<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event report): August 12, 1999
ELECTRONIC TRANSMISSION CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-22135 75-2578619
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5025 Arapaho Road
Suite 501
Dallas, Texas 75248
(Address of principal executive offices) (ZIP Code)
(972) 980-0900
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. DISPOSITION OF ASSETS
Electronic Transmission Corporation (the "Company"), a Delaware corporation,
completed the sale of all of its interest in the stock of Health Plan
Initiatives, Inc. ("HPI"), a Texas corporation, effective August 12, 1999, to A
& G Health Plans, Inc. ("A&G"), the primary customer of HPI. Based on a review
of the Company's current position in the market and the belief that a sale of
HPI would free- up capital to pursue expansion in its core business of
automating claims processing and repricing, the Board of Directors believes the
sale was in the best interests of the Company at this time.
As consideration for the stock of HPI, the Company is to receive $386,000 cash
over a 24-month period payable $50,000 at closing and $14,000 per month for the
remaining 24 month period. A & G also agreed to pay to the Company the adjusted
gross profit from the operations of HPI for the period April 1 through May 31,
1999, and reimburse the Company for certain payroll and telephone expenses of
approximately $29,500.00. A&G also assumed debt in the approximate amount of
$175,000 and accounts payable of approximately $400,000. The obligations of A &
G are secured by a pledge of all of the HPI stock and guaranteed by Mr. Norman
Payson, president of A & G. HPI and ETC are expected to enter into a strategic
marketing alliance to market ETC products and services to A&G customers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Submitted with this report are the Unaudited ProForma Financial Statements for
Electronic Transmission Corporation following sale of the HPI stock.
-2-
<PAGE> 3
ELECTRONIC TRANSMISSION CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30,1999
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HPI ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service revenues $ 1,475,220 $ (568,687) $ -- $ 906,533
Cost and Expenses:
Cost of revenues $ 555,900 $ (379,021) $ -- $ 176,879
Selling, general and administrative 1,213,183 (150,768) -- 1,062,415
Depreciation and amortization 134,925 (24,727) (15,998) 94,200
------------ ------------ ------------ ------------
Total cost and expenses 1,904,008 (554,516) (15,998) 1,333,494
------------ ------------ ------------ ------------
Loss from operations (428,788) (14,171) 15,998 (426,961)
Other income (expense)
Interest expense, net (13,934) (1,536) -- (15,470)
Other income -- -- -- --
------------ ------------ ------------ ------------
Total other income (13,934) (1,536) -- (15,470)
Net income (loss) $ (442,722) $ (15,707) $ 15,998 $ (442,431)
============ ============ ============ ============
Loss per common share:
Basic $ (0.05) $ (0.05)
============ ============
Diluted $ (0.04) $ (0.04)
============ ============
Weighted average common shares outstanding:
Basic 9,222,766 9,222,766
============ ============
Diluted 10,301,933 10,301,933
============ ============
</TABLE>
<PAGE> 4
ELECTRONIC TRANSMISSION CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30,1999
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HPI ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 69,859 $ (3,675) $ -- $ 66,184
Accounts receivable 970,296 (757,888) -- 212,408
Notes receivable -- -- -- --
Current portion, capital lease receivable -- -- -- --
Prepaid assets 89,518 -- -- 89,518
----------- ----------- ----------- -----------
Total current assets 1,129,673 (761,563) -- 368,110
Property and equipment, net 291,324 (50,540) -- 240,784
Investment -- -- --
Other assets 374,717 -- (367,968) 6,749
----------- ----------- ----------- -----------
$ 1,795,714 $ (812,103) $ (367,968) $ 615,643
=========== =========== =========== ===========
LIABILITIES & STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 1,173,128 $ (706,431) $ -- $ 466,697
Notes payable and convertible debentures 558,709 (176,686) -- 382,023
Current portion, capital lease obligations 19,839 -- -- 19,839
Net liabilities of discontinued operations 213,769 -- -- 213,769
----------- ----------- ----------- -----------
Total current liabilities 1,965,445 (883,117) -- 1,082,328
Long-term capital lease obligations 121,405 -- -- 121,405
----------- ----------- ----------- -----------
Total liabilities 2,086,850 (883,117) -- 1,203,733
----------- ----------- ----------- -----------
Commitments and contingencies -- -- -- --
Stockholder's equity (deficit):
Preferred stock -- -- -- --
Common stock 9,464 -- (3,538) 5,926
Additional paid-in-capital 8,264,281 (82,215) (211,201) 7,970,865
Accumulated deficit (8,564,881) 153,229 (153,229) (8,564,881)
----------- ----------- ----------- -----------
Total stockholder's equity (deficit) (291,136) 71,014 (367,968) (588,090)
----------- ----------- ----------- -----------
$ 1,795,714 $ (812,103) $ (367,968) $ 615,643
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
ELECTRONIC TRANSMISSION CORPORATION
NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
On August 12,1999,Electronic Transmission Corporation (the "Company") sold 100%
of its interest in the common stock of Health Plan Initiatives, Inc. ("HPI") to
A & G Health Plans, Inc. The sale has been accounted for using the installment
method of accounting. The Unaudited Pro Forma Balance Sheet as of June 30,1999
gives effect to the transaction as if it had occurred at that date. The
Unaudited Pro Forma Statement of Operations for the six months ended June
30,1999 gives effect to the transaction as if it had occurred on January 1,1999.
