<PAGE> 1
UNITED STATES
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 reported)
November 29, 1999
THE TRIZETTO GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-27501 33-0761159
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
567 San Nicolas Drive, Suite 360, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 719-2200
Page 1 of __
Exhibit Index on Page 6
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ITEM 2. - ACQUISITION OR DISPOSITION OF ASSETS
On November 29, 1999, The TriZetto Group, Inc., a Delaware corporation
(the "Registrant"), acquired all of the issued and outstanding capital stock of
Novalis Corporation, a Delaware corporation ("Novalis"), in accordance with the
terms and conditions of the Stock Purchase Agreement, dated as of November 29,
1999 (the "Agreement"), by and among the Registrant, Novalis, the Novalis
Noteholders described therein and the Novalis Stockholders described therein
(Novalis Noteholders together with Novalis Stockholders are collectively
referred to as the "Novalis Securityholders"). The acquisition was effected by a
stock purchase (the "Acquisition") whereby the Registrant purchased from the
Novalis Securityholders and the Novalis Securityholders sold to the Registrant,
all of the issued and outstanding stock of Novalis. As a result of the
Acquisition, Novalis became a wholly-owned subsidiary of the Registrant.
Pursuant to the Acquisition, the Novalis Securityholders sold,
transferred and delivered to the Registrant, and the Registrant purchased from
the Novalis Securityholders, all of the issued and outstanding shares of capital
stock of Novalis (the "Novalis Stock") for an aggregate purchase price equal to
the sum of (a) $5,001,515.41 cash (the "Cash Portion of the Purchase Price") and
(b) 549,786 validly issued, fully paid and non-assessable shares of common
stock, $.001 par value, of the Registrant (the "Registrant Common Stock").
The number of shares of the Registrant Common Stock issued to the
Novalis Securityholders was calculated by dividing (a) $9,000,000 by (b) the
average of the closing sales prices of Registrant Common Stock for the five
trading days immediately preceding November 22, 1999 (the "Stock Portion of the
Purchase Price," and together with the Cash Portion of the Purchase Price, the
"Purchase Price"). Pursuant to the Agreement, a portion of the Cash Portion of
the Purchase Price and the Stock Portion of the Purchase Price were deposited
into separate escrow accounts and are each subject to possible adjustment as set
forth in the Agreement. The source of funds for the Cash Portion of the Purchase
Price was available cash. The Purchase Price and all other terms of the
Agreement were determined pursuant to arms-length negotiations between the
parties.
In connection with Agreement, the Registrant entered into a Registration
Rights Agreement dated as of November 29, 1999 ("Registration Rights Agreement")
with those certain holders of Registrant Common Stock party thereto (the
"Holders"). Pursuant to the terms of the Registration Rights Agreement, the
Registrant is required to use its commercially reasonable best efforts to
qualify the shares of Registrant Common Stock issued to the Holders under the
Agreement for registration on Form S-3 or, if Form S-3 is not available, then
subject to the availability of the audited consolidated financial statements of
Novalis and its subsidiaries, on Form S-1 or such other available form.
The foregoing description of the Acquisition does not purport to be
complete and is qualified in its entirety by reference to the Agreement, which
is incorporated herein by reference.
<PAGE> 3
ITEM 7. - FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following financial statements of Novalis are unavailable and
are anticipated to be filed under Form 8-K/A within 60 days of
the date of this Report.
- Independent Auditors' Reports
- Audited Consolidated Balance Sheets as of December 31, 1998
and December 31, 1997
- Audited Consolidated Statements of Operations for the years
ended December 31, 1998 and 1997
- Audited Consolidated Statement of Stockholders' Equity for
the years ended December 31, 1998 and 1997
- Audited Consolidated Statements of Cash Flow for the years
ended December 31, 1998 and 1997
- Unaudited Consolidated Balance Sheets as of September 30,
1999
- Unaudited Consolidated Statements of Operations for the nine
months ended September 30, 1999
- Unaudited Consolidated Statement of Stockholders' Equity for
the nine months ended September 30, 1999
- Unaudited Consolidated Statements of Cash Flow for the nine
months ended September 30, 1999
(b) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial statements of Novalis are
unavailable and are anticipated to be filed under Form 8-K/A
within 60 days of the date of this Report.
- Pro forma condensed Balance Sheet as of September 30, 1999
- Pro forma condensed Statement of Operations for the year
ended December 31, 1998 and for the nine months ended
September 30, 1999
(c) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
2.1 Stock Purchase Agreement dated as of November 29,
1999
2.2 Offset Escrow Agreement dated as of November 29,
1999
2.3 Registration Rights Agreement dated as of November
29, 1999
2.4 Form of Promissory Note
2.5 Warrant and Warrant Assignment dated as of November
29, 1999
2.6 Non-Competition Agreement dated as of November 29,
1999
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
2.7 Warrant Escrow Agreement dated as of November 29,
1999
2.8 Form of Stock Pledge Agreement
23.1 Consent of PricewaterhouseCoopers LLP with respect
to the financial statements of the Registrant (to
be filed by amendment)
23.2 Consent of PricewaterhouseCoopers LLP with respect
to the financial statements of Novalis (to be filed
by amendment)
99.1 Financial Statements of Novalis listed in Item 7(a)
above (to be filed by amendment)
99.2 Pro Forma Financial Statements listed in Item 7(b)
above (to be filed by amendment)
</TABLE>
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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.
THE TRIZETTO GROUP, INC.
December 13, 1999 /s/ Jeffrey H. Margolis
---------------------------------------
Jeffrey H. Margolis
Chief Executive Officer, President and
Chairman of the Board of Directors
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
<S> <C> <C>
2.1 Stock Purchase Agreement dated as of November 29, 1999
2.2 Offset Escrow Agreement dated as of November 29, 1999
2.3 Registration Rights Agreement dated as of November 29, 1999
2.4 Form of Promissory Note
2.5 Warrant and Warrant Assignment dated as of November 29, 1999
2.6 Non-Competition Agreement dated as of November 29, 1999
2.7 Warrant Escrow Agreement dated as of November 29, 1999
2.8 Form of Stock Pledge Agreement
23.1 Consent of PricewaterhouseCoopers LLP with respect to the *
financial statements of the Registrant
23.2 Consent of PricewaterhouseCoopers LLP with respect to the *
financial statements of Novalis
99.1 Financial Statements of Novalis listed in Item 7(a) above *
99.2 Pro Forma Financial Statements listed in Item 7(b) above *
</TABLE>
- -----------------
* to be filed by amendment
<PAGE> 1
EXHIBIT 2.1
----------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND AMONG
THE TRIZETTO GROUP, INC.,
NOVALIS CORPORATION
AND
SECURITYHOLDERS OF NOVALIS CORPORATION
DATED AS OF NOVEMBER 29, 1999
----------------------------------------------
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is made and entered
into as of November 29, 1999, by and among The TriZetto Group, Inc., a Delaware
corporation ("TriZetto"), Novalis Corporation, a Delaware corporation
("Novalis"), the holders of the capital stock of Novalis listed on the signature
page hereto (the "Novalis Stockholders"), and the holders of certain promissory
notes made by Novalis listed on the signature page hereto (the "Novalis
Noteholders," and, together with the Novalis Stockholders, the "Novalis
Securityholders"). Certain other capitalized terms used in this Agreement are
defined in Exhibit A attached hereto.
RECITALS
WHEREAS, the Novalis Securityholders are the record and beneficial
owners of the shares of Novalis' (a) Series A Convertible Preferred Stock, par
value $1.00 per share (the "Series A Stock"), (b) Series B Convertible Preferred
Stock, par value $1.00 per share (the "Series B Stock"), and (c) common stock,
par value $.01 per share (the "Common Stock");
WHEREAS, certain of the Novalis Noteholders are the holders of
promissory notes, each dated October 4, 1995, as amended and extended through
January 2, 2000, made by Novalis and payable to such Novalis Noteholders (the
"1995 Notes"), and certain of the Novalis Noteholders are the holders of other
promissory notes, each dated January 19, 1999, as extended through December 31,
1999, made by Novalis and payable to such Novalis Noteholders (the "1999 Notes,"
and, together with the 1995 Notes, the "Novalis Notes");
WHEREAS, prior to the Closing (as defined herein), the Novalis
Noteholders will exchange the principal amount of the Novalis Notes (together
with interest accrued thereon) for shares of Series C Preferred Stock, par value
$1.00 per share (the "Series C Stock"), as described in greater detail in
Appendix A hereto;
WHEREAS, at the time of the Closing and after giving effect to the
foregoing transactions, no Novalis Notes will be outstanding, and the Novalis
Securityholders will be the record and beneficial owners of the outstanding
shares of Common Stock, Series A Stock, Series B Stock and Series C Stock
(collectively, the "Novalis Stock"), as set forth on Schedule 1 attached hereto;
WHEREAS, TriZetto desires to purchase from the Novalis Securityholders,
and the Novalis Securityholders desire to sell to TriZetto, all of the issued
and outstanding shares of capital stock of Novalis, which immediately prior to
the Closing, will consist of (i) 1,186,559 shares of Series A Stock, (ii)
235,000 shares of Series B Stock, (iii) 92,749.03 shares of Series C Stock, and
(iv) 938,519 shares of Common Stock; and
WHEREAS, each of TriZetto, Novalis and the Novalis Securityholders
desire to make certain representations, warranties, covenants and agreements in
connection with the purchase and sale of the Novalis Stock and also to prescribe
various conditions to the consummation thereof.
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:
<PAGE> 3
ARTICLE 1
PURCHASE AND SALE OF SHARES; CONVERSION OF THE NOVALIS NOTES
1.1 PURCHASE AND SALE.
(a) GENERAL. On the terms and subject to the conditions of
this Agreement, in reliance upon the representations, warranties and agreements
of the parties contained herein, on the Closing Date (as defined in Section 1.2)
the Novalis Securityholders shall sell, transfer and deliver to TriZetto, and
TriZetto shall purchase from the Novalis Securityholders, the Novalis Stock for
an aggregate purchase price equal to the sum of (i) $5,001,515.41 cash (the
"Cash Portion of the Purchase Price"); and (ii) 549,786 validly issued, fully
paid and non-assessable shares of common stock, $.001 par value, of TriZetto
(the "TriZetto Stock") which equals the quotient of (A) $9,000,000 divided by
(B) the average of the closing sales prices of the TriZetto Stock for the five
trading days immediately preceding the earlier of (1) November 22, 1999, (2) the
announcement of the transactions contemplated under this Agreement, or (3) the
execution and delivery of this Agreement, as reported on the Nasdaq National
Market System ("NMS")(the "Stock Portion of the Purchase Price," and together
with the Cash Portion of the Purchase Price, the "Purchase Price").
(b) ALLOCATION OF THE STOCK PORTION OF THE PURCHASE PRICE.
The Stock Portion of the Purchase Price shall be allocated among the Novalis
Securityholders in accordance with Exhibit B attached hereto. Any additional
shares of TriZetto Stock which are issued pursuant to Section 1.1(e) below shall
be issued to the Novalis Securityholders in the same proportion as set forth on
Exhibit B, rounded to the nearest whole share. The Stock Portion of the Purchase
Price has been allocated and shall be issued to each Novalis Securityholder
pursuant to mutual agreement of the Novalis Securityholders as set forth in
Exhibit B. By executing and delivering this Agreement, each Novalis
Securityholder agrees to such allocation as set forth on Exhibit B.
(c) ALLOCATION OF THE CASH PORTION OF THE PURCHASE PRICE.
The Cash Portion of the Purchase Price shall be allocated among the Novalis
Securityholders in accordance with Exhibit C attached hereto. The Cash Portion
of the Purchase Price has been allocated and shall be paid to each Novalis
Securityholder pursuant to the mutual agreement of the Novalis Securityholders
as set forth on Exhibit C. By executing and delivering this Agreement, each
Novalis Securityholder agrees to such allocation as set forth on Exhibit C.
(d) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be
paid as follows:
(i) DELIVERY OF $5,000,000 OF THE CASH PORTION OF
THE PURCHASE PRICE. Pursuant to an escrow agreement to be entered into on or
before the Closing in substantially the form of Exhibit D (the "Warrant Escrow
Agreement"), by and among TriZetto, the Novalis Securityholders and Stradling
Yocca Carlson & Rauth (the "Warrant Escrow Agent"), TriZetto will deposit
$5,000,000 of the Cash Portion of the Purchase Price that would otherwise be
delivered to the Novalis Securityholders in an escrow pursuant to the Warrant
Escrow Agreement (the "Warrant Escrow") and the Cash Portion of the Purchase
Price shall remain in the Warrant Escrow until such time as the conditions set
forth therein are waived or satisfied.
(ii) DELIVERY OF REMAINING $1,515.41 OF CASH PORTION
OF PURCHASE PRICE TO THE NOVALIS SECURITYHOLDERS. At the Closing, TriZetto shall
deliver checks for an aggregate of $1,515.41 made payable to the Novalis
Securityholders in accordance with Exhibit C.
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(iii) DELIVERY OF TRIZETTO STOCK INTO ESCROW. Pursuant
to an escrow agreement to be entered into on or before the Closing in
substantially the form of Exhibit E (the "Offset Escrow Agreement"), by and
among TriZetto, the Novalis Securityholders and Bankers Trust of California N.A.
(the "Offset Escrow Agent"), TriZetto will deposit stock certificates
representing 366,524 shares of TriZetto Stock that would otherwise be delivered
to the Novalis Securityholders at the Closing (the "Escrow Shares") in an escrow
pursuant to the Offset Escrow Agreement (the "Offset Escrow") together with
related stock powers. The Escrow Shares and such stock powers, and any other
property with respect thereto delivered to the Offset Escrow Agent as provided
in the Offset Escrow Agreement will be held in escrow to satisfy TriZetto's
offset rights with respect to claims made under Article 8 hereof, Subsection
B.(ii) and Subsection C of the Supplement to Novalis Disclosure Schedule and in
accordance with the Offset Escrow Agreement. Such delivery of TriZetto Stock
shall take into account the transfers contemplated to Chester E. Burrell under
Section 9.2(k).
(iv) DELIVERY OF TRIZETTO STOCK TO NOVALIS
SECURITYHOLDERS. Immediately following the Closing, TriZetto and Novalis shall
submit to TriZetto's registrar and transfer agent, U.S. Stock Transfer
Corporation (the "Transfer Agent"), an instruction letter including a list of
the names, addresses and social security numbers/taxpayer identification numbers
of each Novalis Securityholder who has delivered the certificate or certificates
representing all shares of Novalis Stock held by such Novalis Securityholder. As
soon as reasonably practicable following the Closing, TriZetto shall cause the
Transfer Agent to deliver a certificate to each Novalis Securityholder
representing that number of shares of TriZetto Stock, which such Novalis
Securityholder has the right to receive pursuant to the provisions of this
Article 1, subject to the deposit of Escrow Shares in accordance with Section
1.1(d)(iii).
(e) ADJUSTMENT TO TRIZETTO STOCK. In the event that the
average closing sales price of the TriZetto Stock as reported on the NMS (or
other exchange or similar market on which TriZetto Stock is regularly traded if
not then traded on NMS) for the 20 trading days preceding the one-year
anniversary of the Closing Date (the "Adjustment Date") is less than $16.37 (the
"Initial TriZetto Stock Price") TriZetto shall issue or cause to be issued by
submitting an instruction letter to its Transfer Agent instructing the Transfer
Agent to issue an additional number of shares of TriZetto Stock within five
business days after the Adjustment Date (the "Adjusted Shares Closing") to the
Novalis Securityholders such that the total market value of all the shares of
TriZetto Stock issued and delivered by TriZetto, as required this Section 1.1(e)
as well as by Sections 1.1(a) and 1.1(d)(iii) and (iv) is $9,000,000, based upon
the average closing sales price for the 20 trading days preceding the Adjustment
Date; provided, however, that in no event shall TriZetto be required to issue a
number of additional shares at the Adjustment Shares Closing in excess of
137,447 shares of TriZetto Stock. The adjustment called for by this Section
1.1(e) shall be made before any shares of TriZetto Stock are returned from the
Offset Escrow to TriZetto or otherwise sold in satisfaction of claims under
Article 8 or for any other purpose.
(f) ADJUSTMENT TO CASH PORTION OF THE PURCHASE PRICE. In the
event that the conditions set forth in the Warrant Escrow Agreement in the form
attached hereto as Exhibit F have not been satisfied by November 30, 1999, the
Cash Portion of the Purchase Price shall be reduced by the $5,000,000 held
pursuant to the Warrant Escrow Agreement, the Warrant Escrow Agreement shall be
terminated and the $5,000,000 held pursuant to the Warrant Escrow Agreement
shall be returned to TriZetto.
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<PAGE> 5
(g) STOCK SPLITS, STOCK DIVIDENDS, ETC. Appropriate
adjustments shall be made to the Initial TriZetto Stock Price and the number of
shares of TriZetto Stock to be delivered at the Adjustment Shares Closing to
reflect any stock splits, stock dividends, subdivisions, combinations,
recapitalizations or other events having similar effect after the Closing.
1.2 EXCHANGE OF THE NOVALIS NOTES. Prior to but subject to the
consummation of the Closing, the Novalis Noteholders shall exchange all of the
outstanding principal due under the Novalis Notes (together with the right to
receive accrued but unpaid interest due thereon) for 92,749.03 shares of Series
C Stock, as more particularly described in Appendix A attached hereto, and upon
the consummation of such exchange the Novalis Notes shall be deemed canceled and
of no force or effect.
1.3 CLOSING. The closing of the purchase and sale of the Novalis
Stock (the "Closing") shall take place at the offices of Stradling Yocca Carlson
& Rauth at 660 Newport Center Drive, Suite 1600, Newport Beach, California 92660
or by facsimile, on November 29, 1999, or, if the conditions to Closing set
forth in Section 9 of this Agreement shall not have been satisfied or waived by
the appropriate party by such time of day on such date, at such time of day as
the parties shall agree on the first business day to occur following the date on
which all of the conditions to Closing set forth in Section 9 shall have been
satisfied or waived as provided therein (subject to the provisions of Section 10
hereof, such other date and time as shall be mutually agreed upon by the
parties, but in no event later than November 30, 1999). The date on which the
Closing actually occurs and the transactions contemplated hereby become
effective is hereinafter referred to as the "Closing Date." At the time of the
Closing, TriZetto, Novalis and the Novalis Securityholders shall deliver the
certificates and other documents and instruments required to be delivered
hereunder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF NOVALIS
Novalis represents and warrants to TriZetto that, except as set forth in
the Novalis Disclosure Schedule:
2.1 ORGANIZATION AND GOOD STANDING; AUTHORIZATIONS AND APPROVALS; NO
VIOLATIONS.
(a) Novalis and each Novalis Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation. Novalis and each Novalis Subsidiary is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect on
Novalis and the Novalis Subsidiaries, considered as a whole. The state of
incorporation and each jurisdiction in which each of Novalis and the Novalis
Subsidiaries is qualified to do business as a foreign corporation is listed in
Section 2.1(a) of the Novalis Disclosure Schedule. Novalis and each Novalis
Subsidiary has all necessary corporate power and authority, and all material
governmental licenses, authorizations, consents, and approvals, to carry on its
business as it is now being conducted, and to own or lease, and operate its
properties and assets. Novalis has delivered to TriZetto true and complete
copies of Novalis' and each Novalis Subsidiary's Certification of Incorporation
and Bylaws as currently in effect.
(b) AUTHORIZATION AND APPROVALS. Novalis has all requisite
corporate power and authority to enter into this Agreement, and each other
Transaction Document to which it is a
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party and to perform its obligations hereunder and thereunder. This Agreement
has been, and each other Transaction Document on or prior to the Closing Date
will be, duly executed and delivered by Novalis, as appropriate, and when duly
executed and delivered will constitute the legal, valid and binding obligation
of Novalis, enforceable in accordance with its terms, except as may be limited
by bankruptcy, reorganization, insolvency, moratorium or other laws relating to
or affecting the enforcement of creditors' rights and remedies generally. This
Agreement, and each other Transaction Document, has been duly and validly
authorized by and approved by all requisite corporate action by the Novalis'
board of directors and stockholders. Except as set forth in Schedule 2.1(b) of
the Novalis Disclosure Schedule, no further approvals or consents by, or filings
with, any federal, state, municipal, foreign or other court or governmental or
administrative body, agency or other third party is required in connection with
the execution and delivery by Novalis or of this Agreement or any other
Transaction Document to which it is a party, or the consummation by Novalis of
the transactions contemplated hereby and thereby.
(c) NO VIOLATIONS. Except as disclosed in Section 2.1(c) of
the Novalis Disclosure Schedule, neither the execution and delivery by Novalis
of this Agreement or any other Transaction Document to which Novalis is a party
nor the consummation by Novalis of the transactions contemplated hereby or
thereby will (a) violate any provision of the charter or bylaws of Novalis, (b)
violate, or be in conflict with, or constitute a default (or other event which,
with the giving of notice or lapse of time or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of any material lease, license,
promissory note, contract, agreement, mortgage, deed of trust or other
instrument or document to which Novalis or any Novalis Subsidiary is a party or
by which Novalis or any Novalis Subsidiary or any of their respective properties
or assets may be bound, (c) violate any order, writ, injunction, decree, law,
statute, rule or regulation of any court or governmental authority applicable to
Novalis or any Novalis Subsidiary or any of their respective properties or
assets or (d) give rise to a declaration or imposition of any Lien upon any of
the assets of Novalis or any Novalis Subsidiary.
2.2 SUBSIDIARIES.
(a) Section 2.2(a) of the Novalis Disclosure Schedule sets
forth each entity of which at least 50% of the outstanding securities or other
interests having rights to vote or otherwise direct or cause the direction of
management or policies (whether through ownership of voting securities, by
agreement or otherwise) is owned, directly or indirectly, by Novalis. Except as
disclosed in Sections 2.2(b) and (c) of the Novalis Disclosure Schedule and
except for the Novalis Subsidiaries, Novalis does not own, directly or
indirectly, any ownership, equity, profits or voting interest in, or otherwise
control any corporation, partnership, joint venture or other entity, and has no
agreement or commitment to purchase any such interest.
(b) Except as disclosed in Section 2.2(b) of the Novalis
Disclosure Schedules, all of the outstanding capital stock of, or other voting
securities or ownership interests in, each Novalis Subsidiary is owned by
Novalis, 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 voting securities or
ownership interests), other than any restrictions imposed under the 1933 Act.
Except as disclosed in Section 2.2(b) of the Novalis Disclosure Schedule, there
are no outstanding (i) shares of capital stock or other voting securities or
ownership interests in any Novalis Subsidiary or (ii) securities of Novalis or
any Novalis Subsidiary convertible into or exchangeable for shares of capital
stock, voting securities or other ownership interests in any
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Novalis Subsidiary or (iii) options or other rights to acquire from Novalis or
Novalis Subsidiary, and other obligation of Novalis or Novalis Subsidiary to
issue, and 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, Novalis Subsidiary. There are no
outstanding obligations of Novalis or Novalis Subsidiary to repurchase, redeem
or otherwise acquire any of the securities referred to in clauses (i), (ii) or
(iii) above.
