EXHIBIT 2.15
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 1st
day of April, 2001, by and between HEALTHPLAN HOLDINGS, INC., a Delaware
corporation (the "Purchaser"), and HEALTHPLAN SERVICES CORPORATION (the
"Stockholder"), a Delaware corporation and the sole stockholder of HealthPlan
Services, Inc., a Florida corporation ("HPSI"), and the following wholly-owned
subsidiaries of HPSI: American Benefit Plan Administrators, Inc., a California
corporation ("ABPA"), Southern Nevada Administrators, Inc., a Nevada corporation
("SNA"), Xxxxxxxxxx Management Corporation, a Pennsylvania corporation ("MMC"),
ProHealth, Inc., a Delaware corporation ("PHI"), HealthPlan Services Insurance
Agency of Illinois, Inc., an Illinois corporation ("HPSIA Ill."), Group Benefit
Administrators Insurance Agency, Inc., a Massachusetts corporation ("GBAIA"),
and HealthPlan Services Insurance Agency, Inc., a Massachusetts corporation
("HPSIA" and together with HPSI, MMC, ABPA, SNA, PHI, GBAIA and HPSIA Ill., the
"Companies"). Certain capitalized terms used herein are defined in Article VIII
hereof.
WHEREAS, the Stockholder desires to sell to the Purchaser, upon the
terms and conditions set forth herein, all of the issued and outstanding shares
of capital stock of HPSI; and
WHEREAS, the Purchaser desires to purchase from the Stockholder all of
the issued and outstanding shares of capital stock of HPSI upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF HPSI STOCK; CONSIDERATION; CLOSING DATE
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1.1 Purchase and Sale of Company Stock. Subject to the terms and
conditions set forth in this Agreement, the Stockholder hereby agrees to sell,
transfer, convey, assign and deliver to the Purchaser at the Closing (as defined
in Section 1.5 hereof), and the Purchaser hereby agrees to purchase, accept and
acquire from the Stockholder at the Closing one hundred percent (100%) of the
issued and outstanding shares of capital stock of HPSI, consisting of 500 shares
of common stock, $1.00 par value per share (the "HPSI Stock"), free and clear of
all Liens (as defined in Section 9.16 hereof).
1.2 Purchase Price. The consideration for the HPSI Stock (the "Purchase
Price") shall be the sum of (i) One Dollar ($1.00), in cash, and (ii) the
assumption by the Purchaser of up to Forty Million Dollars ($40,000,000.00) of
the Closing Working Capital Deficit (as defined in Section 1.4 hereof) of the
Companies (but in no event shall the Purchaser assume any portion of the Closing
Working Capital Deficit in excess of Forty Million Dollars ($40,000,000.00)).
1.3 Closing Payments.
(a) At the Closing, the Purchaser shall: (i) pay the Purchase
Price to the Stockholder and (ii) pay to New England Financial ("NEF"),
in cash, the amount of past due payables owed by the Companies to NEF
as of the Closing Date, up to a maximum of $23,600,000, in the
aggregate.
(b) At the Closing, the Stockholder shall: (i) assume the
Indebtedness of the Companies to the Persons, and in the amounts, set
forth on Schedule 1.3 hereto and deliver to the Purchaser a release
from such Persons releasing the Companies from all of the outstanding
Indebtedness of the Companies to such Persons as of the Closing and
terminating any Liens which such Persons may hold encumbering the
assets of the Companies; (ii) pay to the Purchaser an amount in cash
equal to the amount, if any, by which the Estimated Closing Working
Capital Deficit (as defined in Section 9.16 hereof) exceeds the Target
Amount; and (iii) deliver to the Purchaser a fully executed convertible
subordinated promissory note, in form and substance mutually
satisfactory to the Purchaser and the Stockholder (the "Promissory
Note"), and payable over four (4) years, bearing interest at the rate
of six percent (6%) per annum and in the principal amount of (x) Ten
Million Dollars ($10,000,000.00) less (y) the amount, if any (up to a
maximum of $10,000,000), by which the Estimated Closing Working Capital
Deficit is less than the Target Amount.
(c) All payments and deliveries to be made at the Closing
pursuant to this Section 1.3 shall be made as follows: (x) in the case
of payments of cash, by wire transfer on the Closing Date (as defined
in Section 1.5) of immediately available funds to the account(s)
specified by each payee no later than two (2) business days prior to
the Closing Date (unless such payee specifies another acceptable method
of payment no later than two (2) business days prior to the Closing
Date), and (y) in the case of the Promissory Note, by delivery of the
Promissory Note to the Purchaser or its designee on the Closing Date.
1.4 Closing Payment Adjustment. The payment described in Section
1.3(b)(ii) shall be subject to adjustment as follows:
(a) Within sixty (60) days following the Closing Date, the
Purchaser shall cause to be prepared, in accordance with generally
accepted accounting principles ("GAAP"), and, to the extent consistent
with GAAP, applied on a basis consistent with past practice and
utilizing the same accounting procedures and policies as used in
preparing the Balance Sheets and the Latest Balance Sheets (as such
terms are defined in Section 3.4), a Draft Closing Balance Sheet (as
defined in Section 9.16 hereof) and a statement (the "Draft Closing
Working Capital Deficit Statement") setting forth the Purchaser's
determination of the Closing Working Capital Deficit (as defined below)
of the Companies as of the Closing Date. The cost of preparing the
Draft Closing Balance Sheet and the Draft Closing Working Capital
Deficit Statement shall be borne by the Purchaser.
(b) Within sixty (60) days following the Closing Date, the
Purchaser shall deliver to the Stockholder the Draft Closing Balance
Sheet and the Draft Closing Working Capital Deficit Statement together
with the work papers and such other items related thereto as the
Stockholder shall reasonably request. The Draft Closing Balance Sheet
and the Draft Closing
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Working Capital Deficit Statement shall become final and binding upon
the parties thirty (30) days after the Stockholder's receipt thereof
(together with the work papers related thereto), unless the Stockholder
gives the Purchaser written notice of its disagreement (a "Notice of
Disagreement") within such thirty (30) day period, specifying in detail
the Stockholder's disagreement with the Draft Closing Balance Sheet and
the Draft Closing Working Capital Deficit Statement. If a Notice of
Disagreement is received by the Purchaser in a timely manner, then the
Draft Closing Balance Sheet and the Draft Closing Working Capital
Deficit Statement shall become the final Closing Balance Sheet and the
final Closing Working Capital Deficit Statement and shall be binding
upon the parties on the earlier of (i) the date the parties hereto
resolve in writing any differences they may have with respect to any
matter specified in the Notice of Disagreement and (ii) the date any
Disputed Matters (as defined below) are finally resolved in writing by
the Arbitrator (as defined below). Any such Notice of Disagreement
shall state in reasonable detail the nature of any disagreement so
asserted. During a period of ten (10) days (or such longer period as
the Purchaser and the Stockholder may mutually agree after the
expiration of the aforesaid ten (10) day period), the Purchaser and the
Stockholder shall attempt, in good faith, to resolve in writing any
differences that they may have with respect to any matter specified in
the Notice of Disagreement. If, at the end of such ten (10) day period
(or such longer period as the Purchaser and the Stockholder may have
mutually agreed), the Purchaser and the Stockholder fail to reach a
written agreement with respect to all of such matters, then all such
matters as specified in the Notice of Disagreement as to which such
written agreement has not been reached (the "Disputed Matters") shall
be submitted to and reviewed by an arbitrator (the "Arbitrator"). If
the Purchaser and the Stockholder are unable to agree upon the identity
of the Arbitrator within five (5) days, the Stockholder and the
Purchaser shall each select within five (5) days thereafter one of the
"Big-Five" accounting firms having no other relationship with any party
hereto during the past two (2) years to select the Arbitrator. If such
accounting firms cannot agree as to the identity of the Arbitrator,
then each of such accounting firms shall select one nominee and the
Arbitrator shall be chosen by lot from the two (2) nominees. The
Arbitrator shall consider only the Disputed Matters and shall be
instructed to act promptly to resolve all Disputed Matters and prepare
or cause to be prepared a final Closing Balance Sheet and a final
Working Capital Deficit Statement consistent with the standards for
preparation of the Draft Closing Balance Sheet and the Draft Working
Capital Deficit Statement set forth in Section 1.4(a), and its decision
with respect to all Disputed Matters shall be final and binding upon
the Purchaser and the Stockholder. The Purchaser and the Stockholder
agree to provide the Arbitrator in a timely manner any information it
reasonably requests and shall use their best efforts to cause the
Arbitrator to decide all of the Disputed Matters within fifteen (15)
days of the date on which the Arbitrator is selected and provide the
Stockholder and the Purchaser with a written decision regarding his
determination of the Disputed Matters. The fees and expenses of the
Arbitrator with respect to the settlement of all Disputed Matters shall
be borne by the Purchaser, on the one hand, and the Stockholder, on the
other hand, in such proportion as shall be determined by the
Arbitrator, giving consideration to the Purchaser's and the
Stockholder's initial positions with respect to the Disputed Matters
and how far such positions were from the Arbitrator's decision.
(c) As used herein,
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(i) "Closing Balance Sheet" means the Draft Closing
Balance Sheet for the Companies prepared in accordance with
Section 1.4(a), subject to any adjustments resulting from the
resolution of any Notice of Disagreement in accordance with
Section 1.4(b).
(ii) "Closing Working Capital Deficit Statement"
means the Draft Closing Working Capital Deficit Statement for
the Companies prepared in accordance with Section 1.4(a),
subject to any adjustments resulting from the resolution of
any Notice of Disagreement in accordance with Section 1.4(b).
(iii) "Closing Working Capital Deficit" means, with
respect to the Closing Working Capital Deficit Statement, (A)
the sum of (1) the Closing Accounts Receivable (as defined
below) reflected on such statement and (2) the prepaid
expenses reflected on such statement, minus (B) the sum of (1)
the accounts payable reflected on such statement, (2) the
premiums payable to carriers reflected on such statement, (3)
the commissions payable reflected on such statement, (4) the
deferred revenue reflected on such statement, (5) those
accruals described on Schedule 1.4(c)(ii) hereto reflected on
such statement and (6) any other current liabilities of the
Companies reflected on such statement.
(iv) "Closing Accounts Receivable" means the trade
accounts receivable of the Companies reflected on the Closing
Working Capital Deficit Statement, which shall include an
adequate reserve for doubtful accounts in accordance with GAAP
and on a basis consistent with past practices.
(d) Within three (3) days after the Closing Working Capital
Deficit Statement is delivered or otherwise becomes final in accordance
with Section 1.4(b), the Estimated Closing Working Capital Deficit
shall be subtracted from the Closing Working Capital Deficit reflected
on the Closing Working Capital Deficit Statement and, (i) if the result
thereof is positive, the Stockholder shall pay to the Purchaser, in
cash, the amount so derived (provided that if any accounts payable
reflected on the Closing Balance Sheet were paid by the Stockholder
(because the Stockholder believed it was a Stockholder expense) between
Closing and the date that a cash payment is due to Purchaser pursuant
to this Section 1.4(d)(i), then the amount payable pursuant to this
Section 1.4(d)(i) shall be reduced by the aggregate amount of any such
payments made by the Stockholder) and (ii) if the result thereof is
negative, the amount so derived shall be subtracted from the principal
balance due under the Promissory Note; provided, however, if the result
thereof is a negative number that exceeds the then principal balance
due under the Promissory Note, no adjustment shall be made other than
to reduce the then principal balance due under the Promissory Note to
zero.
1.5 Closing. Subject to the fulfillment or waiver of the conditions
precedent hereinafter set forth, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place on April 30,
2001 at 10:00 A.M. at the offices of legal counsel for the Purchaser's senior
lender or at such other time and date and at a location to be mutually agreed
upon by the parties (the "Closing Date").
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
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The Purchaser represents and warrants to the Stockholder as follows:
2.1 Corporate Organization, Etc. The Purchaser is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Delaware, with full power to own its assets and to carry on its business as it
is now being conducted. The Purchaser has the power and authority to execute and
deliver this Agreement and the other agreements and instruments contemplated
herein and to perform its other obligations hereunder and thereunder. The
Purchaser is a newly formed corporation, formed solely for the purposes of the
transactions contemplated hereby.
2.2 Authorization. The execution, delivery and performance by the
Purchaser of this Agreement and the other agreements and instruments
contemplated hereby and the performance by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action of the Purchaser and do not and will not contravene or violate
any provisions of its certificate of incorporation, bylaws, any agreement or
other instrument by which it is bound or by which any of the assets of the
Purchaser are affected, or any judgment, order, injunction, decree, statute,
rule or regulation applicable to the Purchaser or the assets or business of the
Purchaser. Except as otherwise contemplated by this Agreement, no consents,
waivers, approvals, authorizations or orders of or registrations or
qualifications with, any person, bank, corporation, association, governmental
body or court having authority or power to regulate, supervise or direct the
business and affairs of the Purchaser are necessary for the consummation by the
Purchaser of the transactions contemplated by this Agreement. This Agreement has
been, and the other agreements and instruments contemplated hereby will be, duly
and validly executed and delivered by the Purchaser and (assuming due
authorization, execution and delivery by the Stockholder and each other party
thereto) constitutes or will then constitute, as the case may be, the legal,
valid and binding obligations of the Purchaser, enforceable against it in
accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto and the availability of equitable remedies.
2.3 Brokers and Finders. The Purchaser has not employed any broker,
agent or finder or agreed to incur any liability for any brokerage fees, agents'
commissions or finders' fees in connection with the transactions contemplated
hereby.
2.4 Investment Representations. The Purchaser acknowledges that the
HPSI Stock to be delivered to the Purchaser pursuant to this Agreement has not
been and will not be registered under the Securities Act of 1933, as amended
(the "Securities Act"), and therefore may not be resold without compliance with
the Securities Act. The Purchaser represents and warrants that the HPSI Stock to
be acquired by the Purchaser pursuant to this Agreement is being acquired solely
for the Purchaser's own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
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The Stockholder represents and warrants to the Purchaser as follows:
3.1 Corporate Organization, Etc. The Stockholder is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power to own its assets and to conduct its
business as it is now being conducted. The Companies are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation as set forth in Schedule 3.1 hereto,
with full corporate power to own their respective assets and to conduct their
respective businesses as they are now being conducted. The Companies are, or as
of the Closing will be, qualified or licensed to conduct their businesses and
are in good standing in each of the jurisdictions set forth on Schedule 3.1
hereto, which constitute the only jurisdictions where the nature of their
activities or the character of the properties utilized in their businesses make
such qualification or licensing necessary, except for jurisdictions in which the
Companies' failure to be so qualified or licensed and in good standing would not
have a Material Adverse Effect on any of the Companies individually or the
Companies as a whole. Except as set forth on Schedule 3.1, the Companies do not
have any Subsidiaries.
3.2 Authorization.
(a) The Stockholder has the requisite corporate power and
authority to execute and deliver this Agreement and the other
agreements and instruments contemplated hereby and to perform its
obligations hereunder and thereunder. The execution, delivery and
performance by the Stockholder of this Agreement and the other
agreements and instruments contemplated hereby and the performance by
the Stockholder of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate and other action
of the Stockholder and do not and will not contravene or violate its
certificate of incorporation and by-laws.
(b) Except as set forth on Schedule 3.2 hereto, no consents,
waivers, approvals, authorizations or orders of, or registrations or
qualifications with, any person, bank, corporation, association,
governmental body or court having authority or power to regulate,
supervise or direct the businesses and affairs of the Stockholder, the
Companies are necessary for the consummation by the Stockholder of the
transactions contemplated by this Agreement.
(c) This Agreement has been, and the agreements and
instruments contemplated hereby will at the Closing be, duly and
validly executed and delivered by the Stockholder and (assuming due
authorization, execution and delivery by the Purchaser and each other
party thereto) constitute or will then constitute, as the case may be,
the legal, valid and binding obligations of the Stockholder,
enforceable against it in accordance with their respective terms,
subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto and the availability of equitable remedies.