The stock of HPI was acquired effective January 31, 1999, and the Unaudited Pro
Forma Statement of Operations for the six months ended June 30, 1999, includes
the period from the time of acquisition.
The Unaudited Pro Forma Financial Statements are presented for informational
purposes only and are not necessarily indicative of the results of operations
that would have been achieved had the transaction been completed at January
1,1999, nor are they indicative of the Company's future results of operations.
The Unaudited Pro Forma Financial Statements should be read in conjunction with
the historical financial statements of the Company and the related notes
thereto.
<PAGE> 6
ELECTRONIC TRANSMISSION CORPORATION
NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On August 12,1999,Electronic Transmission Corporation (the "Company") sold 100%
of its interest in the common stock of Health Plan Initiatives, Inc. ("HPI") to
A & G Health Plans, Inc. The sale has been accounted for using the installment
method of accounting. The Unaudited Pro Forma Balance Sheet as of June 30,1999
gives effect to the transaction as if it had occurred at that date. The
Unaudited Pro Forma Statement of Operations for the six months ended June
30,1999 gives effect to the transaction as if it had occurred on January 1,1999.
The stock of HPI was acquired effective January 31, 1999, and the Unaudited Pro
Forma Statement of Operations for the six months ended June 30, 1999, includes
the period from the time of acquisition.
The Unaudited Pro Forma Financial Statements are presented for informational
purposes only and are not necessarily indicative of the results of operations
that would have been achieved had the transaction been completed at January
1,1999, nor are they indicative of the Company's future results of operations.
The Unaudited Pro Forma Financial Statements should be read in conjunction with
the historical financial statements of the Company and the related notes
thereto.
2. FEDERAL INCOME TAX
Due to the federal income tax net operating loss carryforward, the federal
income tax effect of the sale is considered immaterial to the Pro Forma
Financial Statements and is not separately disclosed.
3. DEPRECIATION AND AMORTIZATION
Depreciation and amortization was decreased by $15,998 for the six months ended
June 30,1999 as a result of the sale adjustments. Goodwill from the HPI
acquisition was being amortized over its estimated useful life of ten years.
<PAGE> 7
EXHIBIT NUMBER AND DESCRIPTION
- ------------------------------
(2) Purchase Agreement
(2.1) Security Agreement
(2.2) Guaranty Agreement
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELECTRONIC TRANSMISSION CORPORATION,
A DELAWARE CORPORATION
By: /s/ Robert Fortier
----------------------------------------
Robert Fortier, Chief Executive Officer
Date: August 27, 1999
-3-
<PAGE> 9
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
Ex 2 Purchase Agreement
Ex 2.1 Security Agreement
Ex 2.2 Guaranty Agreement
</TABLE>
<PAGE> 1
EXHIBIT 2
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into by and among
ELECTRONIC TRANSMISSION CORPORATION as "Seller", A&G HEALTH PLANS, INC. as
"Purchaser".
A. Seller owns all of the outstanding shares and operates a Texas
corporation known as HEALTH PLAN INITIATIVES, INC., hereinafter "HPI".
B. Purchaser desires to buy, and Seller desires to sell all of the
shares, assets and liabilities of HPI (except those specifically retained by
Seller) upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, for and in consideration of the mutual agreements
contained herein, Purchaser and Seller agree as follows:
1. PURCHASE OF STOCK. On the Closing Date, in reliance upon the
representations, warranties and agreements of the parties, Seller shall sell,
assign, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, free and clear from all encumbrances (except for liens securing
liabilities assumed by Purchaser pursuant to this Agreement), all of the issued
and outstanding stock of HPI and the assets specifically identified herein (the
"Purchased Assets") for the price and terms set forth in this Agreement, to
wit:
Purchase Agreement
Page 1
<PAGE> 2
The assets and properties, tangible and intangible of and pertaining
to or used in the Business wherever located specified and described as follow:
(i) the property, supplies and equipment listed on Schedule 1, (ii) all of
Seller's right, title and interest in all contracts, agreements, and licenses,
and similar documents pertaining to the Business, except those specifically
retained by Seller (iv) all computer printouts, data bases and repricing
software used by Seller and owned (v) all of Sellers trademarks, trade names,
and other proprietary and intangible rights relating or used in connection with
the Business.
2. PURCHASE PRICE. (a) The purchase price is to be $386,000.00 subject
to the offsets and modifications provided herein.
(b) A&G shall assume all of the debts and liabilities of HPI save and
except:
i. Any and all leases of automobiles;
ii. Any and all leases of equipment, including but not limited
to computers, fax machines, furniture, or mailing systems;
iii. Lease for office space;
iv. Payroll or payroll taxes incurred on or before the date of
closing;
v. Insurance premiums;
vi. Employee Contracts; and
vii. Pension and Benefit Agreements
Purchase Agreement
Page 2
<PAGE> 3
The existing known liabilities of HPI being assumed by Purchaser are set forth
in Schedule 3 attached hereto.
