1
EXHIBIT 2.2
----------------------------------------------
STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 5, 1999
BY AND AMONG
THE TRIZETTO GROUP, INC.,
CREATIVE BUSINESS SOLUTIONS, INC.
AND
THE STOCKHOLDERS OF CREATIVE BUSINESS SOLUTIONS, INC.
----------------------------------------------
2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is made and entered
into as of February 5, 1999, by and among Creative Business Solutions, Inc., a
Texas corporation ("CBS"), The TriZetto Group, Inc., a Delaware corporation
("TriZetto"), and Xxxxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx and Xxxxx Xxxxx,
collectively, the "CBS Stockholders" and individually, a "CBS Stockholder").
RECITALS
WHEREAS, the Board of Directors of CBS (i) has approved this Agreement
and the transactions contemplated hereby, and has determined that this Agreement
and the transactions contemplated hereby are in the best interests of the CBS
Stockholders, and (ii) has resolved to recommend approval and adoption of this
Agreement and the other transactions contemplated hereby by the CBS
Stockholders;
WHEREAS, the respective Boards of Directors of TriZetto and CBS have
approved the transaction as set forth below, upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, $1.00 par value per share, of CBS (the "CBS Stock" or the
"Shares"), shall be entitled to receive the Purchase Price (as defined herein)
less expenses payable by the CBS Stockholders pursuant to Section 8.3 below,
unless otherwise paid by the CBS Stockholders on or prior to the Closing Date;
and
WHEREAS, TriZetto, CBS and the CBS Stockholders desire to make certain
representations, warranties, covenants and agreements in connection with the
transaction and also to prescribe various conditions to the consummation
thereof.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1. THE PURCHASE AND SALE OF SHARES.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, TriZetto agrees to purchase from the CBS Stockholders, and
the CBS Stockholders agree to sell, assign, transfer, convey and deliver to
TriZetto at the Closing (as defined in Section 1.2), all of the issued and
outstanding shares of CBS Stock as are set forth on Schedule I attached hereto.
(b) In consideration for the sale of the Shares, TriZetto
shall cumulatively pay to the CBS Stockholders on the Closing Date the following
consideration (the "Purchase Price"): (i) $928,218.93 in cash without interest,
(ii) 572,000 shares of Common Stock of Trizetto (the "TriZetto Common Stock"),
and (iii) a Promissory Note for $260,076 in substantially the form attached
hereto as Exhibit A, less the expenses payable by the CBS Stockholders pursuant
to Section 7.3 below, unless otherwise paid by the CBS Stockholders on or prior
to the Closing Date. Notwithstanding the
1
3
foregoing, fractional shares of TriZetto Common Stock that would be issuable to
any holder of CBS Stock shall be treated in accordance with Section 1.3.
1.2. CLOSING. The delivery of the Shares and payment of the Purchase
Price (the "Closing") shall take place at the offices of Xxxxxxxxx Xxxxx Xxxxxxx
& Xxxxx at 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000, on February 5, 1999, or such other date and time as shall be mutually
agreed upon by TriZetto and CBS, but in no event later than February 28, 1999
(the "Closing Date").
1.3. EXCHANGE OF CBS STOCK FOR PURCHASE PRICE. At the Closing, (a)
the CBS Stockholders shall deliver the Shares, duly endorsed and in form for
transfer to TriZetto; (b) CBS shall deliver the stock books, stock ledgers,
minute books and corporate seals of CBS and its Subsidiary; and (c) TriZetto
shall deliver to the CBS Stockholders payment of the Purchase Price subject to
the deposit of Escrow Shares (defined below in Section 1.4) in accordance with
Section 1.4. No fractional shares of TriZetto Common Stock shall be issued, and
each holder of CBS Stock who would otherwise be entitled to receive a fraction
of a share of TriZetto Common Stock (after aggregating all fractional shares of
TriZetto Common Stock to be received by such holder), shall receive from
TriZetto a whole number of shares rounded up or down to the nearest whole share,
with .5 being rounded up.
1.4. ESCROW SHARES AND ESCROW AGREEMENT. Pursuant to an Escrow
Agreement to be entered into on or before the Closing in substantially the form
of Exhibit B (the "Escrow Agreement"), among TriZetto, the Escrow Agent and the
CBS Stockholders (as those terms are defined herein or in the Escrow Agreement),
TriZetto will withhold, pro rata, from the Purchase Price that would otherwise
be delivered to holders of CBS Stock, twenty percent (20%) of the shares of
TriZetto Common Stock issued in the transaction (the "Escrow Shares") (the
withholding of the Escrow Shares pursuant to this Section 1.4 will be allocated
among the holders of the shares of CBS Stock that are outstanding immediately
prior to the Closing, pro rata according to the number of outstanding shares of
CBS Stock held by each such holder immediately prior to the Closing). TriZetto
will deposit in an escrow pursuant to the Escrow Agreement stock certificates
representing the Escrow Shares and related stock powers (the "Escrow"). The
Escrow Shares and such stock powers, any other property with respect thereto
delivered to the Escrow Agent as provided in the Escrow Agreement, and the
Promissory Notes which shall have a right of offset will be held as collateral
to secure the indemnification obligations of the CBS Stockholders under Article
V hereof in accordance with the Escrow Agreement and the Promissory Notes.
1.5 EXCHANGE OF CERTIFICATES AND PAYMENT OF CONSIDERATION.
(a) TRIZETTO STOCK EXCHANGE PROCEDURES. At the Closing, upon
surrender of a CBS stock certificate for transfer to TriZetto, each CBS
Stockholder shall receive in exchange therefor the consideration set forth on
Schedule II. Upon delivery of the above mentioned consideration, the CBS stock
certificates so surrendered shall be canceled and reissued to TriZetto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CBS
CBS and the CBS Stockholders, jointly and severally, represent and
warrant to TriZetto that, except as set forth in the CBS Disclosure Schedule:
2
4
2.1. CORPORATE EXISTENCE AND POWER. CBS is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas, and has all corporate powers and authority and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. CBS is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on CBS. CBS has heretofore delivered to TriZetto true
and complete copies of CBS's Certificate of Incorporation and Bylaws as
currently in effect.
2.2. CORPORATE AUTHORIZATION. CBS has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by CBS and the
CBS Stockholders and is a legal, valid and binding obligation of CBS and the CBS
Stockholders, enforceable against CBS and the CBS Stockholders, as applicable,
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
2.3. NON-CONTRAVENTION. The execution, delivery and performance by
CBS and the CBS Stockholders of this Agreement and the consummation by CBS and
the CBS Stockholders of the transactions contemplated hereby do not and will not
(i) contravene or conflict with the Certificate of Incorporation or Bylaws of
CBS or the charter documents of its Subsidiary, (ii) contravene or conflict with
or constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to CBS or its Subsidiary
or any of the CBS Stockholders, (iii) constitute a default under or give rise to
a right of termination, cancellation or acceleration of any right or obligation
of CBS or its Subsidiary or to a loss of any benefit to which CBS or its
Subsidiary is entitled under any provision of any agreement, contract or other
instrument binding upon CBS or its Subsidiary or any license, franchise, permit
or other similar authorization held by CBS or its Subsidiary, or (iv) result in
the creation or imposition of any Lien on any asset of CBS or its Subsidiary,
except, in the case of clauses (ii) through (iv) above, as would not,
individually or in the aggregate, have a Material Adverse Effect on CBS.
2.4. COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. CBS and its
Subsidiary hold all material licenses, permits and authorizations necessary for
the lawful conduct of its business as now being conducted pursuant to all
applicable statutes, laws, ordinances, rules and regulations of all governmental
bodies, agencies and other authorities having jurisdiction over it or any part
of its respective operations, and there are no material violations or, to the
knowledge of the CBS Stockholders, claimed violations by CBS or its Subsidiary
of any such license, permit or authorization or any such statute, law,
ordinance, rule or regulation.
2.5. CAPITALIZATION.
(a) The authorized capital stock of CBS consists of 100,000
shares of common stock, $1.00 par value per share (the "CBS Stock") and zero
shares of preferred stock. As of the date hereof, there are outstanding: (i)
9,824 shares of CBS Stock, including all shares restricted under a compensation
plan or arrangement of CBS, (ii) no shares of CBS preferred stock, and (iii) no
warrants to purchase shares of CBS Stock. There are no outstanding options to
purchase shares of CBS Stock.
(b) All outstanding shares of capital stock of CBS have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in this Section 2.5, there are outstanding (i) no shares of capital
stock or other voting securities of CBS, (ii) no securities of CBS
3
5
convertible into or exchangeable for shares of capital stock or voting
securities of CBS, and (iii) no options or other rights to acquire from CBS, and
no obligation of CBS to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of CBS (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "CBS Securities"). There are no outstanding obligations of
CBS or its Subsidiary to repurchase, redeem or otherwise acquire any CBS
Securities.
(c) As of the date hereof, there are no outstanding bonds,
debentures, notes or other indebtedness of CBS having the right to vote (or
convertible into or exercisable for CBS Securities having the right to vote) on
any matters on which stockholders of CBS may vote.
2.6. SUBSIDIARY.
(a) CBS has no subsidiaries other than HealthWeb Systems,
Ltd., a Texas limited partnership (the "CBS Subsidiary" or the "Subsidiary") as
of the date of this Agreement. The CBS Subsidiary is a Texas limited partnership
duly formed, validly existing and in good standing under the laws of its
jurisdiction of formation, has all partnership powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted and is duly qualified to do business as a
foreign limited partnership and is in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect on CBS.
(b) All of the outstanding capital stock of, or other
ownership interests in, the CBS Subsidiary, is owned by CBS and the persons or
entities listed in Section 2.6(b) of the CBS Disclosure Schedule, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). There are no
outstanding (i) securities of CBS or its Subsidiary convertible into or
exchangeable for shares of capital stock or other voting securities or ownership
interests in its Subsidiary or (ii) options or other rights to acquire from CBS
or its Subsidiary, and no other obligation of CBS or its Subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, its Subsidiary (the items in clauses (i)
and (ii) being referred to collectively as the "CBS Subsidiary Securities").
There are no outstanding obligations of CBS or its Subsidiary to repurchase,
redeem or otherwise acquire any outstanding capital stock of its Subsidiary.
