has been a breach by the Acquired Company of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an Acquired Company Material Adverse Effect, or (b) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the Acquired Company.
VIII.5 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the transactions
contemplated by this Agreement pursuant to this Article VIII, all obligations of
the parties hereto shall terminate, except the obligations of the parties
pursuant to this Section 8.5 and except for the provisions of Article VIII.
Moreover, in the event of termination of this Agreement pursuant to Section 8.3
or 8.4, nothing herein shall prejudice the ability of the non-breaching party
from seeking damages from any other party for any breach of this Agreement,
including without limitation, attorneys' fees and the right to pursue any remedy
at law or in equity.
VIII.6 Extension, Waiver. At any time prior to the Closing Date, any
party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the presentations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
VIII.7 Risk of Loss. The Acquired Company assumes all risk of
condemnation, destruction, loss or damage due to fire or other casualty from the
date of this Agreement up to the Closing. If the condemnation, destruction,
loss, or damage is such that the business of the Acquired Company is materially
interrupted or curtailed or the value of the assets of the Acquired Company is
materially adversely affected after taking into account all applicable insurance
proceeds, then Parent shall have the right to terminate this Agreement. If the
condemnation, destruction, loss, or damage is such that the business of the
Acquired Company is neither materially interrupted nor curtailed nor its asset
value
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materially affected after taking into account all applicable insurance proceeds,
or if the business is materially interrupted or curtailed or the asset value is
so materially affected and Parent nevertheless forgoes the right to terminate
this Agreement, the purchase price shall be adjusted at the Closing to reflect
such condemnation, destruction, loss, or damage to the extent that applicable
insurance proceeds are not sufficient to cover such destruction, loss or damage.
If Parent, on the one hand, and the Acquired Company, on the other hand, are
unable to agree upon the amount of such adjustment, the dispute shall be
resolved by arbitration in Tampa, Florida, in accordance with the rules and
regulations of the American Arbitration Association. The decision of such
arbitration shall be final and binding.
IX. GENERAL PROVISIONS.
IX.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
certified mail, return receipt requested, first class postage prepaid, or sent
by Federal Express or similarly recognized national overnight delivery service
with receipt acknowledged, addressed as follows:
IX.1.1 If to the Acquired Company:
OMS Incorporated
00 Xxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
Attn: Xxxx XxXxxxx
Fax: 000-000-0000
and to:
Xxxx X. Xxxxxxxx, Esq.
Xxxxxxx & Xxxxxxx LLP
Xxx Xxxxxxxx Xxx
Xxxxxxxx, XX 00000-0000
Fax: 000-000-0000
IX.1.2 If to Parent or Purchaser:
Xxxxx HealthPlan Services, Inc.
0000 Xxxxxxxx Xxxx
Xxxxx, XX 00000
Fax: 000-000-0000
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and to:
Xxxxx X. Xxxxx
Fowler, White, Gillen, Boggs,
Xxxxxxxxx and Banker, P.A.
000 X. Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxx, XX 00000
Fax: 000-000-0000
IX.1.3 If delivered personally, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail or by overnight delivery service, the
date on which such notice, request, instruction or document is received shall be
the date of delivery. In the event any such notice, request, instruction or
document is mailed or shipped by overnight delivery service to a party in
accordance with this Section 9.1 and is returned to the sender as
nondeliverable, then such notice, request, instruction or document shall be
deemed to have been delivered or received on the fifth day following the deposit
of such notice, request, instruction or document in the United States mail or
the delivery to the overnight delivery service.
IX.1.4 Any party hereto may change its address specified for
notices herein by designating a new address by notice in accordance with this
Section 9.1.
IX.2 Brokers. Parent and Purchaser, jointly and severally represent and
warrant to the Selling Shareholders and OMS Holding, severally but not jointly,
and the Selling Shareholders (other than OMS Holding), jointly and severally,
represent and warrant to Parent and Purchaser that no broker or finder has acted
for it or them or any entity controlling, controlled by or under common control
with it or them in connection with this Agreement, other than Salomon Brothers
which has acted as the Acquired Company's and the Selling Shareholders' advisor.
Parent agrees to indemnify and hold harmless the Acquired Company and the
Selling Shareholders against any fee, loss or expense arising out of any claim
by any broker or finder employed or alleged to have been employed by it, and the
Acquired Company and the Selling Shareholders agree to indemnify and hold
harmless Parent against any fee, loss, or expense arising out of any claim by
any broker or finder employed or alleged to have been employed by it, including
the fees of Salomon Brothers. It is understood and agreed that the fees of
Salomon Brothers will be paid by the Acquired Company either before or promptly
after the Closing, and will be treated as a pre-closing expense of the Acquired
Company for purposes of calculating the Final Closing Balance Sheet.
