1
EXHIBIT 2
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into by and among
ELECTRONIC TRANSMISSION CORPORATION as "Seller", A&G HEALTH PLANS, INC. as
"Purchaser".
A. Seller owns all of the outstanding shares and operates a Texas
corporation known as HEALTH PLAN INITIATIVES, INC., hereinafter "HPI".
B. Purchaser desires to buy, and Seller desires to sell all of the
shares, assets and liabilities of HPI (except those specifically retained by
Seller) upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, for and in consideration of the mutual agreements
contained herein, Purchaser and Seller agree as follows:
1. PURCHASE OF STOCK. On the Closing Date, in reliance upon the
representations, warranties and agreements of the parties, Seller shall sell,
assign, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, free and clear from all encumbrances (except for liens securing
liabilities assumed by Purchaser pursuant to this Agreement), all of the issued
and outstanding stock of HPI and the assets specifically identified herein (the
"Purchased Assets") for the price and terms set forth in this Agreement, to
wit:
Purchase Agreement
Page 1
2
The assets and properties, tangible and intangible of and pertaining
to or used in the Business wherever located specified and described as follow:
(i) the property, supplies and equipment listed on Schedule 1, (ii) all of
Seller's right, title and interest in all contracts, agreements, and licenses,
and similar documents pertaining to the Business, except those specifically
retained by Seller (iv) all computer printouts, data bases and repricing
software used by Seller and owned (v) all of Sellers trademarks, trade names,
and other proprietary and intangible rights relating or used in connection with
the Business.
2. PURCHASE PRICE. (a) The purchase price is to be $386,000.00 subject
to the offsets and modifications provided herein.
(b) A&G shall assume all of the debts and liabilities of HPI save and
except:
i. Any and all leases of automobiles;
ii. Any and all leases of equipment, including but not limited
to computers, fax machines, furniture, or mailing systems;
iii. Lease for office space;
iv. Payroll or payroll taxes incurred on or before the date of
closing;
v. Insurance premiums;
vi. Employee Contracts; and
vii. Pension and Benefit Agreements
Purchase Agreement
Page 2
3
The existing known liabilities of HPI being assumed by Purchaser are set forth
in Schedule 3 attached hereto.
(c) With regard to the line of credit of HPI at Chase Bank, A&G
shall reduce the balance owed on said line to $0.00 on or
before forty-five (45) days following the closing or secure
the release of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as guarantor on the line of
credit. In this regard the parties acknowledge that on May
14, 1999 HPI used $25,000 on the line of credit to reduce the
current outstanding payable to Beach Street by $25,000 and
the current balance is $100,000.00;
(d) The purchase price is to be paid by an initial $50,000
payment on closing, with installments of $14,000 per month
for 24 months commencing on September 1, 1999 with a like
payment on the first of each month thereafter through and
including August 1, 2001.
(e) Should Beech Street cease to provide access to its network to
HPI for any reason other than non-payment on the part of A&G
on or before August 1, 2001, then the monthly installments
accruing thereafter shall be reduced to $10,000.
(f) The performance of A&G hereunder shall be secured by ETC
retaining a security interest in all of the stock, assets and
accounts receivable of HPI or its successors or assigns until
the final payment is made. In consideration of ▇▇▇▇▇▇ ▇▇▇▇▇▇
proving a personal guarantee of the indebtedness of A&G to
ETC, ETC agrees to subordinate its security interest provided
for herein in favor of a security interest required by any
bank or lendor for any transaction or need on the part of
A&G.
3. ADDITIONAL COMPENSATION. In addition to the purchase price, A&G agrees
and shall pay to ETC the adjusted gross profit from the operation of
HPI for the period April 1 through May 31, 1999. The adjusted gross
profit shall be defined as gross income less network access fees as
reflected on Schedule 2. Also in addition to the purchase price for the
Purchase Agreement
Page 3
4
period of June 1, 1999 until the closing, A&G agrees and shall pay to
ETC the actual cost incurred by HPI for payroll and telephone expense,
not to exceed $4,200.00 per month, pro rated for any partial month. The
amounts due under this Paragraph 3 shall be paid as follows: 1) 50% on
or before October 1, 1999 and 2) 50% on or before December 1, 1999.