2.7. CBS FINANCIAL STATEMENTS. CBS has delivered to TriZetto its
unaudited balance sheet as of December 31, 1997 and December 31, 1998 (the "CBS
Balance Sheet") and its unaudited income statement for the twelve months ended
December 31, 1997 and for the twelve months ended December 31, 1998
(collectively, the "CBS Financial Statements"). The CBS Financial Statements
present fairly, in all material respects, the financial condition and results of
operations of CBS as of the dates and for the periods indicated therein, in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis, subject to normal year-end audit adjustments (other than
reserves for contingent liabilities, all of which are reflected in the CBS
Financial Statements), none of which are material.
2.8. ABSENCE OF CERTAIN CHANGES. Except as contemplated by this
Agreement or otherwise disclosed on Section 2.8 of the CBS Disclosure Schedule,
since the date of CBS Balance Sheet, CBS and its
4
6
Subsidiary have conducted their businesses in all material respects in the
ordinary course consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which has had a Material Adverse Effect on CBS (other
than effects arising from or relating to conditions, including, without
limitation, economic or political developments, applicable generally to the
industry); or
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
CBS, or any repurchase, redemption or other acquisition by CBS or any such
Subsidiary, except for any acquisition pursuant to employee compensation or
other such plans of CBS;
(c) any amendment of any term of any outstanding security of
CBS or its Subsidiary;
(d) any incurrence, assumption or guarantee by CBS or its
Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practice;
(e) any creation or assumption by CBS or its Subsidiary of
any Lien on any material asset other than in the ordinary course of business
consistent with past practice;
(f) any making of any loan, advance or capital contribution
to or investment in any person other than loans, advances or capital
contributions to or investments in the Subsidiary of CBS made in the ordinary
course of business consistent with past practice;
(g) any change in any method of accounting or accounting
practice by CBS or its Subsidiary, except for any such change required by reason
of a concurrent change in GAAP; or
(h) any (i) grant of any severance or termination pay to any
director, officer or employee of CBS or its Subsidiary, (ii) entering into of
any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of CBS or its Subsidiary, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements or (iv) increase
in compensation, bonus or other benefits payable to directors, officers or
employees of CBS or its Subsidiary, in each case other than in the ordinary
course of business consistent with past practice.
2.9. LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the CBS Stockholders,
threatened against or affecting, CBS, its officers or directors, its Subsidiary,
any Affiliate of CBS, or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which, would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on CBS. Neither CBS, its officers or directors, its Subsidiary,
any Affiliate of CBS, or any of their respective properties is subject to any
order, writ, judgment, decree or injunction of any court or arbitrator or any
governmental body, agency or official. Section 2.9 of the CBS Disclosure
Schedule contains a complete list of all claims filed against CBS, or pending
since January 1, 1996, together with a brief statement of the nature and amount
of the claim, the court and jurisdiction in which the claim was brought, the
resolution (if resolved), and the availability of insurance to cover the claim.
5
7
2.10. TAXES. Except as set forth on Section 2.10 of the CBS Disclosure
Schedule, CBS and its Subsidiary have filed all material Tax returns required to
have been filed on or before the date hereof, and all Taxes shown to be due on
such Tax returns have been timely paid. Neither CBS nor its Subsidiary has
agreed in writing to waive any statute of limitations in respect of Taxes of CBS
or its Subsidiary. No issues that have been raised in writing by the relevant
Taxing Authority in connection with the examination of such Tax returns are
currently pending, except for any written notice of such issues the subject
matter of which has either been substantially resolved or would otherwise not
have a Material Adverse Effect on CBS. The amounts provided for taxes on the CBS
Financial Statements are sufficient for the payment of all accrued and unpaid
U.S. federal, state, provincial, or local taxes, interest, penalties,
assessments and deficiencies for all periods prior to the dates of such balance
sheets to the extent such taxes are obligations of CBS. Section 2.9 of the CBS
Disclosure Schedule lists all unresolved audits, examinations, contests and
proceedings (including written notices of intent to audit or examine) with
respect to United States federal and state income Tax returns of CBS and its
Subsidiary for periods beginning on or after January 1, 1994.
2.11. CBS EMPLOYEE BENEFIT PLANS.
(a) CBS has made available to TriZetto correct and complete
copies of all CBS Employee Plans and CBS Benefit Arrangements.
(b) Neither CBS nor its Subsidiary maintains, or is required
to contribute to, any "employee pension benefit plan" (as such term is defined
in Section 3(2) of ERISA), on behalf of any employee of CBS or its Subsidiary
other than a plan provided to TriZetto as described in Section 2.11(a). CBS has
made available to TriZetto, with respect to each of such plans correct and
complete copies of (i) all plan documents, amendments and trust agreements, (ii)
the most recent Annual Report (Form 5500 Series) and accompanying schedules, as
filed and (iii) the current summary plan description.
(c) CBS does not contribute, and is not obligated to
contribute, to any Multiemployer Plan with respect to employees of CBS or its
Subsidiary.
2.12. BANKING AND FINDERS' FEES. There is and will be no investment
banker, broker, finder or other intermediary retained by or authorized to act on
behalf of, CBS or its Subsidiary who might be entitled to any fee or commission
from TriZetto or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
2.13. ENVIRONMENTAL COMPLIANCE
(a) CBS, its Subsidiary and its Affiliates are in compliance
with Environmental Laws, except for such noncompliance as would not reasonably
be expected to have a Material Adverse Effect on CBS.
(b) Since January 1, 1996, neither CBS, its Subsidiary, nor
any Affiliate has received any written notice regarding any violation of any
Environmental Laws, or any CBS Environmental Liabilities, including any
investigatory, remedial or corrective obligations, relating to CBS, its
Subsidiary or Affiliate or their respective facilities arising under
Environmental Laws, except for any such written notice the subject matter of
which has either been substantially resolved or would otherwise not reasonably
be expected to have a Material Adverse Effect on CBS.
6
8
(c) Except as set forth in Section 2.13 of the CBS
Disclosure Schedule:
(i) CBS, its Subsidiary or its Affiliates have not
caused, and is not causing or threatening to cause, any disposals or releases of
any Hazardous Material on or under any properties which it (A) leases, occupies
or operates or (B) previously owned, leased, occupied or operated and, to the
knowledge of the CBS Stockholders, no such disposals or releases occurred prior
to CBS, its Subsidiary or its Affiliates having taken title to, or possession or
operation of, any of such properties; and, to the knowledge of the CBS
Stockholders, no such disposals or releases are migrating or have migrated off
of such properties in subsurface soils, groundwater or surface waters after CBS,
its Subsidiary or its Affiliates has taken title to, or possession or operation
of any such properties and, to the knowledge of CBS, its Subsidiary, its
Affiliates or the CBS Stockholders, no such disposals or releases are migrating
or have migrated off of such properties in subsurface soils, groundwater or
surface water prior to such time;
(ii) CBS or its Subsidiary have neither (A) arranged
for the disposal or treatment of Hazardous Material at any facility owned or
operated by another person, or (B) accepted any Hazardous Material for transport
to disposal or treatment facilities or other sites selected by CBS, its
Subsidiary or its Affiliates from which facilities or sites there has been a
release or there is a release or threatened release of a Hazardous Material; any
facility identified in Section 2.13(c)(ii)(A) was duly licensed in accordance
with law and has not been listed in connection with the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) by the United
States Environmental Protection Agency's Comprehensive Environmental Response,
Compensation, and Liability Information System (CERCLIS) or National Priorities
List (NPL) or any equivalent or like listing of sites under state or local law
(whether for potential releases of substances listed in CERCLA or other
substances);
(iii) CBS, its Subsidiary, its Affiliates or the CBS
Stockholders have no actual knowledge of, or any reason to believe or suspect
that, any release or threatened release of any Hazardous Material originating
from a property other than those leased or operated by CBS, its Subsidiary or
its Affiliates has come to be (or may come to be) located on or under properties
leased, occupied or operated by CBS, its Subsidiary or its Affiliates;
(iv) CBS, its Subsidiary or its Affiliates have never
installed, used, buried or removed any surface impoundment or underground tank
or vessel on properties owned, leased, occupied or operated by CBS, its
Subsidiary or its Affiliates;
(v) CBS and its Subsidiary are and have been in
compliance in all material respects with all federal, state, local or foreign
laws, ordinances, regulations, permits, approvals and authorizations relating to
air, water, industrial hygiene and worker health and safety, anti-pollution,
hazardous or toxic wastes, materials or substances, pollutants or contaminants,
and no condition exists on any of the real property owned by or used in the
business of CBS or its Subsidiary that would constitute a material violation of
any such law or that constitutes or threatens to constitute a public or private
nuisance; and
(vi) There has been no litigation, administrative
proceedings or investigations or any other actions, claims, demands notices of
potential responsibility or requests for information brought or, to the
knowledge of CBS, its Subsidiary, its Affiliates or the CBS Stockholders,
threatened against CBS, its Subsidiary or its Affiliates or any settlement
reached by any of them, with, any person or persons alleging the presence,
disposal, release or threatened release of any Hazardous Material on, from or
under any of such properties or as otherwise relating to potential environmental
liabilities.
7
9
(d) This Section 2.13 contains the sole and
exclusive representations and warranties of CBS and the CBS Stockholders with
respect to any Environmental, Health and Safety Matters, including, without
limitation, any arising under any Environmental Laws.
2.14. COLLECTIVE BARGAINING ARRANGEMENTS. CBS and its Subsidiary are
not a party to or bound by any employee collective bargaining agreement; CBS and
its Subsidiary are not a party to or affected by or, to the knowledge of CBS or
the CBS Stockholders, threatened with, any dispute or controversy with a union
or with respect to unionization or collective bargaining involving the employees
of CBS or its Subsidiary.
2.15. ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
CBS Balance Sheet are owned free and clear by CBS and are based on CBS's
reasonable judgment and its normal credit review procedures, business practices
and GAAP, collectible in accordance with their terms in an amount not less than
their aggregate book value. "Aggregate book value", for this purpose, shall mean
the recorded amounts of such accounts receivable less any recorded allowance for
doubtful accounts, trade allowances and return allowances, all as established in
accordance with GAAP consistently applied.
2.16. INVENTORIES. The consolidated inventories reflected on the CBS
Balance Sheet have been valued in accordance with GAAP consistently applied.