2.3 CAPITAL STRUCTURE OF NOVALIS. The authorized capital stock of
Novalis consists of 18,000,000 shares, of which, as of the date of this
Agreement, (i) 16,000,000 are classified as shares of Common Stock, $.01 par
value per share, and (ii) 2,000,000 are classified as shares of preferred stock,
$1.00 par value per share, of which (x) 1,186,559 have been designated as Series
A Convertible Preferred Stock, (y) 235,000 shares have been designated as Series
B Convertible Preferred Stock and 93,000 shares have been designated as Series C
Convertible Preferred Stock. As of the date hereof, Novalis has issued and
outstanding 938,519 shares of Common Stock, 1,186,559 shares of Series A Stock,
235,000 shares of Series B Stock and no shares of Series C Stock. As of the date
of this Agreement, there are options to purchase 700,100 shares of the Common
Stock outstanding (the "Options") and 263,649 shares available for future grants
under Novalis' 1995 Stock Option Plan. As of the Closing Date, there will be no
outstanding Options. Except as provided in this Agreement and the Stockholders
Agreement, dated as of October 4, 1995, by and among Novalis and the
Stockholders named as such therein, as amended (the "Novalis Stockholders
Agreement"), the 1,186,559 shares of Series A Stock, 235,000 shares of Series B
Stock and 92,749.03 shares of Series C Stock issued and outstanding as of the
date hereof, there are no outstanding rights of first refusal, preemptive rights
or other rights, options, stock appreciation rights, redemption rights,
subscriptions, warrants, options, convertible securities or other agreements,
arrangements or commitments either directly or indirectly for the purchase or
acquisition from Novalis or the Novalis Subsidiaries of any shares of capital
stock of Novalis or the Novalis Subsidiaries to purchase or otherwise acquire
equity securities of Novalis. Except as set forth in Section 2.3 of the Novalis
Disclosure Schedule, Novalis does not have outstanding any bonds, debentures,
notes or other obligations, the holders of which have the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Novalis or the Novalis Subsidiaries on any
matter. All of the outstanding shares of capital stock of Novalis and each of
the Novalis Subsidiaries have been validly issued and are fully paid and
nonassessable. All of such shares and the Options have been issued in
transactions exempt from registration under the 1933 Act. Each Novalis
Stockholder owns, and has good, valid and marketable title to the Novalis Stock
free and clear of all Liens, charges, options, rights of first refusal or
limitations or other restrictions on transfer, except as imposed under the 1933
Act and the Novalis Stockholders Agreement.
2.4 TAXES.
(a) Except as disclosed in Section 2.4(a) of the Novalis
Disclosure Schedule, Novalis and the Novalis Subsidiaries have timely filed or
been included in all Tax Returns that were required to be filed prior to the
date hereof by or with respect to the activities of Novalis and the Novalis
Subsidiaries, which Tax Returns are true, correct and complete in all material
respects, and Novalis has paid all Taxes shown thereon to be due. Neither
Novalis nor any Novalis Subsidiary currently is the beneficiary of any extension
of time within which to file any Tax Return.
(b) Novalis and the Novalis Subsidiaries have paid or caused
to be paid within the time and in the manner prescribed by law all Taxes that
were required to be paid by Novalis and the Novalis Subsidiaries prior to the
date hereof. All Taxes attributable to all taxable periods ending
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<PAGE> 8
on or before the last day covered by the Financial Statements, to the extent not
required to be previously paid, have been fully and adequately reserved for (as
taxes payable) on said Financial Statements. Each of Novalis and the Novalis
Subsidiaries has withheld and paid all taxes required to have been withheld and
paid.
(c) Except with respect to any accounting change required by
Section 448 of the Internal Revenue Code of 1986, as amended (the "Code"), and
any similar state or local provision, that will occur as a result of the
consummation of the transactions contemplated herein, Novalis has not taken any
action that would require an adjustment pursuant to Section 481 of the Code, by
reason of a change in accounting method or otherwise. Novalis has not filed a
consent under Section 341(f)(1) of the Code or agreed to have the provisions of
Section 341(f)(2) of the Code apply to any disposition of "subsection (f)
assets" as such term is defined in Section 341(f)(4) of the Code.
(d) No Tax assessment or deficiency which has not been paid
or for which an adequate reserve has not been set aside, has been made or
proposed against Novalis or any Novalis Subsidiary, nor are any of the Tax
Returns now being or, to the Knowledge of Novalis, threatened to be examined or
audited, and no consents waiving or extending any applicable statutes of
limitations for the Tax Returns, or any Taxes required to be paid thereunder,
have been filed. Novalis shall promptly notify TriZetto of any notice of pending
action or proceeding involving Taxes relating to Novalis or any Novalis
Subsidiary between the date of this Agreement and the Closing Date. All Tax
deficiencies determined as a result of any past completed audit have been
satisfied. Novalis has delivered or made available to TriZetto complete and
correct copies of all audit reports and statements of deficiencies that were
issued after January 1, 1996 with respect to any tax assessed against or agreed
to by Novalis or any Novalis Subsidiary.
(e) Prior to the date hereof, Novalis has made available to
TriZetto complete, current and correct copies of the Tax Returns for the years
ended in 1996, 1997 and 1998.
(f) None of the assets of Novalis or any Novalis Subsidiary
are subject to any liens in respect of Taxes (other than for current Taxes not
yet due and payable).
(g) Neither Novalis nor any Novalis Subsidiary is a party to
or bound by any Tax sharing, Tax indemnity or Tax allocation agreement or other
similar arrangement. Neither Novalis nor any Novalis Subsidiary has any
liability for Taxes of any person (other than any of Novalis and the Novalis
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
(h) Neither Novalis nor any Novalis Subsidiary has made any
payments, is obligated to make any payments or is a party to any agreement that
under the circumstances or the transactions contemplated hereunder could
obligate it to make any payments that will not be deductible under Section 280G
of the Code.
(i) With respect to tax years ended in 1996, 1997 and 1998,
neither Novalis nor any Novalis Subsidiary is subject to any Tax in any
jurisdiction or by any Taxing Authority with respect to which it has not filed a
Tax Return required by law.
(j) Neither Novalis nor any Novalis Subsidiary has executed
or entered into any closing agreement pursuant to Section 7121 of the Code, or
any predecessor provisions thereof or any similar provision of state or other
law.
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2.5 TRANSACTIONS WITH AFFILIATES; AFFILIATES.
(a) Except as set forth in Section 2.5 of the Novalis
Disclosure Schedule, neither the Novalis Securityholders nor any of their
Affiliates, have any interest, in any lease, lien, contract, license,
encumbrance, loan or other agreement to which Novalis or any Novalis Subsidiary
is a party or any interest (other than as a shareholder or noteholder) in any
properties or assets of Novalis or any Novalis Subsidiary.
(b) Novalis has no Affiliates other than the Novalis
Securityholders and their Affiliates and PHN.
2.6 FINANCIAL STATEMENTS. True and complete copies of (i) the
unaudited consolidated balance sheet of Novalis and the Novalis Subsidiaries as
of October 31, 1999 (the "Balance Sheet"), and the related consolidated
statement of income, consolidated statement of shareholders' equity and
consolidated statement of cash flows for the ten months then ended (the "Interim
Financial Statements"), and (ii) the audited consolidated financial statements
of Novalis and Novalis Subsidiaries as of and for the fiscal year ended December
31, 1996 and the unaudited consolidated financial statements of Novalis and
Novalis Subsidiaries as of and for the fiscal years ended December 31, 1997 and
1998 (including, without limitation, the related consolidated balance sheets,
consolidated statements of income, consolidated statements of shareholders'
equity, consolidated statements of cash flows and all notes, schedules and
exhibits thereto) (collectively with the Interim Financial Statements, the
"Financial Statements"), are included in Section 2.6 of the Novalis Disclosure
Schedule, and no changes have been made thereto since the date hereof. Except as
expressly set forth or disclosed in the notes, exhibits or schedules thereto or
in Section 2.6 of the Novalis Disclosure Schedule, the Financial Statements (i)
have been prepared in conformity with generally accepted accounting principles
("GAAP") consistently applied throughout the periods covered, except, in the
case of the Interim Financial Statements, for the lack of footnote disclosure
and year-end adjustments which will not be material individually or in the
aggregate and except as may be indicated in the notes thereto, (ii) present
fairly the financial position, results of operations and cash flows of Novalis
on a consolidated basis as of and for the periods then ended, (iii) disclose all
liabilities, including contingent and/or unmatured liabilities as of the dates
thereof, whether or not required by GAAP to be disclosed thereon, and (iv)
reflect that Novalis and Novalis Subsidiaries have set aside adequate reserves
for all taxes with respect to the period then ended and all prior periods, and
with respect to receivables, for all reasonably anticipated uncollectible
amounts, losses, costs and expenses. Except as set forth in Section 2.6 of the
Novalis Disclosure Schedule, neither Novalis nor any Novalis Subsidiary has any
liabilities or obligations of any nature (absolute, accrued or contingent) that
are not fully reflected or reserved against in the Balance Sheet, as prescribed
by GAAP and the Financial Accounting Standards Board, except liabilities or
obligations incurred since the date of the Balance Sheet in the ordinary course
of business and consistent with past practice that are not in excess of $100,000
in the aggregate or $25,000 individually.
2.7 TITLE TO PROPERTIES. Novalis and each Novalis Subsidiary has
good, valid and marketable title to all of the properties and assets which it
purports to own (personal and mixed, tangible and intangible, including, without
limitation, all the properties and assets listed in Sections 2.10 and 2.11 of
the Novalis Disclosure Schedule which it purports to own and all property
reflected on the Balance Sheet other than property that is leased and so
reflected in the Balance Sheet (the "Assets"). Except as set forth in Section
2.7 of the Novalis Disclosure Schedule, all such properties and assets are free
and clear of all title defects or objections or Liens except for Liens that
would not have a Material Adverse Effect on Novalis and the Novalis Subsidiaries
taken as a whole. At the
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Closing Date, Novalis and each Novalis Subsidiary will possess all of the
personal property wherever located used to conduct its business as used prior to
the Closing.
2.8 REAL PROPERTY. Neither Novalis nor any Novalis Subsidiary owns
any real property.
2.9 LEASES. Section 2.9(a) of the Novalis Disclosure Schedule
contains a complete and correct list of all leases pursuant to which Novalis or
any Novalis Subsidiary leases real property, including all amendments thereto
(collectively, the "Real Property Leases"). Section 2.9(b) of the Novalis
Disclosure Schedule contains a complete and correct list of all material leases
pursuant to which Novalis or any Novalis Subsidiary leases personal property,
including all amendments thereto (collectively, the "Personal Property Leases,"
and, together with the Real Property Leases, the "Leases"). Prior to the date
hereof, Novalis has delivered or made available to TriZetto complete, current
and correct copies of the Leases, and no changes have been made thereto since
the date of delivery. Each of the Leases is the legal, valid and binding
obligation of Novalis or the Novalis Subsidiary which is a party thereto,
enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, and except as may be
limited by bankruptcy, reorganization, insolvency, moratorium or other laws
relating to or affecting the enforcement of creditors' rights and remedies
generally. There are no existing material defaults by Novalis or any Novalis
Subsidiary under any of the Leases and to the Knowledge of Novalis, no event has
occurred which would constitute a material default (or any event which, with the
giving of notice or lapse of time or both, would constitute a material default)
thereunder by Novalis or any Novalis Subsidiary.
2.10 FIXED ASSETS. Section 2.10 of the Novalis Disclosure Schedule
sets forth a list of all material fixtures, furniture and equipment owned,
leased or used by Novalis or any Novalis Subsidiary as of October 31, 1999 (the
"Fixed Assets"). The Fixed Assets (a) are in good operating condition and
repair, normal wear and tear excepted, (b) are adequate to conduct the business
of Novalis and the Novalis Subsidiaries substantially in the manner in which
such businesses have been conducted since January 1, 1999, and (c) have been
maintained consistent with the standards generally followed in the industry.
2.11 INTANGIBLE PERSONAL PROPERTY. Section 2.11 of the Novalis
Disclosure Schedule sets forth a complete and correct list for Novalis and for
each Novalis Subsidiary of material domestic and foreign patent, patent
application, invention disclosure, copyright, trademark, trademark registration,
trade name, service mark and applications for any of the foregoing, and any
material software titles, owned by Novalis or such Novalis Subsidiary or used in
the conduct of its respective businesses (such intangible personal property in
addition to any material trade secrets and proprietary know-how owned by Novalis
or any Novalis Subsidiary or used in the conduct of its respective businesses,
the "Intangible Personal Property"). Except as set forth in Section 2.11 of the
Novalis Disclosure Schedules, (a) Novalis and Novalis Subsidiaries have the
right and authority to use all Intangible Personal Property required for the
conduct of their respective businesses in the manner presently conducted, and
(b) to the Knowledge of Novalis, such use does not conflict with, infringe upon
or violate any trademark, trade name, copyright, patent or patent rights of any
other person or entity. Except as disclosed in Section 2.11 of the Novalis
Disclosure Schedule, there have not been any actions or other judicial or
adversary proceedings to which Novalis or any Novalis Subsidiary is a party
concerning the validity of the Intangible Personal Property, nor has Novalis
received any notice that any such action or proceeding is threatened.
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2.12 ACCOUNTS RECEIVABLE. A complete and correct list of all accounts
receivable of Novalis as of October 31, 1999 ("Accounts Receivable") has been
delivered to TriZetto prior to the date hereof, and sets forth the aging of such
Accounts Receivable. The Accounts Receivable represent bona fide sales actually
made or services actually performed on or prior to such date in the ordinary
course of business of Novalis and Novalis Subsidiaries and consistent with past
practices. Except as set forth in Section 2.12 of the Novalis Disclosure
Schedule, to the Knowledge of Novalis, there is no contest, claim or right of
set-off contained in any oral or written agreement with any account debtor
relating to the amount or validity of any Account Receivable, or any other
account receivable created after October 31, 1999, nor are there any facts or
circumstances that could reasonably be expected to give rise to any such claim
or right of offset. The reserves reflected in the Financial Statements have been
established in the ordinary course of business, in accordance with GAAP, and the
Accounts Receivable will be collected in full within 180 days after the Closing
Date in the ordinary course of business, net of such reserves.
2.13 LICENSES AND PERMITS. Section 2.13 of the Novalis Disclosure
Schedule contains a list of all material governmental licenses, permits,
franchises, rights and privileges necessary for the present conduct of Novalis'
business, each Novalis Subsidiary's business, and, to the Knowledge of Novalis,
PHN's business (the "Licenses"). Novalis, each Novalis Subsidiary, and, to the
Knowledge of Novalis, PHN, possesses, as appropriate, all such Licenses. Each of
the Licenses is in full force and effect, Novalis and each Novalis Subsidiary
has complied in all material respects with all conditions, requirements and
terms thereof and there are no pending or threatened claims or proceedings
challenging the validity of or seeking to revoke or discontinue, any of the
Licenses. Prior to the date hereof, Novalis has delivered or made available to
TriZetto a complete, current and correct copy of each of the Licenses.
2.14 INSURANCE. Section 2.14(a) of the Novalis Disclosure Schedule
contains a description of all existing policies of fire, liability, workers'
compensation and all other forms of insurance maintained by Novalis or any
Novalis Subsidiary. Except as set forth in Section 2.14(b) of the Novalis
Disclosure Schedule, all such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
hereof, or the Closing Date, as appropriate, have been paid, and no notice of
cancellation, termination or denial of coverage has been received with respect
to any such policy. Except as set forth in Section 2.14(c) of the Novalis
Disclosure Schedule such policies (a) are adequate for compliance with all
agreements or instruments to which Novalis or any Novalis Subsidiary is a party,
or to which its business, properties or assets may be subject, (b) are valid,
outstanding and enforceable policies, (c) provide insurance coverage in the
amounts indicated in such policies, which are adequate for Novalis' and each
Novalis Subsidiary's businesses, properties, assets and operations as presently
conducted, and (d) all premiums due and owing thereon have been paid. Section
2.14(c) of the Novalis Disclosure Schedule also describes all claims of Novalis
or any Novalis Subsidiary which are pending under such insurance policies or
have been paid to Novalis or any Novalis Subsidiary since January 1, 1998. Since
January 1, 1998, neither Novalis nor any Novalis Subsidiary has been refused
coverage by any insurance carrier with respect to its properties, assets or
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance.
Prior to the date hereof, Novalis has delivered or made available to TriZetto
complete, current and correct copies of all insurance policies and binders for
the insurance policies which are maintained by Novalis or any Novalis
Subsidiary.
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2.15 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 2.15
of the Novalis Disclosure Schedule, and except for the transactions specifically
contemplated by this Agreement, since October 31, 1999, there has not been:
(a) Any declaration or payment of dividends by Novalis or
any repurchase, redemption or other acquisition by Novalis or any Novalis
Subsidiary of any outstanding shares of capital stock or other securities of
Novalis or any Novalis Subsidiary or, except in the ordinary course of business,
any transfer of properties or assets of any kind whatsoever by Novalis to its
shareholders;
(b) Any transaction or commitment made, or any contract or
agreement entered into, by Novalis or any Novalis Subsidiary relating to its
assets or business (including the acquisition or disposition of any assets) or
any relinquishment by Novalis or any Novalis Subsidiary of any contract or other
right, in either case, material to Novalis or any Novalis Subsidiary, taken as a
whole, other than transactions and commitments in the ordinary course consistent
with past practices and those contemplated by this Agreement;
(c) Any loan, advance or capital contribution by Novalis or
any Novalis Subsidiary to any person, except a normal travel advance or other
reasonable expense advance to an officer or employee of Novalis or any Novalis
Subsidiary and normal trade terms extended to customers;
(d) Any damage, destruction or loss, whether or not covered
by insurance, which has had or is reasonably likely to have a Material Adverse
Effect;
(e) Any sale or transfer of any properties or assets not in
the ordinary course of business or any cancellation of any debts or claims of
Novalis or any Novalis Subsidiary;
(f) Any mortgage, pledge or subjection to lien, guaranty of
indebtedness, charge or encumbrance of any kind on any of Novalis' or any
Novalis Subsidiary's properties or assets, or any assumption of, or taking any
properties or assets subject to, any liability;
(g) Any amendment, modification or termination of any
material contract or agreement to which Novalis or any Novalis Subsidiary is a
party or pursuant to which its properties or assets may be bound;
(h) Any sale or granting to any party or parties of any
license, franchise or option with respect to Novalis' or any Novalis
Subsidiary's business or termination of any such rights;
(i) any (i) grant of any severance or termination pay to any
current or former director, officer or employee of Novalis or any Novalis
Subsidiary, (ii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
current or former director, officer or employee of Novalis or any Novalis
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 or otherwise made available to
current or former directors, officers or employees of Novalis (other than in the
ordinary course of business salary increases for employees other than officers
and directors), or (iv) establishment, adoption, or amendment (except as
required by applicable law), of any collective bargaining, bonus, profit
sharing, thrift, pension, retirement, deferred compensation,
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compensation, stock option, restricted stock or other benefit plan or
arrangement covering any current or former director, officer or employee of
Novalis or any Novalis Subsidiary;
(j) Any adoption by Novalis or any Novalis Subsidiary of any
new Benefit Plan (as that term is defined in Section 2.22(b) of this Agreement),
or amendment to any Benefit Plan to provide any new or additional plans,
programs, contracts or arrangements involving direct or indirect compensation to
any officer, director, employee, former employee, or their dependents or
beneficiaries, of Novalis or any Novalis Subsidiary;
(k) Any alteration in the manner of keeping the books,
accounts or records of Novalis or any Novalis Subsidiary or in the manner of
preparing the Financial Statements, or in the accounting practices of Novalis or
any Novalis Subsidiary, except as may be required by any modification or change
in GAAP; or
(l) Any event, occurrence or development of a state of
circumstances or facts which would, individually or in the aggregate, have a
Material Adverse Effect on Novalis (other than adverse effects arising from the
execution and performance of this Agreement, changes in general economic
conditions or changes applicable generally to the industry);
(m) any amendment of any term of any outstanding security of
Novalis or any Novalis Subsidiary;
(n) any material labor dispute, other than routine
individual grievances, or, to the Knowledge of Novalis, any activity or
proceeding by a labor union or representative thereof to organize any employees
of Novalis or any Novalis Subsidiary, which employees were not subject to a
collective bargaining agreement on the date of the Balance Sheet, or any
material lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to such employees; or
(o) any tax election or any settlement of tax liability, in
either case that is material to Novalis and the Novalis Subsidiaries, taken as a
whole.
2.16 COMPLIANCE WITH CONTRACTS. Section 2.16 of the Novalis
Disclosure Schedule contains a list of all material contracts, commitments,
obligations or agreements of Novalis or of any Novalis Subsidiary, whether
written or oral, formal or informal (the "Contracts"). Without limiting the
foregoing all contracts which have a term exceeding one year and have
consideration in excess of $50,000, shall be deemed material. Except as set
forth in Section 2.16 of the Novalis Disclosure Schedule, no event has occurred
which would constitute a material default or cause the incurrence of a material
penalty on the part of Novalis or any Novalis Subsidiary (or any event which,
with the giving of notice or lapse of time or both, would constitute a material
default or cause the incurrence of a material penalty on the part of Novalis or
any of Novalis Subsidiaries) under any term or provision of any of the Contracts
and thereby allow another party to terminate and/or claim penalties or damages
therefor and Novalis and the Novalis Subsidiaries have no knowledge of defaults
by third parties thereto. Each of the Contracts is in full force and effect and
is the legal, valid and binding obligation of Novalis or Novalis Subsidiary
which is a party thereto and, to the Knowledge of Novalis, of the other parties
thereto, enforceable in accordance with its terms, subject to judicial
discretion regarding specific performance or other equitable remedies, and
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
or other laws relating to or affecting the enforcement of creditors' rights and
remedies generally. Except as set forth in Section 2.16 of the Novalis
Disclosure Schedule, neither Novalis nor any Novalis Subsidiary is a party to
any Contract
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that restricts it from carrying on its business or any part thereof, or from
competing in any line of business with any person, corporation or entity. Prior
to the date hereof, Novalis has delivered or made available to TriZetto a
complete and correct copy of each of the written Contracts, as well as a written
summary of each of the oral Contracts, including all amendments and
modifications thereto.
2.17 COMPLIANCE WITH LAWS. Except as set forth in Section 2.17 of the
Novalis Disclosure Schedule, Novalis', each Novalis Subsidiary's, and, to the
Knowledge of Novalis, PHN's, business has been conducted in compliance with, and
is not in violation of, any applicable laws, statutes, ordinances, rules,
regulations, orders, other requirements of national governmental authorities or
of any territories, states, municipalities and other political subdivisions and
agencies thereof, having jurisdiction over Novalis, any Novalis Subsidiary or
PHN and their respective business, including without limitation all such laws,
regulations, ordinances and requirements relating to insurance, environmental,
antitrust, consumer protection, labor and employment, zoning and land use,
immigration, health, occupational safety, pension and securities matters, except
where noncompliance or violation would not have a Material Adverse Effect.
Except as set forth in Section 2.17 of the Novalis Disclosure Schedule, since
January 1, 1996, none of Novalis, any Novalis Subsidiary or, to the Knowledge of
Novalis, PHN, has received any written notification of any asserted present or
past failure by Novalis, any Novalis Subsidiary, or PHN to comply with such
laws, statutes, ordinances, rules, regulations, orders or other requirements
that is unresolved as of the date hereof.
2.18 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Interim
Financial Statements, or in Section 2.18 of the Novalis Disclosure Schedule,
neither Novalis nor any Novalis Subsidiary is directly or indirectly (i) liable,
by guaranty, surety or otherwise, upon or with respect to, or (ii) obligated in
any way to provide funds in respect of, or (iii) obligated to guaranty or assume
any debt, dividend or other obligation of any person, corporation, association,
partnership or other entity.
2.19 LABOR RELATIONS. The attachment to Section 2.19(a) of the
Novalis Disclosure Schedule contains a list as of the date of this Agreement of
all of Novalis' and each Novalis Subsidiary's employees ("Employees"), which
includes the job position and compensation payable to each of the Employees.