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(d) Subject to obtaining the consents described on Schedule
3.2 hereto, the execution, delivery and performance of this Agreement
and the performance of the transactions contemplated hereby do not and
will not contravene or violate (i) any material agreement or other
material instrument by which the Stockholder or the Companies are bound
or by which any of the assets of the Stockholder or the Companies are
affected or (ii) any judgment, order, injunction, decree, statute, rule
or regulation applicable to the Stockholder or the Companies or the
assets or businesses of the Companies. For purposes of the foregoing,
an agreement shall be considered "material" if it satisfies the
criteria set forth in the last sentence of Section 3.9(a) hereof.
3.3 Capitalization.
(a) The authorized capital stock of HPSI consists of Seven
Thousand (7,000) shares of common stock, $1.00 par value per share, of
which Five Hundred (500) shares are issued and outstanding. The
authorized capital stock of ABPA consists of Two Hundred Eighty (280)
shares of common stock, $100.00 par value per share, of which Two
Hundred Eighty (280) shares are issued and outstanding. The authorized
capital stock of SNA consists of One Hundred (100) shares of common
stock, $1.00 par value per share, of which One Hundred (100) shares are
issued and outstanding. The authorized capital stock of MMC consists of
Twenty-Six Thousand (26,000) shares of common stock, $0.10 par value
per share, of which Twenty-Six Thousand (26,000) shares are issued and
outstanding. The authorized capital stock of PHI consists of One
Hundred (100) shares of common stock, $10.00 par value per share, of
which One Hundred (100) shares are issued and outstanding. The
authorized capital stock of HPSIA ILL consists of One Thousand (1,000)
shares of common stock, $.01 par value per share, of which One Thousand
(1,000) shares are issued and outstanding. The authorized capital stock
of HPSIA consists of Two Hundred Thousand (200,000) shares of common
stock, no par value per share, of which Ten (10) shares are issued and
outstanding. The authorized capital stock of GBAIA consists of One
Hundred Thousand (100,000) shares of common stock, $.01 value per
share, of which One Hundred Thousand (100,000) shares are issued and
outstanding. Except as disclosed on Schedule 3.3(a) hereto, all the
outstanding shares of common stock of HPSI are owned by the
Stockholder, and all of the outstanding shares of common stock of each
of MMC, ABPA, SNA, PHI, GBAIA, HPSIA Ill. and HPSIA are owned by HPSI,
free and clear of all Liens and restrictions on voting, sale or
disposition. All outstanding shares of common stock of each of the
Companies have been validly issued and are fully paid and
non-assessable. No shares of common stock of the Companies are subject
to, nor have any been issued in violation of, preemptive or similar
rights.
(b) As of the Closing, HPSI will not have any Subsidiaries
other than MMC, ABPA, SNA, PHI, GBAIA, HPSIA Ill. and HPSIA. None of
MMC, ABPA, SNA, PHI, GBAIA, HPSIA Ill. or HPSIA has any Subsidiaries.
(c) There are no outstanding options, warrants, rights to
acquire or subscribe to, or calls or commitments of any character
whatsoever to which the Stockholder or the Companies are a party or may
be bound, requiring the issuance or sale of shares of any class of
capital stock or other equity securities of the Companies or securities
or rights convertible into or exchangeable for such shares or other
equity securities of any of the Companies, and there are no contracts,
commitments, understandings or arrangements for which the Stockholder
or the
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Companies are or may become bound to issue additional shares of capital
stock or other equity securities or options, warrants or rights to
acquire or subscribe to any additional shares of any class of capital
stock or other equity securities or securities convertible into or
exchangeable for such shares or other equity securities of any of the
Companies. Except for the Stockholder's credit agreement referenced on
Schedule 1.3 hereof, there is no existing arrangement that requires or
permits any shares of capital stock of the Companies to be voted by or
at the discretion of anyone other than the record owner thereof and
there are no proxies providing for such a voting arrangement. Except as
provided on Schedule 3.3(c) hereto and except for restrictions imposed
by applicable securities laws, there are no restrictions of any kind on
the transfer of any of the outstanding shares of capital stock of the
Companies.
(d) The Companies do not own or have any agreement to buy any
shares of capital stock (or other equity interests of entities other
than corporations) of any partnership, joint venture, trust,
corporation, limited liability company or other entity.
(e) As a result of the transaction contemplated by this
Agreement, after the Closing hereunder, the Purchaser shall own one
hundred percent (100%) of the issued and outstanding shares of capital
stock of HPSI and HPSI shall own one hundred percent (100%) of the
issued and outstanding shares of capital stock of each of MMC, ABPA,
SNA, PHI, GBAIA, HPSIA Ill. and HPSIA.
3.4 Financial Information. The unaudited balance sheet of each of the
Companies as at December 31, 1999 and 2000 (said December 31, 2000 balance
sheets being referred to herein as the "Balance Sheets" and December 31, 2000
being referred to herein as the "Balance Sheet Date") and the related statements
of operations of each of the Companies for the twelve-month periods ended on the
respective dates of such balance sheets (collectively, the "Financial
Statements"), copies of which are attached to Schedule 3.4 hereto, fairly
present the financial condition of the Companies as of the respective dates of
such balance sheets and the results of their operations as of such dates and for
the periods covered by such statements and have been prepared in accordance with
GAAP consistently applied except that they do not contain all footnote
disclosures required by GAAP and except for those normal year-end audit
adjustments described on Schedule 3.4 hereto. The unaudited balance sheets of
each of the Companies at February 28, 2001 (said balance sheets being referred
to herein as the "Latest Balance Sheets" and February 28, 2001 being referred to
herein as the "Latest Balance Sheet Date") and the related unaudited statements
of operations of each of the Companies for the comparable two-month period,
copies of which are attached to Schedule 3.4 hereto, fairly present the
financial condition of the Companies and the results of their operations as of
the date and for the two-month period then ended, and have been prepared in
accordance with GAAP consistently applied, except that they do not contain all
the footnote disclosures required by GAAP and except for those normal year-end
audit adjustments described on Schedule 3.4 hereto. All contingent liabilities
of the Companies at the Balance Sheet Date are noted in the Balance Sheets to
the extent required by GAAP and the Companies have not incurred any other such
contingent liabilities subsequent to the Balance Sheet Date except as noted in
the Latest Balance Sheets or except as disclosed on Schedule 3.4 hereto.
3.5 Ordinary Course. Except as set forth on Schedule 3.5 hereto, the
businesses of the Companies have been conducted in the ordinary course,
consistent with past
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practice, since the Balance Sheet Date. Except as set forth on Schedule 3.5
hereto, the Companies have not suffered any material and adverse change in their
respective businesses, operations, conditions (financial or otherwise) or
prospects subsequent to the Balance Sheet Date.
3.6 Assets Necessary for the Business. The Companies own, or as of the
Closing will own, all of the assets necessary for the conduct of their
respective businesses (including without limitation the businesses conducted by
HPSI, MMC, ABPA and SNA and commonly referred to as the "Small Business Group")
in the same manner as they have been conducted since the Balance Sheet Date.
3.7 Accounts Receivable. Schedule 3.7 is an Accounts Receivable Aging
Report which shows (i) the accounts receivable of the Companies, (ii) the name
of each account debtor, (iii) the aging of each account receivable and the
nature of the transaction in which it arose if other than an account receivable
arising in the ordinary course of business and (iv) a list of the provisions for
reserves for doubtful accounts receivable or write-offs of accounts receivable
made by the Companies since December 31, 1999. Except as set forth on Schedule
3.7 hereto, the accounts receivable of the Companies represent bona fide
indebtedness incurred by account debtors and arose in the ordinary course of
business. Since the Latest Balance Sheet Date, except as set forth on Schedule
3.7 hereto, (i) no event has occurred that would, under practices in effect when
the Latest Balance Sheets were prepared, require an increase in the reserves for
any accounts receivable and (ii) to the Knowledge of the Stockholder, there is
no contest, claim or right of set-off with any account debtor relating to the
amount or validity of any account receivable other than those which do not
exceed, in the aggregate, the reserve for uncollectible accounts contained in
the Latest Balance Sheets. The Companies have good and marketable title to their
respective accounts receivable reflected on the Latest Balance Sheets and to
each of the accounts receivable that arose after the Latest Balance Sheet Date,
free and clear of all Liens, except for Liens set forth on Schedule 3.7 hereto.
3.8 Property.
(a) Real Property Leases. Schedule 3.8(a) hereto contains a
description of all real property leased, licensed to or otherwise used
or occupied by the Companies (collectively, the "Leased Real Property")
including, where available, the address thereof, a brief description of
the use of premises, the annual fixed rental, the expiration of the
term, any purchase and/or extension options and any security deposits.
A true and correct copy of each such lease, license and/or occupancy
agreement, and any amendments thereto, with respect to the Leased Real
Property (each a "Real Property Lease", and collectively, the "Real
Property Leases") has been delivered to the Purchaser, and no changes
have been made thereto since the date of delivery. Except as set forth
on Schedule 3.8(a) hereto, all of the Leased Real Property is used or
occupied by the Companies pursuant to a Real Property Lease. Except as
set forth on Schedule 3.8(a) hereto, the Companies have a valid and
enforceable leasehold interest in the Leased Real Property, free and
clear of all Liens. Except as disclosed on Schedule 3.8(a), each Real
Property Lease is valid, binding and enforceable in accordance with its
terms and is in full force and effect. There are no existing defaults
by the Companies or, to the knowledge of the Stockholder, the lessor
under any of the Real Property Leases, and no event has occurred which
(with notice, lapse of time or both) would constitute a breach or
default under any of the Real Property Leases by any of the Companies
or give any lessor the right to terminate, accelerate or modify any
Real
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Property Lease. Except as set forth on Schedule 3.8(a) hereto (i) no
consent is required from the lessor under any of the Real Property
Leases in order to consummate the transactions contemplated hereby and
(ii) no Affiliate of the Stockholder is the owner or lessor of any real
property leased to the Companies.
(b) Owned Real Property. None of the Companies owns any real
property. The Leased Real Property constitutes all of the real property
used or occupied by the Companies in their respective businesses.
(c) Tangible Personal Property. Schedule 3.8(c) hereto lists,
by categories, all equipment, machinery, and other similar tangible
personal property, with an individual original cost of $10,000 or more,
which is owned by the Companies and used in their respective businesses
(the "Tangible Personal Property"). The Companies have good and
marketable title to and are in possession of all items of tangible
personal property used in their respective businesses (other than
leased property), whether or not listed on Schedule 3.8(c) hereto, and
such property is free and clear of all Liens, except for Liens set
forth on Schedule 3.8(c) hereto. Except as set forth on Schedule
3.8(c), the buildings, machinery, equipment and other tangible assets
that the Companies own or lease are free from material patent defects
(and, to the Knowledge of the Stockholder, material latent defects),
have been maintained in accordance with normal industry practice, and
are in satisfactory operating condition and repair (subject to normal
wear and tear). Schedule 3.8(c) hereto describes all sales of Tangible
Personal Property by the Companies since the Latest Balance Sheet Date
outside the ordinary course of business consistent with past practice
and sets forth (i) the date of any such sale, (ii) a description of the
Tangible Personal Property sold in any such sale, (iii) the sales price
of the Tangible Personal Property sold in any such sale and (iv) the
reason(s) for such sale.
(d) Absence of Violations. Except as specifically set forth on
Schedule 3.8(d) hereto, to the Knowledge of the Stockholder:
None of the Leased Real Property or any other property otherwise occupied,
leased, used or operated by the Companies in the conduct of their respective
businesses nor the occupancy, leasing, use or operation thereof, is in violation
of any law or any building, zoning, environmental or other ordinance, code, rule
or regulation.
The condition and use of the Leased Real Property conforms to each applicable
certificate of occupancy, and all other Permits (as defined in Section 3.12
hereof) required to be issued in connection with the Leased Real Property. The
Companies have obtained all Permits necessary for the operation of their
respective businesses on the Leased Real Property.
(e) No Reassessments. There is not now pending or, to the
Stockholder's Knowledge, contemplated any reassessment of any parcel
included in the Leased Real Property which would result in a change in
the rent, additional rent or other sums and charges payable by the
Companies under the lease agreements covering such Leased Real
Property.
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3.9 Contracts.
Schedule 3.9(a) hereto contains an accurate and complete list of all material
agreements, leases, licenses, contracts or commitments (whether oral or written)
to which the Companies are a party or by which any of the Companies' assets,
properties are bound, including, without limitation, (i) royalty, distribution,
sales representative, agency, territorial or license agreements, (ii) agreements
or contracts with any officer, employee, director, stockholder, professional
person or firm, independent contractor or advertising firm or agency, (iii)
contracts or collective bargaining agreements with any labor union or
representative of employees, (iv) agreements, contracts or commitments
containing any covenant restricting the conduct of the businesses conducted by
the Companies, (v) leases of real and personal property, (vi) agreements or
contracts granting or agreeing to grant any Person sourcing, marketing,
distribution or similar rights, (vii) purchase and sales orders and commitments
and agreements or contracts with vendors, contractors or customers, (viii)
powers of attorney, (ix) loans, financing or other credit arrangements or
agreements under which money has been borrowed or loaned (including security
agreements relating thereto), (x) bonds, fidelity or surety contracts,
guarantees or similar obligations, (xi) employment, consulting, pension, profit
sharing, retirement, severance, matching gift, bonus, stock option, employee
stock ownership, employee or officer incentive or other compensation or employee
benefit contracts, plans or agreements, (xii) commitments or contracts relating
to political contributions or donations, (xiii) agreements restricting dividends
or distributions or the right to conduct business, (xiv) joint venture
agreements and (xv) underwriting or similar agreements. For purposes of this
Agreement, an agreement, lease, license, contract or commitment (whether oral or
written) shall be "material" if it (i) involves year 2000 annual consideration
in excess of $50,000 (or $200,000 in the case of agreements with vendors) and
cannot be cancelled without penalty on thirty (30) days or less notice, (ii)
contains a provision to indemnify any person or entity (other than routine
indemnification provisions contained in vendor agreements), or to assume any
Tax, environmental or other liability or (iii) limits or restrains any of the
Companies (or any successor thereto) or, to the Knowledge of the Stockholder,
any employee of any of the Companies from engaging or competing in any manner or
in any business.
(b) No Defaults. Except as set forth on Schedule 3.9(b)
hereto, none of the Companies is in default under any material
agreement, lease, license, contract or commitment (whether oral or
written and whether or not listed on Schedule 3.9(a) hereto) or, to the
Knowledge of the Stockholder, any other agreement, lease, license,
contract or commitment (whether oral or written and whether or not
listed on Schedule 3.9(a) hereto), to which it is a party or under
which it is obligated or bound or to which any of its properties may be
subject, and there is no breach or default on the part of the Companies
or, to the Knowledge of the Stockholder, any event which with notice or
lapse of time, or both would constitute a default by any of the
Companies under any of these agreements or, to the Knowledge of the
Stockholder, give any other party any right to terminate, cancel,
accelerate or modify any of these agreements, (ii) have received notice
that any party to any of these agreements intends to cancel or
terminate any of these agreements or to exercise or not to exercise any
renewal or extension options or rights under any of these agreements,
and (iii) has waived or exercised any material renewal or extension
options or rights under any of these agreements.
-11-
3.10 Intellectual Property.
(a) Set forth on Schedule 3.10(a) hereto is a true and correct
list of all U.S. federal, state and foreign patents, pending patent
applications, invention disclosures, trademarks, trademark
registrations, pending applications for trademark registrations, trade
names, domain names, URL's, service marks, service xxxx registrations,
pending applications for service xxxx registration, registered
copyrights, pending copyright applications and any other intellectual
property rights or licenses owned by the Companies or otherwise used in
connection with their respective businesses, together with all patent,
registration and/or application numbers and expiration dates
(collectively, the "Intellectual Property"). Except as set forth on
Schedule 3.10(a) hereto, (i) no material items of Intellectual Property
are licensed to the Companies, (ii) no item of Intellectual Property
owned by the Companies, and to the Knowledge of the Stockholder no
material item of Intellectual Property licensed by the Companies from a
third party, infringes on any intellectual property of others in any
jurisdiction in which such Intellectual Property is used and none of
the Stockholder or the Companies has received any written notification
of infringement by the Companies or anyone claiming under the Companies
or any written claims with regard to any Intellectual Property and
(iii) to the Knowledge of the Stockholder, the Companies own or possess
the right to use all of the intellectual property which is being used
in their businesses.