2.17. INTERESTS IN REAL PROPERTY. Section 2.17 of the CBS Disclosure
Schedule is the complete and correct list and brief description of all real
property leased by CBS or its Subsidiary on the Closing Date. CBS and its
Subsidiary do not own any real property. All real property leases to which CBS
or its Subsidiary is a party are valid and in full force and effect and are
valid and binding on the parties thereto, assuming enforceability as to the
parties other than CBS and its Subsidiary and neither CBS nor its Subsidiary is
in default of any material provision thereof. All improvements and fixtures made
by or at the direction of CBS or its Subsidiary on real properties leased by CBS
or its Subsidiary conform in all material respects to all applicable health,
fire, safety, environmental, zoning and building laws and ordinances; and all
materials, buildings, structures (or the space used by CBS or its Subsidiary in
such buildings or structures) and fixtures used by CBS or its Subsidiary in the
conduct of their businesses are in good operating condition and repair, ordinary
wear and tear excepted, and are sufficient for the type and magnitude of their
respective operations.
2.18. PERSONAL PROPERTY. Except as set forth in Section 2.18 of the
CBS Disclosure Schedule, CBS and its Subsidiary have good and marketable title,
free and clear of all title defects, security interests, pledges, options,
claims, liens, encumbrances and restrictions of any nature whatsoever to all
inventory and receivables and to any item of machinery, equipment, or tangible
personal property reflected on the CBS Balance Sheet or used in the business by
CBS or its Subsidiary (regardless of whether reflected on the CBS Balance
Sheet). All the machinery, equipment and other tangible personal property used
in the business by CBS or its Subsidiary is in good operating condition and
repair, normal wear and tear excepted. At the Closing Date, CBS and its
Subsidiary will possess all of the personal property wherever located used to
conduct its business as conducted prior to the Closing.
2.19. DIRECTORS AND OFFICERS. Section 2.19 of the CBS Disclosure
Schedule comprises a complete and correct list of all present officers and
directors of CBS and its Subsidiary.
8
10
2.20. CERTAIN TRANSACTIONS. Except as set forth on Schedule 2.20 of
the CBS Disclosure Schedule, neither CBS nor its Subsidiary nor any of their
respective Affiliates, is presently a party to any agreement or arrangement with
CBS: (i) providing for the furnishing of raw materials, products or services to
or by, or (ii) providing for the sale or rental of real or personal property to
or from, any such entity.
2.21. INTELLECTUAL PROPERTY; SOFTWARE; AND YEAR 2000 COMPLIANCE.
2.21.1 INTELLECTUAL PROPERTY, SOFTWARE AND PRODUCTS.
(a) Section 2.21.1(a) of the CBS Disclosure Schedule
contains (a) a complete and correct list of all Intellectual Property, Software
and Products relating to or used in the business or operations of the business
of CBS or its Subsidiary, and (b) a complete and correct list of all persons who
have contributed to the creation or development of the Intellectual Property,
Software and Products. Except as set forth in Section 2.21.1(a) of the CBS
Disclosure Schedule, no CBS Stockholder, employee or contractor, nor any of
their respective Affiliates, has any right, title or interest in or to any
Intellectual Property, Software or Products.
(b) Except as set forth in Section 2.21.1(b) of the
CBS Disclosure Schedule, CBS and its Subsidiary own all right, title and
interest in and to all Intellectual Property and Software used in or necessary
for the conduct of CBS' and its Subsidiary's businesses as presently conducted,
including, without limitation, all Intellectual Property and Software developed
or discovered in connection with or contained in or related to CBS' or its
Subsidiary's Products, free and clear of all liens, mortgages, charges, pledges,
claims and encumbrances (including without limitation any distribution rights
and royalty rights). Except as disclosed in Section 2.21.1(b) of the CBS
Disclosure Schedules, all persons who have contributed to the creation or
development of the Intellectual Property, Software and Products have executed an
Assignment of Rights Agreement transferring any and all ownership rights to CBS.
None of the Products contain any codes or modules which have been created or
developed by third parties. Such Intellectual Property and Software constitutes
all Intellectual Property and Software necessary for the conduct of its business
in the manner conducted immediately prior to the Closing. To the knowledge of
CBS or the CBS Stockholders, neither CBS nor its Subsidiary has infringed nor is
infringing upon any Intellectual Property or Software rights of others. Except
as set forth in Section 2.21.1(b) of the CBS Disclosure Schedules, CBS and its
Subsidiary have the exclusive right to use, sell, license and dispose of, and
has the right to bring actions for infringement of all Intellectual Property,
Software and Products used in connection with their businesses. To the best
knowledge of the CBS Stockholders, the Products do not include any Intellectual
Property or Software that is in the public domain.
(c) Except as set forth in Section 2.21.1(c) of the
CBS Disclosure Schedule, no claims have been asserted against CBS or its
Subsidiary by any person challenging CBS' or its Subsidiary's use or
distribution (including manufacture, marketing license, or sale) of any Product
or products utilized by CBS or its Subsidiary (including, without limitation,
Third Party Technology), or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto (including, without
limitation, the Third Party Licenses). To the best knowledge of CBS, there is no
valid basis for any claim of the type specified in this Section 2.21.1(c).
(d) Except as set forth in Section 2.21.1(d) of the
CBS Disclosure Schedule, CBS or its Subsidiary has valid copyrights in all
material copyrightable material whether or not registered with the U.S.
copyright office, including all copyrights in the Products containing
9
11
material copyrightable material. Consummation of the transactions contemplated
hereby will not alter or impair the validity of any copyrights or copyright
registrations.
(e) Except as set forth in Section 2.21.1(e) of the
CBS Disclosure Schedule: (i) no third party (including any OEM or site license
customer) has any right to manufacture, reproduce, distribute, sell, sublicense,
market or exploit any of the Products or any adaptations, translations, or
derivative works based on the Products, or any portion thereof; (ii) CBS or its
Subsidiary has not granted to any third party any exclusive rights of any kind
with respect to any of the Products, including territorial exclusivity or
exclusivity with respect to particular versions, implementations or translations
of any of the Products; and (iii) CBS or its Subsidiary has not granted any
third party any right to market any product utilizing any Product under any
"private label" arrangements pursuant to which CBS or its Subsidiary is not
identified as the source of such goods. Each document or instrument identified
pursuant to this Section is listed in Section 2.21.1(e) of the CBS Disclosure
Schedule and true and correct copies of such documents or instruments have been
furnished to TriZetto. Except as set forth in Section 2.21.1(e) of the CBS
Disclosure Schedule, no third party has any right to manufacture, reproduce,
distribute, sublicense, market or exploit any works or materials of which any of
the Products are a derivative work.
(f) Except as set forth in Section 2.21.1(f) of the
CBS Disclosure Schedule, each of the Products: (i) substantially complies with
all specifications set forth therefor in any contract, agreement, advertisement
or other promotional material for such products and with all other warranty
requirements, other than bugs or fixes required or expected in the ordinary
course of business and not otherwise material to CBS's business; and (ii) can be
recreated from its associated source code and related documentation by
reasonably experienced technical personnel without undue burden.
(g) CBS has furnished TriZetto with all end user
documentation relating to the use, maintenance or operation of each of the
Products, all of which is true and accurate in all material respects.
(h) Except as set forth in Section 2.21.1(h) of the
CBS Disclosure Schedule, to the best knowledge of CBS, no employee of CBS is in
violation of any term of any employment contract, patent disclosure agreement or
any other contract or agreement relating to the relationship of any such
employee with CBS or any other party because of the nature of the business
conducted by CBS or proposed to be conducted by CBS.
(i) Except as set forth in Section 2.21.1(i) of the
CBS Disclosure Schedule, no Third Party Technology is included in the Products.
2.21.2 YEAR 2000 COMPLIANCE.
(a) Products and Services.
(i) Except as set forth in Section 2.21.2(a)
of the CBS Disclosure Schedule, to the CBS Stockholders knowledge, all of CBS'
products and services and its Subsidiary's products and services are Year 2000
Compliant in all material respects.
10
12
(ii) Except as set forth in Section 2.21.2(a)
of the CBS Disclosure Schedule, if CBS is obligated to repair or replace
products or services previously provided by CBS that are not Year 2000 Compliant
in order to meet CBS's contractual obligations, to avoid personal injury or
other liability, to avoid misrepresentation claims, or to satisfy any other
obligations or requirements, to the CBS Stockholders knowledge CBS has repaired
or replaced those products and services to make them Year 2000 Compliant in all
material respects.
(iii) Except as set forth in Section 2.21.2(a)
of the CBS Disclosure Schedule, CBS has furnished TriZetto with true, correct
and complete copies of any customer agreements and other materials and
correspondence in which CBS has furnished (or could be deemed to have furnished)
assurances as to the performance and/or functionality of CBS' products or
services and its Subsidiary's on or after January 1, 2000.
(b) Computer Software and Systems. Except as set
forth in Section 2.21.2(b) of the CBS Disclosure Schedule, to the CBS
Stockholders knowledge, all of CBS software and systems and its Subsidiary's
computer are Year 2000 Compliant in all material respects.
(c) Suppliers. Except as set forth in Section
2.21.2(c) of the CBS Disclosure Schedule, to the CBS Stockholders knowledge, all
vendors of products or services to CBS and its Subsidiary, and their respective
products, services and operations, are Year 2000 Complaint in all material
respects. Except as set forth in Section 2.21.2(c) of the CBS Disclosure
Schedule, to the knowledge of the CBS Stockholders after a reasonably diligent
investigation, each such vendor will continue to furnish its products or
services to CBS and its Subsidiary, without interruption or material delay, on
and after January 1, 2000.
2.22. CONTRACTS. Section 2.22 of the CBS Disclosure Schedule
describes, and CBS has caused to be delivered to TriZetto complete and correct
copies of, all currently effective contracts to which CBS or its Subsidiary is a
party or by which CBS or its Subsidiary or any of its respective properties or
assets are bound which (i) involve the payment or receipt by CBS or its
Subsidiary of more than $25,000 over the remaining term of the contract; (ii)
are financing documents, loan agreements or promissory notes; (iii) are
otherwise material to the business of CBS or its Subsidiary and are not for the
purchase or sale of goods or services in the ordinary course of business; (iv)
have a remaining term of more than one year from the date of this Agreement; or
(v) are distributorship or other agreements relating to the marketing of
products. CBS and, to the knowledge of the CBS Stockholders, all of the other
parties to such agreements, are in compliance with all material provisions of
all such agreements and, to the knowledge of the CBS Stockholders, no fact
exists which is, or with the passage of time could become, a default under any
of the aforementioned agreements.