Except to the extent set forth in Section 2.19(b) of the Novalis Disclosure
Schedule:
(a) Novalis and each Novalis Subsidiary is in compliance in
all material respects with all laws, statutes, ordinances, rules, regulations,
orders and other requirements relating to the employment of labor, including
without limitation Title VII of the federal Civil Rights Act of 1964, the
federal Age Discrimination in Employment Act of 1967, the federal Americans with
Disabilities Act, ERISA, and any and all provisions thereof relating to wages,
hours, collective bargaining and the payment of social security and similar
Taxes;
(b) There is no pending or, to the Knowledge of Novalis,
threatened charge, complaint, allegation, application or other process or claim
against Novalis or any Novalis Subsidiary before any federal, territorial, state
or local or other governmental or administrative agency or other entity;
(c) No Employee is covered by any collective bargaining
agreement, nor, to the Knowledge of Novalis, is there any effort being made by
any union to organize any of the Employees; and
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(d) Novalis and each Novalis Subsidiary has paid and
performed all obligations when due with respect to its employees, consultants,
agents, officers and directors, including without limitation the payment of any
accrued and payable wages, severance pay, vacation pay, benefits and
commissions, except those obligations which are in good faith being challenged
by Novalis or any Novalis Subsidiary as not valid obligations of Novalis or any
Novalis Subsidiary as more fully described in Section 2.19(d) of the Novalis
Disclosure Schedule.
(e) None of the persons performing services for Novalis or
any Novalis Subsidiary have been improperly classified as independent
contractors or as being exempt from the payment of wages for overtime.
(f) Section 2.19(f) of the Novalis Disclosure Schedule lists
each individual who is absent from active employment with Novalis or any Novalis
Subsidiary by reason of (i) short-term or long term disability, (ii) leave of
absence under the Family and Medical Leave Act of 1993 (or comparable state
statute), (iii) military leave (under conditions that give the employee
re-employment rights), or (iv) other Novalis-approved or Novalis
Subsidiary-approved leave of absence.
(g) During the three years immediately preceding the date of
this Agreement, Novalis and the Novalis Subsidiaries have not effectuated (i) a
"plant closing" (as defined in the WARN Act) affecting any site of employment or
one or more facilities or operating units within any site of employment or
facility of the Novalis and the Novalis Subsidiaries, or (ii) a "mass layoff"
(as defined in the WARN Act) affecting any site of employment or facility of the
Novalis and the Novalis Subsidiaries; nor has either Novalis or the Novalis
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations relating to the Novalis or the Novalis Subsidiaries
sufficient in number to trigger application of any similar state or local law.
No individual employed by Novalis or the Novalis Subsidiaries has suffered any
form of "employment loss" (as defined in the WARN Act) within ninety days prior
to the Closing Date.
2.20 LITIGATION. Except as set forth in Section 2.20 of the Novalis
Disclosure Schedule:
(a) There is no pending or, to the Knowledge of Novalis,
threatened, action, suit, arbitration proceeding, investigation or inquiry
before any court or governmental or administrative body or agency, or any
private arbitration tribunal, (i) against or involving Novalis or any Novalis
Subsidiary, (ii) against or involving any director, officer or Employee of
Novalis or any Novalis Subsidiary in his or her capacity as such, (iii) to which
Novalis or any Novalis Subsidiary is a party, (iv) affecting the assets or
business of Novalis or any Novalis Subsidiary or the transactions contemplated
by this Agreement or any other Transaction Document that arises through any
fault of Novalis or any Novalis Subsidiary, or (v) affecting the assets or
business of Novalis or any Novalis Subsidiary or the transactions contemplated
by this Agreement or any other Transaction Document that arises through no fault
on the part of Novalis or any Novalis Subsidiary, which could, in each case,
reasonably be anticipated to have a Material Adverse Effect. To the Knowledge of
Novalis, there are no facts or circumstances that could reasonably be expected
to give rise to any of the actions set forth in this Section 2.20(a).
(b) There is not in effect any order, judgment or decree of
any court or governmental or administrative body or agency enjoining, barring,
suspending, prohibiting or otherwise limiting Novalis or any Novalis Subsidiary
or, to the Knowledge of Novalis, any officer, director or Employee of Novalis or
any Novalis Subsidiary from conducting or engaging in any aspect of Novalis' or
any Novalis Subsidiary's business, or requiring Novalis or any Novalis
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Subsidiary or any officer, director or Employee of Novalis or any Novalis
Subsidiary to take certain action with respect to any aspect of Novalis' or any
Novalis Subsidiary's business which could reasonably be anticipated to have a
Material Adverse Effect.
(c) Neither Novalis nor any Novalis Subsidiary has received
written notice that it is in violation of or in default under any order,
judgment, writ, injunction or decree of any court or governmental or
administrative body or agency.
2.21 ENVIRONMENTAL COMPLIANCE.
(a) Novalis and the Novalis Subsidiaries are in compliance
in all material respects with Environmental Laws and all Environmental Permits.
(b) Since January 1, 1996, neither Novalis nor the Novalis
Subsidiaries have received any written notice regarding any violation of any
Environmental Laws, or any Novalis Environmental Liabilities, including any
investigatory, remedial or corrective obligations, relating to Novalis or the
Novalis 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 Novalis.
(c) Except as set forth in Section 2.21 of the Novalis
Disclosure Schedule:
(i) Novalis or the Novalis Subsidiaries have not
caused, and are 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 Novalis, no such disposals or releases occurred prior to
Novalis or the Novalis Subsidiaries having taken title to, or possession or
operation of, any of such properties; and, to the knowledge of Novalis, no such
disposals or releases are migrating or have migrated off of such properties in
subsurface soils, groundwater or surface waters after Novalis or the Novalis
Subsidiaries have taken title to, or possession or operation of any such
properties and, to the knowledge of Novalis or the Novalis Subsidiaries, 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) Neither Novalis nor the Novalis Subsidiaries
have (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 Novalis or the Novalis Subsidiaries 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 2.21(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 on the Comprehensive
Environmental Response, Compensation, and Liability Information System (CERCLIS)
or the National Priorities List (NPL) or any equivalent listing of sites under
state or local law (whether for potential releases of substances listed in
CERCLA or other substances).
(iii) Neither Novalis nor the Novalis Subsidiaries
have actual Knowledge of any release or threatened release of any Hazardous
Material originating from a property other than
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those leased or operated by Novalis or the Novalis Subsidiaries have come to be
located on or under properties leased, occupied or operated by Novalis or the
Novalis Subsidiaries;
(iv) Novalis or the Novalis Subsidiaries have never
installed, used, buried or removed any surface impoundment or underground tank
or vessel on properties owned, leased, occupied or operated by Novalis or the
Novalis Subsidiaries;
(v) Novalis and the Novalis Subsidiaries 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 to the Knowledge of Novalis, no
condition exists on any of the real property owned by or used in the business of
Novalis or the Novalis 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 Novalis or the Novalis Subsidiaries, threatened against Novalis or
the Novalis Subsidiaries 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.
2.22 EMPLOYEE BENEFITS.
(a) The attachment to Section 2.22(a) of the Novalis
Disclosure Schedule sets forth a list of all employee benefit plans, as defined
in Section 3(3) of ERISA, of Novalis or any Novalis Subsidiary; and
(b) Section 2.22(b) of the Novalis Disclosure Schedule sets
forth a true and complete list of all other profit-sharing, deferred
compensation, bonus, stock option, stock purchase, stock bonus, phantom stock,
vacation pay, holiday pay, severance, dependent care assistance, excess benefit,
incentive compensation, salary continuation, medical, life or other insurance,
supplemental unemployment and other employee benefit plans, programs, agreements
or arrangements, including all unwritten employee benefit plans, programs,
agreements and arrangements, if any, maintained or contributed to by Novalis or
any Novalis Subsidiary for the benefit of its Employees (or former employees)
and/or their beneficiaries. Both of these types of plans shall be collectively
referred to as "Benefit Plans." An arrangement will not fail to be a Benefit
Plan simply because it only covers one individual, or because Novalis' or any
Novalis Subsidiary's obligations under the plan arise by reason of its being a
"successor employer" under applicable law.
(c) Novalis has delivered or made available to TriZetto a
true and complete copy of:
(i) Each Benefit Plan and any related funding
agreements (e.g., trust agreements or insurance contracts), including all
amendments (and Section 2.22(c) of the Novalis Disclosure Schedule includes a
description of any such amendment that is not in writing);
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(ii) The current draft of the Summary Plan
Description of each Benefit Plan (if applicable); and
(iii) The most recent Internal Revenue Service
determination letter (if applicable) for each Benefit Plan.
(d) Except as set forth in Section 2.22(d) of the Novalis
Disclosure Schedule, neither Novalis nor any Novalis Subsidiary maintains or
contributes to, nor has maintained or contributed to, any Benefit Plan that is
subject to Section 302 of ERISA or Section 412 of the Code.
(e) No Benefit Plan is a "multi-employer plan," as defined
in Section 3(37) of ERISA, nor is a plan described in Section 4063(a) of ERISA.
(f) All costs of administering and contributions required to
be made by Novalis or any Novalis Subsidiary to each Benefit Plan under the
terms of that Benefit Plan, ERISA, the Code or any other applicable law have
been timely made, and are fully deductible. All amounts properly accrued to date
as liabilities of Novalis or any Novalis Subsidiary under or with respect to
each Benefit Plan (including administrative expenses and incurred but not
reported claims) for the current plan year of the Benefit Plan have been
recorded on the appropriate books, to the extent required by law or GAAP.
(g) Except as set forth in Section 2.22(g)(i) of the Novalis
Disclosure Schedule, each Benefit Plan has been maintained and operated in
accordance with, and complies currently with, in all material respects, all
applicable laws, including but not limited to ERISA and the Code. Each Benefit
Plan has been operated in all material respects in accordance with its terms.
Furthermore, the Internal Revenue Service has issued a favorable determination
letter with respect to each Benefit Plan that is intended to qualify under
Section 401(a) of the Code, which letter, except as set forth in Section
2.22(g)(ii) of the Novalis Disclosure Schedule, takes into account any amendment
to each such Benefit Plan, and, no event had occurred (either before or after
the date of the letter) that would disqualify the plan.
(h) No Benefit Plan is intended to provide benefits which
might require compliance with Sections 419 or 419A of the Code.
(i) No prohibited transaction has occurred with respect to
any of the Benefit Plans which is not exempt under Section 4975 of the Code and
Section 406 of ERISA, and neither Novalis nor any Novalis Subsidiary has engaged
in any transaction with respect to any Benefit Plan which could subject it to
either a material civil penalty assessed pursuant to Section 409, 502(i) or
502(l) of ERISA, or a material tax imposed pursuant to Section 4975 or 4976 of
the Code.
(j) Except as set forth in Section 2.22(j) of the Novalis
Disclosure Schedule, neither Novalis nor any Novalis Subsidiary maintains any
plan that provides (or will provide) medical or death benefits to one or more,
current or future former employees (including retirees) beyond their retirement
or other termination of service, other than benefits that are required to be
provided pursuant to Section 4980B of the Code or state law continuation
coverage or conversion rights.
(k) Except as set forth in Section 2.22(k) of the Novalis
Disclosure Schedule, there are no proceedings or lawsuits, pending or, to the
Knowledge of Novalis, threatened, and, to the
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Knowledge of Novalis, are no investigations, either currently in progress or
expected to be instituted in the future, relating to any Benefit Plan, by any
administrative agency, whether local, state or federal or by any fiduciary,
participant or beneficiary of such plan.
(l) Except as set forth in Section 2.22(l) of the Novalis
Disclosure Schedule, none of the Benefit Plans or any other employment agreement
or arrangement entered into by Novalis or any Novalis Subsidiary will entitle
any current or former employee to any benefits or other compensation that become
payable solely as a result of the consummation of this transaction.
(m) None of the Benefit Plans are subject to the tax on
unrelated business taxable income or unrelated debt-financed income under
Section 511 of the Code.
(n) Except as set forth in Section 2.22(n) of the Novalis
Disclosure Schedule, no Benefit Plan has any interest in any annuity contract or
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship, rehabilitation or similar
proceeding.
(o) Section 2.22(o) of the Novalis Disclosure Schedule lists
each individual who (i) has elected to continue participating in a group health
plan of Novalis or any Novalis Subsidiary pursuant to an election under COBRA,
or (ii) has not made an election under COBRA but who is still eligible to make
such election.
2.23 BANK ACCOUNTS. Section 2.23 of the Novalis Disclosure Schedule
sets forth the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which Novalis or any
Novalis Subsidiary maintains safe deposit boxes or accounts of any nature and
sets forth the account number of such accounts and sets forth the names of all
persons authorized to draw on such accounts.
2.24 CORPORATE RECORDS. The minute books of Novalis and of each
Novalis Subsidiary reflect all actions taken to date by the shareholders, board
of directors and committees of the board of directors of Novalis or of any
Novalis Subsidiary, as appropriate, and contain true and complete copies of
Novalis' or any Novalis Subsidiary's charter and Bylaws, and all amendments
thereto.
2.25 ACCOUNTING RECORDS. Novalis and each Novalis Subsidiary
maintains accounting records which fairly and validly reflect, in all material
respects, its transactions and maintains accounting controls sufficient to
provide reasonable assurances that such transactions are, in all material
respects, (i) executed in accordance with management's general or specific
authorization, and (ii) recorded as necessary to permit the preparation of
financial statements in conformity with GAAP.
2.26 INTELLECTUAL PROPERTY; YEAR 2000 COMPLIANCE.
(a) INTELLECTUAL PROPERTY, SOFTWARE AND PRODUCTS.
(i) Except as set forth in Section 2.26(a) of the
Novalis Disclosure Schedule, all non-clerical employees of, or consultants to,
Novalis have executed a proprietary rights agreement or similar documentation (a
copy of which has been provided to TriZetto) assigning all rights, title and
interest to the Intellectual Property, Software and Products. To the Knowledge
of
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Novalis, no Novalis Securityholder, employee or contractor, nor any of their
respective Affiliates, has any right, title or interest in or to any
Intellectual Property, Software or Products.
(ii) Except as disclosed in Section 2.26 of the
Novalis Disclosure Schedule, Novalis and the Novalis Subsidiaries own all right,
title and interest in and to, or have valid licenses to use all Intellectual
Property and Software used in or necessary for the conduct of Novalis' and the
Novalis 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 Novalis' or the Novalis
Subsidiaries' Products, free and clear of all Liens, other than licenses and
services provided to customers in the ordinary course of business (including
without limitation any distribution rights and royalty rights). 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 Novalis, neither Novalis
nor the Novalis Subsidiaries have infringed nor is infringing upon any
Intellectual Property or Software rights of others.
(iii) Except as set forth in Section 2.26 of the
Novalis Disclosure Schedule, no claims have been asserted against Novalis or the
Novalis Subsidiaries by any person challenging Novalis' or the Novalis
Subsidiaries' use or distribution (including manufacture, marketing license, or
sale) of any Product, or products utilized by Novalis or the Novalis
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 Knowledge of Novalis, there is no valid basis for any claim of
the type specified in this Section 2.26(a)(iii).
(iv) Novalis or the Novalis Subsidiaries has valid
copyrights in the Products 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.
(v) Except as set forth in Section 2.26 of the
Novalis Disclosure Schedule, (i) no third party other than TriZetto (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; and (ii) Novalis or the Novalis 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.
Each document or instrument identified pursuant to this Section is listed in
Section 2.26 of the Novalis Disclosure Schedule and true and correct copies of
such documents or instruments have been furnished to TriZetto
(vi) Each of the Products: (i) complies in all
material respects 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
Novalis' business; and (ii) can be recreated from its associated source code and
related documentation by reasonably experienced technical personnel without
undue burden.
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(vii) Novalis has made available to TriZetto 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.
(viii) To the Knowledge of Novalis, no employee of
Novalis 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 Novalis or any other party because of the
nature of the business conducted by Novalis.
(b) YEAR 2000 COMPLIANCE.
(i) PRODUCTS AND SERVICES.
(A) To the Knowledge of Novalis, all of
Novalis' products and services and the Novalis Subsidiaries' products and
services are Year 2000 Compliant in all material respects, and, except as set
forth in Section 2.26(b) of the Novalis Disclosure Schedule, Novalis will not
incur any costs to make such products and services Year 2000 Compliant.
(B) If Novalis is obligated to repair or
replace products or services previously provided by Novalis that are not Year
2000 Compliant in order to meet Novalis' contractual obligations, to avoid
personal injury or other liability, to avoid misrepresentation claims, or to
satisfy any other obligations or requirements, Novalis has repaired or replaced
those products and services to make them Year 2000 Compliant in all material
respects.
(C) Novalis has made available to TriZetto
true, correct and complete copies of any customer agreements and other materials
and correspondence in which Novalis has furnished (or could be deemed to have
furnished) assurances as to the performance and/or functionality of Novalis' and
the Novalis Subsidiaries' products or services on or after January 1, 2000.
(ii) COMPUTER SOFTWARE AND SYSTEMS. Except as set
forth in Section 2.26(b) of the Novalis Disclosure Schedule, all of Novalis and
the Novalis Subsidiaries' software and systems and computers are Year 2000
Compliant in all material respects.
(iii) SUPPLIERS. To the Knowledge of Novalis, all
vendors of products or services to Novalis and the Novalis Subsidiaries, and
their respective products, services and operations, are Year 2000 Compliant in
all material respects. To the Knowledge of Novalis after a reasonably diligent
investigation, each such vendor will continue to furnish its products or
services to Novalis and the Novalis Subsidiaries, without interruption or
material delay, on and after January 1, 2000.
2.27 BROKERS AND FINDERS. Except as set forth in Section 2.27 of the
Novalis Disclosure Schedule, none of Novalis, any Novalis Subsidiary or any
Novalis Securityholder has engaged or authorized any broker, finder, investment
banker or other third party, to act on its behalf, directly or indirectly, as a
broker, finder, investment banker or in any other like capacity in connection
with this Agreement or the transactions contemplated hereby, or has consented to
or acquiesced in anyone so acting, and Novalis does not know of any claim for
compensation from any such broker, finder, investment banker or other third
party for so acting on behalf of Novalis, any Novalis Subsidiary or any Novalis
Securityholder or of any basis for such a claim.
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2.28 RELATED PARTIES INDEBTEDNESS. Except as set forth in Section
2.28 of the Novalis Disclosure Schedule; Novalis has no outstanding indebtedness
owed to any Affiliate of Novalis or to any Novalis Stockholder or Affiliate
thereof.
2.29 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty made in this Agreement or in any other document delivered in connection
herewith, by or on behalf of Novalis, any Novalis Subsidiary or the Novalis
Securityholders to TriZetto, with respect to Novalis, any Novalis Subsidiary or
the Novalis Securityholders, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements so
made, in light of the circumstances under which they are made, not misleading.
2.30 HEALTH MAINTENANCE ORGANIZATIONS. Novalis has no reason to
believe that the representations and warranties contained in Section 3.8 of the
Note Purchase Agreement contemplated by the Arkansas Transaction are inaccurate
in any material respect.
ARTICLE 3
INVESTMENT REPRESENTATIONS
3.1 INVESTMENT REPRESENTATIONS. Each Novalis Securityholder
represents severally, but not jointly, that:
(a) Such Novalis Securityholder is acquiring the TriZetto
Stock for its 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 other than as a liquidating
distribution of a Novalis Securityholder that is an institution.
(b) Such Novalis Securityholder understands that (i) the
TriZetto Stock has not been registered under the 1933 Act by reason of a
specific exemption therefrom, and cannot be sold unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration; (ii) such securities may be resold without registration under the
Securities Act only in certain limited circumstances, and it represents that it
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;
(iii) each certificate representing the TriZetto Stock 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 EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT COVERING SUCH SECURITIES OR IF TRIZETTO
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO TRIZETTO, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT."
and (iv) TriZetto will instruct any transfer agent not to register the transfer
of any of the TriZetto Stock unless the conditions specified in the foregoing
legend are satisfied; provided, however, that no
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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 Novalis Securityholder
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) Such Novalis Securityholder acknowledges that it is able
to fend for himself, can bear the economic risk of his investment and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the TriZetto Stock.
(d) Such Novalis Securityholder is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D as presently in effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TRIZETTO
TriZetto represents and warrants to Novalis and the Novalis
Securityholders that, except as set forth in the TriZetto Disclosure Schedule or
in TriZetto's SEC Filings, which have been provided to Novalis and the Novalis
Securityholders prior to the date hereof:
4.1 CORPORATE EXISTENCE AND POWER. TriZetto and each of the TriZetto
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. TriZetto and each of
the TriZetto Subsidaries has all requisite corporate powers and authority and
all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect on TriZetto.
TriZetto is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is 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 and
each of the TriZetto Subsidiaries, considered as a whole. TriZetto has
heretofore delivered to Novalis true and complete copies of TriZetto's
Certificate of Incorporation and Bylaws as currently in effect.
4.2 CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by TriZetto of
this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby are within TriZetto's corporate
powers and have been duly authorized by all necessary corporate action.
(b) TriZetto's board of directors, at a meeting duly called
and held, has (i) determined that this Agreement and the Transaction Documents
and the transactions contemplated hereby and thereby are in the best interests
of TriZetto's stockholders, and (ii) approved and adopted this Agreement and the
transactions contemplated hereby and thereby.
(c) 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
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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.
(d) No approval of TriZetto's Stockholders is required for
the execution, delivery and performance by TriZetto of this Agreement or of the
other Transaction Documents.
4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by TriZetto of this Agreement and the consummation by TriZetto of
the transactions contemplated hereby and thereby require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, other than (a) compliance with the 1933 Act, the 1934 Act, or foreign
or state securities or blue sky laws; and (b) any other filings, approvals or
authorizations which, if not obtained, would, individually or in the aggregate,
have a Material Adverse Effect on TriZetto or materially impair the ability of
TriZetto to consummate the transactions contemplated by this Agreement.
4.4 NON-CONTRAVENTION. The execution, delivery and performance by
TriZetto of this Agreement and the other Transaction Documents 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 or the charter documents of the TriZetto Subsidiaries, (ii) assuming
compliance with the matters referred to in Section 4.3, 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
the TriZetto Subsidiaries, (iii) require the consent or other action of any
person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of TriZetto
or the TriZetto Subsidiaries or to a loss of any benefit to which TriZetto or
the TriZetto Subsidiaries is entitled under any provision of any agreement or
other instrument binding upon TriZetto or the TriZetto Subsidiaries or any
license, franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of TriZetto, or
(iv) result in the creation or imposition of any Lien on any asset of TriZetto
or the TriZetto Subsidiaries, except, in the case of clauses (ii) through (iv),
for such matters as would not, individually or in the aggregate, have a Material
Adverse Effect on TriZetto or materially impair the ability of TriZetto to
consummate the transactions contemplated by this Agreement.
4.5 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. TriZetto and the
TriZetto Subsidiaries hold all 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 violations or claimed violations
by TriZetto of any such license, permit or authorization or any such statute,
law, ordinance, rule or regulation.
4.6 CAPITALIZATION.
(a) The authorized capital stock of TriZetto consists of
40,000,000 shares of TriZetto common stock (the "TriZetto Common Stock") and
5,000,000 shares of TriZetto preferred stock (the "TriZetto Preferred Stock").
As of October 31, 1999, there were outstanding (i) 20,309,014 shares of TriZetto
Common Stock, (ii) zero shares of TriZetto Preferred Stock, (iii) employee stock
options to purchase an aggregate of 2,962,168 shares of TriZetto Common Stock,
(iv) warrants to purchase an aggregate of zero shares of TriZetto Common Stock,
and (v) an aggregate of zero shares of TriZetto Common Stock issued or relating
to restricted stock awards, or
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other stock based compensation arrangements. 4,600,000 shares of TriZetto Common
Stock have been reserved for issuance pursuant to TriZetto's employee stock
purchase plan and TriZetto's stock option plan.
(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 4.6, and except for changes since October
31, 1999, resulting from the exercise of stock options outstanding on such date,
there are no outstanding (i) shares of capital stock or other voting securities
of TriZetto, (ii) securities of TriZetto convertible into or exchangeable for
shares of capital stock or voting securities of TriZetto, or (iii) options,
restricted stock, other stock-based compensation awards or other rights to
acquire from TriZetto, or other obligation of TriZetto to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of TriZetto. There are no outstanding
obligations of TriZetto or its Subsidiaries to repurchase, redeem or otherwise
acquire any securities referred to in clauses (i), (ii) or (iii) above.