(c) With regard to the line of credit of HPI at Chase Bank, A&G
shall reduce the balance owed on said line to $0.00 on or
before forty-five (45) days following the closing or secure
the release of Robert Fortier as guarantor on the line of
credit. In this regard the parties acknowledge that on May
14, 1999 HPI used $25,000 on the line of credit to reduce the
current outstanding payable to Beach Street by $25,000 and
the current balance is $100,000.00;
(d) The purchase price is to be paid by an initial $50,000
payment on closing, with installments of $14,000 per month
for 24 months commencing on September 1, 1999 with a like
payment on the first of each month thereafter through and
including August 1, 2001.
(e) Should Beech Street cease to provide access to its network to
HPI for any reason other than non-payment on the part of A&G
on or before August 1, 2001, then the monthly installments
accruing thereafter shall be reduced to $10,000.
(f) The performance of A&G hereunder shall be secured by ETC
retaining a security interest in all of the stock, assets and
accounts receivable of HPI or its successors or assigns until
the final payment is made. In consideration of Norman Payson
proving a personal guarantee of the indebtedness of A&G to
ETC, ETC agrees to subordinate its security interest provided
for herein in favor of a security interest required by any
bank or lendor for any transaction or need on the part of
A&G.
3. ADDITIONAL COMPENSATION. In addition to the purchase price, A&G agrees
and shall pay to ETC the adjusted gross profit from the operation of
HPI for the period April 1 through May 31, 1999. The adjusted gross
profit shall be defined as gross income less network access fees as
reflected on Schedule 2. Also in addition to the purchase price for the
Purchase Agreement
Page 3
<PAGE> 4
period of June 1, 1999 until the closing, A&G agrees and shall pay to
ETC the actual cost incurred by HPI for payroll and telephone expense,
not to exceed $4,200.00 per month, pro rated for any partial month. The
amounts due under this Paragraph 3 shall be paid as follows: 1) 50% on
or before October 1, 1999 and 2) 50% on or before December 1, 1999.
The parties acknowledge that there may be future adjustments
to the Adjusted Gross Profit for April 1, 1999 through May 30, 1999 as a result
of backouts related to repricing services rendered by HPI during the period
April 1, 1999 through May 30, 1999. To the extent any future adjustment related
to the services rendered by HPI during the period April 1, 1999 through May 30,
1999 results in a reduction on the amount of the Adjusted Gross Profit for that
period from that reflected on Schedule 2, then the reduced amount shall be the
amount owed by A&G as additional compensation for Adjusted Gross Profit for the
period of April 1, 1999 through May 30, 1999. If A&G has previously paid the
amounts for Adjusted Gross Profit for the period prior to a reduction as a
result of backouts, then in that event A&G shall be entitled to deduct the
amount of any such reduction from its next scheduled installment due under
Paragraph 2(d) and 2(e).
4. CLOSING.
4.1 TIME AND PLACE. The closing (the "Closing") shall take place on or before
August 11, 1999 (the "Closing Date") at the offices
Purchase Agreement
Page 4
<PAGE> 5
of Electronic Transmission Corporation, 15301 Spectrum Drive, Addison Texas
75001 or at such other mutually convenient place as the parties may designate
in writing.
4.2 DELIVERIES OF THE SELLER. At the Closing, Seller shall deliver to
Purchaser:
(i) All of the issued and outstanding stock of HPI duly endorsed and
transferred to A&G and a Bill of Sale and Assignment transferring the
Purchased Assets from Seller to Purchaser;
(ii) Appropriate evidence of all necessary corporate actions by Seller in
connection with the transactions contemplated hereby, including
without limitation certified copies of resolutions duly adopted by
Seller's directors approving the transactions contemplated by this
Agreement and authorizing the execution delivery, performance and
delivery of the Agreement; and
5.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall deliver to Seller:
(i) The cash portion of the Purchase Price;
(ii) Security Agreement and stock certificates securing performance by
Purchaser;
(iii) Appropriate evidence of all necessary corporate action by Purchaser
in connection with the transactions contemplated
Purchase Agreement
Page 5
<PAGE> 6
hereby, including without limitation, certified copies of resolutions duly
adopted by Purchaser's directors approving the transactions contemplated by this
Agreement and authorizing the execution, delivery and performance by Purchaser
of this Agreement.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The obligation of the
Purchaser to consummate the transactions contemplated by this Agreement are
expressly conditioned upon the following:
(i) The representations and warranties of the Seller shall be true and
correct on the Closing Date as though made on the Closing Date.
7. REPRESENTATIONS AND WARRANTIES.
7.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. Seller represents and
warrants to Purchaser as follows:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Seller has all requisite
corporate power and authority to own, lease and operate its properties, to
carry on its business as now being conducted and to execute, deliver, and
perform this Agreement and all writings relating hereto.