2.23. INSURANCE AND BANKING FACILITIES. Section 2.23 of the CBS
Disclosure Schedule comprises a complete and correct list of (i) all contracts
of insurance and indemnity of or relating to CBS or its Subsidiary (except
insurance related to employee benefits) in force at the date of this Agreement
(including name of insurer or indemnitor, agent, annual charge, coverage and
expiration date); (ii) the names and locations of all banks in which CBS or its
Subsidiary has accounts; and (iii) the names of all persons authorized to draw
on such accounts. All premiums and other payments due with respect to all
contracts of insurance or indemnity in force at the date hereof have been or
will be paid, and CBS and its Subsidiary knows of no circumstance (including
without limitation the consummation of the transaction contemplated by this
Agreement) which has or might cause any such contract to be canceled or
terminated.
11
13
2.24. PERSONNEL. Section 2.24 of the CBS Disclosure Schedule comprises
a complete and correct list of, and CBS has caused TriZetto to be furnished with
complete and correct copies of (or, if not in writing, a description of the
terms of), (i) all employment contracts, collective bargaining agreements, and
all compensation plans, agreements, programs, practices, commitments or other
arrangements of any type, including stock, bonus, profit sharing, incentive
compensation, pension and retirement agreements respecting or affecting any
employees of CBS or its Subsidiary; and (ii) all insurance, health, medical,
hospitalization, dependent care, severance, fringe or other employee benefit
plans, agreements, programs, practices, commitments or other arrangements of any
type in effect for employees of CBS or its Subsidiary. Section 2.24 of the CBS
Disclosure Schedule includes a list of all employees of CBS or its Subsidiary.
CBS and its Subsidiary have been and are in compliance with the terms of, and
any laws or regulations applicable to, all such plans, agreements, practices,
commitments or programs, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on CBS.
2.25. POWERS OF ATTORNEY AND SURETYSHIPS. CBS does not have any powers
of attorney outstanding (other than a power of attorney issued in the ordinary
course of business with respect to tax matters or to customs agents and customs
brokers), and, except for obligations as an endorser of negotiable instruments
incurred in the ordinary course of business, CBS and its Subsidiary do not have
any obligations or liabilities (absolute or contingent) as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise respecting the obligation
of any other person.
2.26. MINUTES AND STOCK RECORDS. CBS has caused TriZetto to be given
access to complete and correct copies of the minute books and stock records of
CBS and its Subsidiary. Such items contain a complete and correct record in all
material respects of all proceedings and actions taken at all meetings of, and
all actions taken by written consent by, the holders of capital stock of CBS and
its Subsidiary and its Board of Directors, and all original issuances and
subsequent transfers and the partnership interests of repurchases of its capital
stock.
2.27. INVESTMENT REPRESENTATIONS BY EACH CBS STOCKHOLDER. Each CBS
Stockholder represents and warrants that:
(a) He is acquiring the TriZetto Common Stock for his own
account, not as nominee or agent, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act.
(b) He understands that (i) the shares of TriZetto Common
Stock have not been registered under the Securities Act by reason of a specific
exemption therefrom, that they must be held indefinitely, and that he must,
therefore, bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration; (ii) the Shares and each certificate representing
Shares will be endorsed with the following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT TO SEC
RULE 144 OR RULE 144A OR THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT COVERING SUCH SECURITIES OR THE
12
14
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
1933 ACT."
and (iii) TriZetto will instruct any transfer agent not to register the transfer
of any of the Shares unless the conditions specified in the foregoing legend are
satisfied; provided, however, that no such opinion of counsel shall be necessary
if the sale, transfer or assignment is made pursuant to SEC Rule 144 or Rule
144A and the transferor provides TriZetto with evidence reasonably satisfactory
to TriZetto and its counsel that the proposed transaction satisfies the
requirements of Rule 144 or Rule 144A.
(c) He acknowledges that he is able to fend for itself, can
bear the economic risk of the investment and has such knowledge and experience
in financial or business matters that he is capable of evaluating the merits and
risks of the investment in the Shares.
(d) He understands that the TriZetto Stock he is acquiring
is characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the CBS in a transaction not involving
a public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act, only in
certain limited circumstances, and he represents that he is familiar with SEC
Rule 144 and Rule 144A, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
2.28. FULL DISCLOSURE. All of the representations and warranties made
by CBS and the CBS Stockholders in this Agreement, and all statements set forth
in the certificates delivered by CBS and the CBS Stockholders at the Closing
pursuant to this Agreement, are true, correct and complete in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make such representations,
warranties or statements, in light of the circumstances under which they were
made, misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TRIZETTO
TriZetto represents and warrants to CBS and the CBS Stockholders that,
except as set forth in TriZetto Disclosure Schedule:
3.1. CORPORATE EXISTENCE AND POWER. TriZetto is duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all corporate powers and authority and all material governmental
licenses, authorizations, consents and approvals required to carry on business
as now conducted. TriZetto is duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on TriZetto taken as a whole. TriZetto has delivered to CBS true
and complete copies of the Certificate of Incorporation and Bylaws of TriZetto
as currently in effect.
13
15
3.2. CORPORATE AUTHORIZATION. TriZetto has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by TriZetto and
is a legal, valid and binding obligation of TriZetto, enforceable against
TriZetto, in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
3.3. NON-CONTRAVENTION. The execution, delivery and performance by
TriZetto of this Agreement and the consummation by TriZetto of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
Certificate of Incorporation or Bylaws of TriZetto, (ii) contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to TriZetto or
any Subsidiary of TriZetto, (iii) constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
TriZetto or any Subsidiary of TriZetto or to a loss of any benefit to which
TriZetto or any Subsidiary of TriZetto is entitled under any provision of any
agreement, contract or other instrument binding upon TriZetto or any Subsidiary
of TriZetto or any license, franchise, permit or other similar authorization
held by TriZetto or any Subsidiary of TriZetto, or (iv) result in the creation
or imposition of any Lien on any asset of TriZetto or any Subsidiary of
TriZetto, except, in the case of clauses (ii) through (iv) above, as would not,
individually or in the aggregate, have a Material Adverse Effect on TriZetto.
3.4. CAPITALIZATION.
(a) The authorized capital stock of TriZetto consists of (a)
30,000,000 shares of common stock, $.001 par value (the "TriZetto Common Stock")
and (b) 10,391,608 shares of preferred stock. As of January 31, 1999 there were
outstanding: (i) 9,216,730 shares of TriZetto Common Stock $.001 par value,
including all shares restricted under a compensation plan or arrangement of
TriZetto, (ii) 4,545,454 shares of TriZetto Series A Preferred Stock, (iii)
warrants to purchase an aggregate of 162,595 shares of TriZetto Stock, and (iv)
1,329,128 outstanding options to purchase shares of TriZetto Common Stock.
(b) All outstanding shares of capital stock of TriZetto have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this Section 3.4 and except for changes since January 31,
1999 resulting from the exercise of employee stock options or warrants
outstanding on such date, there are outstanding (i) no shares of capital stock
or other voting securities of TriZetto, (ii) no securities of TriZetto
convertible into or exchangeable for shares of capital stock or voting
securities of TriZetto, and (iii) no options or other rights to acquire from
TriZetto, and no obligation of TriZetto to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of TriZetto (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "TriZetto Securities"). There are no outstanding
obligations of TriZetto to repurchase, redeem or otherwise acquire any TriZetto
Securities.
(c) As of the date hereof, there are no outstanding bonds,
debentures, notes or other indebtedness of TriZetto having the right to vote (or
convertible into or exercisable for TriZetto Securities having the right to
vote) on any matters on which stockholders of TriZetto may vote.
3.5. TRIZETTO FINANCIAL STATEMENTS. TriZetto has delivered to CBS its
unaudited balance sheet as of December 31, 1997 (the "TriZetto Balance Sheet")
and an unaudited Balance Sheet, Statement of Cash
14
16
Flows and Statement of Operations for the twelve months ended December 31, 1998
(collectively, the "TriZetto Financial Statements"). The TriZetto Financial
Statements present fairly, in all material respects, the financial condition and
results of operations of TriZetto as of the dates and for the periods indicated
therein, in conformity with GAAP applied on a consistent basis, subject to
normal year-end audit adjustments (other than reserves for contingent
liabilities, all of which are reflected in TriZetto Financial Statements), none
of which are material.
3.6. ABSENCE OF CERTAIN CHANGES. Except as contemplated by this
Agreement or disclosed in Section 3.6 of TriZetto Disclosure Schedule since the
date of TriZetto Balance Sheet TriZetto, has conducted its business in the
ordinary course consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which has had a Material Adverse Effect on TriZetto
(other than effects arising from or relating to conditions, including, without
limitation, economic or political developments, applicable generally to the
industry); or
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
TriZetto, or any repurchase, redemption or other acquisition by TriZetto or any
such Subsidiary of TriZetto, except for any acquisition pursuant to employee
compensation or other such plans of TriZetto;
(c) any amendment of any term of any outstanding security of
TriZetto or any Subsidiary of TriZetto;
(d) any incurrence, assumption or guarantee by TriZetto or
any Subsidiary of TriZetto of any indebtedness for borrowed money other than in
the ordinary course of business and in amounts and on terms consistent with past
practice;
(e) any creation or assumption by TriZetto or any Subsidiary
of TriZetto of any Lien on any material asset other than in the ordinary course
of business consistent with past practice;
(f) any making of any loan, advance or capital contribution
to or investment in any person other than loans, advances or capital
contributions to or investments in wholly owned Subsidiaries of TriZetto made in
the ordinary course of business consistent with past practice;
(g) any change in any method of accounting or accounting
practice by TriZetto or any Subsidiary of TriZetto, except for any such change
required by reason of a concurrent change in generally accepted accounting
principles; or
(h) any (i) grant of any severance or termination pay to any
director, officer or employee of TriZetto or any Subsidiary of TriZetto, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of TriZetto or any Subsidiary of TriZetto, (iii) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements of TriZetto or (iv) increase in compensation, bonus or
other benefits payable to directors, officers or employees of TriZetto or any
Subsidiary of TriZetto, in each case other than in the ordinary course of
business consistent with past practice.
15
17
3.7. LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of TriZetto threatened against
or affecting TriZetto or any Subsidiaries of TriZetto or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which, would, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on TriZetto. Neither TriZetto, its officers
and directors nor its Subsidiaries or any Affiliate of TriZetto, or any of their
respective properties is subject to any order, writ, judgment, decree or
injunction. Section 3.7 of the TriZetto Disclosure Schedule contains a complete
list of all claims filed against TriZetto, or pending since January 1, 1996,
together with a brief statement of the nature and amount of the claim, the court
and jurisdiction in which the claim was brought, the resolution (if resolved),
and the availability of insurance to cover the claim.