(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 Stock having the right to vote) on
any matters on which the TriZetto stockholders may vote.
4.7 SEC FILINGS OF TRIZETTO. TriZetto has furnished Novalis and the
Novalis Securityholders copies of the reports and other documents (excluding
exhibits) of TriZetto filed with the Securities and Exchange Commission (the
"SEC") set forth in Section 6.1 ("SEC Filings"). Said reports and other
documents (excluding exhibits) are accurate and complete in all material
respects and do not omit any material information required to be set forth
therein. TriZetto has timely filed with the SEC all reports and other documents
(excluding exhibits) required to be filed by it since its initial public
offering in October 1999.
4.8 TRIZETTO FINANCIAL STATEMENTS. The unaudited consolidated
financial statements for its third quarter ended September 30, 1999 are complete
and correct in all material respects in accordance with the books and records of
TriZetto, and present fairly the financial position of TriZetto, at the dates
indicated and the results of its operations and the changes in stockholders
equity for the period then ended, in accordance with generally accepted
accounting principles, consistently applied.
4.9 ABSENCE OF CERTAIN CHANGES. Since September 30, 1999, there has
been no change in the business or financial condition of TriZetto, except as set
forth in the SEC Filings and changes in the ordinary course of business that in
the aggregate have not been materially adverse to TriZetto. To the knowledge of
TriZetto, except as set forth in the SEC Filings, there are no new developments
in any business conducted by TriZetto, nor any new or improved technologies,
products, processes or services useful in connection with the business of
TriZetto or its customers, which can reasonably be expected to have a Material
Adverse Affect on TriZetto.
4.10 LITIGATION. There is no action, suit, investigation, audit or
proceeding pending against, threatened against or affecting, TriZetto, its
officers or directors, the TriZetto Subsidiaries 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, have a Material Adverse
Effect on TriZetto. Neither TriZetto, the TriZetto Subsidiaries or any of their
respective properties, nor to the knowledge of TriZetto, any of its officers or
directors is subject to any order, writ, judgment, decree or injunction of any
court or arbitrator or any governmental body, agency or official.
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4.11 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 the TriZetto Subsidiaries who might be entitled to
any fee or commission from Novalis or any of the TriZetto Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
4.12 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 5
COVENANTS OF NOVALIS AND THE NOVALIS SECURITYHOLDERS
5.1 CONDUCT OF BUSINESS. Novalis agrees that from the date hereof
until the Closing Date, except with the prior written consent of TriZetto, as
set forth in the Novalis Disclosure Schedule or as contemplated by this
Agreement, prior to the Closing Date, (a) Novalis and the Novalis Subsidiaries,
shall conduct their businesses in the ordinary course consistent with past
practice and shall use their reasonable best efforts to preserve intact their
business organizations and keep available the services of their current officers
and employees and preserve their relationships with third parties and (b)
without limiting the generality of the foregoing, and subject to the exceptions
set forth in the preceding clause, Novalis and the Novalis Subsidiaries will
not, except as necessary to facilitate the transaction contemplated by this
Agreement:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect of, any
of its capital stock, other than dividends and distributions by any direct or
indirect subsidiary of Novalis, (ii) adjust, split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) purchase, redeem or otherwise acquire any shares of capital stock of
Novalis or any of the Novalis Subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or other securities
(other than in connection with the exercise of Novalis Options in accordance
with the terms thereof as in effect on the date hereof or as contemplated by
Section 2.3 hereof);
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options, including Novalis Options,
to acquire, any such shares, voting securities or convertible securities (other
than the issuance of Novalis Stock upon the exercise of Novalis Options
outstanding as of the date hereof);
(c) amend their Certificate of Incorporation, Bylaws or
other comparable charter or organizational documents;
(d) sell, lease, license, transfer or otherwise dispose of,
any material properties or assets except (i) pursuant to existing contracts or
commitments, or (ii) in the ordinary course consistent with past practices;
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(e) amend, modify or waive any material term of any
outstanding security of Novalis or the Novalis Subsidiaries;
(f) incur, assume, guarantee or become obligated with
respect to any indebtedness other than drawings on existing revolving credit
facilities listed in the Novalis Disclosure Schedule, or otherwise in the
ordinary course of business, consistent with past practice, or incur, assume,
guarantee or become obligated with respect to any other material obligations
other than in the ordinary course of business and consistent with past practice;
(g) make or agree to make any new capital expenditures or
acquisitions of assets or property or other acquisitions or commitments in
excess of $50,000 individually or $50,000 in the aggregate or otherwise acquire
or agree to acquire any material assets or property;
(h) (i) grant to any current or former director, officer or
employee of Novalis or any of Novalis Subsidiaries any material increase in
compensation or benefits, except for cost of living raises in the ordinary
course of business, and except for employees who are not officers or directors
in the ordinary course of business consistent with past practice, (ii) grant to
any such director, officer, or employee any increase in severance or termination
pay (including the acceleration in the exercisability of Options or in the
vesting of shares of Novalis Stock (or other property) except for acceleration
in accordance with the terms of the Option Plan as contemplated by Section 5.5
hereof, or (iii) enter into any employment, deferred compensation, severance or
termination agreement or arrangement with or for the benefit of any such current
or former director, officer, or employee;
(i) will not knowingly take any actions that would make any
representation and warranty of Novalis or the Novalis Subsidiaries hereunder
inaccurate in any material respect at the Closing Date; or
(j) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.2 NO SOLICITATION. Novalis shall not, directly or indirectly,
through any officer, director, employee, representative or agent of Novalis or
any of the Novalis Subsidiaries, (i) solicit, initiate or encourage the
initiation of any inquiries or proposals regarding any merger, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transactions involving Novalis
or any Novalis Subsidiaries other than the transaction contemplated herein (any
of the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal") except to the extent Novalis determines it is advisable
to engage in discussions in order to resolve the matters referred to in the
Supplement to Novalis Disclosure Schedule or (ii) agree to approve or recommend
any Acquisition Proposal, except as otherwise required by a director or officer
of Novalis in the exercise of his fiduciary duty.
5.3 PAYMENT OF BONUS. The Novalis Securityholders (excluding Chester
B. Burrell and Thomas S. Brown) agree to pay (on a pro rata basis according to
the percentages set forth on Exhibit B) a bonus to Chester E. Burrell in the
amount of $200,000 solely out of the proceeds of their future sale of the
TriZetto Stock in accordance with this Agreement and the Transaction Documents,
which sale for such purpose shall occur no later than 30 days after the
effectiveness of the registration statement contemplated under Section 6.4(g) of
this Agreement, and Chester E. Burrell hereby agrees upon the Closing to release
and discharge Novalis from any obligation with respect to such bonus.
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5.4 PAYMENT OF BROADVIEW FEE. The Novalis Securityholders (excluding
Chester E. Burrell and Thomas S. Brown) agree to pay (on a pro rata basis
according to the percentages set forth on Exhibit B) Broadview International,
L.L.C. ("Broadview") an investment banking fee in the amount of $465,000 out of
the proceeds of their future sale of the TriZetto Stock, in accordance with this
Agreement and the Transaction Documents which sale for such purpose shall occur
no later than 30 days after the effectiveness of the registration statement
contemplated under Section 6.4(g) of this Agreement, and the Novalis
Securityholders shall secure an agreement from Broadview as of the Closing,
releasing and discharging Novalis from any obligation to pay such fee.
5.5 TERMINATION OF THE NOVALIS 1995 STOCK OPTION PLAN. Novalis and
the Novalis Securityholders acknowledge and agree that the transactions
contemplated by this Agreement will, with the giving of the required notice
(which shall be given by Novalis no later than one business day prior to the
Closing), automatically cause all of the outstanding Options, whether or not
previously exercisable under the terms of the Option Plan, to become exercisable
and that all of the holders of the outstanding Options shall have the right to
exercise such Options prior to the Closing. Novalis agrees to cause all
unexercised Options to be terminated prior to the Closing.
5.6 TAX BASIS. The Novalis Securityholders (to the extent such
information is in their possession) shall cooperate with Novalis and TriZetto,
as necessary, to prepare the following information with respect to each of
Novalis and the Novalis Subsidiaries (or, in the case of clause (ii) below, with
respect to each of the Novalis Subsidiaries) as of the most recent practicable
date (as well as on an estimated pro forma basis as of the Closing Date giving
effect to the consummation of the transactions contemplated hereby): (i) the
basis of Novalis or the Novalis Subsidiaries in its assets; (ii) the basis of
the stockholder(s) of the Novalis Subsidiaries in its stock (or the amount of
any excess loss account within the meaning of Treasury Regulation Section
1.1562-19); (iii) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to Novalis or the Novalis Subsidiaries; and (iv) the
amount of any deferred gain or loss allocable to Novalis or the Novalis
Subsidiaries arising out of any deferred intercompany transaction.
ARTICLE 6
COVENANTS OF TRIZETTO
6.1 SEC FILINGS. TriZetto will, at least three business days prior
to the Closing, provide Novalis and each Novalis Securityholder (by federal
express or other overnight service at the address set forth on Appendix B) with
its prospectus dated October 7, 1999 and all Form 10-Q's and Form 8-K's and all
other items filed by TriZetto under Sections 13(a), 14(a) and (c) and 15(d) of
the 1934 Act since the date of such prospectus.
6.2 EMPLOYEE BENEFIT PLANS. As soon as practicable after the
Closing, TriZetto shall cause Novalis to terminate all of its Employee Benefit
Plans in accordance with their terms but without any liability to Novalis or
TriZetto except as required in accordance with applicable law. Concurrently
therewith, TriZetto shall provide, to each person employed after the Closing by
TriZetto or Novalis, employee benefit plans under which such persons shall
receive benefits comparable to those offered to TriZetto employees.
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6.3 INDEMNIFICATION, DIRECTORS' AND OFFICERS' LIABILITY.
(a) From and after the Closing Date, TriZetto shall cause
Novalis and the Novalis Subsidiaries to continue to indemnify, defend and hold
harmless to the fullest extent permitted by law and provided under the Novalis
certificate of incorporation (or other incorporation documents) and bylaws as in
effect on the date of this Agreement, and Novalis and the Novalis Subsidiaries
shall continue to indemnify, defend and hold harmless to the fullest extent
permitted under applicable law and provided under the respective Novalis and the
Novalis Subsidiaries' certificates of incorporation (or other incorporation
documents) and bylaws as in effect on the date of this Agreement each person who
is now, or has been at any time prior to the date hereof, an officer or director
of Novalis or any Novalis Subsidiary, as the case may be (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties").
(b) TriZetto shall cause Novalis to keep in effect
provisions in its and each Novalis Subsidiaries' certificate of incorporation or
other governing instruments with respect to indemnification identical in all
material respects to such provisions contained in the certificate of
incorporation and bylaws of Novalis and the Novalis Subsidiaries, as the case
may be, as of the date of this Agreement, which provisions or express assumption
shall not be amended, repealed or otherwise modified for a period of four years
from the Closing Date in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Closing Date were
directors or officers of Novalis or any Novalis Subsidiary in respect of actions
or omissions at or prior to the Closing Date (including, without limitation, the
transactions contemplated by this Agreement), except as required by applicable
law or except to make changes permitted by law that would not materially
diminish the Indemnified Parties' right of indemnification hereunder, except (i)
with the prior written consent of the Indemnified Parties which shall not be
unreasonably withheld, or (2) if TriZetto or its successor assumes the
indemnification obligations of Novalis or the Novalis Subsidiaries.
(c) For a period of four years after the Closing Date,
Novalis and the Novalis Subsidiaries shall cause to be maintained in effect the
current officers' and directors' liability insurance maintained by Novalis and
the Novalis Subsidiaries with respect to those persons who are currently covered
by Novalis' and the Novalis Subsidiaries' directors' and officers' liability
insurance policy (provided that Novalis and the Novalis Subsidiaries may
substitute therefore policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous in all material
respects to such persons than such existing insurance) covering acts or
omissions occurring prior to the Closing Date; provided, however, that Novalis
and the Novalis Subsidiaries shall not be required in order to maintain or
procure such coverage to pay an annual premium in excess of 150% of the current
annual premium paid by Novalis and the Novalis Subsidiaries for its existing
coverage (the "Cap"); and provided, further, that if existing coverage cannot be
maintained or equivalent coverage cannot be obtained, or can be obtained only by
paying an annual premium in excess of the Cap, Novalis and the Novalis
Subsidiaries shall only be required to obtain as much coverage as can be
obtained by paying an annual premium equal to the Cap in accordance with the
terms and provisions that can be so obtained.
(d) This Section 6.3 shall survive the Closing, is intended
to benefit the officers and directors of Novalis and the Novalis Subsidiaries at
the Closing Date and each of the Indemnified Parties and their respective heirs
and personal representatives (each of whom shall be entitled to enforce this
Section 6.3 against TriZetto as a third-party beneficiary of this Agreement),
and shall be binding on all successors and assigns of TriZetto.
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6.4 REGISTRATION STATEMENT. TriZetto shall use its commercially
reasonable best efforts to qualify for registration on Form S-3 or, if Form S-3
is not available, then on Form S-1 or such other available form, subject to the
availability of audited consolidated financial statements of Novalis and the
Novalis Subsidiaries. Without any request necessary from the Novalis
Securityholders, TriZetto shall file a registration statement covering the
shares of TriZetto Stock issued pursuant to Section 1.1(d)(iii)-(iv) and Section
1.1(e) hereunder, on or before October 8, 2000. TriZetto shall use its
commercially reasonable best efforts to have such registration statement
declared effective prior to the one-year anniversary of the date hereof.
6.5 NASDAQ ADDITIONAL LISTING APPLICATION. TriZetto shall file an
Additional Listing Application covering the shares of TriZetto Stock issuable to
the Novalis Securityholders pursuant to this Agreement within one business day
after the Closing. TriZetto shall use its commercially reasonable best efforts
to have such shares approved for listing on the Nasdaq National Market. In the
event that additional shares of TriZetto common stock are issued pursuant to
Section 1.1(e) hereof, TriZetto shall use its commercially reasonable best
efforts to have such Adjusted Shares listed on the NMS.
6.6 COMPLETION OF AUDIT. TriZetto shall use its commercially
reasonable best efforts to complete the financial audit of the financial books
and records of Novalis and the Novalis Subsidiaries for the fiscal years ending
December 31, 1997, 1998 and 1999 as soon as practicable.
ARTICLE 7
COVENANTS OF TRIZETTO AND NOVALIS
7.1 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
such party is subject, Novalis and TriZetto shall each (and shall cause each of
their subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of the other, reasonable access, during the period
prior to the Closing, to all its properties, books, contracts, commitments and
records and, during such period, Novalis and TriZetto each shall (and shall
cause each of their Subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and each shall make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussions of the other's business, properties and personnel
as either TriZetto or Novalis may reasonably request.
7.2 CONSENTS; APPROVALS. Prior to the Closing, each of Novalis and
TriZetto shall use its reasonable best efforts to obtain all consents, waivers,
approvals, authorizations or orders necessary (including, without limitation,
all governmental and regulatory rulings and approvals), such that the
transaction contemplated herein will not constitute a default (or an event which
with notice or lapse of time or both would become a default) under any material
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which it or any of its subsidiaries is a party. Novalis and
TriZetto shall make all filings (including, without limitation, all filings with
the governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by Novalis and TriZetto
and the consummation by them of the transactions contemplated hereby.
7.3 NOTICES OF CERTAIN EVENTS. Novalis and TriZetto shall promptly
notify the other party of:
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(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental
or regulatory agency in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting such party that, if pending on the date of this
Agreement, would have been required to be disclosed pursuant to Article 2,
Article 3 or Article 4 or that relate to the consummation of the transactions
contemplated by this Agreement.
7.4 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.
7.5 PUBLIC ANNOUNCEMENTS. TriZetto and Novalis shall consult with
each other before issuing any press release with respect to the transaction
contemplated herein or this Agreement, and except as may be required by
applicable law, will not issue any such press release or make any such public
statement without the prior written consent of the other party.
7.6 TRANSFER TAXES. TriZetto and Novalis shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding transfer, stock transfer and stamp taxes, 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 Date. TriZetto and the Novalis Securityholders agree that the Novalis
Securityholders will pay transfer tax, stamp tax, stock transfer tax, or other
similar tax imposed on the sale of the Novalis Stock (collectively, "Transfer
Taxes"), and any penalties or interest with respect to the Transfer Taxes. The
Novalis Securityholders agree to cooperate with TriZetto in the filing of any
returns with respect to the Transfer Taxes.
ARTICLE 8
OFFSET AND INDEMNIFICATION RIGHTS
8.1 TRIZETTO'S OFFSET RIGHTS.
(a) From and after the Closing Date, TriZetto shall have a
right of offset against the Escrow Shares for TriZetto's Recoverable Losses (as
defined in Section 8.1(b)) in the manner and to the extent set forth in this
Section 8.1.
(b) The term "TriZetto's Recoverable Losses" shall include
all losses, costs, expenses (including reasonable attorneys' fees and expenses
and other costs and expenses incident to any suit, action, investigation, claim
or proceeding), fees, claims, liabilities and damages (which shall
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in no event include punitive damages awarded against TriZetto or consequential
damages suffered or incurred by TriZetto or any losses, costs, expenses, fees,
claims, liabilities or damages which are covered by insurance) incurred by
TriZetto arising from (i) a breach of any representation or warranty contained
in Articles 2 or 3 hereof or (ii) a breach of any agreement or covenant of
Novalis or the Novalis Securityholders under or pursuant to this Agreement (in
each case, a "TriZetto Claim"); provided, however, that (A) TriZetto shall not
be entitled to any offset for any TriZetto's Recoverable Losses unless all
claims for TriZetto's Recoverable Losses exceed in the aggregate $100,000, in
which event TriZetto may only offset TriZetto's Recoverable Losses in excess of
$50,000; (B) the threshold set forth in clause (A) of this Section 8.1(b) shall
not apply to any TriZetto Claims resulting from a breach of any representation
or warranty set forth in Sections 2.3 and 2.4 hereof; and (C) TriZetto's maximum
aggregate offset right for TriZetto's Recoverable Losses shall be limited to
Escrow Shares having a maximum value of $3,000,000 (which, for purposes of
resolving claims arising under this Article 8, shall be valued in the manner set
forth in Section 8.3 below), and the liability of each Novalis Securityholder
shall be limited to such holder's pro rata share of the Escrow Shares, as set
forth in Exhibit A to the Offset Escrow Agreement. TriZetto's right to offset
TriZetto Recoverable Losses against the Escrow Shares shall survive the Closing
until 11:59 p.m. (Washington, D.C. time) on the one year anniversary of the
Closing Date (the "Claims Period"); provided, however, that any Claim for offset
by TriZetto must be made by TriZetto, if at all, by giving the Representative a
written Claim Notice (as defined in Section 8.3) during the Claims Period.
8.2 NOVALIS SECURITYHOLDERS' INDEMNIFICATION RIGHTS.
(a) From and after the Closing Date, TriZetto will indemnify
and hold harmless each Novalis Securityholder and its officers, directors,
employees, agents, heirs, personal representatives, successors and assigns from
any and all Novalis Securityholders' Recoverable Losses (as defined in Section
8.2(b)) in the manner and to the extent set forth in this Section 8.2.
(b) The term "Novalis Securityholders' Recoverable Losses"
shall include all losses, costs, expenses (including reasonable attorney's fees
and expenses and other costs and expenses incident to any suit, action,
investigation, claim or proceeding), fees, claims, liabilities and damages
(which shall in no event include punitive damages awarded against the Novalis
Securityholders or consequential damages suffered or incurred by any of the
Novalis Securityholders or any losses, costs, expenses, fees, claims,
liabilities or damages which are covered by insurance) incurred by the Novalis
Securityholders arising from (i) a breach by TriZetto of any representation or
warranty contained in Article 4 hereof; or (ii) a breach of any agreement or
covenant of TriZetto under or pursuant to this Agreement (the circumstances in
each of (i) and (ii) in this Section 8.2(b) being referred to herein as a
"Novalis Securityholders Claim"); provided, however, that (A) TriZetto's
indemnification obligations hereunder shall survive for the Claims Period; (B)
the Novalis Securityholders' indemnification rights shall only apply to Novalis
Securityholders' Claims made or asserted during the Claims Period; and (C) any
claims for indemnification must be made by the Novalis Securityholders by giving
TriZetto a written Claim Notice during the survival period with respect to such
claim. TriZetto's liability hereunder shall be limited to $1,000,000; provided,
however, that (1) this dollar limit shall not apply to Novalis Securityholders
Claims for failure by TriZetto to perform or comply with its obligations
pursuant to Section 1.1, its covenants pursuant to Section 5.5, Articles 6, 7
and 8, Sections 10.2 and 10.3 or Article 11 of this Agreement or its covenants
in the Transaction Documents and (2) the Claims Period or survival period for
the matters covered by clause (1) in this proviso shall be one year from the
Closing Date, except for Section 6.3 which shall survive for four years.
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8.3 CLAIMS FOR OFFSET RIGHTS AND INDEMNIFICATION; DISPUTES.
(a) CLAIMS FOR OFFSET RIGHTS AND INDEMNIFICATION. Any person
entitled to offset rights or indemnification hereunder (individually or with
others, collectively, the "Claimant") shall give the Novalis Securityholders or
TriZetto, as the case may, written notice (the "Claim Notice") of any claim
(including the receipt of any demand) or the commencement of any action with
respect to which offset rights or indemnity, as applicable, may be sought by the
Claimant (individually, a "Claim" and collectively, the "Claims"); provided,
however, that if the Claimant fails to give such Claim Notice prior to the
expiration of the applicable survival period, all rights of the Claimant to
assert any such Claims shall terminate and be forever waived. The Claim Notice
shall state (i) the aggregate amount of TriZetto's Recoverable Losses or the
Novalis Securityholders' Recoverable Losses (in either case, "Recoverable
Losses") as to which offset rights or indemnification, as applicable, are being
sought (which amount may be estimated and updated from time to time); (ii) the
components of the amount of Recoverable Losses for which offset rights or
indemnification, as applicable, are being sought (which components may be
estimated and updated from time to time); and (iii) the specific grounds upon
which the Claim for offset rights or indemnification, as applicable, is being
made. The right of the Claimant to offset rights or indemnification, as
applicable, for a Claim shall be deemed to be accepted by the party against whom
a Claim is asserted unless, within 30 days after such party's receipt of the
Claim Notice, the party against whom a Claim is asserted notifies the Claimant
in writing that it objects in whole or in part to the right of the Claimant to
offset rights or indemnification, as applicable, with respect to the Claim.