The parties acknowledge that there may be future adjustments
to the Adjusted Gross Profit for April 1, 1999 through May 30, 1999 as a result
of backouts related to repricing services rendered by HPI during the period
April 1, 1999 through May 30, 1999. To the extent any future adjustment related
to the services rendered by HPI during the period April 1, 1999 through May 30,
1999 results in a reduction on the amount of the Adjusted Gross Profit for that
period from that reflected on Schedule 2, then the reduced amount shall be the
amount owed by A&G as additional compensation for Adjusted Gross Profit for the
period of April 1, 1999 through May 30, 1999. If A&G has previously paid the
amounts for Adjusted Gross Profit for the period prior to a reduction as a
result of backouts, then in that event A&G shall be entitled to deduct the
amount of any such reduction from its next scheduled installment due under
Paragraph 2(d) and 2(e).
4. CLOSING.
4.1 TIME AND PLACE. The closing (the "Closing") shall take place on or before
August 11, 1999 (the "Closing Date") at the offices
Purchase Agreement
Page 4
5
of Electronic Transmission Corporation, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ or at such other mutually convenient place as the parties may designate
in writing.
4.2 DELIVERIES OF THE SELLER. At the Closing, Seller shall deliver to
Purchaser:
(i) All of the issued and outstanding stock of HPI duly endorsed and
transferred to A&G and a ▇▇▇▇ of Sale and Assignment transferring the
Purchased Assets from Seller to Purchaser;
(ii) Appropriate evidence of all necessary corporate actions by Seller in
connection with the transactions contemplated hereby, including
without limitation certified copies of resolutions duly adopted by
Seller's directors approving the transactions contemplated by this
Agreement and authorizing the execution delivery, performance and
delivery of the Agreement; and
5.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall deliver to Seller:
(i) The cash portion of the Purchase Price;
(ii) Security Agreement and stock certificates securing performance by
Purchaser;
(iii) Appropriate evidence of all necessary corporate action by Purchaser
in connection with the transactions contemplated
Purchase Agreement
Page 5
6
hereby, including without limitation, certified copies of resolutions duly
adopted by Purchaser's directors approving the transactions contemplated by this
Agreement and authorizing the execution, delivery and performance by Purchaser
of this Agreement.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The obligation of the
Purchaser to consummate the transactions contemplated by this Agreement are
expressly conditioned upon the following:
(i) The representations and warranties of the Seller shall be true and
correct on the Closing Date as though made on the Closing Date.
7. REPRESENTATIONS AND WARRANTIES.
7.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. Seller represents and
warrants to Purchaser as follows:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Seller has all requisite
corporate power and authority to own, lease and operate its properties, to
carry on its business as now being conducted and to execute, deliver, and
perform this Agreement and all writings relating hereto.
(b) Seller has good and indefeasible title to the Purchased, and has full
power and authority to convey the Purchased Assets pursuant hereto.
Purchase Agreement
Page 6
7
(c) The execution, delivery and performance of this Agreement and all
writings relating hereto by Seller have been duly and validly authorized by the
Board of Directors of Seller. This Agreement and all writings relating hereto to
be signed by Seller constitute valid and binding obligations of Seller
enforceable according to their respective terms. Neither the execution and
delivery of this Agreement or any writing relating hereto nor the consummation
by the Seller of the transactions contemplated hereby or thereby nor the
compliance with any of the provisions hereof or thereof will: (i) conflict with
or result in a breach of the Articles of Incorporation or Bylaws of Seller, (ii)
violate any statute, law rule or regulation or any order, writ, injunction, or
decree of any court or governmental authority or (iii) violate or conflict or
constitute a default under any agreement or writing of any nature to which
Seller is a party or by which the Purchased Assets may be bound.
(d) As of the Closing Date there shall not have been any material change
in the Purchased Assets or the Business.
(e) As of the Closing Date the Purchased Assets are and shall be free of
any liens or encumbrances except for liens expressly assumed by Purchaser
pursuant to the terms hereof.
7.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Purchaser represents and
warrants as follows:
Purchase Agreement
Page 7
8
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Purchaser has all the
requisite corporate power and authority to own, lease, and operate its
properties, to carry on its business as now being conducted, and to execute,
deliver, and perform this Agreement and all writings relating hereto.
(b) The execution, delivery and performance of this Agreement and all
writings relating hereto by Purchaser have been duly and validly authorized by
the Board of Directors of Purchaser. This Agreement and all writings relating
hereto to be signed by Purchaser constitute valid and binding obligations of
Purchaser enforceable in accordance with their respective terms.
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any party to this Agreement or pursuant hereto shall survive
the closing of the transactions hereunder.