(b) The Intellectual Property constitutes all of the
intellectual property needed to conduct the businesses as conducted by
the Companies as of the Balance Sheet Date and the Closing Date;
provided, however, the Stockholder makes no representation that its
ownership of the right to use the name "HealthPlan" or any variation
thereof is exclusive, as others may be using such name or variations
thereof.
3.11 Legal Proceedings. Except as set forth on Schedule 3.11 hereto,
there are no claims, actions, suits or proceedings or any governmental charges,
audits or investigations (each, a "Proceeding") instituted by or against, or, to
the Knowledge of the Stockholder, threatened (within the last twelve months)
against the Companies, whether at law, in equity or before any governmental
department, commission, board, agency or instrumentality, domestic or foreign,
whether or not fully covered by insurance. Except as set forth on Schedule 3.11
hereto, none of the Companies is subject to any order, writ, injunction or
decree of any court or any governmental department, commission, board, agency or
instrumentality, domestic or foreign, having jurisdiction over them.
3.12 Licenses and Compliance with Law.
(a) To the Knowledge of the Stockholder, the Companies hold
and are in compliance, or will be in compliance as of the Closing, with
all permits, certificates, licenses, approvals, registrations and
authorizations required by them in connection with the conduct of their
respective businesses and the ownership and operation of their
respective assets under all federal, state, local and foreign laws,
rules and regulations (the "Permits"). Except as set forth on Schedule
3.12(a) hereto, all of the Permits are, and as of the Closing of the
transactions contemplated hereby will be, in full force and effect in
all respects in accordance with their respective terms.
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(b) Except as set forth on Schedule 3.12(b) hereto, the
Companies are, or as of the Closing will be, in compliance with all
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and changes
thereunder) of federal, state, local and foreign governments (and all
agencies thereof), asserting or claiming jurisdiction over them or over
any part of their operations, except to the extent such non-compliance
would not have a Material Adverse Effect upon any of the Companies
individually or the Companies as a whole, and no Proceedings or notices
have been filed or commenced against the Companies alleging any failure
to comply.
3.13 Environmental Matters. Except as set forth on Schedule 3.13
hereto:
(a) The Companies are in compliance with all applicable
Environmental Laws. With respect to the properties, assets and
operations of the Companies, (a) to the Knowledge of the Stockholder,
there are no conditions, circumstances, omissions, actions or plans of
the Companies that could reasonably be expected to interfere with,
prevent compliance with, impose liability under, or which give rise to
any claim under, any applicable Environmental Law, (b) neither the
Stockholder nor any of the Companies has received written notice from
any court or governmental or regulatory body that any of the Companies
is in violation or allegedly in violation of, does not comply or
allegedly does not comply with, is responsible or potentially
responsible for the investigation or cleanup of Hazardous Substances
under, or that there is a basis for liability or alleged liability
under, any applicable Environmental Law, (c) to the Knowledge of the
Stockholder, there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, order, decree, directive, notice or demand letter pending
or outstanding relating to Environmental Laws and relating to the
Companies or any uses, activities or operations at or in connection
with the Leased Real Property threatened against the Companies relating
to any Environmental Laws and (d) neither the Stockholder nor any of
the Companies has received notice of a claim, violation, complaint or
demand stating that it is or may be potentially required to pay,
reimburse, guaranty, pledge, defend, indemnify or hold harmless any
person for or against liabilities or costs arising in connection with
any threatened or actual Release (as hereinafter defined) of Hazardous
Substances or under any applicable Environmental Laws.
(b) To the Stockholder's Knowledge, there are no underground
storage tanks, active or abandoned, at any property now or previously
owned, operated or leased by the Companies.
(c) No Hazardous Substance has been released, spilled, leaked,
discharged, disposed of, pumped, poured, emitted, emptied, injected,
leached, dumped or allowed to escape into the environment ("Release")
by the Companies or, to the Knowledge of the Stockholder, by anyone
else which would subject the Companies to any liability.
(d) No written notification of a Release or threat of Release
of a Hazardous Substance has been filed by or on behalf of the
Companies. To the Knowledge of the Stockholder, no real property, now
or previously owned, operated or leased by the Companies is listed or,
to the knowledge of the Stockholder, proposed for listing on the
National Priority List promulgated pursuant to CERCLA or on any similar
state list of sites.
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(e) To the Knowledge of the Stockholder, there are no facts or
circumstances related to environmental matters concerning the existing
or previously owned, operated or leased properties or businesses of the
Companies that could reasonably be expected to lead to any future
environmental claims, liabilities or responsibilities against the
Companies or the Purchaser.
(f) To the Knowledge of the Stockholder, no PCBs or
asbestos-containing materials, are or have been present at any property
now or previously owned, operated or leased by the Companies.
3.14 Labor Matters.
(a) Except as set forth on Schedule 3.14 hereto, no employees
of the Companies are covered by a collective bargaining agreement and,
except as set forth on Schedule 3.14 hereto, no collective bargaining
agreement binding on the Companies restricts the Companies from
relocating or closing any or all of their respective businesses or
operations.
(b) To the Knowledge of the Stockholder, there are no
campaigns being conducted to solicit cards or authorization from
employees of the Companies to be represented by any labor organization.
(c) The Companies are and have been in compliance with all
applicable laws, regulations, policies, procedures and contractual
obligations relating to employment, employment practices, wages, hours,
discrimination, safety and health of employees, workers compensation,
unemployment insurance, withholding of wages, and terms and conditions
of employment. All personnel manuals, handbooks, policy and procedure
manuals applicable to the employees of the Companies have been
disclosed and made available to the Purchaser.
(d) Set forth on Schedule 3.14 hereto is a list of all persons
whose employment was terminated by the Companies during the past three
(3) years whose compensation exceeded $50,000 per annum.
(e) Except as set forth on Schedule 3.14 hereto, the Companies
are not liable for any severance pay or other payments to any employee
or former employee due to the termination of employment on or before
the Closing Date and will not have any liability under any benefit or
severance plan, policy, practice, program or agreement which exists or
may be deemed to exist under any applicable law, as a result of the
transactions contemplated hereunder.
3.15 Taxes. Except as set forth on Schedules 3.15(a) through (k)
hereto:
(a) The Companies have (i) duly and timely filed, or caused to
be duly and timely filed, with each relevant Tax Authority each Tax
Return that is required to be filed, on or before the Closing, by or on
behalf of the Companies or that includes or relates to the Companies,
their income, sales, assets or businesses, which Tax Returns are true,
correct and complete, (ii) duly and timely paid in full, or caused to
be duly and timely paid in full, all Taxes due and payable on or prior
to the Closing, and (iii) have properly accrued on the books and
records of the Companies in accordance with GAAP a provision for the
payment of all Taxes due or claimed to be due or for which the
Companies otherwise are or may be liable with respect to any
Pre-Closing Period.
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(b) Except as set forth on Schedule 3.15(b) hereto, none of
the Companies have requested an extension of time within which to file
any Tax Return in respect of any Tax period which has not since been
filed.
(c) The Companies have complied with all applicable laws
relating to the payment, collection or withholding of any Tax, and the
remittance thereof to any and all Tax Authorities, including, but not
limited to, Code Sections 1441, 1442, 1445 and 3402.
(d) There is no Lien for Taxes upon any asset or property of
the Companies (except for any statutory Lien for any Tax not yet due).
(e) Except as set forth on Schedule 3.15(e) hereto, the
statute of limitations for any Tax Proceeding or the assessment or
collection of any Tax for which the Companies are or may be liable or
with respect to the income, sales, assets or businesses of the
Companies have never been extended or waived except as to any statute
of limitations which is closed for additional Tax assessments or
collection of Taxes by any Tax Authority.
(f) Except as set forth on Schedule 3.15(f) hereto, there is
no outstanding subpoena or request for information or documents from
any Tax Authority with respect to any Tax for which the Companies are
or may be liable or with respect to the income, sales, assets or
businesses of the Companies.
(g) Except as set forth on Schedule 3.15(g) hereto, there is
no power of attorney in effect relating to any Tax for which the
Companies are or may be liable or with respect to the income, sales,
assets or businesses of the Companies.
(h) No jurisdiction where the Companies do not file a Tax
Return has asserted or, to the Knowledge of the Stockholder, threatened
to assert any claim that the Companies are required to file a Tax
Return for such jurisdiction.
(i) Schedule 3.15(i) hereto sets forth a list of all
jurisdictions in which any Tax Returns have been filed by or on behalf
of the Companies, or with respect to the income, sales, assets or
businesses of the Companies after December 31, 1999 and a description
of each such Tax Return and the period for which it was filed; and the
Stockholder has provided to the Purchaser or its agents (i) access to
true, correct and complete copies of the 1997, 1998 and 1999 Tax
Returns filed by the Companies, and (ii) access to all audit reports,
closing agreements, rulings, or technical advice memoranda relating to
any Tax for which the Companies are or may be liable with respect to
their income, sales, assets or businesses.
(j) There is no Tax sharing or similar agreement or
arrangement among the Stockholder and any of the Companies.
(k) The adjusted Tax basis of the assets of the Companies is
set forth on Schedule 3.15(k) hereto.
3.16 Compensation. Schedule 3.16 hereto contains a true and complete
list of the name, title and total annual compensation (i.e. base salary, bonus,
commission and other) of each current employee of the Companies (except for the
employees listed on Schedule 4.6
-15-
hereto) and sets forth the material terms of the policies, if any, of the
Companies concerning vacations, bonuses, health insurance, leaves of absence,
holidays, severance pay and other similar benefits.
3.17 Employee Benefit Plans.
(a) Schedule 3.17(a) hereto lists any bonus, incentive
compensation, deferred compensation, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, stock
appreciation rights, phantom stock, cafeteria, life, health, accident,
disability, welfare, worker's compensation or other insurance,
severance, separation or other employee benefit plan of any kind,
including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") (other than a "multiemployer plan" within
the meaning of Sections 3(37) and 4001 (a)(3) of ERISA; a
"Multiemployer Plan") established by the Companies or to which the
Companies contribute or have contributed within the last four (4) years
(including employee benefit plans not now maintained by, or on behalf
of, the Companies or to which the Companies do not now contribute, but
with respect to which the Companies have or may have any liability).
Except as otherwise provided in Schedule 3.17(a), no such employee
benefit plan is or was subject to Title IV of ERISA. With respect to
each employee benefit plan (where applicable): the Stockholder has
delivered or made available to the Purchaser complete and accurate
copies of (i) all plan texts and agreements and (ii) the most recent
determination letter received from the Internal Revenue Service.
(b) Except as set forth on Schedule 3.17(b) hereto, each
employee benefit plan listed thereon and any related trust agreements,
annuity contracts, insurance contracts or other instruments are in
compliance in all material respects both as to form and operation with
the requirements of ERISA and the Code.
(c) No "pension plan" (within the meaning of Section 3(2) of
ERISA) maintained by, or on behalf of, the Companies which is subject
to Section 302 of ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency"(as defined in Section 302 of ERISA or
Section 412 of the Code), whether or not waived. Each pension plan
which is intended to be qualified under Section 401(a) of the Code has
been determined to be qualified by the Internal Revenue Service.
(d) Except as set forth on Schedule 3.17(d) hereto, the
Companies have not engaged in, and, to the Knowledge of the
Stockholder, no fiduciary of any employee benefit plan listed on
Schedule 3.17(a) has engaged in, any transaction in violation of
Section 406 of ERISA or any "prohibited transaction"(within the meaning
of Section 4975 of the Code) for which no exemption exists under ERISA
or the Code.
(e) Except as set forth on Schedule 3.17(e) hereto, the
Companies have not taken any action, and no action or event has
occurred that could cause the Companies to incur liability, fines or
penalties under ERISA or the Code in respect of an employee benefit
plan (other than routine claims for benefits or normal operations of
the plan).
-16-
(f) Except as set forth on Schedule 3.17(f) hereto, the
consummation of the transactions contemplated by this Agreement will
not (i) entitle any individual to severance pay or (ii) accelerate the
time of payment, vesting or increase the amount of compensation due to
any such individual.
(g) Except as set forth on Schedule 3.17(g) hereto, the
Companies have not communicated (whether orally or in writing)
generally to employees or specifically to any employee regarding (i)
any future increase of benefit levels (or creation of new benefits)
with respect to any employee benefit plan set forth on Schedule 3.17(a)
hereto beyond those reflected in such plans or the collective
bargaining agreements listed on Schedule 3.14 hereto or (ii) the
adoption or creation of any employee benefit plan not set forth on
Schedule 3.17(a) hereto.
(h) The retiree medical plans of the Company contain
provisions preserving to the sponsor the right to amend and terminate
such plans without incurring any liability, fine, penalty or other
obligation of any kind whatsoever and the Companies have made no change
in any such provisions and have not taken any actions which are
contrary to these provisions.
3.18 Relationships with Customers and Vendors. Schedule 3.18 hereto
sets forth a complete and correct list of the names and addresses of the ten
(10) largest vendors and the ten (10) largest customers of each of the Companies
during the twelve-month period ended on the Balance Sheet Date and the
twelve-month period ended on Latest Balance Sheet Date and the total sales to or
purchases from such customers or vendors made by the Companies during each such
twelve-month period. Except as set forth on Schedule 3.18 hereto, no such vendor
or customer of the Companies has advised the Companies or the Stockholder,
formally or, to the Knowledge of the Stockholder, informally, and the
Stockholder has no Knowledge that any such vendor or customer intends to
terminate, discontinue or reduce its business with the Companies by reason of
the transactions contemplated by this Agreement or otherwise.
3.19 Consultants. Set forth on Schedule 3.19 hereto is (i) a list of
all of the outside consultants currently retained by the Companies who receive,
or are entitled to receive, annual payments of $25,000 or more and (ii) a
summary of the material terms of any arrangements or agreements between the
Companies and those consultants.
3.20 Other Entities. Except as set forth on Schedule 3.20 hereto, the
Companies do not own, directly or indirectly, any outstanding capital stock or
equity interest in any corporation, partnership, joint venture or other entity.
3.21 No Undisclosed Liabilities. Except as set forth on Schedule 3.21
hereto, the Companies do not have any liabilities or obligations (whether fixed,
accrued, absolute, contingent, secured, unsecured, known, unknown or otherwise
and whether due or to become due and including, without limitation, Tax
liabilities), other than those set forth in the Latest Balance Sheets and those
incurred thereafter in the ordinary course of their respective businesses which
shall be reflected on the Estimated Closing Balance Sheet and the Estimated
Closing Working Capital Deficit Statement.
3.22 Accounts Payable and Other Accrued Expenses. The accounts payable,
premiums payable to carriers, commissions payable and other accrued expenses of
the
-17-
Companies represent bona fide obligations incurred by the Companies which arose
in the ordinary course of business. Set forth on Schedule 3.22 hereto is a list
of all accounts payable, premiums payable to carriers and other accrued expenses
as of the Latest Balance Sheet Date which are in excess of $5,000, in each case
indicating the name of each payee, the relationship (if any) of the payee to the
Companies, the amount payable to each payee, the date each such payment is due,
the aging of such payable and the nature of the transaction in which it was
incurred if other than a trade payable incurred in the ordinary course of
business consistent with past practice.