(b) CONTROL OF LITIGATION; MUTUAL COOPERATION. If a Claim is
based upon a claim asserted by a third party against the Claimant (a "Third
Party Claim") and the party against whom a Claim is asserted (the "Defending
Party") objects to the right of the Claimant to offset rights or
indemnification, as applicable, with respect to the Claim, the Claimant shall be
entitled to control the defense of the Third Party Claim, including, without
limitation, the employment of counsel reasonably acceptable to the Defending
Party and the right to settle the Third Party Claim with the consent of the
Defending Party, which shall not to be unreasonably withheld or delayed. All
reasonable fees and expenses of counsel retained by the Claimant to defend such
Third Party Claim, expert witness fees and other costs incurred in such action,
shall be payable by the Claimant defending such Third Party Claim; provided,
however, that if such Third Party Claim results in a Recoverable Loss for which
the party against whom a Claim is asserted, notwithstanding any denial of
liability, is found to be liable hereunder, such reasonable fees and expenses of
counsel, expert witness fees and other reasonable costs incurred in such action
shall be deemed to be included in such Recoverable Loss and subject to offset
rights or indemnification, as applicable, by the party against whom the Claim is
asserted to the extent and under the limitations provided in this Article 8. If
the party against whom the Claim is asserted does not object to the right of the
Claimant to offset rights or indemnification, as applicable, with respect to the
Claim, such party shall be entitled, in his, her or its discretion, to assume
the defense of the Third Party Claim, including, without limitation, the
employment of counsel reasonably satisfactory to the Claimant, which consent
shall not be unreasonably withheld. If the party against whom the Claim is
asserted does not object to the right of the Claimant to offset rights or
indemnification, as applicable, with respect to the Claim, but does not elect to
assume the defense of the Third Party Claim, the Claimant shall be entitled to
assume the defense of the Third Party Claim. Regardless of which party is
controlling the defense of the Third Party Claim for which the party against
whom the Claim is asserted admits liability hereunder, (i) such party and the
Claimant shall act in good faith; (ii) no settlement of the Third Party Claim
may be agreed to without the written consents of such party and the Claimant,
which consents shall not be unreasonably withheld or delayed; (iii) the
reasonable fees and expenses of counsel retained to
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defend the Third Party Claim, expert witness fees and other costs incurred in
such action shall be deemed to be included in such Recoverable Losses and shall
be offset or indemnified, as applicable, by the party against whom the Claim is
asserted to the extent and under the limitations provided in this Article 8; and
(iv) the party controlling the defense of the Third Party Claim shall deliver,
or cause to be delivered, to the other party copies of all correspondence,
pleading, motions, briefs, appeals or other written statements relating to or
submitted in connection with the defense of the Third Party Claim, and timely
notices of, and the right to participate in (as an observer and at their own
expense), any hearing or other court proceeding relating to the Third Party
Claim.
(c) RESOLUTION OF DISPUTES; VALUE OF ESCROW SHARES FOR
CLAIMS PURPOSES. The Claimant and the party against whom a Claim is asserted
shall undertake in good faith to or to have their representatives promptly meet
and attempt to resolve all disputes regarding offset rights or indemnification,
as applicable. If the Claimant and the party against whom the Claim is asserted
are unable to resolve such disputes within 30 days after the Claim Notice, the
resolution of the disputes shall be referred to and settled by arbitration in
accordance with Section 11.12 hereof. A Claim under this Agreement shall be
"Resolved" if (a) the parties mutually agree on the resolution of such Claim or
(b) the Claim is settled in accordance with Section 11.12. All TriZetto Claims
under this Agreement and any other TriZetto claims pursuant to Subsection B.(ii)
and Subsection C of the Supplement to Novalis Disclosure Schedule will be held
until the Adjustment Date. For purposes of the payment of any TriZetto Claims
under this Article or any other TriZetto claims under Subsection B.(ii) and
Subsection C of the Supplement to Novalis Disclosure Schedule which are Resolved
in TriZetto's favor, the assumed value of the Escrow Shares for such purposes
shall be equal, on a per share basis, to the average closing sales price of the
TriZetto Stock as reported on the NMS (or other exchange or similar market on
which the TriZetto Stock is regularly traded if not then traded on NMS) for the
20 trading days preceding the Adjustment Date.
8.4 EXCLUSIVE REMEDY. Each of the parties hereto acknowledges and
agrees that, from and after the Closing Date, its sole and exclusive monetary
remedy with respect to any and all claims relating to the subject matter of this
Agreement shall be pursuant to the offset or indemnification provisions, as the
case may be, set forth in this Article 8 and Subsection B.(ii) and Subsection C
of the Supplement to Novalis Disclosure Schedule, except that nothing in this
Agreement shall be deemed to constitute a waiver of any injunctive or other
equitable remedies or any tort claims of, or causes of action arising from,
intentionally fraudulent misrepresentation or deceit.
ARTICLE 9
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTION
CONTEMPLATED HEREIN. The respective obligations of TriZetto and Novalis to
consummate the transactions contemplated herein are 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 transactions contemplated herein
shall be in effect; and
9.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TRIZETTO. The
obligations of TriZetto to purchase and pay for the Novalis Stock are also
subject to the following conditions:
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(a) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Novalis 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 Novalis, or waived by TriZetto;
(b) ESCROW AGREEMENTS. The Warrant Escrow Agreement and the
Offset Escrow Agreement in the form of Exhibit D and Exhibit E shall have been
entered into by TriZetto and each of the Novalis Securityholders;
(c) NON-COMPETITION AGREEMENT. The Non-Competition Agreement
in the form of Exhibit G shall have been entered into by TriZetto and Chester E.
Burrell;
(d) OPINION OF COUNSEL. TriZetto shall have received the
opinion of Hogan & Hartson, LLP counsel to Novalis, dated as of the Closing, in
the form attached hereto as Exhibit H;
(e) EMPLOYMENT AGREEMENT. TriZetto shall have offered
employment to Chester E. Burrell on mutually acceptable terms and Chester E.
Burrell shall have accepted such employment effective as of the Closing;
(f) REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement in the form attached hereto as Exhibit I shall have been entered into
by TriZetto and each of the Novalis Securityholders;
(g) PROMISSORY NOTE AND STOCK PLEDGE AGREEMENTS. The
Promissory Note in the form attached hereto as Exhibit J ("Promissory Note") and
the Stock Pledge Agreement in the form attached hereto as Exhibit K ("Stock
Pledge Agreement") shall have been entered into by Novalis and each of the
Novalis Securityholders;
(h) WARRANT. The Warrant and Warrant Assignment in the form
attached hereto as Exhibit F shall have been entered into by TriZetto and the
Novalis Securityholders or their assigns;
(i) CONVERSION OF NOTES. The 1995 Notes and the 1999 Notes
shall have been converted into shares of Series C Stock in accordance with
Appendix A, and such shares shall be included in the purchase and sale of the
Novalis Stock hereunder and the 1995 Notes and 1999 Notes shall be stamped
cancelled and delivered to TriZetto at the Closing;
(j) RESIGNATIONS. At the Closing, Novalis shall cause to be
delivered to TriZetto duly signed resignations, effective immediately after the
Closing, of all directors and officers of Novalis and the Novalis Subsidiaries
(other than those directors and officers designated in writing by TriZetto to
Novalis at least one day before the Closing Date), or shall take such other
action as is necessary to assure that such persons are not directors or officers
of Novalis or the Novalis Subsidiaries after the Closing; and
(k) BURRELL SHARES. Concurrent with the Closing, the Novalis
Securityholders receiving TriZetto Stock at the Closing shall agree to transfer
to Chester E. Burrell on the one-year anniversary of the Closing Date, (i) 6% of
the shares of TriZetto Stock received by them at Closing, (ii) 6% of the shares
of TriZetto Stock placed in escrow and releasable to such Novalis
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<PAGE> 36
Securityholders under the Offset Escrow Agreement, and (iii) 6% of the shares of
TriZetto Stock issued at the Adjustment Shares Closing.
(l) STOCK PURCHASE AGREEMENT. All of the holders of the
issued and outstanding Novalis Stock shall have entered into this Agreement.
(m) CERTAIN REGULATORY MATTERS. At or prior to the Closing,
Novalis shall deliver either (i) correspondence from the Maryland Insurance
Commissioner either approving the purchase and sale of Novalis Stock or
indicating that no such approval is necessary, or (ii) a letter from Saul Ewing,
special counsel to PHN, satisfactory in form and substance to TriZetto regarding
such matters.
(n) NOVALIS STOCK OPTIONS. All issued and outstanding
Options under the Novalis 1995 Stock Option Plan shall be terminated prior to
the Closing.
9.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF NOVALIS. The obligation
of Novalis to sell and deliver the Novalis Stock is also subject to the
following conditions:
(a) 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; and
(b) OPINION OF COUNSEL. Novalis shall have received the
opinion of Stradling Yocca Carlson & Rauth, counsel to TriZetto, dated as of the
Closing Date, in the form attached hereto as Exhibit L.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior to
the Closing, (notwithstanding any approval of this Agreement by the board of
directors of TriZetto or Novalis or Novalis' Stockholders):
(a) by mutual written agreement duly authorized by the board
of directors of TriZetto and Novalis;
(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 Novalis 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 or cured
by Novalis within 10 days of such noncompliance or nonperformance;
(c) by the board of directors of Novalis, if any condition
to the obligation of Novalis 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
35
<PAGE> 37
performance, and such noncompliance or nonperformance shall not have been waived
by Novalis or cured by TriZetto within 10 days of such noncompliance or
nonperformance; or
(d) by either TriZetto or Novalis if the purchase and sale
of the Novalis Stock shall not have been consummated by December 31, 1999;
provided, however, that the right to terminate this Agreement under this Section
10.1(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).
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Article 10, 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 nothing herein shall
relieve any party from liability for any breach by such party.
10.3 FEES AND EXPENSES. Except as set forth in this Article 10, 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 purchase and sale of Novalis Stock is consummated.
Without limiting the generality of the foregoing, the Novalis Securityholders
(excluding Chester E. Burrell and Thomas S. Brown) will pay, on a pro rata basis
according to the percentages set forth in Exhibit B, all of the fees and
expenses incurred in connection with the transactions contemplated by this
Agreement for Novalis' and the Novalis Securityholders' legal, financial and
accounting advisors, including, without limitation, Hogan & Hartson L.L.P. and
the payment to Broadview specified in Section 5.4; provided, however, that (i)
Novalis may pay up to a maximum of $325,000 of legal fees that were not paid
prior to October 29, 1999, if subject to the execution and delivery of the
Promissory Note and Stock Pledge Agreement attached hereto as Exhibit J and
Exhibit K, respectively, by the Novalis Securityholders (excluding Chester E.
Burrell and Thomas S. Brown) and (ii) subject to the prior approval of TriZetto,
legal fees and expenses related to the Arkansas Transaction or this Agreement
that are incurred by Novalis after the Closing Date shall be payable by Novalis
and shall not be the responsibility of the Novalis Securityholders.
ARTICLE 11
GENERAL PROVISIONS
11.1 EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES. 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 one year following the Closing Date. 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.
11.2 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (c) five
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) two days after deposit with a nationally
recognized overnight courier, specifying two day delivery, with written
verification of receipt. All communications shall be sent to the parties at the
following addresses or facsimile numbers specified below (or at such
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<PAGE> 38
other address or facsimile number for a party as shall be designated by ten days
advance written notice to the other parties hereto):
(a) If to TriZetto:
The TriZetto Group, Inc.
567 San Nicolas Drive, Suite 360
Newport Beach, California 92660
Attn: Jeffrey H. Margolis
Ph: (949) 718-4940
Fax: (949) 718-4944
with a copy to (which shall not constitute notice):
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attn: K.C. Schaaf, Esq.
Ph: (949) 725-4155
Fax: (949) 725-4100
(b) If to Novalis:
Novalis Corporation
1 Columbia Circle
Albany, New York 12203
Attn: President
Ph: (518) 862-3400
Fax: (518) 862-3401
with a copy to (which shall not constitute notice):
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004
Attn: Robert J. Waldman, Esq.
Ph: (202) 637-5600
Fax: (202) 637-5910
(c) If to the Novalis Securityholders:
To the address set forth on Appendix B attached
hereto.
11.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
11.4 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)
37
<PAGE> 39
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.
11.5 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.
11.6 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.
11.7 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.
11.8 ENTIRE AGREEMENT. This Agreement (including the Novalis
Disclosure Schedule, TriZetto Disclosure Schedule together with the other
Transaction Documents and the exhibits attached hereto and thereto and the
certificates referenced herein) constitutes the entire agreement and supersedes
all prior agreements and undertakings (other than the Confidentiality Letter)
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.
11.9 ASSIGNMENT. No party may assign this Agreement or assign its
respective rights or delegate their duties (by operation of law or otherwise),
without the prior written consent of the other party.
11.10 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 6.4 (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 6.4, and may be enforced by such Indemnified
Parties and other persons).
11.11 GOVERNING LAW. This Agreement will be governed by, and construed
and enforced in accordance with the laws of the State of Delaware as applied to
contracts that are executed and performed in Delaware, without regard to the
principles of conflicts of law thereof.
11.12 ARBITRATION. In the event a dispute is initiated by TriZetto,
the Novalis Securityholders or the Representative which relates to this
Agreement, the negotiations surrounding
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<PAGE> 40
the execution and delivery of this Agreement or the interpretation or
enforcement of this Agreement, the dispute will be decided by arbitration in
Orange County, California in accordance with the commercial arbitration rules of
the American Arbitration Association except as modified by the following terms
and conditions:
(a) An arbitration panel shall be appointed within 30 days
after demand for arbitration is made by either the Representative or TriZetto.
The Representative and TriZetto shall each appoint an arbitrator and the two
arbitrators so appointed shall select a third arbitrator to serve as a panel
member and Chairman thereof.
(b) In the event either party fails or refuses to appoint an
arbitrator within 30 days of demand or should the arbitrators selected by the
Representative and TriZetto be unable to agree on the third arbitrator, then and
in that event, the Presiding Judge of the Supreme Court for Orange County,
California, shall appoint an arbitrator for the party failing to appoint an
arbitrator and shall appoint the third arbitrator in the event the arbitrators
previously appointed are unable to agree on the third arbitrator.
(c) Each of the arbitrators appointed must be a member of
the State Bar of the state in which the arbitration is conducted, having been
continuously engaged in the private practice of law for a period of not less
than 15 years immediately prior to appointment as an arbitrator pursuant to this
Agreement. Each arbitrator appointed shall have significant experience in
transactional matters.
(d) The parties shall be given 60 days advance notice of the
arbitration hearing date.
(e) In the arbitration proceeding, the Representative and
TriZetto shall be entitled to a reasonable time to complete prehearing discovery
procedures. These procedures shall be allowed for a period of not less than 120
days after the matter is at issue. The arbitrator may extend the discovery time
period for good cause on application of either the Representative or TriZetto.
The discovery procedures shall include all methods of discovery authorized by
the Federal Rules of Civil Procedure and the time limits of the Federal Rules of
Civil Procedure shall apply for all types of discovery undertaken by any party.
(f) In addition to any award or other relief granted by the
arbitrators, the substantially prevailing party shall be entitled to an award
for its reasonable attorney's fees actually incurred and paid, together with all
other costs incurred in connection with such arbitration proceeding, including
but not limited to reasonable fees paid to expert witnesses, subpoena fees,
reasonable fees paid to its accountants and other reasonable costs incurred and
paid by the prevailing party in the arbitration proceeding.
(g) The arbitrators shall be bound to follow the laws of the
State of Delaware, both decisional and statutory, in reaching any decision and
making any award.
(h) The decision and any award by the arbitrators shall be
in writing and shall include specific findings of fact and conclusions of law.
11.13 REPRESENTATIVE HELD HARMLESS. Each Novalis Securityholder agrees
to hold the Representative free and harmless from any and all loss, cost, claim,
expense, damage or liability
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which he, she or it may incur or sustain as a result of any action taken by such
Representative in good faith pursuant to his, her or its appointment as agent
and attorney-in-fact under this Agreement.
11.14 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. This Agreement shall
become effective when counterparts have been signed by each of the parties and
delivered to the other party.
11.15 ATTORNEYS FEES. If any action or proceeding relating to this
Agreement or the Offset Escrow Agreement, or the enforcement of any provision of
this Agreement or the Offset Escrow Agreement is brought by a party hereto
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.16 GENDER. For purposes of this Agreement, references to the
masculine gender shall include feminine and neuter genders and entities.
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IN WITNESS WHEREOF, the parties have caused this Stock Purchase
Agreement to be duly executed and delivered as of the date first written above
by their respective officers thereunto duly authorized.
"TRIZETTO"
THE TRIZETTO GROUP, INC., a Delaware
corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
"NOVALIS"
NOVALIS CORPORATION
By:
----------------------------------
Name: Chester E. Burrell
Title: Chairman, President and
Chief Executive Officer
"NOVALIS STOCKHOLDERS"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
------------------------------
Name: Frederick L. Bryant
Title: General Partner
BANCBOSTON VENTURES INC.
By:
----------------------------------
Name: Marcia T. Bates
Title: Vice President
<PAGE> 43
EDISON VENTURE FUND III, L.P.
By: Edison Partners III, L.P.,
its General Partner
By:
------------------------------
Name: Gustav H. Koven
Title: General Partner
GALEN EMPLOYEE FUND, L.P.
By:
----------------------------------
Name: Bruce F. Wesson
Title: General Partner
GALEN PARTNERS II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
------------------------------
Name: Bruce F. Wesson
Title: General Partner
GALEN PARTNERS INTERNATIONAL II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
------------------------------
Name: Bruce F. Wesson
Title: General Partner
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY
By:
----------------------------------
Name: Everett V. Cox
Title: Authorized Representative
S-2
<PAGE> 44
ST. PAUL VENTURE CAPITAL IV, L.L.C.
By:
----------------------------------
Name: Everett V. Cox
Title:
----------------------------------
-----------------------------------------
Chester E. Burrell
-----------------------------------------
Thomas S. Brown
"NOVALIS NOTEHOLDERS"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
------------------------------
Name: Frederick L. Bryant
Title: General Partner
BANCBOSTON INVESTMENTS INC.
By:
----------------------------------
Name: Marcia T. Bates
Title: Vice President
EDISON VENTURE FUND III, L.P.
By: Edison Partners III, L.P.,
its General Partner
By:
------------------------------
Name: Gustav H. Koven
Title: General Partner
S-3
<PAGE> 45
GALEN EMPLOYEE FUND, L.P.
By:
----------------------------------
Name: Bruce F. Wesson
Title: General Partner
GALEN PARTNERS II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
------------------------------
Name: Bruce F. Wesson
Title: General Partner
GALEN PARTNERS INTERNATIONAL II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
------------------------------
Name: Bruce F. Wesson
Title: General Partner
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY
By:
----------------------------------
Name: Everett V. Cox
Title: Authorized Representative
ST. PAUL VENTURE CAPITAL V, L.L.C.
By:
----------------------------------
Name: Everett V. Cox
Title:
----------------------------------
S-4
<PAGE> 46
APPENDIX A
PROCEDURES FOR EXCHANGE OF NOVALIS NOTES
FOR SERIES C STOCK
[Omitted pursuant to Item 601 of Regulation S-K - information is not material to
an investment decision]
<PAGE> 47
APPENDIX B
ADDRESSES OF THE NOVALIS SECURITYHOLDERS
[Omitted pursuant to Item 601 of Regulation S-K - information is not material to
an investment decision]
<PAGE> 48
EXHIBIT A
CERTAIN DEFINITIONS
The following terms, as used in the Stock Purchase Agreement, have the following
meanings:
"1933 ACT" means the Securities Act of 1933, as amended.
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
"1995 NOTES" shall have the meaning as set forth in the Recitals.
"1999 NOTES" shall have the meaning as set forth in the Recitals.
"ACCOUNTS RECEIVABLE" shall have the meaning as set forth in Section
2.12 of the Agreement.
"ACQUISITION PROPOSAL" shall have the meaning as set forth in Section
5.2 of the Agreement.
"ADJUSTMENT DATE" shall have the meaning as set forth in Section 1.1(e)
of the Agreement.
"ADJUSTED SHARES CLOSING" shall have the meaning as set forth in Section
1.1(e) of the Agreement.
"AFFILIATE" shall mean any corporation, partnership, firm, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Entity, or person, the spouse,
brother, sister and direct ascendants and descendents of any individual person,
and any other person controlling, controlled by or under common control with the
subject person, with control being evidenced by ownership of more than 20% of
the capital stock of a person or the ability to direct the management or
policies of another person through any other means; provided, however, that for
purposes of this Agreement the term Affiliate shall not include QCA or its
subsidiaries.
"AGREEMENT" shall have the meaning as set forth in the Preamble.
"ARKANSAS TRANSACTION" shall mean that certain transaction occurring
simultaneously herewith.
"ASSETS" shall have the meaning as set forth in Section 2.7 of the
Agreement.
"BALANCE SHEET" shall have the meaning as set forth in Section 2.6 of
the Agreement.
"BENEFIT PLAN" shall have the meaning as set forth in Section 2.22(b) of
the Agreement.
"BROADVIEW" shall have the meaning as set forth in Section 5.4 of the
Agreement.
"CAP" shall have the meaning as set forth in Section 6.3(c) of the
Agreement.
<PAGE> 49
"CASH PORTION OF THE PURCHASE PRICE" shall have the meaning as set forth
in Section 1.1 of the Agreement.
"CLAIMANT" shall have the meaning as set forth in Section 8.3(a) of the
Agreement.
"CLAIM NOTICE" shall have the meaning as set forth in Section 8.3(a) of
the Agreement.
"CLAIMS" shall have the meaning as set forth in Section 8.3(a) of the
Agreement.
"CLAIMS PERIOD" shall have the meaning as set forth in Section 8.1(a) of
the Agreement.
"CLOSING" shall have the meaning as set forth in Section 1.3 of the
Agreement.
"CLOSING DATE" shall have the meaning as set forth in Section 1.3 of the
Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"CODE" shall have the meaning as set forth in Section 2.4(c) of the
Agreement.
"COMMON STOCK" shall have the meaning as set forth in the Recitals.
"CONTRACTS" shall have the meaning as set forth in Section 2.16 of the
Agreement.
"CONFIDENTIALITY LETTER" means that certain Confidentiality Letter
executed between TriZetto and Novalis on October 25, 1999.
"DEFENDING PARTY" shall have the meaning set forth in Section 8.3(b) of
the Agreement.
"EMPLOYEES" shall have the meaning as set forth in Section 2.19 of the
Agreement.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws (including, without limitation, common law), judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements,
treaties and governmental restrictions, relating to human health, the
environment or to emissions, discharges or releases of pollutants, contaminants
or other Hazardous Substances 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
Substances or wastes or the clean-up or other remediation thereof.
"ENVIRONMENTAL PERMITS" means, with respect to any person, all permits,
licenses, franchises, certificates, approvals and other similar authorizations
of governmental authorities relating to or required by Environmental Laws and
affecting, or relating in any way to, the business of such person as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ESCROW SHARES" shall have the meaning set forth in Section 1.1(d)(iii)
of the Agreement.
A-2
<PAGE> 50
"FINANCIAL STATEMENTS" shall have the meaning as set forth in Section
2.6 of the Agreement.
"FIXED ASSETS" shall have the meaning as set forth in Section 2.10 of
the Agreement.
"GAAP" shall have the meaning as set forth in Section 2.6 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 is regulated under any
Environmental Law.
"INDEMNIFIED PARTIES" shall have the meaning as set forth in Section 8.4
of the Agreement.
"INITIAL TRIZETTO STOCK PRICE" shall have the meaning as set forth in
Section 1.1(e) of the Agreement.
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning as set forth in
Section 2.11 of the Agreement.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning as set forth in
Section 2.6 of the Agreement.
"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, in each case material to the business of Novalis and the Novalis
Subsidiaries taken as a whole.
"KNOWLEDGE OF NOVALIS" means the actual knowledge of the officers of
Novalis, and knowledge that an officer should have after due inquiry.
"LEASES" shall have the meaning as set forth in Section 2.9 of the
Agreement.
"LICENSES" shall have the meaning as set forth in Section 2.13 of the
Agreement.
"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 financial condition, business, assets or liabilities of
such Person and its Subsidiaries taken as a whole.
"NMS" shall have the meaning as set forth in Section 1.1 of the
Agreement.
"NOVALIS" shall have the meaning as set forth in the Preamble.
"NOVALIS DISCLOSURE SCHEDULE" shall mean the written disclosure schedule
delivered on or prior to the date hereof by Novalis to TriZetto that is arranged
in paragraphs corresponding to the numbered and lettered paragraphs
corresponding to the numbered and lettered paragraphs contained in the
Agreement.
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<PAGE> 51
"NOVALIS ENVIRONMENTAL LIABILITIES" mean any and all liabilities of or
relating to Novalis and 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 Date.