3.8. TAXES. TriZetto and its Subsidiaries have filed all material Tax
returns required to have been filed on or before the date hereof, and all Taxes
shown to be due on such Tax returns have been timely paid. Neither TriZetto nor
its Subsidiaries have agreed in writing to waive any statute of limitations in
respect of Taxes of TriZetto or such Subsidiaries. No issues that have been
raised in writing by the relevant taxing authority in connection with the
examination of such Tax returns are currently pending, except for any written
notice of such issues the subject matter of which has either been substantially
resolved or would otherwise not have a Material Adverse Effect on TriZetto. The
amounts provided for taxes on the TriZetto Financial Statements are sufficient
for the payment of all accrued and unpaid U.S. federal, state, provincial, or
local taxes, interest, penalties, assessments and deficiencies for all periods
prior to the dates of such balance sheets to the extent such taxes are
obligations of TriZetto and its Subsidiaries. Section 3.9 of the Disclosure
Schedule lists all unresolved audits, examinations, contests and proceedings
(including written notices of intent to audit or examine) with respect to United
States federal, foreign and state income tax Returns of TriZetto for periods
beginning on or after January 1, 1994.
3.9. TRIZETTO EMPLOYEE BENEFIT PLANS.
(a) TriZetto has made available to CBS correct and complete
copies of all TriZetto Employee Benefit Plans and TriZetto Benefit Arrangements.
(b) Neither TriZetto nor its Subsidiaries maintains, or is
required to contribute to, any "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA, or any similar foreign law, on behalf of any
employee of TriZetto or its Subsidiaries other than a plan provided to CBS as
described in Section 3.9(a). TriZetto has made available to CBS, with respect to
each of such plans correct and complete copies of (i) all plan documents,
amendments and trust agreements, (ii) the most recent Annual Report (Form 5500
Series) and accompanying schedules, as filed (or similar documents with respect
to any foreign plans) and (iii) the current summary plan description.
(c) TriZetto does not contribute, and is not obligated to
contribute, to any Multiemployer Plan with respect to employees of TriZetto or
its Subsidiaries.
(d) TriZetto's 1998 Stock Option Plan is a "qualified plan"
as defined by the Internal Revenue Code of 1986, as amended from time to time.
3.10. BANKING AND FINDERS' FEES. There is and will be no investment
banker, broker, finder or other intermediary retained by or authorized to act on
behalf of TriZetto or any of its Subsidiaries who might
16
18
be entitled to any fee or commission from TriZetto or any of its Subsidiaries
upon consummation of the transactions contemplated by this Agreement.
3.11. ENVIRONMENTAL COMPLIANCE.
(a) TriZetto and its Subsidiaries are in compliance with
Environmental Laws, except for such noncompliance as would not reasonably be
expected to have a Material Adverse Effect on TriZetto.
(b) Since January 1, 1996, neither TriZetto nor any of its
Subsidiaries has received any written notice regarding any violation of any
Environmental Laws, or any TriZetto Environmental Liabilities, including any
investigatory, remedial or corrective obligations, relating to TriZetto or its
Subsidiaries or their respective facilities arising under Environmental Laws,
except for any such written notice the subject matter of which has either been
substantially resolved or would otherwise not reasonably be expected to have a
Material Adverse Effect on TriZetto.
(c) Except as set forth in Section 3.11 of the TriZetto
Disclosure Schedule:
(i) TriZetto, its Subsidiaries or its Affiliates
have not caused, and is not causing or threatening to cause, any disposals or
releases of any Hazardous Material on or under any properties which it (A)
leases, occupies or operates or (B) previously owned, leased, occupied or
operated and to the knowledge of TriZetto no such disposals or releases occurred
prior to TriZetto, its Subsidiaries or its Affiliates having taken title to, or
possession or operation of, any of such properties; and, to the knowledge of
TriZetto, such disposals or releases are migrating or have migrated off of such
properties in subsurface soils, groundwater or surface waters after TriZetto,
its Subsidiaries or its Affiliates has taken title to, or possession or
operation of any such properties and, to the knowledge of TriZetto, its
Subsidiaries or its Affiliates, no such disposals or releases are migrating or
have migrated off of such properties in subsurface soils, groundwater or surface
water prior to such time;
(ii) TriZetto, its Subsidiaries or its Affiliates
have neither (A) arranged for the disposal or treatment of Hazardous Material at
any facility owned or operated by another person, or (B) accepted any Hazardous
Material for transport to disposal or treatment facilities or other sites
selected by TriZetto, its Subsidiaries or its Affiliates from which facilities
or sites there has been a release or there is a release or threatened release of
a Hazardous Material; any facility identified in Section 3.11(c)(ii)(A) was duly
licensed in accordance with law and has not been listed in connection with the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
by the United States Environmental Protection Agency's Comprehensive
Environmental Response, Compensation, and Liability Information System (CERCLIS)
or National Priorities List (NPL) or any equivalent or like listing of sites
under state or local law (whether for potential releases of substances listed in
CERCLA or other substances).
(iii) TriZetto, its Subsidiaries or its Affiliates
have no actual knowledge of, or any reason to believe or suspect that, any
release or threatened release of any Hazardous Material originating from a
property other than those leased or operated by TriZetto, its Subsidiaries or
its Affiliates has come to be (or may come to be) located on or under properties
leased, occupied or operated by TriZetto, its Subsidiaries or its Affiliates;
17
19
(iv) TriZetto, its Subsidiaries or its Affiliates
have never installed, used, buried or removed any surface impoundment or
underground tank or vessel on properties owned, leased, occupied or operated by
TriZetto, its Subsidiaries or its Affiliates;
(v) TriZetto and its Subsidiary are and have been in
compliance in all material respects for the last three years with all federal,
state, local or foreign laws, ordinances, regulations, permits, approvals and
authorizations relating to air, water, industrial hygiene and worker health and
safety, anti-pollution, hazardous or toxic wastes, materials or substances,
pollutants or contaminants, and no condition exists on any of the real property
owned by or used in the business of TriZetto or its Subsidiaries that would
constitute a material violation of any such law or that constitutes or threatens
to constitute a public or private nuisance; and
(vi) There has been no litigation, administrative
proceedings or investigations or any other actions, claims, demands notices of
potential responsibility or requests for information brought or, to the
knowledge of TriZetto, its Subsidiaries or its Affiliates, threatened against
TriZetto, its Subsidiaries or its Affiliates or any settlement reached by any of
them, with, any person or persons alleging the presence, disposal, release or
threatened release of any Hazardous Material on, from or under any of such
properties or as otherwise relating to potential environmental liabilities.
(d) This Section 3.11 contains the sole and exclusive
representations and warranties of TriZetto and its Subsidiaries with respect to
any Environmental, Health and Safety Matters, including, without limitation, any
arising under any Environmental Laws.
3.12. INVESTMENT INTENT. The CBS Stock to be acquired by TriZetto is
being and will be acquired by TriZetto for its own account for investment and
not with any present intention to distribute.
3.13. INTELLECTUAL PROPERTY; SOFTWARE; AND YEAR 2000 COMPLIANCE.
3.13.1 INTELLECTUAL PROPERTY, SOFTWARE AND PRODUCTS.
(a) Section 3.13.1(a) of the TriZetto Disclosure
Schedule contains (a) a complete and correct list of all Intellectual Property,
Software and products relating to or used in the business or operations of the
business of TriZetto and its Subsidiaries, and (b) a complete and correct list
of all persons who have contributed to the creation or development of the
Intellectual Property, Software and products. Except as set forth in Section
3.13.1(a) of the TriZetto Disclosure Schedule, no TriZetto stockholder, employee
or contractor, nor any of their respective Affiliates, has any right, title or
interest in or to any Intellectual Property, Software or products.
(b) Except as set forth in Section 3.13.1(b) of the
TriZetto Disclosure Schedule, TriZetto and its Subsidiaries own all right, title
and interest in and to all Intellectual Property and Software used in or
necessary for the conduct of TriZetto's and its Subsidiaries' businesses as
presently conducted, including, without limitation, all Intellectual Property
and Software developed or discovered in connection with or contained in or
related to TriZetto's or its Subsidiaries' products, free and clear of all
liens, mortgages, charges, pledges, claims and encumbrances (including without
limitation any distribution rights and royalty rights). Except as disclosed in
Section 3.13.1(b) of the TriZetto Disclosure Schedules, all persons who have
contributed to the creation or development of the Intellectual Property,
Software and products have executed an Assignment of Rights Agreement or similar
18
20
document transferring any and all ownership rights to TriZetto. None of the
products contain any codes or modules which have been created or developed by
third parties. Such Intellectual Property and Software constitutes all
Intellectual Property and Software necessary for the conduct of its business in
the manner conducted immediately prior to the Closing. To the knowledge of
TriZetto neither TriZetto nor its Subsidiaries have infringed nor are infringing
upon any Intellectual Property or Software rights of others. Except as set forth
in Section 3.13.1(b) of the TriZetto Disclosure Schedules, TriZetto and its
Subsidiaries have the exclusive right to use, sell, license and dispose of, and
has the right to bring actions for infringement of all Intellectual Property,
Software and products used in connection with their businesses. To the best
knowledge of TriZetto, the products do not include any Intellectual Property or
Software that is in the public domain.
(c) Except as set forth in Section 3.13.1(c) of the
TriZetto Disclosure Schedule, no claims have been asserted against TriZetto or
its Subsidiaries by any person challenging TriZetto's or its Subsidiaries' use
or distribution (including manufacture, marketing license, or sale) of any
product or products utilized by TriZetto or its Subsidiaries (including, without
limitation, Third Party Technology), or challenging or questioning the validity
or effectiveness of any license or agreement relating thereto (including,
without limitation, the Third Party Licenses). To the best knowledge of
TriZetto, there is no valid basis for any claim of the type specified in this
Section 3.13.1(c).
(d) Except as set forth in Section 3.13.1(d) of the
TriZetto Disclosure Schedule, TriZetto or its Subsidiaries have valid copyrights
in all material copyrightable material whether or not registered with the U.S.
copyright office, including all copyrights in the products containing material
copyrightable material. Consummation of the transactions contemplated hereby
will not alter or impair the validity of any copyrights or copyright
registrations.