8. INDEMNIFICATIONS.
8.1. INDEMNIFICATION BY SELLER. Seller shall indemnify and hold Purchaser and
each of its officers, directors and shareholders harmless from and against any
and all damages, losses, settlement payments, obligations, liabilities, claims,
actions or causes of action, encumbrances, and reasonable costs and expenses,
including without limitation, attorneys fees and court costs, suffered
Purchase Agreement
Page 8
9
sustained, incurred or required to be paid by Purchaser: (i) because of the
untruth, inaccuracy or breach of any representation, warranty, covenant or
agreement of Seller contained in or made in connection with this Agreement or
(ii) arising from the operation of the Business prior to March 31, 1999 save
and except the liabilities assumed by Purchaser set forth on Schedule 2.
8.2. INDEMNIFICATION BY PURCHASER AND SHAREHOLDER. Purchaser and Shareholder
shall indemnify and hold Seller and each of its officers, directors and
shareholders harmless from and against any and all damages, losses, settlement
payments, obligations, liabilities, claims, actions or causes of action,
encumbrances, and reasonable costs and expenses, including without limitation,
attorneys fees and court costs, suffered, sustained, incurred or required to be
paid by Seller because of the untruth inaccuracy or breach of any
representation warranty, covenant or agreement of Purchaser contained in or
made in connection with this Agreement.
9.0 COVENANTS.
9.1 CONDUCT OF BUSINESS. Except as otherwise contemplated by this Agreement,
during the period from the date hereof to the Closing Date, Seller shall conduct
its operations according to its ordinary course of business consistent with past
practice. Seller shall use its reasonable best efforts to preserve intact the
Purchase Agreement
Page 9
10
Business and to keep available the services of the officers and employees of
Seller and to maintain existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers, and others having business
relationships with Seller.
9.2 ACCESS TO INFORMATION. Between the date hereof and the Closing Date, Seller
shall give Purchaser and its authorized representatives reasonable access to
all employees, offices and other facilities of the Business to make such
inspections as Purchaser may reasonably require and will furnish Purchaser with
such financial and operating data and other information with respect to the
Business as Purchaser may from time to time request.
9.3 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all actions and do or cause to be done, all things
reasonably necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing Date any further action
is necessary or desirable to carry out the purposes of this Agreement, each
party hereto shall take all such necessary action.
9.4 CONSENTS. Each of the parties to this Agreement will use its
Purchase Agreement
Page 10
11
best efforts to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
9.5 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to
Purchaser of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (ii) any material failure of any
party to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by it hereunder; provided however, the delivery of
any notice pursuant to this paragraph 9.5 shall not limit or otherwise effect
the remedies available hereunder to the party receiving such notice.
10. TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date as follows:
(a) by mutual written consent of Purchaser and Seller; or
(b) by Purchaser or Seller if the Closing Date has not occurred on or
before August 2, 1999; or
(c) if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling or
taken any other action permanently restraining or enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree ruling or
Purchase Agreement
Page 11
12
other action shall have become final and nonappealable.
The right to terminate this Agreement under paragraph 10(b) shall not be
available to any party whose breach of a representation or warranty or failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in failure of, the Closing Date to occur.
11.0 MISCELLANEOUS.
11.1 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties.
11.2 EXPENSES. All expenses in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring same.
11.3 PARTIES IN INTEREST. All of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of, and shall be enforceable
by the respective successors and assigns of the parties hereto.
11.4 ENTIRE AGREEMENT. This Agreement, including the exhibits, schedules and
other documents and writings referred to herein or delivered pursuant hereto,
which form a part hereof, contains the entire understanding of the parties with
respect to its subject matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly set forth
herein or therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
Purchase Agreement
Page 12
13
11.5 HEADINGS. The section and paragraph headings contained in this Agreement
are for reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 NOTICES. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed (registered or certified mail, postage prepaid,
return receipt requested) addressed as follows:
If to Seller:
Electronic Transmission Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Purchaser:
A&G Health Plans, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or to such other address or additional recipient as any party may have
furnished to the others in writing in accordance herewith, except that notices
of changes of address shall only be effective upon receipt.
11.7 LAW GOVERNING. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, without regard to
its conflict of laws rules.
Purchase Agreement
Page 13
14
11.8 ARBITRATION AGREEMENT. Any dispute arising out of, or related to, this
agreement shall be resolved by binding arbitration conducted by the American
Arbitration Association in accordance with the then applicable Commercial
Arbitration Rules.
11.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and same instrument.
Purchase Agreement
Page 14
15
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
the 11 day of August, 1999
SELLER:
ELECTRONIC TRANSMISSION CORPORATION
By
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
PURCHASER:
A&G HEALTH PLANS, INC.
By
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Purchase Agreement
Page 15