3.23 Absence of Changes. Except as contemplated hereby, reflected in
the Latest Balance Sheets or set forth on Schedule 3.23 hereto, since the Latest
Balance Sheet Date, there has not been:
(a) any material damage, destruction or casualty loss (whether
or not covered by insurance) suffered by the Companies;
(b) any material change in the condition (financial or
otherwise), business, properties, assets, liabilities, earnings or
prospects of the Companies;
(c) any transaction of any nature material to the business or
the assets of the Companies, except arm's length transactions in the
ordinary course of business;
(d) any employment agreement or deferred compensation
agreement entered into between the Companies and any of their employees
providing for payments in excess of $25,000; or any increase, not in
the ordinary course of business, in the compensation or benefits
payable or to become payable by the Companies to any employee (except
as required by an existing collective bargaining agreement or
employment agreement) or the adoption of any new (or amendment to or
alteration of any existing) bonus, incentive, compensation, pension,
stock, matching gift, profit sharing, retirement, death benefit or
other fringe benefit plan;
(e) any increase in the aggregate Indebtedness or any increase
in purchase commitments or other liabilities or obligations (whether
absolute, accrued, contingent or otherwise) incurred by the Companies,
nor have the Companies issued or assumed, guaranteed or endorsed any
debt securities or otherwise as an accommodation which will not be
released at Closing, and none of the Companies have become responsible
for, the obligations of any other Person which will not be released at
Closing, nor has there been any change in any assumption underlying, or
method of calculating, any bad debt, contingency or other reserve,
except, in each case, for (i) liabilities, commitments and obligations
incurred in the ordinary and usual course of business and consistent
with past practice and (ii) those changes reflected on Schedule 3.23
hereto which were required by GAAP or by any federal, state, local or
foreign governmental agency in connection with changes in rules,
regulations or the interpretation thereof;
(f) any assets or properties acquired (including by lease) by
the Companies except in the ordinary course of business consistent with
past practice or any Lien created on any of such assets or properties
except for blanket Liens of the Stockholder's lenders which will be
released at Closing;
(g) any material labor dispute involving the employees of the
Companies;
-18-
(h) any sale, assignment, transfer or other disposition or
license of any material assets or properties of the Companies;
(i) any amendment, termination or waiver by the Companies of
any right of substantial value belonging to them;
(j) any amendment of the certificates (or articles) of
incorporation or by-laws of the Companies;
(k) any declaration, payment or setting aside by the Companies
of any dividend or other distribution of assets, pro rata or otherwise,
to the Stockholder or any direct or indirect purchase, redemption or
retirement or other acquisition by the Companies of any shares of their
capital stock;
(l) any capital expenditure or commitment by the Companies not
fully paid for in excess of (i) $50,000 individually and (ii) $150,000
in the aggregate;
(m) except as set forth on Schedule 3.8(a) hereto, any
amendment or termination of any of the Real Property Leases of any of
the Companies;
(n) any change (except for changes in authorized signatories
arising out of personnel changes) in banking or safe deposit box
arrangements of any of the Companies;
(o) any powers of attorney granted by any of the Companies
(other than powers of attorney granted in the ordinary course of
business with respect to Tax matters, powers granted to the
Stockholder's lenders which will be terminated at Closing, or powers
granted for the sole purpose of executing the documents contemplated by
this Agreement);
(p) any transfer or license of the rights or interests to any
of the Intellectual Property, nor have the Companies caused or injected
in the public domain or made public, or disposed of or licensed or
disclosed to any entity any of such Intellectual Property not
theretofore a matter of public knowledge;
(q) any merger or consolidation with, or purchase of all or a
part of the assets of, or other acquisition of any business or any
proprietorship, firm, association, partnership, corporation or other
business organization or division thereof involving any of the
Companies;
(r) any change in any methods of accounting or accounting
practice of the Companies other than those required by changes in GAAP
or by the Securities and Exchange Commission;
(s) any transaction entered into of any kind with any officer,
director or stockholder of the Companies
(t) any actual, anticipated or threatened termination,
discontinuation, reduction or other change in the scope, nature or
amount of services provided by the Companies to their respective
customers;
-19-
(u) any change in the policies or practices of the Companies
regarding the payment of accounts payable and other similar items
(including, without limitation, premiums payable to carriers and
commissions payable); or
(v) any agreement by the Companies to do any of the foregoing.
3.24 Insurance. Schedule 3.24 hereto sets forth each insurance policy
(specifying the insurer, the type of insurance and the policy number) maintained
by, or on behalf of, the Companies on their properties, assets, products,
businesses or personnel, and true and complete copies of the most recent
inspection reports, if any, received from insurance underwriters as to the
condition of the properties and assets owned, leased, occupied or operated by
the Companies in the conduct of their respective businesses. Except as set forth
on Schedule 3.24 hereto, the Companies have maintained comparable insurance with
carriers which to the Knowledge of the Stockholder, are financially sound and of
good reputation continuously for the past five (5) years and such insurance is,
and has been maintained with coverage, and in amounts, in accordance with the
standards of the industry in which the Companies operate. True and complete
copies of all liability insurance policies of the Companies which are in effect
have heretofore been made available by the Stockholder to the Purchaser and its
agents.
3.25 Bank Accounts. Schedule 3.25 hereto sets forth: (a) the name of
each bank in which the Companies have an account or safe deposit box used in
their respective businesses and the names of all persons authorized to draw
thereon or to have access thereto; and (b) the name of each person, corporation,
firm, association or business organization, entity or enterprise holding a
general or special power of attorney from the Companies with respect to such
accounts and safe deposit boxes.
3.26 Affiliate and Associate Transactions. Except as set forth on
Schedule 3.26 hereto, none of the Companies has any loan or advance outstanding
to any stockholder, officer, director or employee and, to the Knowledge of the
Stockholder, no officer or director of the Stockholder or the Companies has,
either directly or indirectly:
(a) an equity or debt interest in any Person which purchases
from or sells or furnishes to the Companies any goods or services or
otherwise does business with the Companies; or
(b) a beneficial interest in any contract, commitment or
agreement to which the Companies are a party or under which the
Companies are obligated or bound or to which their respective assets
may be subject, other than contracts, commitments or agreements between
the Companies and such persons in their capacities as employees,
officers or directors of the Companies;
provided, however, that such representation and warranty in clauses (a) and (b)
above shall not apply to the ownership, as a passive investment, by any such
stockholder, employee, officer or director, of less than 1% of a class of
securities listed for trading on a national securities exchange or publicly
traded in the over-the-counter market.
3.27 Brokers and Finders. Except for EGL Holdings, Inc., whose fees
shall be the sole responsibility of the Stockholder (and not the Companies),
none of the Stockholder, the
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Companies nor any of their respective officers, directors or employees has
employed any broker, agent or finder or incurred any liability for any brokerage
fees, agents' commissions or finders' fees in connection with the transactions
contemplated hereby. The foregoing notwithstanding, any fees or expenses which
may be owed to Xxxxxxxx Xxxxx Xxxxxx and Xxxxx as a result any action by Xxxx
Xxx or persons representing Xxxx Xxx shall not be covered by this representation
and shall not be the responsibility of the Stockholder.
3.28 Information Accurate and Complete; Reliance. Without limiting the
specific language of any other representation or warranty herein, all
information furnished or to be furnished by the Stockholder or the Companies to
the Purchaser in this Agreement, and in exhibits or schedules attached hereto,
is or will be accurate and complete, includes or will include all material facts
required to be stated therein and does not or will not contain any untrue
statement of a material fact or omit any material fact necessary to make the
statements therein not misleading. Notwithstanding any right of the Purchaser
fully to investigate the affairs of the Companies, and notwithstanding any
knowledge of facts determined or determinable by the Purchaser pursuant to such
investigation or right of investigation, the Purchaser has the right to rely
fully upon the representations and warranties of the Stockholder contained
herein, in the exhibits or the schedules hereto or in any other document
delivered in connection with the transactions contemplated hereby.
3.29 No Indebtedness. Schedule 3.29 hereto lists any and all
Indebtedness owed by the Companies.
3.30 Third Party Obligations. Except as set forth on Schedule 3.30
hereto, none of the Companies has any obligation or liability, either actual or
accrued, accruing or contingent, as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise, in respect of the obligation of any
corporation, partnership, limited liability company, joint venture, association,
organization, entity or other person, except as endorser or maker of checks
endorsed or made in the ordinary course of business.
3.31 Services Provided by Corporate. Schedule 3.31 hereto lists (i) the
material services furnished by the Stockholder and its Affiliates to or for the
benefit of the Companies in the ordinary course of business consistent with past
practice, (ii) the costs and expenses, if any, charged or allocated to the
Companies in respect of such services and (iii) the material services which the
Stockholder and its Affiliates will no longer provide to the Companies after the
Closing Date.
ARTICLE IV
COVENANTS
---------
4.1 Conduct of the Business. The Stockholder covenants and agrees that,
from and after the execution of this Agreement through the Closing, the
Companies will conduct their respective businesses in the ordinary course and in
a manner consistent with past practice (except for other changes to the conduct
of such businesses requested or approved in writing by the
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Purchaser) and will not (except to the extent otherwise permitted by this
Agreement or consented to by the Purchaser in writing):
(a) take any action or omit to take any action covered by
Section 3.23 hereof;
(b) fail to comply with any laws, ordinances, regulations or
other governmental restrictions applicable to them or fail to attain or
maintain all Permits required to operate the businesses of the
Companies as they are presently being operated;
(c) engage in or enter into any material transaction of any
nature not expressly provided for herein;
(d) subject to the requirements of the Stockholder's lenders,
declare or pay any dividends or other distributions of any kind to the
Stockholder or any other Person (it being understood that if the
Stockholders lenders require the payment of any dividend or
distribution, the Stockholder will notify the Purchaser of this event);
(e) pay any compensation to any employee or consultant in
excess of the current base salaries of such Persons, except for (i)
normal and customary annual increases for employees not exceeding 4% of
their respective base salaries and (ii) increases required by the terms
of those collective bargaining agreements set forth on Schedule 3.14
hereto;
(f) agree or commit, whether in writing or otherwise, to do
any of the foregoing.
4.2 Access. From the date hereof until the Closing, the Stockholder
shall cause the Companies, on reasonable notice, to (a) give the Purchaser and
its authorized representatives, access, during normal business hours, to the
books, records, properties and personnel of the Companies, and (b) permit the
Purchaser to make such inspections as it may reasonably require. The Purchaser
shall use commercially reasonable efforts to conduct and cause its
representatives to conduct such inspections and investigations in a manner so as
not to interfere unreasonably with the operations of the Companies. No
investigation conducted by the Purchaser or its representatives or agents or
disclosure of any such information to the Stockholder shall in any way diminish,
modify or alter the representations, warranties or covenants of the Stockholder
or the liability of the Stockholder for any misrepresentation or breach of any
warranty or covenant hereunder or the conditions to Closing contained in Article
V hereof. The Purchaser shall be afforded an opportunity to contact the
Companies' customers and vendors during the course of its due diligence
investigations with reasonable advance notice to the Stockholder.
4.3 Preservation of Organization. Except as otherwise permitted by this
Agreement, from the date hereof through the Closing, the Stockholder will cause
the Companies to use their best efforts to (a) maintain their existence in good
standing and their properties and facilities in as good working order and
condition as at present, ordinary wear and tear excepted; (b) perform all their
obligations under agreements related to or affecting their assets, properties
and rights; (c) pay any and all premiums necessary to keep in full force and
effect present insurance policies or other comparable insurance coverage; (d)
keep available the services of their present employees and agents; and (e)
preserve the goodwill of their customers, suppliers and others having business
relations with them.
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4.4 No-Shop. From and after the date hereof and continuing until the
Closing or the earlier termination of this Agreement pursuant to Article VII
hereof, the Stockholder hereby covenants and agrees that it will not, and will
not authorize or permit any officer, director, employee or agent of the
Stockholder, the Companies or any Affiliate of the Stockholder or the Companies
to, or authorize or permit any investment banker, attorney, accountant or other
representative retained by the Stockholder, the Companies or any Affiliate of
the Stockholder or the Companies to, directly or indirectly, without the written
consent of the Purchaser, solicit or encourage, furnish any information with
respect to the Companies to any Person in connection with, or engage in any
discussions with any other Person in connection with any proposal for a merger
or other business combination involving the Companies or for the acquisition of
an equity interest in the Companies or a substantial portion of the assets of
the Companies, other than as contemplated by this Agreement. The Stockholder
hereby covenants and agrees that it will promptly advise the Purchaser of any
offer, solicitation or request for information received by it or its Affiliates
from any Person, including the identity of the Person making such offer,
solicitation or request and the nature and terms (if any) of any such offer,
solicitation or request. Additionally, the Stockholder shall, and shall cause
the Companies to, immediately request in writing that all materials concerning
the Companies previously provided to any Person in connection with any such
negotiations or discussions be returned to the Stockholder and the Companies as
soon as possible. Upon a breach of any provisions of this Section 4.4, the
Purchaser shall be entitled to injunctive relief, without the requirement for
the posting of or other security, since the remedy at law would be inadequate
and insufficient. In addition, the Purchaser shall be entitled to be immediately
reimbursed for all costs and expenses (including, without limitation, legal,
accounting and consultant fees and expenses, and commitment fees of prospective
lenders) incurred by or on behalf of the Purchaser in connection with the
transactions contemplated hereunder and such damages as it can show it has
sustained by reason of such breach.
4.5 Notification of Certain Matters. The Purchaser, on the one hand,
and the Stockholder, on the other hand, will each give prompt notice to the
other of (i) the occurrence, or failure to occur, of any event the occurrence or
failure of which would reasonably be likely to cause any of their respective
representations or warranties contained in this Agreement to be untrue or
incorrect at any time from the date hereof to the Closing Date, and (ii) any
failure on their respective parts or on the part of any of their respective
Affiliates, officers, directors, partners, employees, representatives or agents,
if any, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by each of them under this Agreement; provided,
however, that no such notification will alter or otherwise affect such
representations, warranties, covenants, conditions or agreements.
4.6 Non-Competition, Non-Solicitation and Non-Disclosure.
(a) As part of the consideration for the transactions
contemplated by this Agreement, the Stockholder covenants and agrees
that, for a period of four (4) years following the Closing Date, it
will not, either directly or indirectly, alone or as a partner, joint
venturer, officer, director, employee, lender, consultant, agent,
independent contractor, stockholder or otherwise, or permit any
business organization directly or indirectly controlled by it or any of
its Affiliates to, engage in the Restricted Business (as defined in
Section 9.16 hereof) anywhere in the United States or any foreign
country. In order to avoid any doubt, uncertainty or ambiguity,
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this Section 4.6(a) shall apply to prohibit the Stockholder and its
Affiliates from engaging in any business or activity included in the
definition of "Restricted Business" in which the Stockholder or its
Affiliates were engaged at any time during the two (2) year period
preceding the Closing Date. Notwithstanding the foregoing, this Section
4.6(a) shall not preclude any Person that acquires (i) fifty percent
(50%) or more of the stock of the Stockholder or any of its
Subsidiaries or (ii) all or substantially all of the assets of the
Stockholder or any of its Subsidiaries, from engaging in the Restricted
Business if such Person actively engaged in the Restricted Business
prior to the date such Person first discusses any such acquisition with
the Stockholder or any of its Subsidiaries; provided, however, that the
Stockholder and its direct and indirect Subsidiaries shall continue to
be bound by all of the restrictions contained in this Section 4.6. The
passive ownership by the Stockholder or its Affiliates, of not more
than three percent (3%) of the shares of capital stock of any
corporation having a class of equity securities actively traded on a
national securities exchange or in the over-the-counter market shall
not be deemed, in and of itself, to violate the prohibitions of this
Section 4.6(a).
(b) Except for the right of the Stockholder to solicit and
attempt to hire the individuals listed on Schedule 4.6 hereto prior to
the Closing, the Stockholder covenants and agrees that, for a period of
four (4) years following the Closing Date, it will not, either directly
or indirectly, employ, hire, engage or be associated with, or attempt
to employ, hire, engage or be associated with, or permit any business
organization directly or indirectly controlled by the Stockholder or
any of its Affiliates to employ, hire, engage or be associated with, or
attempt to employ, hire, engage or be associated with, any person who
was employed by, or acted as a sales representative for, the Companies
during the twelve (12) months prior to the Closing Date or at any time
after the Closing Date, without the prior written consent of the
Purchaser (which consent may be granted or withheld in the sole
discretion of the Purchaser).
(c) The Stockholder covenants and agrees that it will not, at
any time following the Closing Date, disclose, directly or indirectly,
or make available to any Person, or in any manner use for its own
benefit, any confidential information or trade secrets relating to the
businesses, operations, assets or properties of the Purchaser, the
Companies or their Subsidiaries (collectively, the "Group"), including,
without limitation, business strategies, operating plans, acquisition
strategies (including the identities of (and any other information
concerning) possible acquisition candidates), financial information
(pro forma or otherwise), market analysis, acquisition terms and
conditions, personnel information, product information, sources of
leads and methods of obtaining new business, know-how, customer lists
and relationships, vendor lists, underwriting strategies and methods or
any other methods of doing and operating the business of the Group, or
other non-public proprietary and confidential information relating to
the Group ("Confidential Information"), except to the extent that such
information (i) is obtained from a third party whom the Stockholder
does not have any reason to believe is bound by a duty of
confidentiality, (ii) relates to information that is or becomes
generally known to the public other than as a result of a breach
thereof or (iii) is required to be disclosed by law (including without
limitation any federal regulations) or judicial or administrative
process (in which case prior to such disclosure the disclosing party
shall promptly provide prior written notice of such required disclosure
to the Purchaser in order to afford the Purchaser the opportunity to
seek an appropriate protective order preventing such disclosure).