(b) Seller has good and indefeasible title to the Purchased, and has full
power and authority to convey the Purchased Assets pursuant hereto.
Purchase Agreement
Page 6
<PAGE> 7
(c) The execution, delivery and performance of this Agreement and all
writings relating hereto by Seller have been duly and validly authorized by the
Board of Directors of Seller. This Agreement and all writings relating hereto to
be signed by Seller constitute valid and binding obligations of Seller
enforceable according to their respective terms. Neither the execution and
delivery of this Agreement or any writing relating hereto nor the consummation
by the Seller of the transactions contemplated hereby or thereby nor the
compliance with any of the provisions hereof or thereof will: (i) conflict with
or result in a breach of the Articles of Incorporation or Bylaws of Seller, (ii)
violate any statute, law rule or regulation or any order, writ, injunction, or
decree of any court or governmental authority or (iii) violate or conflict or
constitute a default under any agreement or writing of any nature to which
Seller is a party or by which the Purchased Assets may be bound.
(d) As of the Closing Date there shall not have been any material change
in the Purchased Assets or the Business.
(e) As of the Closing Date the Purchased Assets are and shall be free of
any liens or encumbrances except for liens expressly assumed by Purchaser
pursuant to the terms hereof.
7.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Purchaser represents and
warrants as follows:
Purchase Agreement
Page 7
<PAGE> 8
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Purchaser has all the
requisite corporate power and authority to own, lease, and operate its
properties, to carry on its business as now being conducted, and to execute,
deliver, and perform this Agreement and all writings relating hereto.
(b) The execution, delivery and performance of this Agreement and all
writings relating hereto by Purchaser have been duly and validly authorized by
the Board of Directors of Purchaser. This Agreement and all writings relating
hereto to be signed by Purchaser constitute valid and binding obligations of
Purchaser enforceable in accordance with their respective terms.
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any party to this Agreement or pursuant hereto shall survive
the closing of the transactions hereunder.
8. INDEMNIFICATIONS.
8.1. INDEMNIFICATION BY SELLER. Seller shall indemnify and hold Purchaser and
each of its officers, directors and shareholders harmless from and against any
and all damages, losses, settlement payments, obligations, liabilities, claims,
actions or causes of action, encumbrances, and reasonable costs and expenses,
including without limitation, attorneys fees and court costs, suffered
Purchase Agreement
Page 8
<PAGE> 9
sustained, incurred or required to be paid by Purchaser: (i) because of the
untruth, inaccuracy or breach of any representation, warranty, covenant or
agreement of Seller contained in or made in connection with this Agreement or
(ii) arising from the operation of the Business prior to March 31, 1999 save
and except the liabilities assumed by Purchaser set forth on Schedule 2.
8.2. INDEMNIFICATION BY PURCHASER AND SHAREHOLDER. Purchaser and Shareholder
shall indemnify and hold Seller and each of its officers, directors and
shareholders harmless from and against any and all damages, losses, settlement
payments, obligations, liabilities, claims, actions or causes of action,
encumbrances, and reasonable costs and expenses, including without limitation,
attorneys fees and court costs, suffered, sustained, incurred or required to be
paid by Seller because of the untruth inaccuracy or breach of any
representation warranty, covenant or agreement of Purchaser contained in or
made in connection with this Agreement.
9.0 COVENANTS.
9.1 CONDUCT OF BUSINESS. Except as otherwise contemplated by this Agreement,
during the period from the date hereof to the Closing Date, Seller shall conduct
its operations according to its ordinary course of business consistent with past
practice. Seller shall use its reasonable best efforts to preserve intact the
Purchase Agreement
Page 9
<PAGE> 10
Business and to keep available the services of the officers and employees of
Seller and to maintain existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers, and others having business
relationships with Seller.
9.2 ACCESS TO INFORMATION. Between the date hereof and the Closing Date, Seller
shall give Purchaser and its authorized representatives reasonable access to
all employees, offices and other facilities of the Business to make such
inspections as Purchaser may reasonably require and will furnish Purchaser with
such financial and operating data and other information with respect to the
Business as Purchaser may from time to time request.
9.3 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all actions and do or cause to be done, all things
reasonably necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing Date any further action
is necessary or desirable to carry out the purposes of this Agreement, each
party hereto shall take all such necessary action.
9.4 CONSENTS. Each of the parties to this Agreement will use its
Purchase Agreement
Page 10
<PAGE> 11
best efforts to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
9.5 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to
Purchaser of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (ii) any material failure of any
party to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by it hereunder; provided however, the delivery of
any notice pursuant to this paragraph 9.5 shall not limit or otherwise effect
the remedies available hereunder to the party receiving such notice.
10. TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date as follows:
(a) by mutual written consent of Purchaser and Seller; or
(b) by Purchaser or Seller if the Closing Date has not occurred on or
before August 2, 1999; or
(c) if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling or
taken any other action permanently restraining or enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree ruling or
Purchase Agreement
Page 11
<PAGE> 12
other action shall have become final and nonappealable.