"NOVALIS NOTEHOLDER" shall have the meaning as set forth in the
Preamble.
"NOVALIS NOTES" shall have the meaning as set forth in the Recitals.
"NOVALIS 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 contractor of Novalis or any of its
Subsidiaries or any predecessor thereof to purchase Novalis Stock pursuant to
Novalis' Option Plan (as defined below).
"NOVALIS SECURITYHOLDER" shall have the meaning as set forth in the
Preamble.
"NOVALIS SECURITYHOLDERS CLAIM" shall have the meaning set forth in
Section 8.2(b) of the Agreement.
"NOVALIS SECURITYHOLDERS RECOVERABLE LOSSES" shall have the meaning set
forth in Section 8.2(b) of the Agreement.
"NOVALIS STOCK" shall have the meaning as set forth in the Recitals.
"NOVALIS STOCKHOLDER" shall have the meaning as set forth in the
Preamble.
"NOVALIS STOCKHOLDERS AGREEMENT" shall have the meaning as set forth in
Section 2.3
of the Agreement
"NOVALIS SUBSIDIARY" means any Subsidiary of Novalis including, without
limitation, each of the following or any combination thereof: Novalis
Development and Licensing Corporation, an Indiana corporation (formerly known as
Health Networks of America, Inc.), Novalis Services Corporation, a Delaware
corporation, Novalis Development Corporation, a Delaware corporation (formerly
known as Novalis Corporation), Health Networks of America, Inc., a Maryland
corporation, and Digital Insurance Systems Corporation, an Ohio corporation. For
purposes of this Agreement, Novalis Subsidiary shall not include PHN and QCA.
"OFFSET ESCROW" shall have the meaning set forth in Section 1.1(d)(iii)
of the Agreement.
"OFFSET ESCROW AGENT" shall have the meaning set forth in Section
1.1(d)(iii) of the Agreement.
"OFFSET ESCROW AGREEMENT" shall have the meaning set forth in Section
1.1(d)(iii) of the Agreement.
"OPTION PLAN" shall refer to Novalis' 1995 Stock Option Plan, as
amended.
"OPTIONS" shall have the meaning as set forth in Section 2.3 of the
Agreement.
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<PAGE> 52
"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.
"PERSONAL PROPERTY LEASES" shall have the meaning as set forth in
Section 2.9 of the Agreement.
"PHN" means Preferred Health Network of Maryland, Inc. a Maryland
corporation.
"PRODUCTS" means the proprietary software applications developed or
owned by Novalis and/or the Novalis Subsidiaries.
"PROMISSORY NOTE" shall have the meaning as set forth in Section 9.2(g)
of the Agreement.
"PURCHASE PRICE" shall have the meaning as set forth in Section 1.1 of
the Agreement.
"QCA" means QualChoice of Arkansas, an Arkansas non-profit corporation.
"RECOVERABLE LOSSES" shall have the meaning set forth in Section 8.3(a)
of the Agreement.
"REAL PROPERTY LEASES" shall have the meaning as set forth in Section
2.9 of the Agreement.
"REPRESENTATIVE" means ABS Capital Partners, L.P.
"SEC" shall have the meaning as set forth in Section 4.7 of the
Agreement.
"SEC FILINGS" shall have the meaning as set forth in Section 4.7 of the
Agreement.
"SERIES A STOCK" shall have the meaning as set forth in the Recitals.
"SERIES B STOCK" shall have the meaning as set forth in the Recitals.
"SERIES C STOCK" shall have the meaning as set forth in the Recitals.
"SOFTWARE" means software programs and rights in any thereof (insofar as
it is practical to list or describe such rights).
"STATE REGULATIONS" shall have the meaning as set forth in Section 2.3
(b) (i).
"STOCK PLEDGE AGREEMENT" shall have the meaning as set forth in Section
9.2(g) of the Agreement.
"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) and (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).
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<PAGE> 53
"TAX RETURNS" means any return, report, information return, registration
form or other document (including any related or supporting information) filed
or required to be filed with any Taxing Authority in connection with the
determination of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"TAXES" means any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
real property, personal property, or windfall profit tax, custom duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
addition to tax or additional amount imposed by any Taxing Authority responsible
for the imposition of any such tax (domestic or foreign).
"TAXING AUTHORITY" shall mean any governmental authority responsible for
the imposition of Taxes.
"THIRD PARTY CLAIM" shall have the meaning set forth in Section 8.3(b)
of the Agreement.
"THIRD PARTY LICENSES" means all licenses and other agreements with
third parties relating to any Intellectual Property or products that Novalis or
its Subsidiaries are licensed or otherwise authorized by such third parties to
use, market, distribute or incorporate into products marketed and distributed by
Novalis or its Subsidiaries.
"THIRD PARTY TECHNOLOGY" means all Intellectual Property and products
owned by third parties and licensed pursuant to Third Party Licenses.
"TRANSACTION DOCUMENTS" means the Agreement, the Offset Escrow
Agreement, the Warrant Escrow Agreement, the Non-Competition Agreement, the
Registration Rights Agreement, the Stock Pledge Agreements, the Promissory
Notes, the Warrant, the employment letter agreement dated as of the date of the
Agreement by and between TriZetto and Chester E. Burrell, and any other document
executed and delivered pursuant hereto together with any exhibits or schedules
to such documents.
"TRANSFER AGENT" shall have the meaning as set forth in Section
1.1(d)(iv) of the Agreement.
"TRANSFER TAXES" shall have the meaning as set forth in Section 7.6 of
the Agreement.
"TRIZETTO" shall have the meaning as set forth in the Preamble.
"TRIZETTO CLAIMS" shall have the meaning set forth in Section 8.1(b) of
the Agreement.
"TRIZETTO COMMON STOCK" shall have the meaning set forth in Section
4.6(a) of the Agreement.
"TRIZETTO DISCLOSURE SCHEDULE" shall mean the written disclosure
schedule delivered on or prior to the date hereof by TriZetto to Company that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
corresponding to the numbered and lettered paragraphs contained in the
Agreement.
"TRIZETTO PREFERRED STOCK" shall have the meaning set forth in Section
4.6(a) of the Agreement.
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<PAGE> 54
"TRIZETTO RECOVERABLE LOSSES" shall have the meaning set forth in
Section 8.1(b) of the Agreement.
"TRIZETTO STOCK" shall have the meaning as set forth in Section 1.1 of
the Agreement.
"TRIZETTO SUBSIDIARY" means any Subsidiary of TriZetto including,
without limitation, each of the following or any combination thereof: Croghan &
Associations, Inc., a Colorado corporation, Margolis Health Enterprises, Inc., a
California corporation, and Creative Business Solution, Inc. a Texas
corporation.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act.
"WARRANT ESCROW" shall have the meaning as set forth in Section
1.1(b)(i) of the Agreement.
"WARRANT ESCROW AGENT" shall have the meaning set forth in Section
1.1(b)(i) of the Agreement.
"WARRANT ESCROW AGREEMENT" shall have the meaning as set forth in
Section 1.1(b)(i) of the Agreement.
"YEAR 2000 COMPLIANT" means that 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, to the extent such products, services or other items are not
modified by a third party and such products, services or other items are not
combined with third party products unless otherwise authorized by the vendor
thereof.
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<PAGE> 55
EXHIBIT B
ALLOCATION OF THE STOCK PORTION OF THE PURCHASE PRICE
[Omitted pursuant to Item 601 of Regulation S-K - information is not material to
an investment decision]
<PAGE> 56
EXHIBIT C
ALLOCATION OF THE CASH PORTION OF THE PURCHASE PRICE
[Omitted pursuant to Item 601 of Regulation S-K - information is not material to
an investment decision]
<PAGE> 57
EXHIBIT D
FORM OF WARRANT ESCROW AGREEMENT
See Exhibit 2.7 filed with the Company's Form 8-K
<PAGE> 58
EXHIBIT E
FORM OF OFFSET ESCROW AGREEMENT
See Exhibit 2.2 filed with the Company's Form 8-K
<PAGE> 59
EXHIBIT F
FORM OF WARRANT AND WARRANT ASSIGNMENT
See Exhibit 2.5 filed with the Company's Form 8-K
<PAGE> 60
EXHIBIT G
FORM OF NON-COMPETITION AGREEMENT
See Exhibit 2.6 filed with the Company's Form 8-K
<PAGE> 61
EXHIBIT H
FORM OF OPINION OF NOVALIS' COUNSEL
[Omitted pursuant to Item 601 of Regulation S-K - information is not material to
an investment decision]
<PAGE> 62
EXHIBIT I
FORM OF REGISTRATION RIGHTS AGREEMENT
See Exhibit 2.3 filed with the Company's Form 8-K
<PAGE> 63
EXHIBIT J
FORM OF PROMISSORY NOTE
See Exhibit 2.4 filed with the Company's Form 8-K
<PAGE> 64
EXHIBIT K
FORM OF STOCK PLEDGE AGREEMENT
See Exhibit 2.8 filed with the Company's Form 8-K
<PAGE> 65
EXHIBIT L
FORM OF SYCR OPINION
[Omitted pursuant to Item 601 of Regulation S-K - information is not material to
an investment decision]
<PAGE> 1
EXHIBIT 2.2
OFFSET ESCROW AGREEMENT
THIS OFFSET ESCROW AGREEMENT (this "Agreement") is made and entered into
as of November 29, 1999 (the "Effective Date") by and among The TriZetto Group,
Inc., a Delaware corporation ("TriZetto"), the parties listed on Exhibit A
attached hereto (collectively, the "Novalis Securityholders," and each
individually, a "Novalis Securityholder"), ABS Capital Partners, L.P., as the
representative of the Novalis Securityholders (the "Representative"), and
Bankers Trust Company of California, N.A, as escrow agent (the "Escrow Agent").
RECITALS
WHEREAS, TriZetto, Novalis Corporation, a Delaware corporation
("Novalis"), and the Novalis Securityholders entered into a Stock Purchase
Agreement dated as of November 29, 1999 (the "Purchase Agreement"), pursuant to
which TriZetto will purchase all of the issued and outstanding shares of Novalis
capital stock (the "Novalis Stock") from the Novalis Securityholders;
WHEREAS, the Purchase Agreement and the Supplement to Novalis Disclosure
Schedule ("Supplement to Novalis Disclosure Schedule") each provides that a
portion of the consideration will be withheld from the Purchase Price (as
defined in the Purchase Agreement) and will be placed in an escrow established
in accordance with this Agreement to secure the offset obligations under Article
8 of the Purchase Agreement and the Supplement to Novalis Disclosure Schedule;
and
WHEREAS, the parties desire to enter into this Agreement to establish the
terms and conditions under which the escrow will be established and maintained.
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:
1. CERTAIN DEFINED TERMS.
1.1 TERMS DEFINED IN PURCHASE AGREEMENT AND THE SUPPLEMENT TO
NOVALIS DISCLOSURE SCHEDULE. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the same meanings given to such terms in the
Purchase Agreement and the Supplement to Novalis Disclosure Schedule.
1.2 ESCROW. As used herein, the "Escrow" means the escrow and the
Escrow Account (as defined in Section 3.1 below) established pursuant to this
Agreement in which the Escrowed Property (as defined in Section 1.3 below) will
be held to secure the offset rights of TriZetto in accordance with Article 8 of
the Purchase Agreement and the Supplement to Novalis Disclosure Schedule.
1.3 ESCROWED PROPERTY. As used herein, the "Escrowed Property"
means, collectively: (a) 366,524 shares of TriZetto Stock issued on the Closing
Date in connection with the purchase and sale of the Novalis Stock (the "Escrow
Shares") and the Stock Powers (as defined in Section 3.1 below) executed and
delivered by the Novalis Securityholders; (b) all interest or other amounts paid
with respect to such Escrow Shares; and (c) all other property
<PAGE> 2
(including Distributions and Secondary Distributions (as defined in Section 3.2
below)) other than cash dividends issued or paid with respect to any Escrow
Shares that are deposited in the Escrow Account pursuant to this Agreement, all
of which shall be deemed to be "Escrowed Property" upon deposit in the Escrow
Account. The number of Escrow Shares of each Novalis Securityholder that will be
placed in the Escrow Account is equal to each Novalis Securityholder's
proportionate share of the Escrowed Property set forth on Exhibit A hereto (the
"Pro Rata Share"). As used herein, the term "Escrowed Property" includes all
Distributions and Secondary Distributions (as defined in Section 3.2) on
Escrowed Property and the term "Escrow Shares" includes all Distributions and
Secondary Distributions on Escrowed Property consisting of stock or other
securities.
1.4 TERMINATION DATE. "Termination Date" means the one-year
anniversary of the date hereof.
2. APPOINTMENT OF ESCROW AGENT. TriZetto and the Novalis Securityholders
hereby mutually appoint and designate the Escrow Agent to receive the Escrow
Shares as set forth herein.
3. FORMATION OF ESCROW ACCOUNT.
3.1 DELIVERY AND DEPOSIT OF ESCROWED PROPERTY. Upon the execution of
this Agreement by all parties hereto, TriZetto will promptly deliver to the
Escrow Agent the Escrow Shares in the form of duly authorized and executed stock
certificates issued in the respective names of the Novalis Securityholders,
representing each Novalis Securityholder's Pro Rata Share of the Escrow Shares;
and (b) each Novalis Securityholder will promptly deliver to the Escrow Agent
duly executed Stock Assignments Separate From Certificate for such Novalis
Securityholder's Escrow Shares in the form of Exhibit B ("Stock Powers"), signed
in blank by such Novalis Securityholder. The Escrow Agent agrees to accept
delivery of the above-mentioned Escrowed Property, which shall be clearly
designated by TriZetto and the Novalis Securityholders, as applicable, as
"Escrowed Property", and to hold the same in escrow in an escrow account (the
"Escrow Account"), subject to the terms and conditions of this Agreement. The
Escrow Agent shall deliver a Receipt and Acknowledgement to the Representative
upon receipt of any Escrowed Property.
3.2 DISTRIBUTIONS, CONVERSIONS, VOTING AND RIGHTS OF OWNERSHIP. So
long as the Escrow is in effect, dividends payable in stock or securities of
TriZetto or of any other person, firm or entity or any other property, other
than cash dividends which shall be distributed directly to Novalis
Securityholders, or other distributions of any kind (including without
limitation shares of TriZetto Common Stock issued in connection with a
subdivision, split or recapitalization of TriZetto's Common Stock) that are
paid, issued or made by TriZetto in respect of the Escrow Shares that are
issuable by TriZetto or a third party upon the conversion or other exchange of
Escrow Shares in a merger, consolidation, liquidation, exchange of shares or
other transaction affecting the Escrow Shares or other Escrowed Property (the
"Distributions"), or in respect of any such Distributions ("Secondary
Distributions"), will be immediately delivered to the Escrow Agent and will be
held in the Escrow on the same terms and conditions as those applied hereunder
to the Escrow Shares, and the Novalis Securityholders will promptly sign and
deliver to the Escrow Agent new Stock Powers or other applicable instruments of
transfer for such Distributions and/or Secondary Distributions (duly executed in
blank by the Novalis Securityholders) to be held in the Escrow as Escrowed
Property pursuant to this Agreement. The
2
<PAGE> 3
Novalis Securityholders will have the right to exercise any and all rights to
vote the Escrow Shares deposited in the Escrow Account for their account so long
as such Escrow Shares are held in the Escrow and have not been released to
TriZetto as provided herein and TriZetto will take all steps necessary to allow
the exercise of such rights. While the stock certificates representing, and
Stock Powers for, Escrow Shares remain in the Escrow Agent's possession pursuant
to this Agreement, the Novalis Securityholders, will (subject to the provisions
of Sections 3.3 and 3.4 below) retain and be able to exercise all other
incidents of ownership of the Escrow Shares that are not inconsistent with the
terms and conditions of this Agreement. If reasonably requested to do so by
TriZetto or the Escrow Agent, each Novalis Securityholder shall promptly execute
and deliver to the Escrow Agent (or to TriZetto, as to Escrow Shares that are
released to TriZetto as provided herein) replacement Stock Powers for any Escrow
Shares or other shares of stock or securities that are or become Escrowed
Property. If requested by TriZetto, due to the failure of any Novalis
Securityholder to promptly execute and deliver replacement Stock Powers as
herein provided, the Representative, acting as attorney-in-fact for each Novalis
Securityholder, shall promptly execute on behalf of such Novalis Securityholder,
and deliver to the Escrow Agent, replacement Stock Powers for any Escrow Shares
or other shares of stock or securities that are or become Escrowed Property.
3.3 NO TRANSFER OR ENCUMBRANCE. Except to the extent expressly
permitted by the provisions of this Section 3.3, no Escrowed Property or any
beneficial interest therein may be sold, assigned, pledged, encumbered or
otherwise transferred (including without limitation by operation of law, other
than an exchange or conversion of shares in a merger or consolidation) by any
Novalis Securityholder or be taken or reached by any legal or equitable process
in satisfaction of any debt or other liability of a Novalis Securityholder
(other than such Novalis Securityholder's obligations under this Agreement)
prior to the delivery and release to the Novalis Securityholders of the Escrowed
Property by the Escrow Agent in accordance with the provisions of Section 4
hereof; provided, however, that any Novalis Securityholder may transfer its
share of the Escrowed Property hereunder so long as such transfer is (i) by
gift, (ii) upon death or permanent incapacity to his guardian, conservator,
executor, administrator, trustees or beneficiaries under his will, (iii) to his
spouse, children, stepchildren, grandchildren, parents, siblings or legal
dependents, (iv) to a trust of which the beneficiary or beneficiaries of the
corpus and the income shall be such a person, and all such persons agree to be
bound by the terms hereof, or (v) to partners of, or other persons legally
entitled to a distribution of property from, a Novalis Securityholder that is a
partnership or similar investment vehicle, provided that as a condition to any
such transfer, such partner or other person shall execute a joinder agreement
specifically agreeing to be bound by the terms hereof.
3.4 TREATMENT OF ESCROWED PROPERTY. The Escrowed Property shall be
held by the Escrow Agent as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto.
3.5 INVESTMENT OF FUNDS. The cash portion of the Escrowed Property,
if any, shall be invested and reinvested by the Escrow Agent, upon the
instruction of the Representative, in U.S. Treasury obligations having a
maturity of not more than 90 days or in such other certificates of deposit or
instruments. All brokerage commissions and similar fees incurred in connection
with the investments shall be paid out of the Escrowed Property. All interest
income generated by such U.S. Treasury obligations, certificates of deposit or
instruments shall be deemed part of the Escrowed Property and at the Termination
Date, the income from the funds in the Escrow, if any, shall be paid to the
Novalis Securityholders in
3
<PAGE> 4
accordance with each Novalis Securityholder's Pro Rata Share. Subject to the
provisions of Section 7, the Escrow Agent shall not have any liability for loss
sustained as a result of (i) any investment made pursuant to the instructions of
the Representative, (ii) any liquidation of any investment prior to its
maturity, or (iii) the failure of the Representative to give the Escrow Agent
any instruction to invest or reinvest the cash portion of the Escrowed Amount or
any earnings thereon.
4. ADMINISTRATION OF ESCROW ACCOUNT. The Escrow Agent shall administer the
Escrow Account as follows:
4.1 LOCATION OF ESCROWED PROPERTY. The Escrow Agent shall keep all
of the Escrowed Property, and all documents related to the recordkeeping of the
Escrowed Property, at the office of the Escrow Agent identified in Section 10.1,
in a suitable place for safekeeping.
4.2 NOTICE OF CLAIMS FOR OFFSET RIGHTS AND INDEMNIFICATION. In the
event either TriZetto or the Novalis Securityholders gives a Claim Notice to
TriZetto or the Novalis Securityholders, as the case may be (as contemplated in
Article 8 of the Purchase Agreement and the Supplement to Novalis Disclosure
Schedule), the party providing such Claim Notice shall also give a copy of such
Claim Notice to the Escrow Agent.
4.3 RESOLUTION OF CLAIMS. As soon as practicable following
resolution of a Claim (in accordance with the procedure in Article 8 of the
Purchase Agreement and the Supplement to Novalis Disclosure Schedule for the
resolution of such Claims) for which the Escrow Agent has been provided a Claim
Notice pursuant to Section 4.2, the parties shall promptly provide or cause to
be provided to the Escrow Agent either (i) a written notice signed by TriZetto,
on the one hand, and the Representative, on the other hand, indicating that the
Claim or Claims specified in the Claim Notice have been resolved by the parties
through a mutually agreed upon resolution of the Claim or Claims, and
identifying the amount of any TriZetto Recoverable Loss and/or Novalis
Securityholders' Recoverable Loss upon which the parties have mutually agreed,
(ii) a written notice from the arbitrator or arbitrators who heard and decided
the Claim in accordance with Section 11.12 of the Purchase Agreement
(collectively, the "Arbitrator"), following final settlement of the Claim or
Claims in accordance with the procedure in Section 11.12 of the Purchase
Agreement, which notice shall indicate that the Claim or Claims specified in the
Claim Notice have been resolved, and identifying the amount of any TriZetto
Recoverable Loss and/or Novalis Securityholders' Recoverable Loss to which the
parties are entitled with respect to such Claim or Claims as determined by the
Arbitrator, or (iii) receipt of a court order or judgment directing the Escrow
Agent to act with respect to the distribution of any Escrowed Property (each
notice identified in (i), (ii) and (iii) above is referred to herein as a "Claim
Resolution Notice"). In the event that any Claim Resolution Notice fails to
indicate the amount of any TriZetto Recoverable Loss and/or Novalis
Securityholders' Recoverable Loss, the Escrow Agent shall promptly request such
information from TriZetto and the Representative, and TriZetto and the
Representative shall cause such information to be promptly forwarded to the
Escrow Agent.
4.4 DELIVERY OF ESCROW STATEMENT. No Escrowed Property shall be
released prior to the Termination Date. No more than ten business days after the
Termination Date, the Escrow Agent shall deliver to TriZetto and the
Representative an escrow statement identifying the following (the "Escrow
Statement"):
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<PAGE> 5
(a) the value of the Escrowed Property in the Escrow Account,
as determined in accordance with this Section 4.4;
(b) the aggregate amount of all TriZetto Recoverable Losses
identified in all Claim Resolution Notices received by the Escrow Agent;
(c) the aggregate amount of all Novalis Securityholders'
Recoverable Losses identified in all Claim Resolution Notices received by the
Escrow Agent;
(d) a statement to the effect that either:
(i) the aggregate amount of all TriZetto Recoverable
Losses exceeds the aggregate amount of all Novalis Securityholders' Recoverable
Losses, and the amount of the excess of such TriZetto Recoverable Losses
("TriZetto Recovery Amount"), or
(ii) the aggregate amount of all Novalis
Securityholders' Recoverable Losses exceeds the aggregate amount of all TriZetto
Recoverable Losses, and the amount of the excess of such Novalis
Securityholders' Recoverable Losses ("Novalis Securityholders' Recovery
Amount"); and
(e) a list of all Claims with respect to which the Escrow
Agent received a Claim Notice prior to the Termination Date but for which no
Claim Resolution Notice has yet been received ("Outstanding Claims"), and the
value of any TriZetto Recoverable Loss and/or Novalis Securityholders'
Recoverable Loss identified in such Claim Notice(s).
For purposes of determining the value of the Escrowed Property to be reported in
the Escrow Statement, the value of all Escrowed Property that is cash shall be
the value of such cash in U.S. dollars, and the value of the Escrow Shares shall
be equal, on a per share basis, to the average closing sales price of the
TriZetto Stock as reported on the Nasdaq National Market ("NMS") (or other
exchange or similar market on which the TriZetto Stock is regularly traded if
not then traded on NMS) for the 20 trading days preceding the Termination Date.