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(d) The Stockholder acknowledges and agrees that a breach by
it or its Affiliates of any of the provisions of this Section 4.6 will
cause irreparable harm and damage to the Purchaser and the Companies
and that, in the event of such breach, the Purchaser shall have, in
addition to any and all remedies at law, the right to an injunction,
specific performance or other equitable relief to prevent the violation
of the obligations of the Stockholder or its Affiliates hereunder
without the necessity of proving such irreparable harm or damage or the
inadequacy of remedies at law and without the necessity of posting any
bond.
(e) The Stockholder acknowledges and agrees that each
provision of this Section 4.6 shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall in
no way impair the enforceability of any of the other clauses herein.
Furthermore, if one or more of the provisions contained in this Section
4.6 shall for any reason be held to be excessively broad as to
geographical scope, duration, activity or otherwise so as to be
unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting and reducing it or them,
as the case may be, so as to be enforceable to the maximum extent
compatible with the applicable law as it shall then appear.
4.7 Best Efforts. Upon the terms and subject to the conditions hereof,
each of the parties hereto agrees to use its best efforts promptly to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement no later than the thirtieth (30th) day after the
date of this Agreement and will use its best efforts to obtain all waivers,
Permits, consents, approvals and releases and to effect all registrations,
filings, assignments and notices with or to third parties or governmental or
public bodies or authorities which, in the reasonable opinion of any party
hereto, are necessary in connection with the transactions contemplated by this
Agreement. An undertaking of a Person under this Agreement to use such Person's
best efforts shall not require such Person to incur unreasonable expenses or
obligations in order to satisfy such undertaking. If at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each party hereto and its proper officers, directors or other
representatives will promptly take such action.
4.8 Use of Names. From and after the Closing, neither the Stockholder
nor any of its Affiliates shall have any right to use (i) the trade name or
corporate name "HealthPlan", "HealthPlan Services", "American Benefit Plan
Administrators", "Southern Nevada Administrators", Xxxxxxxxxx Management",
"HPS", "ABPA", "SNA", "MMC" or any variant thereof alone or in conjunction with
other words or phrases or (ii) the domain name "xxxxxxxxxx.xxx", all of which
are, and as of the Closing shall be, owned by the Companies. As promptly as
practicable after the Closing, the Stockholder shall take such steps as may be
necessary to change its and its Subsidiaries' trade names and corporate names to
delete the words "HealthPlan Services" therefrom.
4.9 Xxxx-Xxxxx-Xxxxxx Act. The parties hereto agree to promptly make
all filings, if any, required under the Xxxx-Xxxxx Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), including without limitation responses
to requests for additional information.
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4.10 Casualty. Loss or damage to the assets or properties of the
Companies as a result of fire or casualty between the date of this Agreement and
the Closing shall be at the risk of the Stockholder. Any material loss or damage
to the assets or properties of the Companies as a result of fire or other
casualty, shall, in all events, entitle the Purchaser either: (a) to terminate
this Agreement at which time this Agreement shall be null, and, except as
otherwise set forth in this Agreement, neither party shall have any further
rights, duties or obligations hereunder; or (b) subject to any prior rights the
Stockholder's lenders may have to such proceeds, to require the completion of
the Closing, in which event the Purchaser, at Closing, shall be entitled to the
proceeds of any insurance paid or payable to the Stockholder or the Companies on
account of any such loss or damage and to an assignment of all proceeds and
claims to proceeds of any such insurance policies. The Stockholder shall execute
and deliver to the Purchaser any and all documents or instruments required
before or after the Closing to transfer all interests in such claims or proceeds
to the Purchaser or to whomever the Purchaser shall direct. The Stockholder
shall not agree to any compensation or proceeds or compromise any claim without
the Purchaser's prior written approval.
4.11 Tax Return Preparation and Examinations.
(a) Returns for Period Through the Closing Date. The
Stockholder shall include the income of the Companies (including,
without limitation, any deferred income recognized by virtue of
Treasury Regulation ss. 1.1502-13 and Treasury Regulation ss.
1.1502-13T and any excess loss accounts taken into income under
Treasury Regulation ss. 1.1502-19) on the Stockholder's consolidated
federal income Tax Return for all periods through the Closing Date
(including, without limitation, all Pre-Closing Periods) and pay all
federal, state, local and foreign Taxes attributable thereto. The
Companies shall furnish Tax information to the Stockholder for
inclusion in the Stockholder's federal, state, local and foreign income
Tax Returns for the period beginning on January 1, 2001 and ending on
the Closing Date. The Stockholder shall allow the Purchaser not less
than thirty (30) days to review and comment upon such federal, state,
local and foreign income Tax Returns (including any amended federal,
state, local and foreign income Tax Returns) prior to the filing
thereof to the extent that such federal, state, local and foreign
income Tax Returns relate to the Companies. The Stockholder shall take
no position on such federal, state, local and foreign income Tax
Returns that could adversely affect the Companies for any period (or
part thereof) before or after the Closing Date. The income of the
Companies shall be apportioned to the period up to and including the
Closing Date and the period after the Closing Date by a method mutually
agreed upon by the Stockholder and the Purchaser which reasonably
allocates the income of the Companies to such periods.
(b) Transfer Taxes. The Stockholder and the Purchaser shall
cooperate in the preparation, execution and filing of all Tax Returns,
questionnaires, applications or other documents regarding any real
property transfer or gains, sales, use, transfer and stamp taxes and
any transfer, recording, registration and other fees and any similar
Taxes ("Transfer Taxes") that become payable in connection with the
sale of the Company Stock. All Transfer Taxes shall be paid by the
Stockholder when due.
(c) Tax Audits and Notices of Deficiencies. The Stockholder
shall consult with the Purchaser with respect to any Tax audits or
notices of deficiency relating to the Companies. The Stockholder shall
not settle, or take any other action in respect of, any such
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matter in a manner which could adversely affect the Companies after the
Closing Date without the prior written consent of the Purchaser, which
consent may be granted or withheld in the sole discretion of the
Purchaser.
(d) Section 338(h)(10) Election. The Stockholder and the
Purchaser shall join in making a timely, effective and irrevocable
election under Section 338(h)(10) of the Code (and any corresponding
elections under applicable state, local or foreign Tax law)
(collectively a "Section 338(h)(10) Election") with respect to the
purchase and sale of the Company Stock. The Stockholder and the
Purchaser shall jointly prepare the Section 338 Forms (as defined in
this Section 4.11) to the extent such preparation has not been
completed prior to the Closing and shall timely make any required
filings and take any and all other actions reasonably necessary to
effect the Section 338(h)(10) Election. The Stockholder shall include
in its consolidated federal income Tax Return for its taxable period
ending on the Closing Date any Section 338 Forms that are required to
be so included on account of the Section 338(h)(10) Election. The
Stockholder and the Purchaser shall cooperate fully, and in good faith,
with each other in making the Section 338(h)(10) Election and in
allocating the purchase price among the Companies' assets in accordance
with Section 338 of the Code (and Schedule 4.11). The Stockholder and
the Purchaser agree that the allocation set forth in Schedule 4.11
represents a good faith determination of such allocation, and the
parties shall report, act and file their respective Tax Returns, in all
respects and for all purposes consistent with such determination. The
Stockholder shall pay any and all federal, state, local and foreign
Taxes resulting from or otherwise attributable to the Section
338(h)(10) Election. "Section 338 Forms" means all returns, documents,
statements, and other forms that are required to be submitted to the
Internal Revenue Service by a selling consolidated return group or a
purchasing corporation in connection with a Section 338(h)(10)
Election, including without limitation IRS Form 8023 (together with any
schedules or attachments thereto) and any other forms that are required
pursuant to the Treasury Regulations and any analogous forms that are
required to be filed for state, local or foreign Tax purposes.
(e) Cooperation in Tax Matters. The Stockholder and the
Purchaser agree to cooperate with and to provide each other with all
information for periods prior to or after the Closing Date that is
relevant in preparing the Tax Returns pertaining to the Companies. The
Stockholder, on the one hand, and the Purchaser, on the other, agree to
furnish or cause to be furnished to each other upon request, as
promptly as practicable, such information (including access to books or
records and Tax Returns (or portions thereof)) pertinent to the
Companies, and shall preserve all such information, records and
documents in accordance with its generally applicable record retention
policies, but in no event for less than seven (7) years.
4.12 Post-Closing Access to Information and Records.
(a) Access to Stockholder Records. After the Closing Date, the
Stockholder agrees to provide the Purchaser with full and complete
access, during normal business hours upon reasonable notice, to any and
all books and records of the Stockholder relating to the Companies
necessary to permit the Purchaser or the Companies to file their
respective Tax Returns or to accomplish any other legitimate purpose.
The Stockholder shall also provide the Purchaser reasonable access to
the Stockholder's employees and other representatives to interpret or
explain such books and records, and to assist in defending or pursuing
any action affecting the
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Companies resulting from their respective operations prior to the
Closing Date. The Stockholder agrees to respond timely (but in all
events within fifteen (15) days of any reasonable written request made
by the Purchaser) to all inquiries and requests for documents and
information made by the Purchaser with respect to such matters.
Notwithstanding any provision of this Agreement to the contrary, this
covenant shall survive the Closing Date without limitation as to time.
(b) Access to Company Records. After the Closing Date, the
Purchaser agrees to provide the Stockholder with full and complete
access, during normal business hours upon reasonable notice, to any and
all books and records of the Companies necessary to permit the
Stockholder to file its Tax Returns or to accomplish any other
legitimate purpose. The Purchaser shall also provide the Stockholder
reasonable access to the employees and other representatives of the
Companies to interpret or explain such books and records, and to assist
in defending or pursuing any action resulting from the operation of the
businesses of the Companies prior to the Closing Date; provided that
the Stockholder shall promptly (but in no event later than ten (10)
days after the date of any invoice therefor) reimburse the Purchaser or
the Companies, as the case may be, or pay directly (if possible) all
out-of-pocket expenses incurred by the Purchaser and the Companies
attributable thereto. The Purchaser agrees to respond timely (but in
all events within fifteen (15) days of any reasonable written request
made by the Stockholder) to all inquiries and requests for documents
and information made by the Stockholder with respect to such matters.
Notwithstanding any provision of this Agreement, this covenant shall
survive the Closing Date without limitation as to time.
4.13 Actions and Claims.
(a) Subject in all respects to the provisions of Article VI
hereof, following the Closing, the Purchaser and the Companies shall
have responsibility for and liability with respect to, all third-party
claims, actions, suits and proceedings ("Actions") relating to the
Companies, regardless of the type of claim or the date on which the
claim arose or was brought to the attention of the Purchaser and the
Companies, except for the following Actions, which shall be assumed by
the Stockholder following the Closing, and in respect of which the
Stockholder shall have all responsibility and liability and the right
to any recoveries which may occur as a result thereof:
(i) workers' compensation claims for which the
occurrence took place on or before the Closing Date;
(ii) claims based on occurrences on or before the
Closing Date for which the Stockholder has available to it
coverage under its insurance policies and will have the right
to receive reimbursement from such insurance carrier for such
claims under the terms of such policies;
(iii) all Proceedings listed on Schedule 3.11 hereto,
except for that certain litigation between HPSI and its former
employee, Xxx Xxxxx (the "Xxxxx Litigation");
(iv) all liabilities, debts and other obligations not
reflected on the Latest Balance Sheets or the Closing Working
Capital Deficit Statement, regardless of whether such
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liabilities, debts or other obligations are Contingent
Liabilities (as defined in Section 9.16 hereof);
(v) all severance and similar obligations owed by the
Companies to those employees terminated prior to the Closing
(including, without limitation, those individuals listed in
Schedule 3.14 hereto), and up to a maximum aggregate of
$250,000 of severance and similar obligations owed by the
Companies to those employees who are terminated by the
Companies within sixty (60) days after the Closing Date, a
list of whom shall be delivered to the Stockholder no later
than sixty (60) days after the Closing Date; provided that
such severance and similar obligations to be assumed and paid
by the Stockholder for terminations occurring after the
Closing Date shall not include any obligation associated with
any failure to give required WARN Act notices or to otherwise
comply with the WARN Act or similar state statutes with regard
to terminations occurring after the Closing Date;
(vi) all liabilities, debts and other obligations in
respect of (a) the R.E. Xxxxxxxxxx, Inc. Deferred Compensation
Agreement by and between R.E. Xxxxxxxxxx, Inc. and Xxxxxx X.
Xxxxxx, dated as of May 15, 1987, and amended as of November
8, 1994 and June 26, 1996; and (b) the Deferred Compensation
Plan of R. E. Xxxxxxxxxx, Inc. by and between R.E. Xxxxxxxxxx,
Inc. and Xxxxxx X. Xxxxxx, dated as of January 1, 1988, and
amended as of November 8, 1994 and June 26, 1996, copies of
which are attached to Schedule 4.13 hereto;
(vii) all liabilities, debts and other obligations in
respect of (a) the Asset Sale Agreement by and among Plan
Services, Inc., CG Insurance Services, Inc. and Xxxxx X.
Xxxxxx, dated as of May 27, 1993, and amended as of May 25,
1994; and (b) the Convertible Promissory Notes between the
Stockholder and Centra Benefit Services, Inc., dated as of
June 16, 1998, copies of which are attached to Schedule 4.13
hereto; and
(viii) those matters listed on Schedule 4.13 hereto
(which Schedule may be supplemented upon the mutual agreement
of the Purchaser and the Stockholder at any time prior to the
Closing).
(b) At the Closing, the Stockholder shall execute and deliver
to the Purchaser an Assignment and Assumption Agreement in the form of
Exhibit B hereto pursuant to which it shall assume those Actions
referenced in clauses (i) through (viii) of Section 4.13 (a). The
parties acknowledge and agree that some or all of such Actions that
shall be assumed by the Stockholder may not be validly or legally
transferable from the Companies to the Stockholder. Subject to the
terms of Article VI, defense of all such Actions shall nonetheless be
irrevocably undertaken by the Stockholder after the Closing Date, all
at the sole cost and expense of the Stockholder, including all costs of
judgment or settlement. Subject in all respects to the provisions of
Article VI hereof, the Companies shall have no responsibility to
defend, indemnify, incur costs or expenses or otherwise participate in
any such Actions; provided, however, the Companies shall be required to
provide reasonable assistance and cooperation to the Stockholder in the
defense thereof by making personnel of the Companies available
(provided that such assistance and cooperation does not unreasonably
interfere with such employees' ability to fulfill their normal work
responsibilities) and to provide reasonable access to the books and
records of the Companies upon reasonable prior written notice. In the
event that the Stockholder fails to
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undertake and diligently defend any such Action, the Purchaser shall be
entitled to do so in accordance with the indemnification procedures and
remedies set forth in this Agreement.
(c) Certain of the Actions being assigned to, and assumed by,
the Stockholder involve disputes over leased or owned equipment and in
order for Stockholder to properly defend or prosecute such Actions HPSI
must retain the equipment until the Action is resolved. As an
accommodation to the Stockholder, the Purchaser agrees that HPSI shall
retain the equipment listed on Schedule 4.13(c) hereto (the
"Equipment") until a date designated by the Stockholder (but in no
event later than twelve months after the Closing), at which time, HPSI
shall dispose of the Equipment in accordance with the reasonable
written request of the Stockholder and the Stockholder shall reimburse
HPSI for all costs incurred by HPSI in connection with such
disposition. Notwithstanding the foregoing, if HPSI determines that it
no longer has sufficient space to store the Equipment, then it may
dispose of the Equipment, at the Stockholder's sole cost, provided that
HPSI (i) gives the Stockholder ten (10) days prior written notice of
such disposition, and (ii) complies with the Stockholder's reasonable
requests regarding the manner in which HPSI disposes of the Equipment.