IX.3 Waiver. Any failure on the part of any party hereto to
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comply with any of its obligations, agreements or conditions hereunder may be
waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
IX.4 Expenses. Except as otherwise provided herein, Purchaser and
Parent shall pay all their respective costs in connection with or related to the
negotiation, preparation, authorization, execution and consummation of this
Agreement and the Closing of the transactions contemplated hereby. The expenses
incurred by the Acquired Company and the Selling Shareholders in connection with
or related to the negotiation, preparation, authorization, execution and
consummation of this Agreement and the Closing of the transactions contemplated
hereby will be paid by the Acquired Company either before or promptly following
Closing, and will be treated as a pre-closing expense of the Acquired Company
for purposes of calculating the Final Closing Balance Sheet.
IX.5 Public Announcements. At all times at or before the Closing, the
Acquired Company and the Selling Shareholders, on the one hand, and the Parent,
on the other hand, will consult with one another before issuing or making any
reports, statements, or releases to the public with respect to this Agreement or
the transactions contemplated hereby and will use good faith efforts to agree on
the text of a joint public report, statement, or release or will use good faith
efforts to obtain the other parties' approval of the text of any public report,
statement, or release to be made solely on behalf of a party. If such parties
are unable to agree on or approve any such public report, statement, or release
and such report, statement, or release is, based on the advice of legal counsel
to a party, required by Law or appropriate to discharge such party's disclosure
obligations, then such party may make or issue the legally required or
appropriate report, statement, or release upon prior notice to the other parties
hereto.
IX.6 Confidentiality. The parties hereto will refrain from disclosing
to any other Person (i) any documents or information concerning the other party
furnished to it in connection with this Agreement or the transactions
contemplated hereby, and (ii) any documents or information concerning the other
party, unless (A) such disclosure is compelled by judicial or administrative
process or by other requirements of law and notice of such disclosure is
furnished to Parent; or (B) such confidential documents or information can be
shown to have been (x) previously known by the Person receiving such documents
or information, or (y) in the public domain through no fault of such Persons. If
for any reason the transactions contemplated by this
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Agreement are not consummated, the parties hereto agree that they will return
any and all such confidential information provided by any of them to the other
party so providing such information. The Confidentiality Agreement between the
parties hereto shall not be replaced by this provision but shall remain in place
in addition to this Agreement.
IX.7 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
IX.8 Headings. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
IX.9 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
IX.10 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida (regardless of the laws that
might be applicable under principles of conflicts of law) as to all matters
including, but not limited to, matters of validity, construction, effect and
performance.
IX.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IX.12 Pronouns. All pronouns used herein shall be deemed to refer to
the masculine, feminine or neuter gender as the context requires.
IX.13 Exhibits Incorporated. All Exhibits attached hereto are
incorporated herein by reference, and all blanks in such Exhibits, if any, will
be filled in as required in order to consummate the transactions contemplated
herein and in accordance with this Agreement.
IX.14 Time of Essence. Time is of the essence in this Agreement.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
"Parent"
XXXXX HEALTHPLAN SERVICES, INC.
By:
--------------------------------
Title:
"Acquired Company":
OMS INCORPORATED
By:
--------------------------------
Title:
"Purchaser"
SHPS ACQUISITION CORP.
By:
--------------------------------
Xxxxx X. Xxxxxx
Title:
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"Current Shareholders"
----------------------------------
Xxxx XxXxxxx
----------------------------------
Xxxxxxx Xxxxxxx, M.D.
----------------------------------
Xxxx Xxxxxxx
OMS HOLDING COMPANY
By:
----------------------------------
Title:
"Current Option Holders"
-----------------------------------
Xxxxxx Xxxxxx, M.D.
-----------------------------------
Xxxxx Xxxxx, M.D.
"Selling Shareholders"
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LIST OF EXHIBITS
EXHIBITS
1.1 Definitions.
2.2.1 Allocation of Consideration among the Selling Shareholders
2.6(a) List of Employees to Enter into Employment Agreements.
2.6(b) Forms of Employment Agreements for Employees.
2.9.1 Benefit Plans to be Terminated
2.12 Form of Selling Shareholder Consent and Power of Attorney
2.16 Form of Massachusetts Legal Opinion
5.2.2 Form of Certificate of the President of the Acquired Company.
5.2.3 Form of Opinion of Counsel for the Acquired Company.
5.2.8 Form of Escrow Agreement
5.2.10(a) BCBSC License Agreement Extension
5.2.10(b) BCBSC Consulting Agreement
5.3.2 Officer's Certificate of Parent and Purchaser.
5.3.3 Form of Opinion of Counsel for Parent and Purchaser.
(i)
49
EXHIBIT 1.1
DEFINED TERMS
As used herein, the following terms shall have the following meanings unless the
context otherwise requires:
1. "Acquired Company" shall mean OMS Incorporated, a Massachusetts
corporation.