(e) Except as set forth in Section 3.13.1(e) of the
TriZetto Disclosure Schedule: (i) no third party (including any OEM or site
license customer) has any right to manufacture, reproduce, distribute, sell,
sublicense, market or exploit any of the products or any adaptations,
translations, or derivative works based on the products, or any portion thereof;
(ii) TriZetto or its Subsidiaries have not granted to any third party any
exclusive rights of any kind with respect to any of the products, including
territorial exclusivity or exclusivity with respect to particular versions,
implementations or translations of any of the products; and (iii) TriZetto or
its Subsidiaries have not granted any third party any right to market any
product utilizing any product under any "private label" arrangements pursuant to
which TriZetto or its Subsidiaries have not identified as the source of such
goods. Each document or instrument identified pursuant to this Section is listed
in Section 3.13.1(e) of the TriZetto Disclosure Schedule and true and correct
copies of such documents or instruments have been furnished to CBS. Except as
set forth in Section 3.13.1(e) of the TriZetto Disclosure Schedule, no third
party has any right to manufacture, reproduce, distribute, sublicense, market or
exploit any works or materials of which any of the products are a derivative
work.
(f) Except as set forth in Section 3.13.1(f) of the
TriZetto Disclosure Schedule, each of the products: (i) substantially complies
with all specifications set forth therefor in any contract, agreement,
advertisement or other promotional material for such products and with all other
warranty requirements, other than bugs or fixes required or expected in the
ordinary course of business and not otherwise material to TriZetto's business;
and (ii) can be recreated from its associated source code and related
documentation by reasonably experienced technical personnel without undue
burden.
19
21
(g) TriZetto has furnished CBS with all end user
documentation relating to the use, maintenance or operation of each of the
products, all of which is true and accurate in all material respects.
(h) Except as set forth in Section 3.13.1(h) of the
TriZetto Disclosure Schedule, to the best knowledge of TriZetto, no employee of
TriZetto is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with TriZetto or any other party because of
the nature of the business conducted by TriZetto or proposed to be conducted by
TriZetto.
(i) Except as set forth in Section 3.13.1(i) of the
TriZetto Disclosure Schedule, no Third Party Technology is included in the
products.
3.13.2 YEAR 2000 COMPLIANCE.
(a) Products and Services.
(i) Except as set forth in Section 3.13.2(a)
of the TriZetto Disclosure Schedule, to the TriZetto Stockholders knowledge, all
of TriZetto's products and services and its Subsidiaries' products and services
are Year 2000 Compliant in all material respects.
(ii) Except as set forth in Section 3.13.2(a)
of the TriZetto Disclosure Schedule, if TriZetto is obligated to repair or
replace products or services previously provided by TriZetto that are not Year
2000 Compliant in order to meet TriZetto's contractual obligations, to avoid
personal injury or other liability, to avoid misrepresentation claims, or to
satisfy any other obligations or requirements, to the TriZetto Stockholders
knowledge TriZetto has repaired or replaced those products and services to make
them Year 2000 Compliant in all material respects.
(iii) Except as set forth in Section 3.13.2(a)
of the TriZetto Disclosure Schedule, TriZetto has furnished CBS with true,
correct and complete copies of any customer agreements and other materials and
correspondence in which TriZetto has furnished (or could be deemed to have
furnished) assurances as to the performance and/or functionality of TriZetto's
products or services and its Subsidiaries' on or after January 1, 2000.
(b) Computer Software and Systems. Except as set
forth in Section 3.13.2(b) of the TriZetto Disclosure Schedule, to the TriZetto
knowledge, all of TriZetto's software and systems and its Subsidiaries'
computers are Year 2000 Compliant in all material respects.
(c) Suppliers. Except as set forth in Section
3.13.2(c) of the TriZetto Disclosure Schedule, to TriZetto's knowledge, all
vendors of products or services to TriZetto and its Subsidiaries, and their
respective products, services and operations, are Year 2000 Complaint in all
material respects. Except as set forth in Section 3.13.2(c) of the TriZetto
Disclosure Schedule, to the knowledge of TriZetto after a reasonably diligent
investigation, each such vendor will continue to furnish its products or
services to TriZetto and its Subsidiaries, without interruption or material
delay, on and after January 1, 2000.
3.14. COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. TriZetto holds all
material licenses, permits and authorizations necessary for the lawful conduct
of its business as now being conducted pursuant
20
22
to all applicable statutes, laws, ordinances, rules and regulations of all
governmental bodies, agencies and other authorities having jurisdiction over it
or any part of its respect operations, and there are no material violations or,
to the knowledge of TriZetto, claimed violations by TriZetto of any such
license, permit or authorization or any such statute, law, ordinance, rule or
regulation, except where such violations would not have a Material Adverse
Effect on TriZetto.
3.15. FULL DISCLOSURE. All of the representations and warranties made
by TriZetto in this Agreement, and all statements set forth in the certificates
delivered by TriZetto at the Closing pursuant to this Agreement, are true,
correct and complete in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make such representations, warranties or statements, in light of the
circumstances under which they were made, misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 FURTHER ACTION. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
4.2. PUBLIC ANNOUNCEMENTS. TriZetto and CBS shall consult with each
other before issuing any press release with respect to this Agreement, and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which shall not be unreasonably withheld.
4.3. TRANSFER TAXES. TriZetto and CBS shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Closing. TriZetto and CBS agree that CBS
will pay any real property transfer or gains tax, stamp tax, stock transfer tax,
or other similar tax imposed on the transfer of the Shares pursuant to this
Agreement (collectively, "Transfer Taxes"), excluding any Transfer Taxes as may
result from the transfer of beneficial interests in the Shares other than as a
result of this Agreement, and any penalties or interest with respect to the
Transfer Taxes. CBS agrees to cooperate with TriZetto in the filing of any
returns with respect to the Transfer Taxes.
4.4 REMOVAL OF GUARANTEES. In connection with TriZetto's assumption
of CBS' obligations, TriZetto shall use its best efforts to have the CBS
Stockholders released from their personal guarantees of CBS' obligations under
the credit facility with Bank of Texas, N.A. In the event that TriZetto is
unable to remove such guarantees prior to April 10, 1999, TriZetto covenants and
agrees that it will not renew such credit facility without the prior written
consent of the CBS Stockholders.
21
23
ARTICLE V
INDEMNIFICATION
5.1. INDEMNIFICATION OF TRIZETTO.
(a) Subject to the limitations contained in this Article V,
the CBS Stockholders shall, jointly and severally, on a pro rata basis, defend,
indemnify and hold harmless TriZetto, its officers, directors, stockholders,
employees, attorneys, accountants and agents from and against any and all
losses, claims, judgments, liabilities, demands, charges, suits, penalties,
costs or expenses, including court costs and attorneys' fees ("Claims and
Liabilities") with respect to or arising from (i) the breach of any warranty or
any inaccuracy of any representation made by CBS or a CBS Stockholder in this
Agreement; (ii) the breach of any covenant or agreement made by CBS or a CBS
Stockholder in this Agreement; or (iii) relating to the Separation Agreement
entered into on December 14, 1998 by and between CBS and Xxxxx X. Xxxxxx, Xx.
(b) With respect to Subsection 5.1(a), the CBS Stockholders
shall be liable to TriZetto for any Claims and Liabilities only if the aggregate
amount of all Claims and Liabilities, when combined with the Claims and
Liabilities pursuant to Article V of that certain Partnership Interest Purchase
Agreement dated concurrently herewith, exceeds $50,000 (the "Basket Amount"), in
which case the CBS Stockholders shall be obligated to indemnify TriZetto for all
such Claims and Liabilities without regard to the Basket Amount. Further, the
CBS Stockholders' aggregate liability under Subsection 5.1(a) (other than with
respect to any intentional or willful breach or failure to perform) shall in no
event exceed the aggregate amount of consideration placed in the Escrow Account
plus the Promissory Notes and cash issued or paid hereunder.
(c) The indemnification obligations of the CBS Stockholders
under this Section 5.1 shall first be satisfied by an offset to the Promissory
Note and second, out of the Escrow Account. Thereafter, TriZetto shall have
recourse against the CBS Stockholders under this Section 5.1 subject to the
limitations set forth in Section 5.1(b).
5.2 LIMITATIONS. Anything to the contrary notwithstanding, TriZetto
shall not be indemnified and held harmless in respect of any Claims and
Liabilities which are (a) covered by insurance owned by CBS or its Subsidiary,
to the extent that any net loss is reduced by such insurance, or (b) satisfied
out of the proceeds of the Escrow Account to the extent that any net loss is
reduced by such proceeds.
5.3 INDEMNIFICATION OF CBS. TriZetto shall defend, indemnify and
hold harmless the CBS Stockholders against and in respect to all Claims and
Liabilities with respect to or arising from (i) breach of any warranty or any
inaccuracy of any representation made by TriZetto, or (ii) breach of any
covenant or agreement made by TriZetto in this Agreement.
5.4 CLAIMS PROCEDURE. Promptly after the receipt by any indemnified
party (the "Indemnitee") of notice of the commencement of any action or
proceeding against such Indemnitee, such Indemnitee shall, if a claim with
respect thereto is or may be made against any indemnifying party (the
"Indemnifying Party") pursuant to this Article V, give such Indemnifying Party
written notice of the commencement of such action or proceeding and give such
Indemnifying Party a copy of such claim and/or process and all legal pleadings
in connection therewith. The failure to give such notice shall not relieve any
Indemnifying Party of any of his or its indemnification obligations contained in
this Article V, except where, and solely to the extent that, such failure
actually and materially prejudices the rights of such Indemnifying Party. Such
Indemnifying Party
22
24
shall have, upon request within thirty (30) days after receipt of such notice,
but not in any event after the settlement or compromise of such claim, the right
to defend, at his or its own expense and by his or its own counsel, any such
matter involving the asserted liability of the Indemnitee; provided, however,
that if the Indemnitee determines that, as a result of an existing or
prospective business relationship between TriZetto or any of its Subsidiaries on
the one hand and any other party or parties to such claim on the other hand, or
as a result of other reasonable circumstances, there is a reasonable probability
that a claim may materially and adversely affect him or it, other than solely as
a result of money payments required to be reimbursed in full by such
Indemnifying Party under this Article V, the Indemnitee shall have the right to
defend, compromise or settle such claim or suit; and, provided, further, that
such settlement or compromise shall not, unless consented to in writing by such
Indemnifying Party, which should not be unreasonably withheld, be conclusive as
to the liability of such Indemnifying Party to the Indemnitee. In any event, the
Indemnitee, such Indemnifying Party and his or its counsel shall cooperate in
the defense against, or compromise of, any such asserted liability, and in cases
where the Indemnifying Party shall have assumed the defense, the Indemnitee
shall have the right to participate in the defense of such asserted liability at
the Indemnitee's own expense. In the event that such Indemnifying Party shall
decline to participate in or assume the defense of such action, prior to paying
or settling any claim against which such Indemnifying Party is, or may be,
obligated under this Article V to indemnify an Indemnitee, the Indemnitee shall
first supply such Indemnifying Party with a copy of a final court judgment or
decree holding the Indemnitee liable on such claim or, failing such judgment or
decree, the terms and conditions of the settlement or compromise of such claim.