The value of any other Escrowed Property (other than cash and Escrow Shares)
shall be determined by TriZetto and the Representative (in the event TriZetto
and the Representative are unable to mutually agree on a value of such property
within 30 days after a request by the Escrow Agent for such a determination, the
parties shall submit the dispute to arbitration in accordance with the procedure
specified in Section 11.12 of the Purchase Agreement, which arbitration decision
shall be final and binding for purposes of determining the value of such
Escrowed Property). TriZetto and the Representative shall each review the
accuracy and completeness of the Escrow Statement, and shall notify each other
and the Escrow Agent of any discrepancy asserted in good faith within 10
business days (the "Objection Notice Period") of receipt of the Escrow Statement
("Objection to Escrow Statement Notice").
4.5 RELEASE OF ESCROWED PROPERTY - NO OUTSTANDING CLAIMS. In the
event neither party has timely submitted an Objection to Escrow Statement Notice
to the Escrow Agent (or the Escrow Agent has delivered the Final Escrow
Statement in accordance with Section 4.7 below, as the case may be) and assuming
there are no Outstanding Claims, then, promptly following the expiration of the
Objection Notice Period (or the delivery of the Final Escrow Statement, as
applicable), the Escrow Agent shall release the Escrowed Property as follows:
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<PAGE> 6
(a) If prior to the Termination Date, the Escrow Agent did not
receive any Claim Resolution Notices, then the Escrow Agent shall deliver to
each of the Novalis Securityholders an amount of the Escrowed Property
representing such Novalis Securityholder's Pro Rata Share of the Escrowed
Property, free and clear of the Escrow created by this Agreement.
(b) If, prior to the Termination Date, the Escrow Agent
received one or more Claim Resolution Notices, then:
(i) if the Escrow Agent reported a TriZetto Recovery
Amount in the Escrow Statement (or Final Escrow Statement, as applicable), the
Escrow Agent shall deliver to TriZetto such Escrowed Property with a value (as
determined in accordance with Section 4.4) equal to the TriZetto Recovery Amount
(subject to the limitations set forth in Section 4.8(a)), which Escrowed
Property shall be in such proportions of Escrow Shares and other Escrowed
Property as may be requested by the Representative (subject to the availability
of such type(s) of Escrowed Property at such time) and, to the extent
practicable, shall be pro rata based on each Novalis Securityholders' Pro Rata
Share of the Escrowed Property, and shall deliver to each of the Novalis
Securityholders an amount of the remaining Escrowed Property (following the
distribution to TriZetto of the TriZetto Recovery Amount), if any, representing
such Novalis Securityholder's Pro Rata Share of such remaining Escrowed
Property, free and clear of the Escrow created by this Agreement; and
(ii) if the Escrow Agent reported a Novalis
Securityholders' Recovery Amount in the Escrow Statement (or Final Escrow
Statement, as applicable), the Escrow Agent shall deliver to each of the Novalis
Securityholders an amount of the Escrowed Property representing such Novalis
Securityholder's Pro Rata Share of the Escrowed Property, free and clear of the
Escrow created by this Agreement.
4.6 RELEASE OF ESCROWED PROPERTY - OUTSTANDING CLAIMS. In the event
neither party has timely submitted an Objection to Escrow Statement Notice to
the Escrow Agent (or the Escrow Agent has delivered the Final Escrow Statement
in accordance with Section 4.7 below, as the case may be) and assuming there are
one or more Outstanding Claims, then, promptly following the expiration of the
Objection Notice Period (or the delivery of the Final Escrow Statement, as
applicable), the Escrow Agent shall release the Escrowed Property as follows:
(a) If, prior to the Termination Date, the Escrow Agent did
not receive any Claim Resolution Notices, then the Escrowed Property shall be
distributed in accordance with Section 4.5(a); provided that, the Escrow Agent
shall retain in the Escrow pursuant to the terms of this Agreement such Escrowed
Property having a value (as determined in accordance with Section 4.4) equal to
125% of the excess of (i) the aggregate amount of all TriZetto Recovery Losses
identified in the Claim Notice(s) for such Outstanding Claims over (ii) the
amount of any Novalis Securityholders' Recoverable Losses reported by the Escrow
Agent on the Escrow Statement (or Final Escrow Statement, as applicable) (the
"Holdback Property").
(b) If, prior to the Termination Date, the Escrow Agent
received one or more Claim Resolution Notices, then the Escrowed Property shall
be distributed in accordance with Section 4.5(b); provided that, the Escrow
Agent shall retain in the Escrow pursuant to the terms of this Agreement the
Holdback Property.
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<PAGE> 7
(c) Any Holdback Property retained in Escrow shall be
distributed only upon the receipt by the Escrow Agent of Claim Resolution
Notices for all Outstanding Claims. If the aggregate amount of all TriZetto
Recoverable Losses identified on the Claim Resolution Notices for all such
Outstanding Claims exceeds the aggregate amount of all Novalis Securityholders'
Recoverable Losses identified on the Claim Resolution Notices for all such
Outstanding Claims (the "Final TriZetto Recovery Amount"), then the Escrow Agent
shall, promptly following receipt of Claim Resolution Notices for all
Outstanding Claims, deliver to TriZetto such Holdback Property with a value (as
determined in accordance with Section 4.4) equal to the Final TriZetto Recovery
Amount (subject to the limitation set forth in Section 4.8(a)), which Holdback
Property shall be in such proportions of Escrow Shares and other Escrowed
Property as may be requested by the Representative (subject to the availability
of such type(s) of Escrowed Property at such time) and, to the extent
practicable, shall be pro rata based on each Novalis Securityholders' Pro Rata
Share of the Escrowed Property, and shall deliver to each of the Novalis
Securityholders an amount of the remaining Holdback Property (following the
distribution to TriZetto of the Final TriZetto Recovery Amount), if any,
representing such Novalis Securityholder's Pro Rata Share of such remaining
Holdback Property, free and clear of the Escrow created by this Agreement. If,
instead, the aggregate amount of all Novalis Securityholders' Recoverable Losses
identified on the Claim Resolution Notices for all such Outstanding Claims
exceeds the aggregate amount of all TriZetto Recoverable Losses identified on
the Claim Resolution Notices for all such Outstanding Claims (or if there are no
such TriZetto Recoverable Losses), then the Escrow Agent shall, promptly
following receipt of Claim Resolution Notices for all Outstanding Claims,
deliver to each of the Novalis Securityholders an amount of the Holdback
Property representing such Novalis Securityholder's Pro Rata Share of such
Holdback Property, free and clear of the Escrow created by this Agreement.
4.7 DISPUTES REGARDING THE ACCURACY OF THE ESCROW STATEMENT.
(a) In the event either party timely submits an Objection to
Escrow Statement Notice, TriZetto, the Representative and the Escrow Agent shall
undertake in good faith to or to have their representatives promptly meet and
attempt to resolve all disputes regarding the accuracy of the Escrow Statement.
(b) If TriZetto and the Representative are able to resolve all
disputes regarding the accuracy of the Escrow Statement within 30 days after the
date of the Objection to Escrow Statement Notice, then TriZetto and the
Representative shall promptly provide written instructions to the Escrow Agent
regarding the appropriate revisions to the Escrow Statement.
(c) If TriZetto and the Representative are unable to resolve
all disputes regarding the accuracy of the Escrow Statement within 30 days after
the date of the Objection to Escrow Statement Notice, the resolution of the
disputes shall be referred to and settled by arbitration in accordance with
Section 11.12 of the Purchase Agreement. Following settlement by arbitration,
the Arbitrator shall distribute to TriZetto, the Representative and the Escrow
Agent written instructions regarding the appropriate revisions to the Escrow
Statement.
(d) Following receipt of the written instructions regarding
revisions to the Escrow Statement from the parties or the Arbitrator, as
applicable, as contemplated in Subsections (b) and (c) above (the "Written
Instructions"), the Escrow Agent shall promptly deliver a revised Escrow
Statement (the "Revised Escrow Statement") to TriZetto and the
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<PAGE> 8
Representative. TriZetto and the Representative shall have five business days
from the date they receive the Revised Escrow Statement to notify the other
party and the Escrow Agent of any discrepancies regarding the accuracy of the
Revised Escrow Statement (provided that such discrepancies shall be limited to
discrepancies regarding the Escrow Agent's failure to follow the Written
Instructions). Any such discrepancies shall be promptly communicated to the
other party and the Escrow Agent and the Revised Escrow Statement shall be
further revised accordingly. If necessary (and if applicable), the parties will
consult the Arbitrator to assist in the resolution of any such discrepancies.
(e) Following finalization and recirculation of the Revised
Escrow Statement in accordance with Subsection (d) hereof (the "Final Escrow
Statement"), the Escrow Agent shall distribute the Escrowed Property in
accordance with the procedures specified in Sections 4.5 or 4.6, as applicable;
it being understood, that, for purposes of Sections 4.5 and 4.6, all references
to amounts and information identified on the Escrow Statement shall be deemed to
refer to amounts and information identified on the Final Escrow Statement.
(f) Notwithstanding anything herein to the contrary, the
Escrow Agent shall have no liability with respect to the accuracy or
completeness of the Escrow Statement, any Revised Escrow Statement or any Final
Escrow Statement (except as a result of the gross negligence or willful
misconduct of the Escrow Agent).
4.8 EXCESS RECOVERABLE LOSSES.
(a) EXCESS TRIZETTO RECOVERABLE LOSSES. In the event that,
following the resolution of all Outstanding Claims (or, if there are no
Outstanding Claims, then as reported in the Escrow Statement or Final Escrow
Statement, as applicable), there is a TriZetto Recovery Amount that has not
already been satisfied in accordance with instructions set forth in a Claim
Resolution Notice, such unsatisfied TriZetto Recovery Amount shall be satisfied
in accordance with Section 4.5(b)(i) or 4.6(c), as applicable, up to the amount
of the aggregate value of the Escrowed Property (as determined in accordance
with Section 4.4). TriZetto shall not be entitled to receive any amounts in
excess of the value of the Escrowed Property.
(b) EXCESS NOVALIS SECURITYHOLDERS' RECOVERABLE LOSSES. In the
event that, following the resolution of all Outstanding Claims (or, if there are
no Outstanding Claims, then as reported in the Escrow Statement or Final Escrow
Statement, as applicable) there is a Novalis Securityholders' Recovery Amount,
(i) the Escrowed Property shall be released to the Novalis Securityholders
pursuant to the terms of this Agreement; and (ii) TriZetto shall pay to each of
the Novalis Securityholders such Novalis Securityholder's Pro Rata Share of the
Novalis Securityholders' Recoverable Losses in accordance with the requirements
and subject to the dollar limitations in Article 8 of the Purchase Agreement and
the Supplement to Novalis Disclosure Schedule. Nothing in this Section 4.8 shall
be deemed to affect TriZetto's obligations with respect to the satisfaction of
any future claims by Novalis Securityholders in accordance with the terms of
Article 8 of the Purchase Agreement and the Supplement to Novalis Disclosure
Schedule.
4.9 NO RESPONSIBILITY OF ESCROW AGENT TO RESOLVE DISPUTE; AMBIGUITY
OR DISPUTE. If any controversy arises involving any party to this Agreement
(other than the Escrow Agent) concerning the subject matter of this Agreement,
including any Claim, TriZetto Recoverable Losses, Novalis Securityholders'
Recoverable Losses, Escrow Statement, Revised
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<PAGE> 9
Escrow Statement or Final Escrow Statement, the Escrow Agent will not be
required to determine the controversy or to take any action until such dispute
has been resolved. If the Escrow Agent is uncertain as to its duties and rights
hereunder, or in the event of any other dispute between or among the parties
hereto and/or any other person or entity with respect to the Escrowed Property,
the Escrow Agent shall be entitled, as its sole option, to refuse to comply with
any demands, claims or instructions and to refrain from taking any action other
than to keep the Escrowed Account and all Escrowed Property in the Escrow until
the Escrow Agent is directed otherwise by joint written instructions signed by
the parties hereto, or by a court order, and the Escrow Agent is authorized to
deliver the Escrowed Property to, or commence an interpleader action in, any
court of competent jurisdiction, whereupon the Escrow Agent shall be relieved of
any further obligation pursuant hereto. The Escrow Agent shall not be or become
liable in any way for actions taken in accordance with this Section 4.9.
4.10 DELIVERY METHODS. Delivery of Escrowed Property by the Escrow
Agent shall be by nationally recognized overnight courier. The Escrow Agent
shall not be responsible for obtaining insurance in connection with such
delivery.
4.11 POWER TO TRANSFER ESCROW AMOUNTS. The Escrow Agent is hereby
granted the power to effect any transfer of Escrowed Property permitted or
required by this Agreement in accordance with its terms.
5. FEES AND EXPENSES OF ESCROW AGENT AND REPRESENTATIVE.
5.1 ESCROW AGENT. TriZetto shall pay the fees of the Escrow Agent
for the services to be rendered by the Escrow Agent hereunder; provided,
however, that any extraordinary fees and expenses referred to in Section 5.3
below, including, without limitation, any fees or expenses incurred by the
Escrow Agent in connection with a dispute over the distribution of Escrowed
Property will be paid 50% by TriZetto and 50% by the Novalis Securityholders.
5.2 REPRESENTATIVE. The Representative will not be entitled to
receive any compensation from TriZetto or the Novalis Securityholders in
connection with this Agreement; however, the Novalis Securityholders shall
indemnify and promptly reimburse the Representative for all reasonable expenses
actually incurred by the Representative in connection with the performance of
its duties hereunder (including, but not limited to, all losses, costs and
expenses which the Representative may incur as a result of involvement in any
legal proceedings arising from the performance of its duties hereunder) pro rata
according to the Novalis Securityholders' respective Pro Rata Share. TriZetto
shall not have any obligation to reimburse the Representative for any expenses
whatsoever.
5.3 ESCROW AGENT'S EXTRAORDINARY FEES. TriZetto and the
Representative hereby acknowledge that all fees and usual charges for services
of the Escrow Agent hereunder shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the Escrow Agent
renders any service not provided for in this Agreement, or if the parties hereto
request a substantial modification of the terms of this Agreement, or if any
controversy arises and/or the Escrow Agent is made a party to any litigation
pertaining to this Agreement or its subject matter, then the Escrow Agent shall
be compensated for such extraordinary services and reimbursed for all reasonable
costs, attorney's fees and expenses incurred by the Escrow Agent in rendering
such extraordinary services (except to the extent that
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<PAGE> 10
the Escrow Agent is not entitled to indemnification pursuant to Section 7.3
hereof), which costs, fees and expenses shall be borne by TriZetto and the
Novalis Securityholders as provided in Section 5.1 above.
6. LIABILITY AND AUTHORITY OF REPRESENTATIVE; SUCCESSORS AND ASSIGNEES.
6.1 LIMITS ON LIABILITY. The Representative shall incur no liability
with respect to any action taken or suffered by him in his capacity as
Representative in reliance upon any note, direction, instruction, consent,
statement or other documents believed by it in good faith to be genuinely and
duly authorized, nor for other action or inaction except its own willful
misconduct or gross negligence. The Representative may, in all questions arising
under this Escrow Agreement, rely on the advice of counsel, and for anything
done, omitted or suffered in good faith by the Representative based on such
advice, the Representative shall not be liable to anyone.
6.2 SUCCESSOR REPRESENTATIVES. In the event of the death or
permanent disability of the Representative, or the resignation of Representative
as the representative of the Novalis Securityholders hereunder, a successor
Representative shall be elected by a majority vote of the Novalis
Securityholders, with each such Novalis Securityholder (or his successors or
assigns) to be given a weighted vote based on such Novalis Securityholder's Pro
Rata Share. Each successor Representative shall have all of the power,
authority, rights and privileges conferred by this Agreement upon the original
Representative, and the term "Representative" as used herein shall be deemed to
include each successor Representative.
6.3 AUTHORITY OF REPRESENTATIVE. The Representative shall have full
power and authority to represent the Novalis Securityholders and their
successors with respect to all matters arising under this Agreement or related
to the subject matter hereof and all actions taken by the Representative
hereunder shall be binding upon each and all of the Novalis Securityholders and
their successors, as if expressly confirmed and ratified in writing by each of
them. Without limiting the generality of the foregoing, the Representative shall
have full power and authority to interpret all of the terms and provisions of
this Agreement, to compromise and settle any claims asserted hereunder and to
authorize payments to be made with respect thereto, on behalf of the Novalis
Securityholders and their successors. The Novalis Securityholders have consented
to the appointment of the Representative as representative of the Novalis
Securityholders and as the attorney-in-fact and agent for and on behalf of each
Novalis Securityholder for the purposes of taking actions and executing
agreements and documents on behalf of any of the Novalis Securityholders as
provided in this Agreement, and, subject to the express limitations set forth
below, the taking by the Representative of any and all actions and the making of
any decisions required or permitted to be taken by him under this Agreement,
including, but not limited to, the exercise of the power to authorize delivery
to TriZetto of Escrowed Property and to take all actions necessary in the
judgment of the Representative for the accomplishment of the foregoing and all
of the other terms, conditions and limitations of this Agreement. The
Representative will have unlimited authority and power to act on behalf of each
Novalis Securityholder with respect to this Agreement and the disposition,
settlement or other handling of all claims, rights or obligations arising under
this Agreement with respect to Escrowed Property so long as all Novalis
Securityholders are treated in the same manner (unless the Novalis
Securityholders otherwise consent). The Novalis Securityholders will be bound by
all actions taken by the Representative in connection with this Agreement, and
TriZetto will be entitled to rely on any action or decision of the
Representative.
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7. LIMITATION OF ESCROW AGENT'S RESPONSIBILITY AND LIABILITY.
7.1 LIMITATION OF RESPONSIBILITY. The Escrow Agent's duties are
limited to those set forth in this Agreement, and the Escrow Agent, acting as
such under this Agreement, is not charged with knowledge of or any duties or
responsibilities under any other document or agreement, including, without
limitation, the Purchase Agreement and the Supplement to Novalis Disclosure
Schedule. The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through its
agents or attorneys. Nothing in this Escrow Agreement will be deemed to impose
upon the Escrow Agent any duty to qualify to do business or to act as a
fiduciary or otherwise in any jurisdiction. The Escrow Agent will not be
responsible for, and will not be under a duty to examine into or pass upon, the
validity, binding effect, execution or sufficiency of this Agreement or of any
agreement mandatory or supplemental hereto.
7.2 LIMITATION OF LIABILITY. The Escrow Agent will incur no
liability with respect to any action taken, not taken or suffered by it in
reliance upon any notice, direction, instruction, consent, statement or other
document believed by it to be genuine and duly authorized, nor for any other
action or inaction, except its own gross negligence or willful misconduct. In
all questions arising under this Agreement, the Escrow Agent may rely on the
advice of counsel, and for anything done, omitted or suffered in good faith by
the Escrow Agent based on such advice, the Escrow Agent will not be liable to
anyone, provided that the Escrow Agent shall have used reasonable care in the
selection of such counsel. The Escrow Agent will not be required to take any
action hereunder involving any expense unless the payment of such expense is
made or provided for in a manner satisfactory to it. The Escrow Agent will not
be liable for any action taken or omitted to be taken by it in good faith unless
a court of competent jurisdiction determines that the Escrow Agent's gross
negligence or willful misconduct was the cause of any loss to TriZetto, the
Representative, or any Novalis Securityholder. The Escrow Agent makes no
representation or warranty with respect to, and is not responsible for, the
Escrowed Amount, other than any losses resulting from its gross negligence or
willful misconduct. The Escrow Agent will have no duty to solicit the delivery
from TriZetto of any Escrowed Property. The Escrow Agent will have no obligation
with respect to the Escrowed Property other than to (i) keep safely all property
held in escrow, (ii) withhold the release of Escrowed Property to the Novalis
Securityholders, or (iii) release the Escrowed Property to TriZetto, as the case
may be, to the extent expressly provided in this Agreement.
7.3 INDEMNITY. TriZetto and each of the Novalis Securityholders
(each an "Indemnifying Party" and together the "Indemnifying Parties"), each
hereby severally, but not jointly, covenants and agrees to reimburse, indemnify
and hold harmless the Escrow Agent and its employees officers, directors and
agents from and against any loss, damage or liability suffered, incurred by or
asserted against the Escrow Agent (including amounts paid in settlement of any
action, suit, proceeding, or claim brought or threatened to be brought and
including reasonable expenses of legal counsel) arising out of, in connection
with or based upon any act or omission by the Escrow Agent relating in any way
to this Agreement or the Escrow Agent's services hereunder; provided, however,
that neither TriZetto, on the one hand, or the Novalis Securityholders, on the
other hand, shall be responsible for more than half of any liability imposed
upon or incurred by the Escrow Agent under this Section 7.3 unless TriZetto, on
the one hand, or any of the Novalis Securityholders on the other hand, was the
sole cause of a liability to be imposed upon or incurred by the Escrow Agent, in
which event, TriZetto or the Novalis Securityholders, as applicable, shall be
solely responsible for the liability imposed upon or
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incurred by the Escrow Agent; provided further, that the liability of any
Novalis Securityholder shall be limited to such Novalis Securityholder's pro
rata share of the liability of all of the Novalis Securityholders hereunder,
based on the number of shares of Novalis stock held by such Novalis
Securityholder; provided further, that each of TriZetto and the Novalis
Securityholders shall have rights of contribution against each other to effect
and enforce the rights and obligations set forth in this sentence; and provided
further, that a party that caused a liability to be imposed upon or incurred by
the Escrow Agent is not entitled to any contribution from the other party under
this Escrow Agreement or otherwise. This indemnity will not apply to any such
loss, damage or liability arising from the gross negligence or willful
misconduct on the Escrow Agent's part. Anything in this Agreement to the
contrary notwithstanding, in no event will any party be liable for special,
indirect or consequential damage or loss of any kind whatsoever (including but
not limited to lost profits) suffered or incurred by any other party, even if
such party has been advised of the likelihood of such loss or damage and
regardless of the form of action.
7.4 PARTICIPATION IN DEFENSE OF THE ESCROW AGENT. Each Indemnifying
Party may participate at its own expense in the defense of any claim or action
that may be asserted against the Escrow Agent, and if the Indemnifying Parties
so elect, the Indemnifying Parties may assume the defense of such claim or
action; provided, however, that if there exists a conflict of interest that
would make it inappropriate for the same counsel to represent both the Escrow
Agent and the Indemnifying Parties, the Escrow Agent's retention of separate
counsel will be reimbursable as provided in Section 7.3. The Escrow Agent's
right to indemnification hereunder will survive the Escrow Agent's resignation
or removal as escrow agent hereunder and will survive the termination of this
Agreement by lapse of time or otherwise.
7.5 NOTICE OF CLAIMS AGAINST ESCROW AGENT. The Escrow Agent will
notify each Indemnifying Party by letter, or by telephone or telecopy confirmed
by letter sent U.S. first class mail, registered or certified, of any receipt by
the Escrow Agent of a written assertion of a claim against the Escrow Agent
related to this Agreement, or any action commenced against the Escrow Agent,
within 10 business days after the Escrow Agent's receipt of written notice of
such claim. However, the Escrow Agent's failure to so notify each Indemnifying
Party will not operate in any manner whatsoever to relieve an Indemnifying Party
from any liability that it may have otherwise than on account of this Section 7;
provided, however, that, in the event the Escrow Agent fails to so notify each
Indemnifying Party and an Indemnifying Party is prejudiced thereby, then such
Indemnifying Party will not have liability to Escrow Agent under this Section 7.
7.6 RELIANCE. The Escrow Agent shall be entitled to rely upon any
court order, judgment, certification, instruction, award, notice or other
writing delivered to it in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity thereof. The Escrow Agent may
act in reliance upon any instrument comporting with the provisions of this
Agreement or signature reasonably believed by it to be genuine, and may
reasonably assume that any person purporting to give notice or receipt or advice
or to make any statement or to execute any document in connection with the
provisions hereof has been duly authorized to do so.