The Stockholder shall reimburse HPSI for all costs incurred by HPSI in
connection with such disposition. The Stockholder hereby agrees that
(i) the Purchaser and the Companies shall not be responsible for any
liabilities, damages, losses, obligations, costs or expenses
attributable to the retention of such equipment by the Purchaser and
the Companies (collectively the "Equipment Liabilities"), except that
HPSI agrees that the Stockholder shall not be liable to HPSI or any of
the Companies for any rent or storage fees in connection with the
storage of the Equipment and (ii) the Equipment Liabilities shall be
the sole responsibility of the Stockholder.
(d) The Companies shall retain the right to control the Xxxxx
Litigation, including the discretion to settle, abandon or prosecute
such litigation. Any recoveries from the Xxxxx Litigation shall be used
first to pay or reimburse the Companies for the cost of the Xxxxx
Litigation and any payments required to be made to Xxxxx and the
balance shall be paid 50% to the Purchaser and 50% to the Stockholder.
(e) The Stockholder shall be entitled to all rights of
indemnity or reimbursement from third parties, set-off and counterclaim
which the Companies my have for any matter which the Stockholder
assumes liability hereunder or indemnifies Purchaser for under the
provisions of Article VI.
4.14 Financing. Prior to the Closing Date, the Purchaser shall use
commercially reasonable efforts to obtain a commitment to finance (i) the
transactions contemplated hereby and (ii) the working capital requirements of
the Companies, on terms and conditions satisfactory to the Purchaser in its sole
discretion, and the Stockholder shall cooperate with, and assist, the Purchaser
in such efforts in any manner reasonably requested by the Purchaser.
4.15 Tampa Facility. The Purchaser shall use commercially reasonable
efforts to cause the landlords to release the Stockholder from any guaranty of
(i) the existing lease for the Stockholder's offices located at 0000 Xxxxxxxx
Xxxx, Xxxxx, Xxxxxxx 00000, provided that the Stockholder agrees to sublease
from the Purchaser, on mutually satisfactory terms and conditions, office space
for approximately thirty (30) employees for a period of not more than
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one hundred twenty (120) days after the Closing Date and (ii) all other existing
leases for office space used, as of the date of this Agreement, by the Companies
in the conduct of their respective businesses.
4.16 Other Agreements.
(a) Systems. Prior to the Closing, the Stockholder shall
transfer and assign to HPSI, or shall cause others to transfer and
assign to HPSI, all right, title and interest, free and clear of all
Liens, in and to all accounting systems (including, without limitation,
the system commonly referred to as "xxxxxx"), payroll systems and
assets which are part of the Data Center but are not owned by the
Companies as of the date of this Agreement.
(b) Trewit Payment. After the Closing, the Stockholder shall
pay the Purchaser a monthly fee of Twenty-Five Thousand Dollars
($25,000.00), payable on the last day of each month commencing on the
last day of the month in which the Closing occurs and ending on
December 31, 2001; provided, however, that such monthly fee shall no
longer be payable on and after any date on which the Companies receive
Data Center revenues from any new customer in an amount equal to One
Million Dollars ($1,000,000.00), on an annualized basis.
(c) Transferred Assets. Prior to the Closing, the Companies
shall assign or otherwise transfer the Transferred Assets (as defined
in Section 9.16) to the Stockholder.
(d) Bonds, Cash Collateral Accounts, Etc. At or prior to the
Closing, the Purchaser shall (i) replace those bonds and the letter of
credit issued in favor of NEF which are listed on Schedule 4.16(d) and
(ii) provide reasonable assistance to the Stockholder in its efforts to
cause those bonds, cash collateral accounts and letters of credit
listed on Schedule 4.16(d) to be released prior to the Closing and any
cash deposits related thereto to be returned to the Stockholder. It is
understood that Purchaser will not be required by this Agreement to put
up any cash collateral in order to secure the above referenced bonds.
(e) Trewit Agreements. From and after the Closing, HPSI shall
perform the obligations of HPSI and the Stockholder under (i) the
Temporary Services Agreement between the Stockholder and Trewit, Inc.
relating to the Charleston, West Virginia office of HPSI, a copy of
which agreement is attached hereto as Schedule 4.16(e) (ii) under the
Transition Services Agreement between HPSI and Xxxxxxxxxx Benefit
Services, Inc. dated October 29, 2000; and (iii) the Data Services
Agreement between HPSI and Xxxxxxxxxx Benefit Services, Inc. dated
October 29, 2000.
(f) Lenders' Approval. The Stockholder shall use its best
efforts to obtain not later than the Closing the consent of its lenders
to the consummation of the transactions contemplated hereby and the
release of its Liens on the assets of the Companies, the HPSI Stock and
the stock of MMC, ABPA, SNA, PHI, GBAIA, HPSIA Ill. and HPSIA.
(g) Assignment of Stock. Prior to the Closing, the Stockholder
shall cause HPSI to assign or otherwise transfer to the Stockholder all
of the issued and outstanding shares of capital stock of HPS of
Delaware LLC, HPS of Louisiana, Inc., Retail Card LLC and HPS of
Missouri, Inc. and shall change the names of such entities to delete
the letters "HPS" therefrom.
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(h) COBRA Coverage. Effective as of Closing, the Companies
shall retain responsibility for providing health care continuation
coverage under Code Section 4980B and ERISA Section 601-608 ("COBRA")
for all individuals who are eligible, as of the Closing, for COBRA as a
result of their employment with one of the Companies. The Stockholder
shall reimburse the Purchaser for the administrative cost of providing
such coverage, in accordance with the terms of the Transition Services
Agreement, as hereinafter defined.
(i) Vesting for Certain Employees. As of Closing, each "Target
Participant" (which shall mean each individual listed on Schedule 4.16
(i) who is a participant in and who has an account balance or balances
in the HealthPlan Services, Inc. Retirement Savings 401(k) Plan) shall
become fully vested in such Target Participant's account balance or
balances in the HealthPlan Services, Inc. Retirement Savings 401(k)
Plan. The Stockholder agrees to establish a defined contribution plan
that is qualified under Code Section 401(a) ("Stockholder Plan") as
soon as administratively feasible after Closing. As soon as
administratively feasible after the establishment of the Stockholder
Plan, Purchaser agrees to cause the trustee of the HealthPlan Services,
Inc. Retirement Savings 401(k) Plan to transfer to the trustee of the
Stockholder Plan, the account balance or balances of each Target
Participant, including an in-kind transfer of any outstanding plan
loans with respect to each Target Participant. The value of the
transferred account balances shall be determined as of the date the
distribution request is processed by the trustee of the HealthPlan
Services, Inc. Retirement Savings 401(k) Plan or its designee.
(j) Ceres Group Claims. Notwithstanding anything contained in
this Agreement to the contrary, the first $150,000 of any amounts
payable by the Companies to the Ceres Group, Inc. ("Ceres") as a result
of any claims of Ceres arising out of HPSI's business relationship with
Ceres prior to the Closing shall be borne equally by the Purchaser and
the Stockholder. In addition, the Stockholder hereby agrees to
indemnify, defend and hold the Companies harmless from and against all
amounts payable by the Companies to Ceres in excess of $150,000 as a
result of any such claims subject to the notification and defense
provisions of Section 7.4 and the cap on maximum liability contained in
Section 7.3(a).
ARTICLE V
CONDITIONS PRECEDENT TO THE TRANSACTION
---------------------------------------
5.1 Conditions Precedent to the Purchaser's Obligation to Close.
Notwithstanding any other provision herein, the obligations of the Purchaser to
consummate the transactions contemplated hereunder are, at the option of the
Purchaser, subject to the satisfaction of each of the conditions set forth
below:
(a) Agreements and Conditions. On or before the Closing Date,
the Stockholder shall have complied with and duly performed all
agreements and conditions to be complied with or performed by it on or
before the Closing Date pursuant to or in connection with this
Agreement.
(b) Representations and Warranties. The representations and
warranties of the Stockholder contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with
the same force and effect as though such representations and
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warranties had been restated and made on and as of the Closing Date,
except for those representations and warranties which speak as of a
specified date.
(c) Opinion of Counsel. The Purchaser shall have received an
opinion of Fowler, White, Gillen, Boggs, Xxxxxxxxx & Banker, P.A.,
counsel for the Stockholder, dated as of the Closing Date, in form and
substance satisfactory to the Purchaser.
(d) No Legal Proceedings. No order shall have been entered
against the Stockholder or the Purchaser restraining or prohibiting
consummation of the transactions contemplated hereby.
(e) Consents. The Stockholder shall have obtained the consent
of each party to all contracts, leases and agreements, and all
governmental consents and approvals which are required in order to
consummate the transactions contemplated by this Agreement as set forth
on Schedule 3.2 hereto and any consents required under the HSR Act.
(f) Stockholder's Certificate. The Purchaser shall have
received a certificate dated the Closing Date and executed by the
Stockholder, certifying that the representations and warranties made by
the Stockholder in this Agreement are true and correct in all material
respects at and as of the Closing Date (except for such representations
and warranties which speak as of a specified date) and that it has
fulfilled all conditions to the Closing provided for in this Agreement
to be fulfilled by it.
(g) Certificate of Secretary. The Purchaser shall have
received a certificate of the Secretary of the Stockholder, setting
forth (i) a copy of the resolutions adopted by the board of directors
and the shareholders (if required) of the Stockholder approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, (ii) a copy of the certificates (or
articles) of incorporation of the Stockholder and the Companies
certified by the Secretary of State or other equivalent authority in
its jurisdiction of formation as of a date no more than ten (10) days
prior to the Closing Date, (iii) a copy of the by-laws (or other
similar document) of the Stockholder and the Companies, together with a
signature and incumbency certificate, and (iv) a certificate of good
standing from the Secretary of State or other equivalent authority in
its jurisdiction of incorporation and every state where the Stockholder
and the Companies are authorized to do business, as of a date no more
than ten (10) days prior to the Closing Date.
(h) Indebtedness. All Indebtedness of the Companies shall have
been assumed by the Stockholder and the Companies shall have been fully
released therefrom, in each case in form and substance reasonably
satisfactory to the Purchaser.
(i) No Material Adverse Change. Except as set forth on
Schedule 5.1(i) hereto, there shall not have occurred a material
adverse change in the financial condition, results of operations,
assets, properties, businesses, prospects or material agreements of the
Companies since the Latest Balance Sheet Date which, in the Purchaser's
judgment, would make it inadvisable to proceed with the Closing. The
Purchaser shall not have discovered any fact, event or condition which,
in the Purchaser's good faith judgment, has or is likely in the
immediate future to have a Material Adverse Effect on the Companies.
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(j) Employment Agreements. Each of those key employees
identified by the Purchaser prior to the Closing shall have entered
into an employment agreement with the Purchaser, in form and substance
satisfactory to the Purchaser (the "Employment Agreements").
(k) Third Party Real Estate Documents. To the extent required
by the Purchaser's lenders, the Stockholder shall have delivered to the
Purchaser original (i) non-disturbance and attornment agreements from
the holder of each mortgage or deed of trust encumbering any Leased
Real Property and (ii) estoppel certificates, and landlord waivers and
access agreements, from each landlord of any Leased Real Property, each
of which documents shall be in form and substance reasonably
satisfactory to the Purchaser.
(l) Lender Approval and Lien Releases. The Stockholder shall
have delivered to the Purchaser (i) written evidence that the
Stockholder's lenders have approved the terms of this Agreement and the
consummation of the transactions contemplated hereby and (ii) releases
of all Liens on or otherwise affecting the assets or properties of the
Companies, in each case in form and substance reasonably satisfactory
to the Purchaser.
(m) Release. At the Closing, the Stockholder shall have
delivered to the Purchaser an instrument dated the Closing Date
releasing the Companies from any and all claims of the Stockholder
against the Companies arising prior to the Closing.
(n) Financial Certificate. At the Closing, the Purchaser shall
have received a certificate, dated as of the Closing Date, signed on
behalf of the Stockholder, setting forth the Estimated Closing Balance
Sheet and the Estimated Closing Working Capital Deficit of the
Companies as of the third day before the Closing Date.
(o) Stock Powers. The Stockholder shall have delivered to the
Purchaser duly executed original stock powers and all other documents
required to consummate the transactions contemplated hereby, and the
Stockholder shall have delivered to the Purchaser (i) original
certificates representing the HPSI Stock and (ii) original certificates
issued to HPSI representing all of the issued and outstanding shares of
capital stock of MMC, ABPA, SNA, PHI, GBAIA, HPSIA Ill. and HPSIA.
(p) Transition Services Agreement. The Stockholder, the
Purchaser and the Companies shall have executed and entered into a
Transition Services Agreement, in form and substance satisfactory to
the Purchaser (the "Transition Services Agreement").
(q) Lender's Financing of the Transaction. The Purchaser shall
have obtained financing to consummate the transactions contemplated
hereby and to operate the business conducted by the Companies following
the closing in an amount of up to $20,000,000 and upon terms and
conditions which are satisfactory to the Purchaser in its sole
discretion.
(r) Promissory Note. The Stockholder shall have executed and
delivered to the Purchaser the Promissory Note.
(s) Due Diligence Investigation. The Purchaser shall have
completed its due diligence review of the business of the Companies and
shall not have delivered to the
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Stockholder written notice (a "Due Diligence Termination Notice") that
it desires to terminate this Agreement because it is not satisfied, in
its sole discretion, with the results thereof.
Assignment and Assumption Agreement. The Stockholder shall have executed and
delivered to the Purchaser an Assignment and Assumption Agreement, in form and
substance satisfactory to the Purchaser (the "Assignment and Assumption
Agreement").
ARTICLE VI
CONDITIONS PRECEDENT TO THE TRANSACTION
---------------------------------------
6.1 Conditions Precedent to the Stockholder's Obligation to Close.
Notwithstanding any other provision herein, the obligations of the Stockholder
to consummate the transactions contemplated hereunder are, at the option of the
Stockholder, subject to the satisfaction of each of the conditions set forth
below:
(a) Agreements and Conditions. On or before the Closing Date,
the Purchaser shall have complied with and duly performed all
agreements and conditions to be complied with or performed by it on or
before the Closing Date pursuant to or in connection with this
Agreement.
(b) Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with
the same force and effect as though such representations and warranties
had been restated and made on and as of the Closing Date, except for
those representations and warranties which speak as of a specified
date.
(c) No Legal Proceedings. No order shall have been entered
against the Stockholder or the Purchaser restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) Purchaser's Certificate. The Stockholder shall have
received a certificate dated the Closing Date and executed by the
Purchaser, certifying that the representations and warranties made by
the Purchaser in this Agreement are true and correct in all material
respects at and as of the Closing Date (except for such representations
and warranties which speak as of a specified date) and that it has
fulfilled all conditions to the Closing provided for in this Agreement
to be fulfilled by it.
(e) Certificate of Secretary. The Stockholder shall have
received a certificate of the Secretary of the Purchaser, setting forth
(i) a copy of the resolutions adopted by the board of directors and the
shareholders (if required) of the Purchaser approving the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, (ii) a copy of the certificate (or articles) of
incorporation of the Purchaser certified by the Secretary of State or
other equivalent authority in its jurisdiction of formation as of a
date no more than ten (10) days prior to the Closing Date, (iii) a copy
of the by-laws (or other similar document) of the Purchaser, together
with a signature and incumbency certificate, and (iv) a certificate of
good standing from the Secretary of State or other equivalent authority
in the Purchaser's jurisdiction of incorporation.
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(f) Release. The Stockholder shall have received an instrument
dated the Closing Date executed by the Persons listed on Schedule
6.1(f) hereto which releases the Stockholder and its Affiliates from
any premiums payable to such Persons as of the Closing Date. In
addition, the Purchaser and the Companies shall have delivered to the
Stockholder a release executed by them which releases the Stockholder
from the claims they may have against the Stockholder as a result of
the premiums payable to such Persons, other than any claims arising
under, pursuant to or in accordance with the terms of this Agreement or
any agreement, instrument or document contemplated hereby.
(g) Lender Approval. The Stockholder shall have received the
approval of its lenders to consummate the transactions contemplated
hereby.