An Indemnitee's failure to supply such final court judgment or decree or the
terms and conditions of a settlement or compromise to such Indemnifying Party
shall not relieve such Indemnifying Party of any of his or its indemnification
obligations contained in this Article V, except where, and solely to the extent
that, such failure actually and materially prejudices the rights of such
Indemnifying Party. If the Indemnifying Party is defending the claim as set
forth above, the Indemnifying Party shall have the right to settle the claim
only with the consent of the Indemnitee; provided, however, that if the
Indemnitee shall fail to consent to the settlement of such a claim by the
Indemnifying Party, which settlement (i) the claimant has indicated it will
accept, and (ii) includes an unconditional release of the Indemnitee and its
affiliates by the claimant and imposes no material restrictions on the future
activities of the Indemnitee and its affiliates, the Indemnifying Party shall
have no liability with respect to any payment required to be made to such
claimant in respect of such claim in excess of the proposed amount of
settlement. If the Indemnitee is defending the claim as set forth above, the
Indemnitee shall have the right to settle or compromise any claim against it
after consultation with, but without the prior approval of, any Indemnifying
Party, which should not be unreasonably withheld, provided, however, that such
settlement or compromise shall not, unless consented to in writing by such
Indemnifying Party, which shall not be unreasonably withheld, be conclusive as
to the liability of such Indemnifying Party to the Indemnitee.
5.5 TREATMENT OF INDEMNITY PAYMENTS. Any payment made to TriZetto
pursuant to this Article V or the Escrow Agreement shall be treated as a
reduction in the consideration paid by TriZetto in connection with this
Agreement.
5.6 SOLE REMEDY. After the Closing, the rights set forth in this
Article V shall be each party's sole and exclusive remedies against the other
party thereto for misrepresentations or breaches of covenants contained in this
Agreement. Notwithstanding the foregoing, nothing herein shall prevent any of
the Indemnified Parties from bringing an action based upon allegations of fraud
or other intentional breach of an obligation of or with respect to either party
in connection with this Agreement. In the event such action is brought, the
prevailing party's attorneys' fees and costs shall be paid by the nonprevailing
party.
23
25
ARTICLE VI
CONDITIONS TO CLOSING
6.1. CONDITIONS TO OBLIGATION OF EACH PARTY TO CLOSE THE TRANSACTION.
The respective obligations of each party to close the transaction shall be
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) NO INJUNCTIONS. No temporary restraining order,
preliminary or permanent injunction issued by any court of competent
jurisdiction preventing the consummation of the transaction shall be in effect.
(b) ESCROW AGREEMENT. The Escrow Agreement in the form of
Exhibit B shall have been entered into by TriZetto, Banker's Trust, and each of
the CBS Stockholders.
(c) RESTRICTED STOCK AGREEMENT. The Restricted Stock
Agreement in the form of Exhibit G shall have been entered into by TriZetto and
each of the CBS Stockholders. The Company represents that each of the Company's
employee shareholders have executed a form of Restricted Stock Agreement which
contains identical provisions relating to the right of first refusal and
termination.
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF TRIZETTO. The
obligations of TriZetto to close the transaction are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CBS and the CBS Stockholders contained in this Agreement shall be
true and correct in all material respects on and as of the Closing, with the
same force and effect as if made on and as of the Closing and TriZetto shall
have received a certificate to such effect signed by the President and the Chief
Financial Officer of CBS and the CBS Stockholders;
(b) AGREEMENTS AND COVENANTS. CBS and the CBS Stockholders
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing and TriZetto shall have received a certificate to
such effect signed by the President and Chief Financial Officer of CBS and the
CBS Stockholders; and
(c) CONSENTS OBTAINED. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made, by CBS for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by CBS.
(d) OPINION OF COUNSEL. TriZetto shall have received the
opinion of McGuire, Woods, Battle & Xxxxxx LLP, and Xxxxx Xxxxxxx & Xxxx LLP
counsel to CBS, dated as of the Closing, in the form attached hereto as Exhibit
E.
(e) COMPLETION OF ACQUISITION OF HEALTHWEB SYSTEMS, LTD.
TriZetto shall concurrently complete the acquisition of all of the partnership
interests of HealthWeb Systems, Ltd.
24
26
(f) EMPLOYMENT AGREEMENTS. At the Closing, TriZetto shall
have entered into an employment agreement with Xxxxxx Xxxxxxxx, Xxxxxxxx
Xxxxxxxx and Xxxxx Xxxxx on the terms of the form of employment agreement as set
forth as Exhibit C substantially hereto (the "Employment Agreement").
(g) NON-COMPETITION AGREEMENT. At the Closing, TriZetto
shall have entered into a non-competition agreement with each of Xxxxxx
Xxxxxxxx, Xxxxxxxx Xxxxxxxx and Xxxxx Xxxxx on substantially the terms of the
form of non-competition agreement as set forth as Exhibit D hereto (the
"Non-Competition Agreement").
(h) CBS shall deliver to TriZetto evidence that CBS
possesses all intellectual property rights and software rights, including but
not limited to copies of all software licenses and executed assignments of
rights as executed by each consultant or employee who assisted in its
development.
(i) CBS shall have paid off the Promissory Note issued to
Xxxx Xxxxxxxx on October 15, 1997 and cancelled the 1,000 shares of CBS Common
Stock which are held by Xxxx Xxxxxxxx as collateral thereunder. TriZetto shall
be entitled to deduct the payoff amount from the cash consideration paid
hereunder.
(j) Each CBS Stockholder shall have paid off his
indebtedness to CBS, including accrued interest, and CBS shall have delivered
evidence thereto to TriZetto.
(k) The Shareholder's Agreement dated June 1, 1998 by and
among CBS and the CBS Stockholders shall be terminated and evidence shall be
delivered to TriZetto.
(l) Xxxxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx and Xxxx Xxxxx shall
have executed an Assignment of Rights Agreement in the form of Exhibit H.
6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF CBS. The obligation of
CBS and the CBS Stockholders to close the transaction is also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TriZetto contained in this Agreement shall be true and correct in
all respects on and as of the Closing, with the same force and effect as if made
on and as of the Closing and CBS shall have received a certificate to such
effect signed by the President and the Chief Financial Officer of TriZetto;
(b) AGREEMENTS AND COVENANTS. TriZetto shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing and CBS shall have received a certificate to such effect signed by the
President and the Chief Financial Officer of TriZetto;
(c) CONSENTS OBTAINED. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made, by TriZetto for the authorization, execution and delivery
of this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by TriZetto, except where the failure
to receive such consents, etc. would not reasonably be expected to have a
Material Adverse Effect on TriZetto.
25
27
(d) OPINION OF COUNSEL. CBS shall have received the opinion
of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, counsel to TriZetto, dated as of the
Closing, in the form attached hereto as Exhibit F.
(e) ISSUANCE OF OPTIONS. Each of the CBS Stockholders shall
have received options to purchase shares of TriZetto in accordance with his
respective employment agreement.
ARTICLE VII
TERMINATION
7.1. TERMINATION. This Agreement may be terminated at any time prior
to the Closing, notwithstanding approval thereof by the stockholders of CBS:
(a) by mutual written consent duly authorized by the Board
of Directors of TriZetto and CBS; or
(b) by the Board of Directors of TriZetto if any condition
to the obligation of TriZetto under this Agreement to be complied with or
performed by CBS at or before the Closing shall not have been complied with or
performed at the time required for such compliance or performance and such
noncompliance or nonperformance shall not have been waived by TriZetto;
(c) by the Board of Directors of CBS if any condition to the
obligation of CBS under this Agreement to be complied with or performed by
TriZetto at or before the Closing shall not have been complied with or performed
at the time required for such compliance or performance and such noncompliance
or nonperformance shall not have been waived by CBS; or
(d) by either TriZetto or CBS if the Closing shall not have
been consummated by February 28, 1999; provided, however, that the right to
terminate this Agreement under this Section 7.1(d) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Closing to occur on or before such
date).
7.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Article VII, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
directors, officers, stockholders or Affiliates except (i) as set forth in
Article VII and Section 7.1 hereof, and (ii) that, except as otherwise provided
in Article VII, nothing herein shall relieve any party from liability for any
breach by such party except as set forth in Section 7.3 hereof.
7.3. FEES AND EXPENSES.
(a) Except as set forth in this Article VII, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Closing is consummated. Without limiting the generality of the
foregoing, the CBS Stockholders will pay, on a pro rata basis according to their
ownership of Shares, all of the fees and expenses incurred in connection with
the transactions contemplated by this Agreement for CBS and the CBS
Stockholders' legal, financial and accounting advisors, including, without
limitation, Xxxxxxxx Xxxxx, and Fennebresque, Clark, Xxxxxxxx & Hay, and
McGuire, Woods, Battle & Xxxxxx, LLP, and Xxxxx Liddell & Xxxx LLP.
26
28
ARTICLE VIII
GENERAL PROVISIONS
8.1. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
DISCLOSURES.
(a) The representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the Closing
and shall continue in full force and effect for a period of two (2) years
following the Closing except for Section 2.5, Section 2.13, Section 3.4 and
Section 3.11 which shall survive until the expiration of the applicable statute
of limitations (as the same may be extended from time to time). The covenants
and agreements of the parties contained in this Agreement shall survive the
Closing unless and until they are otherwise terminated pursuant to their terms
as a matter of applicable laws.
(b) Notwithstanding any other provision in this Agreement to
the contrary, any disclosure made with reference to one or more sections of the
CBS Disclosure Schedule or the TriZetto Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant.
8.2. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to TriZetto
The TriZetto Group, Inc.
000 Xxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxx
Ph: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: X.X. Xxxxxx, Esq.
Ph: (000) 000-0000
(b) If to CBS
Creative Business Solutions, Inc.