2. "Acquired Company Material Adverse Effect" shall mean a material
adverse effect on the business, prospects, results of operation or
condition (financial or otherwise) of the Acquired Company.
3. "Acquired Company Material Adverse Event" shall mean an event which
causes an Acquired Company Material Adverse Effect.
4. "Acquired Company Software" shall have the meaning set forth in Section
3.14.2(iii).
5. "Adjustment Payment" shall mean the payment of either the undisputed
portion of the Downward Purchase Price Adjustment Amount, or the
payment the undisputed portion of the Upward Purchase Price Adjustment
Amount, as the case may be.
6. "Affiliate" shall mean, with respect to a Person, any other Person
which is required to be aggregated with such Person under Code ss.
414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
7. "Agreement" shall mean this Acquisition Agreement.
8. "Alternative Proposal" shall have the meaning ascribed thereto in
Section 2.11.
9. "Asserted Liability" shall have the meaning set forth in Section 7.2.
10. "BCBSC" shall mean Anthem Health Plans, Inc. d/b/a Anthem Blue Cross
and Blue Shield of Connecticut.
11. "Benefit Plans" shall have the meaning set forth in Section 3.17.1.
12. "Cash Purchase Price Amount" means the sum of $10,000,000.00 (U.S.).
13. "Claims Notice" shall have the meaning set forth in Section 7.2.
(i)
50
14. "Closing" shall mean the closing of the transactions contemplated by
this Agreement as provided in Section 6.1 hereof.
15. "Closing Balance Sheet" means the balance sheet of the Company as of
the close of business on the Closing Date prepared by the Parent and
the Company in accordance with GAAP except as otherwise provided in
this Agreement.
16. "Closing Date" shall mean the date on which the Closing occurs pursuant
to Section 6.1 hereof.
17. "Code" shall mean the Internal Revenue Code of 1986, as amended.
18. "Current Option Holders" shall mean Xxxxxx Xxxxxx, M.D. and Xxxxx
Xxxxx, M.D.
19. "Current Shareholders" shall mean Xxxx XxXxxxx, Xxxxxxx Xxxxxxx, M.D.,
Xxxx Xxxxxxx and OMS Holding Company
20. "Disclosure Letter" shall mean the letter delivered to Parent by the
Acquired Company and the Selling Shareholders simultaneously with the
execution of this Agreement containing certain requested disclosures
concerning the Acquired Company.
21. "Downward Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.2.2.2.
22. "Employees" shall have the meaning set forth in Section 2.9.2.
23. "Employment Agreements" shall mean those Employment Agreements among
the entities and those individuals set forth in Exhibit 2.6(a),
substantially in the form attached as Exhibit 2.6(b), each of which may
be referred to individually as an "Employment Agreement."
24. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
25. "ERISA Plan" shall have the meaning set forth in Section 3.17.1.
26. "Escrow Agent" means NationsBank N.A. or such other financial
institution as the Purchaser and the Selling Shareholders may agree
upon to hold the Escrow Amount pursuant to the Escrow Agreement.
27. "Escrow Agreement" means the escrow agreement in form or substance
reasonably satisfactory to Purchaser, the Selling
(ii)
51
Shareholders and the Escrow Agent pursuant to which the Escrow Amount
will be held by the Escrow Agent.
28. "Escrow Amount" means the sum of $500,000 (U.S.).
29. "Escrow Claims Terminate Date" shall mean June 30, 1998.
30. "Escrow Fund" is defined as set forth in the Escrow Agreement.
31. "Final Closing Balance Sheet" means the Final Closing Balance Sheet
specified in Section 2.2.2.1.
32. "Financial Statements" shall have the meaning set forth in Section
3.5.1.
33. "GAAP" shall mean Generally Accepted Accounting Principles formulated
by the American Institute of Certified Public Accountants as in effect
from time to time during the term of this Agreement.
34. "Hazardous Substance" shall have the meaning set forth in Section 3.19.
35. "Interim Financial Statements" shall have the meaning set forth in
Section 3.5.1.
36. "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
37. "Limited Representations and Warranties shall mean the representations
and warranties contained in Sections 3.5.2, 3.6, 3.7.1, 3.8, 3.10
(except 3.10.1, 3.10.3, 3.10.8 and 3.10.10), 3.11 through 3.17 (except
that the last sentence of Section 3.14.1 and the first sentence of
Section 3.12 shall not be considered a Limited Representation and
Warranty), 3.19 and 3.21 through 3.23.
38. "Material Agreements" shall have the meaning set forth in Section
3.13.11.
39. "Maximum Indemnity Amount" shall have the meaning set forth in Section
7.6.1.
40. "Minimum Indemnity Amount" shall have the meaning set forth in Section
7.6.1.