The right to terminate this Agreement under paragraph 10(b) shall not be
available to any party whose breach of a representation or warranty or failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in failure of, the Closing Date to occur.
11.0 MISCELLANEOUS.
11.1 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties.
11.2 EXPENSES. All expenses in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring same.
11.3 PARTIES IN INTEREST. All of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of, and shall be enforceable
by the respective successors and assigns of the parties hereto.
11.4 ENTIRE AGREEMENT. This Agreement, including the exhibits, schedules and
other documents and writings referred to herein or delivered pursuant hereto,
which form a part hereof, contains the entire understanding of the parties with
respect to its subject matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly set forth
herein or therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
Purchase Agreement
Page 12
<PAGE> 13
11.5 HEADINGS. The section and paragraph headings contained in this Agreement
are for reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 NOTICES. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed (registered or certified mail, postage prepaid,
return receipt requested) addressed as follows:
If to Seller:
Electronic Transmission Corporation
15301 Spectrum Drive
Suite 501
Addison, Texas 75001
If to Purchaser:
A&G Health Plans, Inc.
6620 Southpoint Drive
Suite 100
Dallas, Texas 75248
or to such other address or additional recipient as any party may have
furnished to the others in writing in accordance herewith, except that notices
of changes of address shall only be effective upon receipt.
11.7 LAW GOVERNING. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, without regard to
its conflict of laws rules.
Purchase Agreement
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<PAGE> 14
11.8 ARBITRATION AGREEMENT. Any dispute arising out of, or related to, this
agreement shall be resolved by binding arbitration conducted by the American
Arbitration Association in accordance with the then applicable Commercial
Arbitration Rules.
11.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and same instrument.
Purchase Agreement
Page 14
<PAGE> 15
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
the 11 day of August, 1999
SELLER:
ELECTRONIC TRANSMISSION CORPORATION
By
-----------------------------
Robert Fortier, CEO
PURCHASER:
A&G HEALTH PLANS, INC.
By
-----------------------------
Norman Payson, President
Purchase Agreement
Page 15
<PAGE> 1
EXHIBIT 2.1
SECURITY AGREEMENT
(Pledge of Certificate of Stock)
Effective DATE: August 11, 1999
DEBTOR: A&G Health Plans, Inc.
DEBTOR'S MAILING ADDRESS: 6620 Southport Drive, Suite 100, Dallas, Texas 75248
SECURED PARTY: Electronic Transmission Corporation
SECURED PARTY'S MAILING ADDRESS: 15301 Spectrum Drive, Suite 501, Addison, Texas
75001
COLLATERAL: 1,000 shares of the common stock of Health Plan Initiatives, Inc.
certificated as follows:
Certificate Number Number of Shares
- ------------------ ----------------
Accounts Receivable
OBLIGATION: The indebtedness described in the schedule of payments set forth in
the Purchase Agreement dated August 11, 1999 between Electronic Transmission
Corporation and A&G Health Plans, Inc., the gross total payments being
$386,000.00 subject to certain offsets and limitations as set forth in the
Purchase Agreement, which terms and conditions are incorporated herein by
reference.
Date: August 11, 1999
Maker: A&G Health Plans, Inc.
Payee: Electronic Transmission Corporation
Subject to the terms of this agreement, Debtor grants to Secured Party a
security interest in the Collateral and all proceeds thereof and payments
thereon to secure payment and performance of the Obligation and all renewals and
extensions of the Obligation or part thereof and performance of Debtor's
Covenants set out herein.
SECURITY AGREEMENT Page 1
<PAGE> 2
DEBTOR'S WARRANTIES
1. Ownership. Debtor owns the Collateral and has the authority to grant this
security interest. Ownership is free from any setoff, claim, restriction, lien,
security interest or encumbrance except this security interest.
DEBTOR'S COVENANTS
1. Protection of Collateral. Debtor will defend the Collateral against all
claims and demands adverse to Secured Party's interest and will keep it free
from all liens except for taxes not yet due and from all security interests
except this one.
2. Additional Documents. Debtor will sign any papers that Secured party
considers necessary to obtain, maintain, and perfect this security interest or
to comply with any relevant law.
3. Notice of Changes. Debtor will immediately notify Secured Party of any
material change in the Collateral; change in Debtor's name, address or location
charge in any matter warranted or represented in this agreement; change that may
affect this security interest; and any event of default.
4. Sale. Debtor will not sell, transfer or further encumber any of the
Collateral without the prior written consent of Secured Party, which will not be
unreasonably withheld.
5. Modification of Collateral. Without the written consent of Secured Party,
Debtor will not agree to any modification of terms of the Collateral or in any
writing related to the Collateral.
6. Delivery of Receipts to Secured Party. Upon any monetary default in the
obligation, on Secured Party's demand Debtor will deposit all payments received
as proceeds of, or payments on, the Collateral in a special bank account
designated by Secured Party, who alone will have power of withdrawal. Debtor
will deposit the payments on receipt, in the form received, and with any
necessary endorsements as security for the Obligation. Secured Party may make
any endorsements in Debtor's name and behalf. Between receiving and depositing
these payments, Debtor will not mingle them with any of Debtor's other funds or
property but will hold them separate and in an express trust for Secured Party.