(h) Letters of Credit and Bonds. All letters of credit and
bonds listed on Schedule 4.16(d) hereto shall have been replaced and
arrangements satisfactory to Stockholder for the return of all cash
collateral related thereto shall have been made.
(i) Transition Services Agreement. The Stockholder, the
Purchaser and the Companies shall have executed and entered into the
Transition Services Agreement.
(j) Assignment and Assumption Agreement. The Purchaser shall
have executed and delivered to the Stockholder the Assignment and
Assumption Agreement, in a form satisfactory to the Stockholder.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 By the Stockholder.
(a) The Stockholder agrees to indemnify, defend and hold
harmless the Purchaser from and against (i) any and all liabilities,
debts, obligations, losses, damages, deficiencies, claims, actions,
suits, proceedings, demands, assessments, Taxes, customs obligations,
penalties, interest or any other costs, orders and judgments (whether
known or unknown, fixed, contingent, accrued, absolute or otherwise),
joint or several, to which the Purchaser (and after the Closing, the
Companies) may become subject ("Losses"), arising out of (A) any
inaccuracy in any representation or warranty by the Stockholder in this
Agreement, (B) any breach or default in the performance or observance
by the Stockholder of any of the covenants or agreements which it is to
perform or observe hereunder, (C) any brokerage, finder's fee or the
like incurred as a result of the actions of the Stockholder in
connection with the transactions herein contemplated, or (D) the
Actions described in clauses (i) through (viii) of Section 4.13(a); and
(ii) any and all actual costs, fees and expenses (including, without
limitation, reasonable legal and accounting fees) related to, resulting
from or arising out of any of the foregoing.
(b) The Stockholder shall not be liable hereunder for any
claims made by the Purchaser pursuant to Section 7.1(a)(i)(A) or
7.1(a)(i)(D) to the extent it requires indemnification for items under
4.13(a)(iv) for something which is also a breach of a representation
and warranty hereof after eighteen (18) months from the Closing Date,
except that there shall be no limitation
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(other than the applicable statute of limitations) on the time within
which a claim may be made by the Purchaser (i) pursuant to Section
7.1(a)(i)(A) with respect to a breach of Section 3.2(a), Section
3.3(a), (b) and (d), the second sentence of Section 3.8(c), Section
3.13, Section 3.15, Section 3.17, Section 3.27 or Section 3.29 hereof,
(ii) pursuant to Section 7.1(a)(i)(B), (C) or (D) to the extent it
requires indemnification for items under 4.13(a)(iv) for something
which is not a breach of a representation and warranty hereof , or
Section 7.1(a)(ii) (to the extent such costs, fees and expenses relate
to any of the above extended items) or (iii) with respect to any
fraudulent act or omission by the Stockholder.
7.2 By the Purchaser.
(a) The Purchaser agrees to indemnify, defend and hold
harmless the Stockholder from and against (i) any and all liabilities,
debts, obligations, losses, damages, deficiencies, claims, actions,
suits, proceedings, demands, assessments, orders and judgments (whether
known or unknown, fixed, contingent, accrued, absolute or otherwise),
joint or several, to which the Stockholder may become subject, arising
out of (A) any inaccuracy in any representation or warranty made by the
Purchaser in this Agreement, (B) any breach or default in the
performance or observance by the Purchaser of any of the covenants or
agreements which it is to perform or observe hereunder, (C) any
brokerage, finder's fee or the like incurred as a result of the
Purchaser's actions in connection with the transactions herein
contemplated or (D) subject to the obligations of the Stockholder
pursuant to Section 1.3(b)(ii), Section 1.4(d), Section 4.13 and
Section 7.1, any liability of the Companies which is included on the
final Working Capital Deficit Statement or which was incurred by the
Companies after the Closing Date and for which the Stockholder is not
otherwise obligated to indemnify the Purchaser or the Companies
pursuant to the terms of this Agreement; and (ii) any and all actual
costs, fees and expenses (including, without limitation, reasonable
legal and accounting fees) related to, resulting from or arising out of
any of the foregoing.
(b) The Purchaser shall not be liable hereunder for any claims
made by the Companies pursuant to Section 7.2(a)(i)(A) hereof after
eighteen (18) months from the Closing Date, except that there shall be
no limitation (other than the applicable statute of limitations) on the
time within which a claim may be made by the Stockholder (i) pursuant
to Section 7.2(a)(i)(A) with respect to a breach of Section 2.2 or
Section 2.3, (ii) pursuant to Section 7.2(a)(i)(B) or (C) hereof or
Section 7.2(a)(ii) (to the extent such costs, fees and expenses relate
to any of the above extended items) or (iii) with respect to any
fraudulent act or omission by the Purchaser.
7.3 Indemnification Amounts.
(a) Notwithstanding anything to the contrary contained herein,
the Stockholder shall not have any liability under Section 7.1(a)(i)(A)
or 7.1(a)(i)(D) to the extent it requires indemnification for items
under 4.13(a)(iv) or as a result of a breach of the covenant contained
in Section 4.13(a)(iv) hereof unless at least $100,000 of damage is
suffered by the Purchaser by reason of the matters described therein,
in which event the Stockholder shall be liable for the amount of all
such damage from the first dollar, up to a maximum aggregate amount of
Forty Million Dollars ($40,000,000.00); provided however, that the
unpaid principal balance of the Promissory Note shall be reduced, on a
dollar for dollar basis, for each dollar by
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which the Purchaser's indemnification obligations hereunder exceed
Thirty Million Dollars ($30,000,000.00).
(b) Notwithstanding anything to the contrary contained herein,
the Purchaser shall not have any liability under Section 7.2(a)(i)(A)
hereof unless at least $100,000 of damage is suffered by the
Stockholder by reason of the matters described therein, in which event
the Purchaser shall be liable for the amount of all such damage.
7.4 Notice of and Defense Against Claims.
(a) (1) With respect to all Proceedings pending as of the
Closing (except for those Proceedings described in Section 7.4(a)(2)
and listed on Schedule 7.4 hereto), and promptly after receipt by an
indemnified party of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party, send notice of the commencement thereof
to the indemnifying party. The failure of the indemnified party to give
such notice shall not relieve the indemnifying party of its obligations
under this Article VI except to the extent that the indemnifying party
is actually and materially prejudiced by the failure to give such
notice. Additionally, the indemnified party shall keep the indemnifying
party reasonably informed of any matters, including correspondence
which may be reasonably expected to result in claim for
indemnification. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party in
respect of such action for any legal or other expenses subsequently
incurred by the indemnified party after the date such notice is given
to such indemnified party in connection with the defense thereof. The
indemnified party, however, shall have the right, but not the
obligation, to participate at its own cost and expense in such defense
by counsel of its own choice. In the event that the indemnifying party
and the indemnified party are named parties in or are subject to such
action and either such party determines with the advice of counsel that
there may be one or more legal defenses available to it that are
different from or additional to those available to the other party or
that a material conflict of interest between such parties may exist in
respect of such action, the indemnifying party may decline to assume
the defense on behalf of the indemnified party or the indemnified party
may retain the defense on its own behalf and in either such case the
indemnifying party shall be required to pay any legal or other
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, incurred by the indemnified party in such defense. If
the indemnifying party shall assume the defense of any such action, the
indemnified party shall cooperate with it and the indemnifying party
shall not, without the consent of the indemnified party, consent to the
entry of any judgment or enter or enter into any settlement or
compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such action or claim. Provided
the proper notice has been duly given, if the indemnifying party shall
fail promptly and diligently to assume the defense thereof, the
indemnified party may respond to, contest and defend against such
action and make in good faith any compromise or settlement with respect
thereto and recover the entire cost and expense thereof, including,
without limitation, reasonable attorneys' fees and disbursements and
all
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amounts paid or foregone as a result of such action or the settlement
of compromise thereof from the indemnifying party. The indemnification
required hereunder shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when
bills or invoices are received or loss, liability, obligation, damage
or expense is actually suffered or incurred. Except as is otherwise
provided hereinabove, no indemnifying party shall be liable for any
settlement of any claim or action pursuant to this Article VII effected
without the prior written consent of such indemnifying party; provided,
however, that if the indemnifying party does not consent to a
settlement, the indemnified party may nevertheless settle, unless the
indemnifying party agrees to indemnify, defend and hold the indemnified
party harmless against any Losses, costs, fees and expenses
attributable thereto to the indemnified party's satisfaction.
(2) Notwithstanding the assumption by the Stockholder
of all proceedings listed on Schedule 3.11 hereto in which any
of the Companies is a defendant, the Companies shall continue
to defend those Proceedings listed on Schedule 7.4 hereto, all
of which are hereby represented by the Stockholder to be
routine litigation matters arising from the conduct of the
Companies' businesses in the ordinary course. The Stockholder
shall have the right to participate in such Proceedings in the
manner specified in this Section 7.4, and nothing contained
herein shall prevent the Stockholder from assuming the defense
of any such Proceeding. In order to avoid any doubt,
uncertainty or ambiguity, the Stockholder acknowledges and
agrees that (i) it shall remain solely responsible for, and
shall pay as incurred, all Losses, costs, fees and expenses
attributable to the Proceedings set forth on Schedule 7.4
hereto and (ii) this Section 7.4(a)(2) shall not be construed
or interpreted in any manner to modify Section 4.13 hereof.
(b) Any claim on account of any loss, liability, obligation,
damage or expense referred to in Sections 7.1 or 7.2 hereof which does
not result from a third party claim shall be asserted by written notice
given by the indemnified party to the indemnifying party. The
indemnifying party shall have a period of thirty (30) days within which
to respond thereto. If the indemnifying party does not respond within
such thirty (30) day period, the indemnifying party shall be deemed to
have accepted responsibility to make payment and shall have no further
right to contest the validity of such claim. If the indemnifying party
does respond within such thirty (30) day period and rejects such claim
in whole or in part, the indemnified party shall be free to pursue such
remedies as may be available to such party under applicable law.
ARTICLE VIII
TERMINATION
-----------
8.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Closing Date by the mutual written consent of the
Purchaser and the Stockholder. This Agreement shall automatically terminate if
the Closing Date has not occurred on or before June 15, 2001 unless such date is
extended by written consent of the parties hereto.
8.2 Termination by the Purchaser. The Purchaser may terminate this
Agreement by written notice to the Stockholder at any time prior to the Closing
Date if:
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(a) a condition to the performance of the Purchaser set forth
herein shall not be fulfilled on or before the date specified for the
fulfillment thereof, unless such failure is a result of acts or
failures to act of the Purchaser;
(b) a change in the business, operations or condition of the
Companies has occurred that has a Material Adverse Effect on the
Companies or their assets, properties, prospects or financial
condition, either individually or in the aggregate;
(c) a material default under or a material breach of this
Agreement or a material misrepresentation or a material breach of any
warranty or covenant of the Stockholder set forth in this Agreement or
in any instrument delivered by the Stockholder pursuant hereto shall
have occurred and be continuing unless the same is curable and is cured
by the Stockholder on or prior to the Closing Date;
(d) the Stockholder delivers a supplemental Schedule (which
highlights all of the changes to the original Schedules attached
hereto) after execution of this Agreement but prior to Closing and the
Purchaser is not willing to accept the supplemental Schedule as a
replacement for the original Schedule and notifies the Stockholder of
the exercise of this termination right in writing within five (5) days
after the receipt of the supplemental Schedule in accordance with
Section 9.19 hereof; or
(e) on or before the Closing Date the Purchaser shall have
delivered to the Stockholder a Due Diligence Termination Notice.
8.3 Termination by the Stockholder. The Stockholder may terminate this
Agreement by written notice to the Purchaser at any time prior to the Closing
Date if:
(a) a condition to the performance of the Stockholder set
forth herein shall not be fulfilled on or before the date specified for
the fulfillment thereof, unless such failure is a result of acts or
failures to act of the Stockholder; or
(b) a material default under or a material breach of this
Agreement or a material misrepresentation or a material breach of any
warranty or covenant of the Purchaser set forth in this Agreement or in
any instrument delivered by the Purchaser pursuant hereto shall have
occurred and be continuing unless the same is curable and is cured by
the Purchaser on or prior to the Closing Date.
8.4 Effect of Termination. In the event of the termination and
abandonment hereof prior to the Closing Date pursuant to the provisions of this
Article VIII, this Agreement shall become void and have no effect, and each
party shall pay all of its own expenses incurred in connection herewith, without
any liability on the part of any party or its partners, directors, officers or
stockholders, except for the obligations between the parties described in
Section 9.2 and Section 9.3 hereof and the Purchaser shall promptly return to
the Stockholder all confidential information received in connection with the
transactions contemplated hereby; provided, however, that if this Agreement is
terminated and abandoned because either party has defaulted under or breached
this Agreement or any representation, warranty or covenant set forth in this
Agreement which breach was within their control, then the party so electing to
terminate this Agreement shall be entitled to pursue, exercise and enforce any
and all other remedies, rights,
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powers and privileges available to it at law or in equity. For purposes of this
Agreement, if the Purchaser terminates this Agreement pursuant to Section 8.2(d)
or (e) hereof, the Purchaser shall not be entitled to seek any remedy for breach
hereof.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Further Assurances. From and after the Closing Date, the parties
hereto will, without further consideration, execute and deliver such further
documents and instruments and take such other actions as may be necessary or
desirable to perfect the transactions contemplated hereby.
9.2 Publicity. Except as otherwise required by law, no publicity
release or announcement concerning this Agreement or the transactions
contemplated hereby which identifies the parties hereto other than the party
making such announcement (except for notices that may be made as a result of
requesting early termination of the Xxxx-Xxxxx-Xxxxxx waiting period, if any)
shall be made without advance approval thereof by the Stockholder and the
Purchaser.
9.3 Confidentiality. Each party hereto agrees that it will, and will
advise its officers, directors, stockholders, attorneys, accountants,
consultants and agents of the necessity to, keep confidential all non-public
information concerning the other which it has learned in connection with the
transactions contemplated by this Agreement.
9.4 No Waiver. The failure of either party hereto to enforce any
provision hereof on any occasion shall not be deemed to be a waiver of any
preceding or succeeding breach of such provision or any other provision.
9.5 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto and the documents, agreements, certificates and letters delivered
pursuant hereto constitute the entire agreement and understanding of the parties
hereto with respect to the transactions contemplated herein and therein and
supersede all previous agreements, writings, negotiations and commitments.
9.6 Governing Law; Venue and Jurisdiction. This Agreement shall be
construed, interpreted and enforced in accordance with, and shall be governed
by, the laws of the State of Delaware applicable to contracts made and to be
performed wholly therein. Each party to this Agreement: (a) agrees that any
legal action or proceeding under this Agreement shall be brought in the courts
of the State of Delaware or in the United States District Court located in the
State of Delaware; (b) irrevocably submits to the jurisdiction of such courts;
(c) agrees not to assert any claim or defense that it is not personally subject
to the jurisdiction of such courts, that any such forum is not convenient or the
venue thereof is improper, or that this Agreement or the subject matter hereof
may not be enforced in such courts; and (d) agrees to accept service of process
on it by certified or registered mail or by any other method authorized by law.
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9.7 Assignment.
(a) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assignable by any of the parties hereto
without the prior written consent of the other party, except that the
rights of the Purchaser hereunder may be assigned in whole but not in
part, without the consent of the other parties hereto, to any Person
all of the outstanding capital stock of which is owned or controlled,
directly or indirectly, by the Purchaser or to any Affiliate of the
Purchaser; provided that the assignee shall assume in writing all of
the Purchaser's obligations hereunder and the Purchaser shall remain
liable for such obligations.
(b) Notwithstanding any provision of this Agreement to the
contrary, the Stockholder hereby acknowledges and agrees that all of
the covenants, representations, warranties and indemnities of the
Stockholder under this Agreement, and under any other agreement or
instrument contemplated hereby to which the Stockholder is a party may
be collaterally assigned to any and all lenders to the Purchaser or any
of its Affiliates, any and all of whom may enforce their rights and
remedies in connection with any such collateral assignment or
realization thereon to the extent provided in the applicable security
agreements and other debt instruments or at law or in equity.
9.8 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement is not intended, and shall not be deemed, to create or
confer any right or interest for the benefit of any other Person.