0000 Xxxxxxxx, # 000
Xxxxxx, XX 00000
Ph: (000) 000-0000
27
29
with a copy to:
McGuire, Woods, Battle & Xxxxxx, LLP
Bank of America Corporate Center Suite 2900
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx
Ph: (000) 000-0000
8.3. CERTAIN DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Affiliate" shall mean any individual, corporation, partnership,
firm, joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or Governmental Entity, or
person directly or indirectly controlling, controlled by or under common
control with CBS, including all officers and directors of CBS.
"Agreement" shall have the meaning as set forth in the Preamble.
"CBS" shall have the meaning as set forth in the Preamble.
"CBS Balance Sheet" shall have the meaning as set forth in
Section 2.7 of the Agreement.
"CBS Benefit Arrangement" means any employment, severance or
similar contract or arrangement whether or not written or any plan,
policy, fund, program or contract or arrangement (whether or not
written) providing for compensation, bonus, profit-sharing, stock
option, or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including
any self-insured arrangements), health or medical benefits, disability
benefits, worker's compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other
benefits) that (i) is not a CBS Employee Plan, (ii) is entered into,
maintained, administered or contributed to, as the case may be, by CBS
or its Subsidiary and (iii) covers any employee or former employee of
CBS or its Subsidiary.
"CBS Disclosure Schedule" shall mean the written disclosure
schedule delivered on or prior to the date hereof by CBS to TriZetto.
"CBS Employee Plan" means any "employee benefit plan", as
defined in Section 3(3) of ERISA, that (i) is subject to any provision
of ERISA, (ii) is maintained, administered or contributed to by CBS or
its Subsidiary and (iii) covers any employee or former employee of CBS
or its Subsidiary.
"CBS Environmental Liabilities" mean any and all liabilities of
or relating to CBS and its Subsidiary, whether contingent or fixed,
actual or potential, known or unknown, which (i) arise under or relate
to matters covered by Environmental Laws and (ii) relate to actions
occurring or conditions existing on or prior to the Closing Time.
"CBS Option" means any option granted, whether exercisable or
not exercisable and not exercised or expired, to a current or former
employee, director, consultant, advisor or independent
28
30
contractor of CBS or its Subsidiary or any predecessor thereof to
purchase Shares pursuant to CBS's Option Plan (as defined below).
"CBS Securities" shall have the meaning as set forth in Section
2.5 of the Agreement.
"CBS Stockholder" shall have the meaning as set forth in the
Preamble.
"CBS Stock" shall have the meaning as set forth in the Preamble.
"CBS Subsidiary" shall mean HealthWeb Systems, Ltd., a Texas
limited partnership.
"Claims and Liabilities" shall have the meaning as set forth in
Section 5.1 of the Agreement.
"Closing" shall have the meaning as set forth in Section 1.2 of
the Agreement.
"Environmental Laws" mean any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, relating to human health, the environment or to emissions,
discharges or releases of pollutants, contaminants or other Hazardous
Materials or wastes into the environment, including without limitation
ambient air, surface water, ground water or land, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or other
Hazardous Materials or wastes or the clean-up or other remediation
thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Escrow" shall have the meaning as set forth in Section 1.4 of
the Agreement.
"Escrow Agreement" shall have the meaning set forth in Section
1.4 of the Agreement.
"Escrow Shares" shall have the meaning set forth in Section 1.4
of the Agreement.
"GAAP" shall have the meaning as set forth in Section 2.7 of the
Agreement.
"Hazardous Material" means any toxic, radioactive, corrosive or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing characteristics,
which in any event is regulated under any Environmental Law.
"Intellectual Property" means patents, patent applications,
patent licenses, copyrights, copyright licenses, trademarks, trademark
applications and trademark licenses, trade names, service marks, service
names, licenses, trade secrets and any other know-how or intellectual
property rights, and rights in any thereof (insofar as it is practical
to list or describe such rights).
29
31
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
to such asset.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the condition (financial or otherwise),
business, assets or liabilities of such Person and its Subsidiaries
taken as a whole.
"Multiemployer Plan" means each CBS Employee Arrangement or each
TriZetto Employee Arrangement, as the case may be, that is a
multiemployer plan, as defined in Section 3(37) or Section 4001(a)(3) of
ERISA, or any similar foreign law or regulation.
"Person" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a government or political subdivision or any
agency or instrumentality thereof.
"Products" means the Remedy Software, Respond Software, Live-Doc
Software, Care Line Software, Directory Studio, Managed Care Information
System and all related products, including any Intellectual Property
related thereto.
"Shares" shall have the meaning as set forth in the Preamble.
"Software" means software programs and rights in any thereof
(insofar as it is practical to list or describe such rights).
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); or (ii)
any partnership (a) the sole general partner or managing general partner
of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more Subsidiaries
of such Person (or any combination thereof); and (c) HealthWeb Systems,
Ltd., a Texas limited partnership.
"Taxes" shall mean all income, gross receipts, sales, transfer,
use, employment, franchise, profits, property and other taxes, fees,
stamp taxes and duties, assessments, and charges of any kind whatsoever
(whether payable directly or by withholding), together with any interest
thereof and any penalties, additions to tax or additional amounts
imposed by any Taxing Authority.
"Taxing Authority" shall mean any governmental authority
responsible for the imposition of Taxes.
"Third Party Licenses" means all licenses and other agreements
with third parties relating to any Intellectual Property or products
that CBS or its Subsidiary is licensed or otherwise authorized by such
third parties to use, market, distribute or incorporate into products
marketed and distributed by CBS or its Subsidiary.
30
32
"Third Party Technology" means all Intellectual Property and
products owned by third parties and licensed pursuant to Third Party
Licenses.
"Transfer Taxes" shall have the meaning as set forth in Section
4.3 of this Agreement.
"TriZetto" shall have the meaning as set forth in the Preamble.
"TriZetto Balance Sheet" shall have the meaning as set forth in
Section 3.5 of the Agreement.
"TriZetto Benefit Arrangement" means any employment, severance
or similar contract or arrangement whether or not written or any plan,
policy, fund, program or contract or arrangement (whether or not
written) providing for compensation, bonus, profit-sharing, stock
option, or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including
any self-insured arrangements), health or medical benefits, disability
benefits, worker's compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other
benefits) that (i) is not a TriZetto Employee Plan, (ii) is entered
into, maintained, administered or contributed to, as the case may be, by
TriZetto or any of its Subsidiaries and (iii) covers any employee or
former employee employed in the United States.
"TriZetto Common Stock" shall have the meaning set forth in
Section 1.1(b) of the Agreement.
"TriZetto Disclosure Schedule" shall mean the written disclosure
schedule delivered on or prior to the date hereof by TriZetto to CBS
that is arranged in paragraphs corresponding to the numbered and
lettered paragraphs corresponding to the numbered and lettered
paragraphs contained in the Agreement.
"TriZetto Employee Plan" means any "employee benefit plan", as
defined in Section 3(3) of ERISA, that (i) is subject to any provision
of ERISA, (ii) is maintained, administered or contributed to by TriZetto
or any of its Subsidiaries and (iii) covers any employee or former
employee of TriZetto.
"TriZetto Environmental Liabilities" means any and all
liabilities of or relating to TriZetto or any of its Subsidiaries,
whether contingent or fixed, actual or potential, known or unknown,
which (i) arise under or relate to matters covered by Environmental Laws
and (ii) relate to actions occurring or conditions existing on or prior
to the Closing.
"TriZetto Financial Statements" shall have the meaning as set
forth in Section 3.6 of the Agreement.
"Year 2000 Compliant" means that (1) the products, services, or
other item(s) at issue accurately process, provide and/or receive all
date/time data (including calculating, comparing, sequencing, processing
and outputting) within, from, into, and between centuries (including the
twentieth and twenty-first centuries and the years 1999 and 2000),
including leap year calculations, and (2) neither the performance nor
the functionality of the company's or its
31
33
subsidiary's provision of the products, services, and other item(s) at
issue will be affected by any dates/times prior to, on, after, or
spanning January 1, 2000. The design of the products, services, and
other item(s) at issue to ensure compliance with the foregoing
warranties and representations includes proper date/time data century
recognition and recognition of 1999 and 2000, calculations that
accommodate single century and multi-century formulae and date/time
values before, on, after, and spanning January 1, 2000, and date/time
data interface values that reflect the century, 1999, and 2000. In
particular, but without limitation, (i) no value for current date/time
will cause any error, interruption, or decreased performance in or for
such product(s), service(s), and other item(s), (ii) all manipulations
of date and time related data (including calculating, comparing,
sequencing, processing, and outputting) will produce correct results for
all valid dates and times when used independently or in combination with
other products, services, and/or items, (iii) date/time elements in
interfaces and data storage will specify the century to eliminate date
ambiguity without human intervention, including leap year calculations,
(iv) where any date/time element is represented without a century, the
correct century will be unambiguous for all manipulations involving that
element, (v) authorization codes, passwords, and zaps (purge functions)
will function normally and in the same manner during, prior to, on and
after January 1, 2000, including the manner in which they function with
respect to expiration dates and CPU serial numbers, and (vi) the
company's or its subsidiary's supply of the product(s), service(s), and
other item(s) will not be interrupted, delayed, decreased, or otherwise
affected by the advent of the year 2000.
8.4. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Closing. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
8.5. WAIVER. At any time prior to the Closing, any party hereto may
with respect to any other party hereto (a) extend the time for performance of
any of the obligations or other acts, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
8.6. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible, in an acceptable manner, to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.8. ENTIRE AGREEMENT. This Agreement (inclusive of CBS Disclosure
Schedule and TriZetto Disclosure Schedule) constitutes the entire agreement and
supersedes all prior agreements and undertakings
32
34
both oral and written, among the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein.
8.9. ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise.
8.10. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.6 (which is intended to be for the benefit of the Indemnified Parties
and the others specifically referenced therein as beneficiaries of the
agreements contained in Section 5.6, and may be enforced by such Indemnified
Parties and other persons).
8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
8.12. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California
applicable to contracts executed and fully performed within the State of
California.
8.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
33
35
IN WITNESS WHEREOF, the parties have caused this Stock Purchase
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
THE TRIZETTO GROUP, INC.,
a Delaware corporation
By: [Signature Illegible}
---------------------------------------------
Name: [Illegible]
-------------------------------------------
Title: [Illegible]
------------------------------------------
CREATIVE BUSINESS SOLUTIONS, INC.,
a Texas corporation
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: CEO
"CBS STOCKHOLDERS"
/s/ Xxxxxx Xxxxxxxx
------------------------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
------------------------------------------------
Xxxxx Xxxxx