Secured party shall apply these funds against the Obligation.
EVENTS OF DEFAULT
Each of the following conditions is an event of default:
SECURITY AGREEMENT Page 2
<PAGE> 3
1. if Debtor defaults in timely payment or performance of the Obligation or
pursuant to any written agreement between Debtor and Secured Party or in any
other transaction secured by this agreement;
2. if any warranty, covenant, or representation made to Secured Party by or on
behalf of Debtor proves to have been false in any material respect when made;
3. if a receiver is appointed for Debtor or any of the Collateral;
4. if the Collateral is assigned for the benefit of creditors or, to the extent
permitted by law, if bankruptcy or insolvency proceedings commence against or by
any of these parties: Debtor; any partnership of which Debtor is a general
partner; and any maker, drawer, acceptor, endorser, guarantor, surety,
accommodation party, or other person liable on or for any part of the
Obligation;
5. if any lien attaches to any of the Collateral; or
6. if there is a default in any instrument or lien constituting the Collateral.
REMEDIES OF SECURED PARTY ON DEFAULT
During the existence of any event of default, Secured Party may declare the
unpaid principal and earned interest on the Obligation, immediately due in whole
or part, enforce the Obligation, and exercise any rights and remedies granted by
the Texas Uniform Commercial Code or by this agreement, including the following:
1. set off the Collateral or the proceeds thereof against the Obligation or
otherwise dispose of any of the Collateral in accord with the rights, remedies
and duties of a Secured Party under Chapter 9 of the Texas Uniform Commercial
Code after giving notice as required by those chapters. Notice will be deemed
reasonable if it is mailed, postage prepaid, to Debtor at the address specified
in this agreement at least ten (10) days before any public sale or ten (10) days
before the time when the Collateral may be otherwise disposed of without further
notice to Debtor; and, any public sale shall be deemed commercially reasonable
if notice thereof is published in a newspaper of general circulation in the
county of Secured Party's mailing address specified in this agreement at least
twice during the ten (10) days before the date of sale and the sale is conducted
in the office of Secured Party;
2. apply any proceeds from set off or other disposition of the collateral after
default in the manner specified in Chapter 9 of
SECURITY AGREEMENT Page 3
<PAGE> 4
the Texas Uniform Commercial Code, including payment of Secured Party's
reasonable attorney's fees and court expenses; and
3. if set off or other disposition of the Collateral leaves the Obligation
unsatisfied, collect the deficiency from Debtor.
GENERAL PROVISIONS
1. Parties Bound. Secured Party's rights under this agreement shall inure to the
benefit of its successors and assigns. Assignment of any part of the Obligation
and delivery by Secured Party of any part of the Collateral will fully discharge
Secured Party from responsibility for that part of the Collateral. If Debtor is
more than one, all their representations, warranties and agreements are joint
and several. Debtor's Obligation and covenants under this agreement shall bind
Debtor's personal representatives, successors and assigns.
2. Waiver. Neither delay in exercise nor partial exercise of any of Secured
Party's remedies or rights shall waive further exercise of those remedies or
rights. Secured Party's failure to exercise remedies or rights does not waive
subsequent exercise of those remedies or rights. Secured Party's waiver of any
default does not waive further default. Secured Party's waiver of any right in
this agreement or of any default is binding only if it is in writing. Secured
Party may remedy any default without waiving it.
3. Reimbursement. If Debtor fails to perform the Obligation or covenants,
Secured Party may perform same and be reimbursed by Debtor on demand at the
place where the Note is payable for all sums so paid, including attorney's fees
and other legal expenses, plus interest on those sums from the dates of payment
at the rate stated in the Obligation for matured, unpaid amounts. The sum to be
reimbursed shall be part of the Obligation and secured by this Security
Agreement.
4. Interest Rate. Interest included in the Obligation shall not exceed the
maximum amount of non-usurious interest that may be contracted for, taken,
reserved, charged, or received under law; any interest in excess of that maximum
amount shall be credited to the principal of the Obligation or, if that has been
paid, refunded. On any acceleration or required or permitted prepayment of the
Obligation, any such excess shall be canceled automatically as of the
acceleration or prepayment or, if already paid, credited on the principal amount
of the Obligation or, if the principal amount has been paid, refunded. This
provision overrides other provisions in this and all other instruments
concerning the Obligation.
SECURITY AGREEMENT Page 4
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5. Modifications. No provisions of this agreement shall be modified or limited
except by written agreement.
6. Severability. The unenforceability of any provision of this agreement will
not affect the enforceability or validity of any other provision.
7. Applicable Law. This agreement will be construed according to Texas Laws.
8. Place of Performance. This agreement is to be performed in the county of
Secured Party's mailing address.
9. Presumption of Truth and Validity. If the Collateral is sold after default,
recitals in the bill of sale or transfer will be prima facie evidence of their
truth, and all prerequisites to the sale specified by this agreement and by the
Texas Uniform Commercial Code will be presumed satisfied.