41. "Owned Software" shall have the meaning set forth in Section 3.14.2(i).
42. "Parent" shall mean Xxxxx HealthPlan Services, Inc., a Florida
corporation.
(iii)
52
43. "Permitted Employee Distributions" shall have the meaning set forth in
Section 2.3.1.
44. "Person" shall include, but is not limited to, an individual, a trust,
an estate, a partnership, an association, a company, a corporation, a
limited liability company, a sole proprietorship, a professional
corporation or a professional association.
45. "Plan Transfer Date" shall have the meaning set forth in Section 2.9.1.
46. "Product Liability" shall have the meaning ascribed thereto in Section
3.15.
47. "Purchaser" shall mean SHPS Acquisition Corp., a Florida corporation.
48. "Real Property" shall have the meaning set forth in Section 3.19.
49. "Schedule" shall mean the schedules contained in the Disclosure Letter.
50. "Selling Shareholders" shall mean the shareholders of the Acquired
Company at the Closing Date, each of which may be referred to
individually as a "Selling Shareholder."
51. "Selling Shareholders Consent" shall have the meaning set forth in
Section 2.12.
52. "Selling Shareholders' Representative" shall have the meaning set forth
in Section 2.12.
53. "Settlement Auditor" shall mean a big-six accounting firm to be
mutually agreed upon by the parties. If for any reason such accounting
firm shall not be available to resolve such issues, Seller and
Purchaser shall promptly contact the national office of, and shall
retain the services of, another big-six accounting firm. If Seller and
Purchaser cannot agree on such accounting firm to be retained, Seller
and Purchaser shall each submit the name of another big-six independent
accounting firm which does not at the time provide, and has not in the
prior two years provided, significant services to Seller or Purchaser,
and the firm shall be selected by lot from these two firms.
54. "Shares" shall mean all of the issued and outstanding shares of capital
stock of the Acquired Company as of the time of the Closing.
(iv)
53
55. "Shrinkwrap Software" shall mean commercially available software which
is produced for the mass market and is subject to general licensing
terms applicable to all purchasers.
56. "Tax" or "Taxes" shall mean all taxes, charges, fees, levies, or other
similar assessments or Liabilities including without limitation income,
gross receipts, inventory, ad valorem, excise, real property, personal
property, sales, use, transfer, withholding, deed, license, employment,
payroll, and franchise taxes imposed by any governmental authority
(including any interest, fines, penalties, or additions attributable to
any such tax or any contest or dispute thereof).
57. "Tax Return" or "Return" shall mean any report, return, statement or
other written information required to be supplied to a taxing authority
in connection with Taxes.
58. "Upward Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.2.2.2.
(v)
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SCHEDULES TO THE DISCLOSURE LETTER
Schedule
2.3.1 Conduct of Business Prior to Closing
2.3.2 Bank Accounts, Safe Deposit Boxes and Powers of Attorney
2.10 Affiliated Assets and Contracts
3.1.2 Jurisdiction of Incorporation and Foreign Jurisdictions where there is Good Standing Status
3.1.4 Residence of Selling Shareholders
3.2 Certificate of Incorporation and Bylaws of the Acquired Company
3.3 Capitalization of the Acquired Company
3.4 Equity Investments
3.5.1(a) 1994, 1995, 1996 and eight-month Interim 1997 Financial Statements
3.5.1(b) Liabilities Not Disclosed in the Financial Statements and the Interim Financial Statements
and Undisclosed Liabilities
3.7 Assets and Leases; Encumbrances
3.8(a) Aged Accounts Receivable
3.8(b) Accounts Receivable Over Thirty Days Old
3.9 Required Consents
3.10 Changes
3.11 Litigation
3.12 Licenses and Permits and Noncompliance with Laws
3.13 Contracts
3.14.1 Trademarks, Trade Names, Service Marks, Service Names, Etc.
(i)
55
3.14.2(i) Owned Software
3.14.2(ii) Licensed Software, Problems with Software Licenses
3.14.2(iii) Computer Programming Services Providers and agreements
3.14.2(iv)(a) Marketing Rights Received
3.14.2(iv)(b) Marketing Rights Granted to Third Parties
3.15 Product Warranties and Liabilities
3.16 Highly Compensated Employees and their Compensation, Union Activities and Labor Disputes
3.17 Benefit Plans
3.17.8 Undisclosed Current or Future Liability Under Benefit Plans
3.17.9 Benefit Plans Providing Deferred or Stock Based Compensation
3.17.10 Benefit Plans Providing Post Separation Benefits
3.18 Customers, Addresses, Telephone Numbers and Principal Person of Contact and Problems with
Customer
3.19 Environmental Matters
3.20 Insurance Matters
3.21 Related Party Relationships
(ii)