9.9 Fees and Expenses. Except as otherwise required herein, the
Stockholder, on the one hand, and the Purchaser, on the other hand, shall each
bear their own direct and indirect expenses (including, without limitation, the
fees and expenses of their legal, tax and accounting counsel and advisors)
incurred in connection with the negotiation and preparation of this Agreement
and the other agreements and documents contemplated hereby and the consummation
and performance of the transactions contemplated hereby and thereby. In the
event of any Proceeding among any of the parties hereto concerning this
Agreement or the transactions contemplated hereby, the prevailing party in such
Proceeding shall be entitled to reimbursement from the party opposing such
prevailing party of all reasonable attorneys' fees and costs incurred in
connection with such Proceeding.
9.10 Amendment and Waiver. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively, and either
for a specified period of time or indefinitely), only by the written consent of
all parties hereto. Any agreement on the part of a party to any extension or
waiver shall only be valid if set forth in an instrument in writing signed on
behalf of such party. Any such waiver or extension shall not operate as waiver
or extension of any other subsequent condition or obligation.
9.11 Paragraph Headings. The paragraph headings herein have been
inserted for convenience of reference only and shall in no way be deemed to
affect the meaning or interpretation of any of the terms or provisions hereof.
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9.12 Notices. Any notice or demand hereunder to or upon any party
hereto required or permitted to be given or made shall be deemed to have been
duly given or made for all purposes if (a) in writing and sent by (i) messenger
or an overnight courier service against receipt, or (ii) certified or registered
mail, postage paid, return receipt requested, or (b) sent by telegram, telecopy,
telex or similar electronic means, provided that a written copy thereof is sent
on the same day by postage paid first-class mail, to such party at the following
address:
In the case of the Stockholder, to it at:
HealthPlan Services Corporation
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy to:
Fowler, White, Gillen, Boggs, Xxxxxxxxx & Banker, P.A.
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
In the case of the Purchaser, to it at:
HealthPlan Holdings, Inc.
c/o Sun Capital Advisors, LLC
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xx. Xxxx X. Xxxxx and Xx. Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy to:
Sun Capital Partners, Inc.
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: C. Xxxxx Xxxxx, Esq.
Fax: (000) 000-0000
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this Section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt; in the case of clause (a)(ii), five
(5) business days after such notice or demand is sent; and, in the case of
clause (b), the date of receipt if prior to 5:00 p.m. local time, otherwise the
business day next following the date such notice or demand is sent.
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9.13 Unenforceability; Severability. If any provision of this Agreement
is found to be void or unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same force and effect as though the unenforceable part had been
severed and deleted.
9.14 Brokers' Fees. The Stockholder warrants that the Purchaser shall
have no liability with respect to any brokerage fees or agents' commissions
incurred by the Stockholder or the Companies in connection with the transactions
contemplated hereby. The Purchaser warrants that the Stockholder shall not have
any liability with respect to brokerage fees or agents' commissions incurred by
the Purchaser in connection with the transactions contemplated hereby.
9.15 Specific Performance. The parties hereto agree that irreparable
damage would occur if any of the provisions of this Agreement were not performed
in accordance with their specific terms or otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which they are entitled at
law or in equity.
9.16 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(a) "Affiliate" with respect to any person, means any person
controlling, controlled by or under common control with, or the
parents, spouse, lineal descendants or beneficiaries of such person.
(b) "Capital Lease" means, with respect to any Person, any
lease of (or other agreement conveying the right to use) any real or
personal property by such Person that, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of such Person.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Contingent Liabilities" means, with respect to any
Person, those liabilities, debts and other obligations that, in
conformity with GAAP, are not required to be accounted for as a
liability, debt or other obligation on the balance sheet of such
Person.
(e) "Data Center" means (i) the hardware, software (whether
owned or leased), support services and wide area network connectivity
used to provide data processing capabilities to the Companies,
Xxxxxxxxxx Benefit Services, Erisco, the State of Oklahoma, and all of
their respective clients and (ii) the financial, accounting and payroll
applications and support hardware and software used by the Companies.
(f) "Draft Closing Balance Sheet" means the consolidated
balance sheet of the Companies as of the Closing Date which the
Purchaser shall cause to be prepared in accordance with GAAP and, to
the extent consistent with GAAP, applied on a basis consistent with
past practice and utilizing the same accounting procedures and policies
as used in preparing the Balance Sheets and the Latest Balance Sheets.
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(g) "Employee Benefits" means any and all non-public pension
or welfare benefit programs, plans, arrangements, agreements and
understandings which cover or otherwise benefit employees or former
employees of the Companies generally or specific individual employees
of the Companies and to which the any of such companies contribute or
is a party, by which it may be bound, or under which it may have
liability, including pension or retirement plans, deferred compensation
plans, bonus or incentive plans, early retirement programs, severance
pay policies, support funds, medical, dental, life and disability
insurance.
(h) "Environmental Laws" means all federal, state, local and
foreign laws and regulations relating to pollution or to protection of
human health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata),
including, without limitation, laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous
Substances, record keeping, notification and reporting requirements
respecting Hazardous Substances, or otherwise relating to manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Substances.
(i) "Estimated Closing Balance Sheet" means the good faith
estimate by the Stockholder of the Closing Balance Sheet of the
Companies, if any, which shall be set forth in a Schedule to be
delivered to the Purchaser not less than three (3) business days prior
to the Closing Date.
(j) "Estimated Closing Working Capital Deficit" means the good
faith estimate by the Stockholder of the Closing Working Capital
Deficit of the Companies, if any, which shall be set forth in a
Schedule to be delivered to the Purchaser not less than three (3)
business days prior to the Closing Date.
(k) "Hazardous Substances" means any substance regulated under
any Environmental Laws, including without limitation hazardous
substances as defined by the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., as amended
("CERCLA"), petroleum products, radioactive materials, asbestos and
polychlorinated biphenyls ("PCBs").
(l) "Indebtedness" means all current and long-term
indebtedness for borrowed money (including, without limitation, all
revolving credit facilities, term loans and notes, lines of credit, or
loans or similar financing arrangements due to banks, similar financial
institutions or other third parties issued for the account of the
Companies, letters of credit, bankers' acceptances, Capital Leases and
overdrafts) of the Companies. "Indebtedness" shall not include any
premiums payable to carriers or other accounts payable taken into
account in determining the Closing Working Capital Deficit and set
forth on the Closing Working Capital Deficit Statement
(m) "Knowledge" with respect to the Stockholder means the
knowledge of any director or executive officer of the Stockholder or
any director or executive officer of the Companies (including, without
limitation, Xxxx Xxx, Xxxx Fazer, Xxx Xxxxx and Xxx Xxxxxxx), including
in each case facts of which directors and officers, in the reasonably
prudent exercise of their duties, should be aware.
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(n) "Liens" means any mortgages, liens, claims, pledges,
charges, security interests, restrictions, prior assignments and
encumbrances of any kind whatsoever, or any conditional sale agreement
or other title retention agreement.
(o) "Material Adverse Effect" means, with respect to any
Person, any effect that is, or series of effects that are, in the
aggregate, materially adverse to the operations, business, assets,
liabilities, properties, prospects, results of operations or financial
condition of such Person.
(p) "Person" includes, but is not limited to, a natural
person, corporation, joint stock company, limited liability company,
partnership, joint venture, association, organization, trust,
government or governmental authority, agency or instrumentality, or
other entity, and any group of any of the foregoing acting in concert.
(q) "Pre-Closing Period" shall mean any Tax period ending on
or before the Closing Date and, in the case of any Tax period that
begins on or before the Closing Date and ends after the Closing Date,
the portion of such period through and including the Closing Date.
(r) "Restricted Business" means the businesses conducted by
the Companies as of the Closing Date and at any time during the two (2)
year period preceding the Closing Date (including, without limitation,
the business commonly referred to as the "Small Group Business");
provided, however, that the term "Restricted Business" shall not
include the business of performing general preferred provider
organization services including the following: provider file management
and maintenance, claim repricing, network data management, claim data
reporting, web-hosting for network clients, e-commerce/internet
services for network and payer clients, overpayment recovery, health
card/medical discount card services, network access (primary ppo and
supplemental ppo), defined contribution ppo services, HMO services,
reinsurance reporting, fraud and abuse claim investigation, workers
compensation claim repricing, subrogation, utilization
management/utilization review, pharmacy benefit management, medical
demand management, physician/facility profiling, hospital xxxx audit,
hospital xxxx review, network recruiting, network credentialing,
quality/accreditation, international healthcare, travel ppo,
catastrophic care/network services, network loading and maintenance,
x-Xxxxxxxxx.xxx, medical liability insurance, off-shore risk captive,
auto/personal injury repricing and claim management, cognos reporting,
national payer marketing, e-pricing (claimpass services) and "claim
management" (which term shall mean the management of the flow of claim
related data to or from claim adjusters and other third parties and
incidental pre-adjudication, repricing or processing activities but
shall not include claim processing, adjudication or claim payment
services which are commonly provided by a carrier, administrator or
third party administrator).
(s) "Subsidiary" means (a) any corporation of which at least a
majority in interest of the outstanding voting stock (having by the
terms thereof voting power under ordinary circumstances to elect a
majority of the directors of such corporation, irrespective of whether
or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly,
owned or controlled by the Companies, or (b) any corporate or
non-corporate entity in which the Companies, directly or indirectly, at
the date of determination thereof, has an ownership interest
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and one hundred percent (100%) of the revenue of which is included in
the consolidated financial reports of the Companies consistent with
GAAP. With respect to past events, a reference to a Subsidiary shall be
a reference to such Subsidiary and its predecessors.
(t) "Target Amount" means negative Forty Million Dollars
(-$40,000,000.00).
(u) "Tax" means any federal, state, local or foreign tax,
charge, fee, levy, deficiency or other assessment of whatever kind or
nature including, without limitation, any net income, gross income,
profits, gross receipts, excise, real or personal property, sales, ad
valorem, withholding, social security, retirement, excise, employment,
unemployment, minimum, estimated, severance, stamp, property,
occupation, environmental, windfall profits, use, service, net worth,
payroll, franchise, license, gains, customs, transfer, recording and
other tax, duty, fee, assessment or charge of any kind whatsoever,
imposed by any Tax Authority, including any liability therefor as a
transferee (including without limitation under Code Section 6901 or any
similar provision of applicable law), as a result of Treasury
Regulation ss.1.1502-6 or any similar provision of applicable law, or
as a result of any tax sharing or similar agreement, together with any
interest, penalties or additions to tax relating thereto.
(v) "Tax Authority" means any branch, office, department,
agency, instrumentality, court, tribunal, officer, employee, designee,
representative, or other Person that is acting for, on behalf or as a
part of any foreign or domestic government (or any political
subdivision thereof) that is engaged in or has any power, duty,
responsibility or obligation relating to the legislation, promulgation,
interpretation, enforcement, regulation, monitoring, supervision or
collection of or any other activity relating to any Tax or Tax Return.
(w) "Tax Proceeding" means any audit, examination, review,
assessment or reassessment, refund claim, litigation or other
administrative judicial proceeding or other similar action by a Tax
Authority relating to any Tax for which any of the Companies is (or is
asserted to be) or may be liable, the collection, payment, or
withholding of any Tax, or any Tax Return filed by or on behalf of any
of the Companies.
(x) "Tax Return" means any return, election, declaration,
report, schedule, information return, document, information, opinion,
statement, or any amendment to any of the foregoing (including without
limitation any consolidated, combined or unitary return) submitted or
required to be submitted to any Tax Authority.
(y) "Transferred Assets" means those assets of the Companies
listed on Schedule 9.16(y) hereto which shall be assigned or otherwise
transferred to the Stockholder prior to the Closing.
(z) "Treasury Regulation" means any temporary, proposed or
final Treasury regulation promulgated under the Code.
9.17 Counterparts. This Agreement may be executed in counterparts, all
of which shall be deemed to be duplicate originals.
9.18 Legal Fees. If any party to this Agreement seeks to enforce the
terms and provisions of this Agreement, then the prevailing party in such action
shall be entitled to
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recover from the non-prevailing party, all costs incurred in connection with
such action, including without limitation reasonable attorneys' fees, expenses
and costs incurred at the trial court, all appellate courts and during
negotiations.
9.19 Supplemental Schedules. If at any time subsequent to execution of
this Agreement but no less than ten (10) days prior to Closing, the Stockholder
shall determine that any Schedule delivered hereunder is incorrect or incomplete
in any material respect or facts or circumstances intervening since the delivery
of such Schedule has made such Schedule incorrect or incomplete, the Stockholder
may deliver to the Purchaser a supplemental Schedule and subject to Purchaser's
right to terminate this Agreement by notifying Purchaser in writing of the
exercise of such right within five (5) days after the receipt thereof if
Purchaser concludes, in its sole discretion, that the matters disclosed on such
supplemental Schedule are not acceptable to the Purchaser, such supplemental
Schedule shall be substituted for the Schedule it supplements or replaces and
any representation or warranty related thereto shall thereafter refer to such
supplemented Schedule for purposes of determining whether or not the
representation or warranty is inaccurate or incomplete.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
HEALTHPLAN HOLDINGS, INC.
By: /s/ M. Xxxxxx Xxxx
---------------------------------------
Name:
Title: Vice President
HEALTHPLAN SERVICES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name:
Title: Pres. & CEO
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Schedules
---------
Schedule 1.3 Indebtedness
Schedule 1.4(c)(ii) Accruals
Schedule 3.1 Good Standing and Foreign Qualifications
Schedule 3.2 Consents and Approvals
Schedule 3.3(a) Liens and Voting Restrictions on Stock
Schedule 3.3(c) Transfer Restrictions on Stock
Schedule 3.4 Financial Statement Information
Schedule 3.5 Exceptions to Ordinary Course of Business
Schedule 3.7 Accounts Receivable
Schedule 3.8(a) Real Property Leases
Schedule 3.8(c) Tangible Personal Property
Schedule 3.8(d) Absence of Violations
Schedule 3.9(a) Contracts
Schedule 3.9(b) No Defaults
Schedule 3.10(a) Intellectual Property
Schedule 3.11 Legal Proceedings
Schedule 3.12(a) Permits
Schedule 3.12(b) Proceedings regarding Non-compliance with Laws
Schedule 3.13 Environmental Matters
Schedule 3.14 Labor Matters
Schedule 3.15(a)-(k) Taxes
Schedule 3.16 Compensation
Schedule 3.17(a) Employee Benefit Plans
Schedule 3.17(b) Compliance with ERISA and the Code
Schedule 3.17(d) Prohibited Transactions
Schedule 3.17(e) Fines or Penalties under ERISA or the Code
Schedule 3.17(f) Severance Pay/Acceleration of Compensation
Schedule 3.17(g) Communications with Employees
Schedule 3.17(h) Retiree Medical Benefit Plans
Schedule 3.18 Relationships with Customers and Suppliers
Schedule 3.19 Consultants
Schedule 3.20 Other Entities
Schedule 3.21 No Undisclosed Liabilities
Schedule 3.22 Accounts Payable and Other Accrued Expenses
Schedule 3.23 Absence of Changes
Schedule 3.24 Insurance
Schedule 3.25 Bank Accounts
Schedule 3.26 Affiliate and Associate Transactions
Schedule 3.29 No Indebtedness
Schedule 3.30 Third Party Obligations
Schedule 3.31 Services Provided by Corporate
Schedule 4.6 Individuals that may be Solicited and Hired
Schedule 4.11 Allocation of Purchase Price
Schedule 4.13 Other Actions and Claims
Schedule 4.13(c) Equipment to be Held for the Stockholder
Schedule 4.16(d) Bonds, Letters of Credit and Cash Collateral
Schedule 4.16(e) Temporary Services Agreement between Stockholder and
Trewit, Inc.
Schedule 4.16(i) Target Participants
Schedule 5.1(i) Exception to Material Adverse Changes
Schedule 6.1(f) Carriers to Provide Releases
Schedule 7.4 Routine Litigation
Schedule 9.16(y) Assets to be Transferred to Stockholder
[AS REQUIRED BY APPLICABLE LAW, THE COMPANY WILL FURNISH SUPPLEMENTALLY ANY
OMITTED EXHIBIT OR SCHEDULE UPON REQUEST]