10. Singular and Plural. When the context requires, singular nouns and pronouns
include the plural.
11. Priority of Security Interest. This security interest shall neither affect
nor be affected by any other security for any of the Obligation. Neither
extensions of the Obligation nor releases of any of the Collateral will affect
the priority or validity of this security interest with reference to any third
person. ETC agrees to subordinate its security interest provided for herein in
favor of a security interest required by a national bank or other federally
insured lending institution for a legitimate business transaction or need on the
part of A&G.
12. Cumulative Remedies. Foreclosure of this security interest by suit does not
limit Secured Party's remedies, including the right to sell the Collateral under
the terms of this agreement. All remedies of the Secured Party may be exercised
at the same or different times, and no remedy shall be a defense to any other.
Secured Party's rights and remedies include all those granted by law, or other
agreements securing the Obligation, or otherwise, in addition to those specified
in this agreement.
13. Agency. Debtor's appointment of Secured Party as Debtor's agent is coupled
with an interest and will survive any disability of Debtor.
14. Arbitration Agreement. Any dispute arising out of, or related to, this
agreement shall be resolved by binding arbitration conducted by the American
Arbitration Association in accordance with the then applicable Commercial
Arbitration Rules.
SECURITY AGREEMENT Page 5
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SECURED PARTY:
Electronic Transmission Corporation
- ----------------------------
Robert Fortier,
Chief Executive Officer
DEBTOR:
A&G Health Plans, Inc.
- ----------------------------
Norman Payson
President
SECURITY AGREEMENT Page 6
<PAGE> 1
EXHIBIT 2.2
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is entered into by and between the undersigned
(hereinafter referred to collectively as "Guarantors", whether one or more) and
Electronic Transmission Corporation (hereinafter referred to as "Lender").
FOR VALUE RECEIVED, the Guarantors, jointly and severally if more than
one, hereby unconditionally and absolutely guarantee the collection of
Indebtedness.
1. INDEBTEDNESS. For purposes hereof, the "Indebtedness" shall include
all principal, interest, penalties, expenses, cost of collection, and fees
(including, but not limited to attorney's fees) related to or due in connection
with the indebtedness represented by the Purchase Agreement ("Agreement") in the
original principal sum of $386,000.00 dated August 11, 1999, executed by A&G
Health Plans, Inc. ("Borrower") and payable to the Lender. Provided, however, no
provision herein or in the Agreement or in any instrument executed by the
Borrower nor the Guarantors in connection with the indebtedness evidenced by the
Agreement shall require the payment of or permit the collection of interest in
excess of the maximum permitted by law. If any excess of interest is provided
for herein or in the Note or in any loan document, the provisions of this
paragraph shall govern, and neither the Borrower nor the Guarantors shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the amount permitted by law. It is the intention of the parties to conform
strictly to the usury laws now in force, and the Note and all loan documents
executed by the Borrower or the Guarantors shall be subject to reduction of the
amount allowed under said usury laws now or hereafter construed by the courts
having jurisdiction.
2. CONTINUING GUARANTY. This is a continuing Guaranty and shall apply
to the Indebtedness and any renewals, extensions, refinancings and amendments to
or modifications thereof.
3. SUIT AGAINST GUARANTORS. Suit may be brought against the Guarantors,
jointly and severally and against less than all of them, without impairing the
rights of the Lender against the other Guarantors. The Lender may compromise
with any Guarantor for less than all of the Indebtedness and release any
Guarantor from all further liability to the Lender without impairing the right
of the Lender to demand and collect the balance of the Indebtedness from other
Guarantors not so released. It is agreed among the Guarantors that such
compromise and release shall not impair the rights of the Guarantors as among
themselves.
GUARANTY AGREEMENT Page 1
<PAGE> 2
4. UNGUARANTEED INDEBTEDNESS. If, at any time, there be Debts owed by
the Borrower to the Lender which are not part of the Indebtedness ("Unguaranteed
Debt"), the Lender, without in any manner impairing its rights hereunder, may,
at its option, exercise rights of offset by applying first to said Unguaranteed
Debt any deposit balances to the credit of the Borrower and, except as hereafter
provided, apply first to the Unguaranteed Debt, all amounts realized by the
Lender from collateral or security held by the Lender for the payment of the
Borrower's debts. If a particular security instrument expressly requires an
application different from that permitted under the preceding sentence, proceeds
realized by the Lender from such security instrument shall be applied as
provided in such instrument.
5. OBLIGATIONS NOT IMPAIRED. The obligations of the Guarantors under
this Guaranty shall not be released or impaired without the express prior
written consent of the Lender. Without limiting the generality of the foregoing,
the obligations of the Guarantors shall not be released or impaired on account
of the following events:
(a) the voluntary or involuntary liquidation, sale or other disposition
of all or substantially all of the assets of the Borrower, or any receivership,
insolvency, bankruptcy, reorganization or other similar proceedings affecting
the Borrower or any of its assets;
(b) the addition of an additional guarantor or guarantors or the
addition of additional collateral securing the Indebtedness;
(c) any impairment, modification, release or limitation of liability
of, or stay of lien enforcement proceedings against, the Borrower, its property,
or its estate in bankruptcy or any modification, discharge or extension of the
Indebtedness resulting from the operation of any present or future provision of
the Federal Bankruptcy Code or any other similar federal or state statute, or
from the decision of any court, it being the intention hereof that the
Guarantors shall remain liable on the Indebtedness, notwithstanding any act,
omission or thing which might, but for the provisions hereof, otherwise operate
as a legal or equitable discharge of the Guarantors;
(d) the substitution or withdrawal of collateral or release of
security, and the exercise or failure to exercise by the Lender of any right
conferred upon it herein or in any security agreement;
(e) if the Borrower is not liable because the act of creating the
Indebtedness is ultra vires or the officers or persons creating the Indebtedness
acted in excess of their authority, or for any reason the Indebtedness cannot be
enforced against the Borrower;
GUARANTY AGREEMENT Page 2
<PAGE> 3
(f) any payment by the Borrower to the Lender if such payment is held
to constitute a preference under the bankruptcy laws, or if for any other reason
the Lender is required to refund such payment to the Borrower or pay the amount
thereof to any other party;
(g) if the Guarantors are or become liable for any indebtedness owing
by the Borrower to the Lender, by endorsement or otherwise, other than under
this Guaranty; or
(h) if this Guaranty is ever deemed invalid or unenforceable as to any
of the Guarantors.
6. BENEFIT TO GUARANTORS. Guarantors acknowledge and warrant that they
derived or expect to derive financial and other advantage and benefit, directly
or indirectly, from the Indebtedness and each and every advance thereof and from
each and every renewal, extension, release of collateral or other relinquishment
of legal rights made or granted or to be made or granted by the Lender to the
borrower.
7. INDUCEMENT TO CREDITOR. Guarantors acknowledge that this Guaranty is
given to induce the Lender to extend credit to the Borrower which would not be
extended except in reliance upon this Guaranty.
8. MODIFICATION OR CONSENT. No modification, consent or waiver of any
provision of this Guaranty, nor consent to any departure by any Guarantor
therefrom, shall be effective unless the same shall be in writing and signed by
the Lender and the Guarantors, and then shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on any
Guarantors in any case shall, of itself, entitle any Guarantors to any other or
further notice or demand in similar or other circumstances.
9. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of the
Lender, its successors and assigns, and in the event of any assignment by the
Lender, its successors or assigns, of the Indebtedness, or any part thereof, the
rights and benefits hereunder, to the extent applicable to the Indebtedness so
assigned, may be transferred with such Indebtedness.
10. DEATH OF GUARANTOR. Upon the death of any Guarantor, the obligation
of the deceased Guarantor shall continue against his estate as to the
Indebtedness.
GUARANTY AGREEMENT Page 3
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11. RIGHTS AND REMEDIES OF CREDITOR. All rights and remedies of the
Lender hereunder are cumulative of each other and of every other right or remedy
which the Lender may otherwise have at law or in equity or under any contract or
document, and the exercise Or one or more rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of other rights or remedies. No
delay or omission by the Lender in exercising any power or right hereunder shall
impair any such right or power or be construed as a waiver thereof or in an
acquiescence therein, nor shall any single or partial exercise or any such power
preclude other or further exercise thereof or the exercise of any other right or
power hereunder.
12. COSTS OF COLLECTION. Guarantors agree to pay all costs of
collection, including reasonable attorneys' fees and expenses, if this Guaranty
is placed in the hands of any attorney for collection or is collected through
any court.
13. COUNTERPARTS. This Guaranty may be executed in counterparts each of
which shall be deemed an original. The failure of a Guarantor to execute a
counterpart hereof shall not effect or impair the Validity or enforceability of
this Guaranty against the Guarantors executing same.
14. PLACE OF PERFORMANCE. Guarantors agree that this agreement is
performable in Dallas County, Texas, and waive the right to be sued elsewhere.
15. Arbitration Agreement. Any dispute arising out of, or related to, this
agreement shall be resolved by binding arbitration conducted by the American
Arbitration Association in accordance with the then applicable Commercial
Arbitration Rules.
ADDRESS OF GUARANTORS: GUARANTORS:
6620 Southpoint Drive
Suit 100
Dallas, Texas 75248
--------------------------
Norman Payson
GUARANTY AGREEMENT Page 4
<PAGE> 5
List of Schedules
<TABLE>
<CAPTION>
Schedules Description
- --------- -----------
<S> <C>
Schedule 1 Assets to be delivered to A&G Financial
Consultants, Inc.
Schedule 2 Gross Revenue (less Access Fees) for Health Plan
Initiatives, Inc. for months April 1999 & May 1999
Schedule 3 Outstanding liability balances as of 3/31/99
Schedule 3A Network List
Schedule 4 Outstanding receivable balances as of 3/31/99
Schedule 4(a) Client List
</TABLE>
GUARANTY AGREEMENT Page 5