7.7 NO IMPLIED DUTIES; COLLATERAL AGREEMENTS. The Escrow Agent shall
not be obligated to perform any duties that are not expressly set forth in this
Agreement, and no implied covenants or obligations shall be inferred from this
Agreement against the Escrow
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Agent. The Escrow Agent shall not be bound in any way by any contract or
agreement between the other parties or among the other parties and any third
parties, whether or not the Escrow Agent has knowledge of any such contract or
agreement or of its terms or conditions.
8. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign at any time and be discharged from its duties or obligations
hereunder by giving a written resignation to the parties to this Escrow
Agreement, specifying not less than 30 days prior written notice of the date
when such resignation shall take effect; provided, however, that no such
resignation shall become effective until the appointment of a successor Escrow
Agent and acceptance of such appointment by such successor Escrow Agent.
TriZetto may appoint a successor Escrow Agent without the consent of the
Representative so long as such successor is a bank with assets of at least Five
Hundred Million Dollars ($500,000,000) which has no direct depository or lending
relationship with TriZetto or any of the Novalis Securityholders and which is
qualified to do business in the State of California, and may appoint any other
successor Escrow Agent with the written consent of the Representative, which
shall not be unreasonably withheld. If, within such notice period, TriZetto
provides to the Escrow Agent written instructions with respect to the
appointment of a successor Escrow Agent in accordance with this Section 8 and
directions for the transfer of any Escrowed Property then held by the Escrow
Agent to such successor, the Escrow Agent shall act in accordance with such
instructions and promptly transfer such Escrowed Property to such designated
successor. If no successor Escrow Agent is appointed within 60 days of the date
specified for the Escrow Agent's resignation to take effect, any party hereto
(including the Escrow Agent) shall have the right to apply to a court of
competent jurisdiction for such appointment at the expense of TriZetto. Each
successor Escrow Agent shall execute and deliver an instrument accepting such
appointment and shall, without further acts, be vested in all the estates,
properties, rights, powers and duties of the Escrow Agent or any other
predecessor Escrow Agent as if originally named as Escrow Agent hereunder.
9. TERMINATION. This Agreement shall terminate upon the earlier of (a) the
release by the Escrow Agent of all of the Escrowed Property in accordance with
this Agreement following the Termination Date, or (b) the delivery of written
notice of earlier termination executed by or on behalf of TriZetto and the
Representative. In the event that a contest exists on the Termination Date, the
Escrow shall continue in place until the dispute is resolved pursuant to Section
7. This Escrow Agreement shall not be otherwise terminated. The obligations and
liabilities of the Escrow Agent hereunder will terminate on termination of the
Escrow Agreement. Irrespective of the date on which the obligations and
liabilities of the Escrow Agent hereunder shall be terminated, the rights of the
Escrow Agent and the obligations of the parties under Sections 5 and 7.3 shall
survive, notwithstanding termination of this Escrow Agreement or the resignation
of the Escrow Agent.
10. MISCELLANEOUS.
10.1 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day;
(c) five business days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) two business days after
deposit with a nationally recognized overnight courier, specifying two day
delivery, with written verification of receipt. All communications shall be sent
to the parties at the following addresses
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or facsimile numbers specified below (or at such other address or facsimile
number for a party as shall be designated by ten business days advance written
notice to the other parties hereto):
IF THE ESCROW AGENT:
Bankers Trust Company of California, N.A
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Alan Sueda
IF TO TRIZETTO TO:
The TriZetto Group, Inc.
567 San Nicolas Drive, Suite 360
Newport Beach, California 92660
Attention: Jeffrey H. Margolis
WITH A COPY TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: K.C. Schaaf, Esq.
IF TO NOVALIS, TO:
Novalis Corporation
1 Columbia Circle
Albany, New York 12203
Attention: Chester E. Burrell
WITH A COPY TO:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: Robert J. Waldman, Esq.
IF TO THE NOVALIS SECURITYHOLDERS:
The address set forth on Exhibit A attached hereto.
IF TO THE REPRESENTATIVE:
The address of the Representative set forth on Exhibit A attached
hereto.
10.2 AMENDMENT. This Agreement may be amended by the written
agreement of TriZetto, the Escrow Agent and the Representative, provided that,
if the Escrow Agent does not agree to an amendment agreed upon by TriZetto and
the Representative, the
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Escrow Agent will resign (which resignation shall be effective immediately and,
in any event, prior to the effective date of the amendment) and TriZetto will
appoint a successor Escrow Agent in accordance with Section 8 hereof. No such
amendment may treat any one Novalis Securityholder differently from the other
Novalis Securityholders unless consented to in writing by Novalis
Securityholders having beneficial ownership of a majority of the Escrow Shares,
including the consent of any Novalis Securityholder who is to be treated
differently.
10.3 WAIVER. At any time prior to the termination of this Agreement
in accordance with Section 9, 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.
10.4 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.
10.5 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.
10.6 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.
10.7 ENTIRE AGREEMENT. Except as otherwise set forth in the Purchase
Agreement, the Supplement to Novalis Disclosure Schedule and this Agreement (and
the schedules and exhibits attached hereto) constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements or understandings, 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.
10.8 BENEFITS; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns as permitted hereunder. No party may assign this Agreement or assign its
respective rights or delegate their duties (by operation of law or otherwise),
without the prior written consent of the other party (except as expressly
contemplated in Section 8 hereof and except for the assignment of any of a
Novalis Securityholder's rights to the extent such rights are assigned to a
person or entity entitled to a distribution of property held by such Novalis
Securityholder.
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10.9 ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties hereby
agrees to take or cause to be taken such further actions to execute, deliver and
file or cause to be executed, delivered and filed such further documents and
instruments, and to use reasonable efforts to obtain such consents, as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
10.10 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with the laws of the State of Delaware as applied to
contracts that are executed and performed in Delaware, without regard to choice
of law provisions thereof.
10.11 COUNTERPARTS. This Agreement may be executed and delivered in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. This Agreement shall become effective when counterparts have been
signed by each of the parties and delivered to all of the other parties hereto.
10.12 GENDER. For purposes of this Agreement, references to the
masculine gender shall include feminine and neuter genders and entities.
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IN WITNESS WHEREOF, the parties have duly executed and delivered this
Offset Escrow Agreement as of the day and year first above written.
THE TRIZETTO GROUP, INC., THE "COMPANY"
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
"ESCROW AGENT"
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
ABS CAPITAL PARTNERS, L.P.,
"REPRESENTATIVE"
By: ABS Partners, L.P.,
its General Partner
By:
------------------------------------
Name: Frederick L. Bryant
Title: General Partner
"NOVALIS SECURITYHOLDERS"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
------------------------------------
Name: Frederick L. Bryant
Title: General Partner
<PAGE> 18
BANCBOSTON INVESTMENTS INC.
By:
------------------------------------
Name: Marcia T. Bates
Title: Vice President
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY
By:
------------------------------------
Name: Everett V. Cox
Title: Authorized Representative
ST. PAUL VENTURE CAPITAL V, L.L.C.`
By:
------------------------------------
Name: Everett V. Cox
Title:
------------------------------------
EDISON VENTURE FUND III, L.P.
By: Edison Partners III, L.P.,
its General Partner
By:
---------------------------------
Name: Gustav H. Koven
Title: General Partner
GALEN EMPLOYEE FUND, L.P.
By:
--------------------------------------
Name:Bruce F. Wesson
Title: General Partner
GALEN PARTNERS II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
----------------------------------
Name: Bruce F. Wesson
Title: General Partner
<PAGE> 19
GALEN PARTNERS INTERNATIONAL II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
----------------------------------
Name: Bruce F. Wesson
Title: General Partner
<PAGE> 20
EXHIBIT A
LISTING OF NOVALIS STOCKHOLDERS AND ESCROWED AMOUNTS
[Omitted pursuant to Item 601 of Regulation S-K - information is not material
to an investment decision]
A-1
<PAGE> 21
EXHIBIT B
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers an
aggregate of ___________________ (______) shares of Common Stock of The TriZetto
Group, Inc., a Delaware corporation (the "Company"), standing in the
undersigned's name on the books of said Company represented by Certificate No.
___ to ________________________.
The undersigned further does hereby irrevocably constitute and appoint
Bankers Trust Company of California, N.A, as escrow agent under the Offset
Escrow Agreement dated as of November __, 1999 by and among the TriZetto Group,
Inc., the parties listed on Exhibit A thereto, ABS Capital Partners, L.P. and
Bankers Trust Company of California, N.A, its attorney-in-fact, with full power
of substitution, to transfer said stock on the books of the Company.
Dated:
--------------------------- ----------------------------------------
B-1
<PAGE> 1
EXHIBIT 2.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of November 29, 1999, by and among The TriZetto Group, Inc., a Delaware
corporation ("TriZetto"), and the holders of TriZetto's Common Stock listed on
Schedule A hereto (collectively, the "Holders" and individually, a "Holder").
RECITALS
WHEREAS, TriZetto, Novalis Corporation, a Delaware corporation
("Novalis"), and the Securityholders of Novalis, entered into a Stock Purchase
Agreement on November 29, 1999 (the "Stock Purchase Agreement"), pursuant to
which the Securityholders of Novalis were issued shares of TriZetto's Common
Stock;
WHEREAS, it is a condition precedent to the obligations of the
Securityholders of Novalis under the Stock Purchase Agreement that TriZetto
enter into a Registration Rights Agreement in the form of this Agreement with
TriZetto; and TriZetto understands and acknowledges that this Agreement is a
material inducement to the Securityholders of Novalis upon which they are
relying in consummating the transactions contemplated by the Stock Purchase
Agreement;
WHEREAS, in connection with TriZetto's previous issuance of an aggregate
of 4,545,454 shares of Series A Preferred Stock and 1,730,770 shares of Series B
Preferred Stock, TriZetto entered into a First Amended and Restated Investor
Rights Agreement dated April 9, 1999 (the "Investor Rights Agreement"), pursuant
to which the purchasers of preferred stock (the "Venture Capitalists") were
granted certain registration rights;
WHEREAS, the Venture Capitalists continue to have registration rights
relating to the 6,276,224 shares of TriZetto common stock which were issued upon
the conversion of all issued and outstanding shares of preferred stock on
October 14, 1999; and
WHEREAS, the Holders acknowledge that the Venture Capitalists have
preferential rights over the Holders.
NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions and releases contained herein, TriZetto and the Holders hereby agree
as follows:
1. REGISTRATION RIGHTS. TriZetto hereby grants to each of the Holders
the registration rights set forth in this Section 1, with respect to the
Registrable Securities (as hereinafter defined) owned by the Holders. TriZetto
and the Holders agree that the registration rights provided herein set forth the
sole and entire agreement on the subject matter between TriZetto and the
Holders.
1.1 DEFINITIONS. AS USED IN THIS SECTION 1:
1.1.1 The terms "register", "registered", and "registration"
refer to a registration effected by filing with the Securities and Exchange
Commission (the "SEC") a registration statement (the "Registration Statement")
in compliance with the Securities Act of 1933, as amended (the "1933 Act"), and
the declaration or ordering by the SEC of the effectiveness of such Registration
Statement.
<PAGE> 2
1.1.2 The term "Registrable Securities" means (i) the shares of
Common Stock of TriZetto issued pursuant to the Stock Purchase Agreement or (ii)
any Common Stock of TriZetto issued as (or issuable upon the conversion or
exercise of any warrant, right, or other security that is issued as) a dividend
or other distribution with respect to, or in exchange or in replacement of, such
Registrable Securities. In the event of any recapitalization by TriZetto,
whether by stock split, reverse stock split, stock dividend or the like, the
number of shares of Registrable Securities used throughout this Agreement for
various purposes shall be proportionately increased or decreased.
1.2 TRIZETTO REGISTRATION.
1.2.1 If at any time or from time to time TriZetto shall
determine to register any of its securities, either for its own account or the
account of security holders (including the Holders), other than a registration
relating solely to employee benefit plans, a registration on Form S-4 relating
solely to an SEC Rule 145 transaction, or a registration pursuant to Section 1.8
hereof, TriZetto will:
(a) promptly give to each of the Holders written notice
thereof (which shall include a list of the jurisdictions in which TriZetto
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(b) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from
TriZetto, or by any of the Holders.
1.3 UNDERWRITING. If the registration of which TriZetto gives notice
is for a registered public offering involving an underwriting, TriZetto shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 1.2.1(a). In such event, the right of any of the Holders to registration
pursuant to this Section 1.3 shall be conditioned upon such Holders'
participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. Each
of the Holders proposing to distribute their securities through such
underwriting shall, together with TriZetto and the other parties distributing
their securities through such underwriting, enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by TriZetto. Notwithstanding any other provision of this Section
1.3, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may limit the number
of Registrable Securities to be included in the registration and underwriting,
or may exclude Registrable Securities entirely from such registration and
underwriting subject to the terms of this paragraph. In such event, TriZetto
shall so advise the holders of TriZetto's securities that would otherwise be
registered and underwritten pursuant hereto, and the number of shares of such
securities, including Registrable Securities, that may be included in the
registration and underwriting shall be allocated in the following manner: (1) to
the Venture Capitalists who hold shares of TriZetto common stock which was
issued upon conversion of Series A Preferred Stock and Series B Preferred Stock;
(2) if permitted by the underwriters, to the Holders of Registrable Securities
hereunder; provided however, that if a limitation on the number of shares is
required, the number of Registrable Securities that may be included pursuant to
this Section 1.3 shall be allocated to the Holders with respect to their
Registrable Securities in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by each such Holder at the
time of filing the Registration Statement; and (3) if permitted by the
underwriters, to other stockholders who have been requested to be included in
such
2
<PAGE> 3
registration. For purposes of any underwriter cutback, all Registrable
Securities held by a Holder which is a partnership or corporation shall also
include any Registrable Securities held by the partners, retired partners,
stockholders or affiliated entities of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons, and such Holder and other persons shall be
deemed to be a single "Selling Holder", and any pro rata reduction with respect
to such "Selling Holder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "Selling Holder", as defined in this sentence. No securities excluded from
the underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any of the Holders disapproves of the terms of
the underwriting, such Holder may elect to withdraw therefrom by written notice
to TriZetto and the underwriter. The Registrable Securities so withdrawn shall
also be withdrawn from registration.
1.4 EXPENSES OF REGISTRATION. All registrations effected pursuant to
Sections 1.2 and 1.8, including without limitation all registration, filing, and
qualification fees (including blue sky fees and expenses), printing expenses,
escrow fees, fees and disbursements of counsel for TriZetto and of one special
counsel for the Holders, and expenses of any special audits incidental to or
required by such registration, shall be borne by TriZetto; provided, however,
that TriZetto shall not be required to pay stock transfer taxes, underwriters'
discounts or commissions relating to Registrable Securities.
1.5 OBLIGATIONS OF TRIZETTO. Whenever required under this Section 1
to effect the registration of any Registrable Securities, TriZetto shall, as
expeditiously as reasonably possible:
1.5.1 Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its diligent best efforts to
cause such registration statement to become effective, and keep such
registration statement effective for up to ninety 90 days or until the Holders
have completed the distribution relating thereto, provided however, that (i)
such 90 day period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of TriZetto;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 90 day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(A)(3) of the Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the
"1934 Act") in the registration statement.
1.5.2 Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
1.5.3 Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such
3
<PAGE> 4
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
1.5.4 Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that TriZetto shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
1.5.5 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each of the
Holders participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
1.5.6 Notify each of the Holders covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the 1933 Act of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
1.5.7 Cause all such Registrable Securities registered hereunder
to be listed on each securities exchange on which similar securities issued by
TriZetto are then listed.
1.5.8 Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
1.5.9 Furnish, at the request of any of the Holders, if
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing TriZetto for the purposes
of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to each Holder, if requesting registration of Registrable
Securities, and (ii) to the extent permitted under the rules of the AICPA, a
letter, dated such date, from the independent accountants of TriZetto, in form
and substance as is customarily given by independent accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to each Holder, if requesting registration of Registrable Securities.
1.6 INDEMNIFICATION.
1.6.1 TriZetto will, and does hereby undertake to, indemnify and
hold harmless each Holder and each of such Holder's officers, directors,
partners and agents, and each person controlling such Holder, with respect to
any registration, qualification, or compliance effected pursuant to this Section
1, and each underwriter, if any, and each person who controls any underwriter,
of the Registrable Securities held by or issuable to such Holder, against all
claims, losses, damages, and liabilities (or actions in respect thereto) to
which they may become subject
4
<PAGE> 5
under the 1933 Act, the 1934 Act, or other federal or state law arising out of
or based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular, or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any violation or alleged violation by TriZetto of any federal, state or
common law rule or regulation applicable to TriZetto in connection with any such
registration, qualification, or compliance, and will reimburse, as incurred,
each Holder, each underwriter, and each director, officer, partner, agent and
controlling person, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action; provided that TriZetto will not be liable in any such case
to the extent that any such claim, loss, damage, liability or expense, arises
out of or is based on any untrue statement or omission based upon written
information furnished to TriZetto by an instrument duly executed by any of the
Holders or underwriter and stated to be specifically for use therein.
1.6.2 Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification, or
compliance, severally and not jointly, indemnify TriZetto, each of its
directors, and each officer who signs a Registration Statement in connection
therewith, and each person controlling TriZetto, each underwriter, if any, and,
each person who controls any underwriter, of TriZetto's securities covered by
such a Registration Statement, against all claims, losses, damages, and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such Registration Statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, TriZetto, and each such underwriter
or other person, for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) was made in such Registration Statement, prospectus, offering
circular, or other document, in reliance upon and in conformity with written
information furnished to TriZetto by an instrument duly executed by such Holder
and stated to be specifically for use therein; provided, however, that the
liability of each such Holder hereunder shall be limited to the net proceeds
received by such Holder from the sale of securities under such Registration
Statement. In no event will any Holder be required to enter into any agreement
or undertaking in connection with any registration under this Section 1
providing for any indemnification or contribution obligations on the part of
such Holder greater than such Holder's obligations under this Section 1.6.
1.6.3 Each party entitled to indemnification under this Section
1.6 (the "Indemnified Party") shall give notice to the party required to provide
such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense with its separate counsel at the Indemnifying
Party's expense if representation of such Indemnified Party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding; and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this
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<PAGE> 6
Section 1, except to the extent that such failure to give notice shall
materially adversely affect the Indemnifying Party in the defense of any such
claim or any such litigation. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
therein, to such Indemnified Party, of a release from all liability in respect
to such claim or litigation.
1.7 INFORMATION BY THE HOLDER. If any Holder includes Registrable
Securities in any registration, such Holder shall furnish to TriZetto such
information regarding such Holder, and the distribution proposed by such Holder,
as TriZetto may reasonably request in writing and as shall be required in
connection with any registration, qualification, or compliance referred to in
this Section 1.
1.8 SPECIAL DEMAND REGISTRATIONS. TriZetto shall use its
commercially reasonable best efforts to qualify for registration on Form S-3 on
or about October 8, 2000 or, if Form S-3 is not available, then on Form S-1 or
such other available form, subject to the availability of audited consolidated
financial statements of Novalis and the Novalis Subsidiaries. Without any
request necessary from the Holders, TriZetto shall file such registration
statement covering all shares of Registrable Securities on or before October 8,
2000. TriZetto shall use its commercially reasonable best efforts to have such
registration statement declared effective prior to the one-year anniversary of
the date hereof. After TriZetto has qualified for the use of Form S-3, the
Holders shall have the right to request three additional registrations on Form
S-3 under this Section 1.8. Subject to the foregoing, TriZetto will use its
commercially reasonable best efforts to effect promptly the registration of all
shares of Registrable Securities on Form S-3, Form S-1, or such other available
form, as the case may be, to the extent request by Holders thereof for purposes
of disposition; provided, however, that TriZetto shall not be obligated to
effect any such registration (i) if the Holders propose to sell Registrable
Securities and such other securities, if any, at an aggregate price to the
public of less than $250,000, or (ii) more than once during any six month
period; or (iii) within 90 days immediately following the effective date of any
registration statement pertaining to an underwritten public offering of
TriZetto's securities for its own account (other than a registration on Form S-4
relating solely to an SEC Rule 145 transaction, or registration relating solely
to employee benefit plans.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 RULE 144 REPORTING. With a view to making available to the
Holders, the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, TriZetto agrees to use its best efforts to:
1.10.1 Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the 1933 Act, at all times commencing 90 days after the
effective date of the first registration filed by TriZetto for an offering of
its securities to the general public;
1.10.2 File with the SEC, in a timely manner, all reports and
other documents required of TriZetto under the 1933 Act and 1934 Act; and
1.10.3 So long as a Holder owns any Registrable Securities,
furnish to such
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<PAGE> 7
Holder upon request: a written statement by TriZetto as to its compliance with
the reporting requirements of Rule 144 and of the 1934 Act (at any time after it
has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of TriZetto; and such other reports and documents as
a Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
1.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section
1 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of TriZetto and the Holders owning 50% of the Registrable
Securities owned by all Holders. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each Holder, each future holder of
Registrable Securities, and TriZetto.
1.12 EXPIRATION OF RIGHTS. The obligations of TriZetto to register
any Holders' Registrable Securities shall expire on the earlier of (a) the two
year anniversary date of this Agreement and (b) such date when all Registrable
Securities held by and issuable to such Holder (and its affiliates, partners,
former partners, members and former members, securityholders and former
securityholders, and other holders (or former holders)) of an ownership
interest, may be sold under SEC Rule 144 during any 90 day period.
1.13 MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that
during the 180-day period following the effective date of a registration
statement of shares of TriZetto's Common Stock filed under the 1933 Act, he
shall not, to the extent requested by TriZetto and any underwriter, sell or
otherwise transfer or dispose of (other than to donors, or as part of a
liquidation distribution to parties, who agree to be similarly bound) any Common
Stock of TriZetto held by him at any time during such period except Common Stock
included in such registration; provided, however, that all officers and
directors of the Company and all other persons with registration rights (whether
or not pursuant to this Agreement) enter into similar agreements. In order to
enforce the foregoing covenant, Trizetto may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
2. MISCELLANEOUS.
2.1 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (c) five
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) two days after deposit with a nationally
recognized overnight courier, specifying two day delivery, with written
verification of receipt. All communications shall be sent to the parties at the
following addresses or facsimile numbers specified below (or at such other
address or facsimile number for a party as shall be designated by ten days
advance written notice to the other parties hereto):
IF TO TRIZETTO TO:
The TriZetto Group, Inc.
567 San Nicolas Drive, Suite 360
Newport Beach, California 92660
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<PAGE> 8
Attention: Jeffrey H. Margolis
WITH A COPY TO (which shall not constitute notice):
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: K.C. Schaaf, Esq.
IF TO THE HOLDERS, TO:
The address set forth on Exhibit A attached hereto.
WITH A COPY TO (which shall not constitute notice):
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: Robert J. Waldman, Esq.
2.2 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
2.3 WAIVER. At any time prior to the expiration of this Agreement
pursuant to Section 1.12, 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.
2.4 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.
2.5 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.
2.6 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
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<PAGE> 9
end that transactions contemplated hereby are fulfilled to the extent possible.
2.7 ENTIRE AGREEMENT. Except as otherwise set forth in the Purchase
Agreement, this Agreement (and the schedules and exhibits attached hereto)
constitutes the entire understanding and agreement of the parties with respect
to the subject matter of this Agreement and supersedes all prior agreements or
understandings, 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.
2.8 PARTIES IN INTEREST; TRANSFER OF REGISTRATION RIGHTS. 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. The rights of the Holders
contained in Sections 1.2 and 1.8 hereof, to cause TriZetto to register the
Registrable Shares, may be assigned or otherwise conveyed to a transferee or
assignee of Registrable Securities, who shall be considered a "Holder" for
purposes of Section 1; provided that (a) such transferee or assignee receives
such securities as a partner, member, securityholder or other holder of an
ownership interest in connection with partnership, L.L.C., corporate or other
entity distributions of a Holder, and (b) TriZetto is given written notice by
such Holder at the time of, or within a reasonable time after, said transfer
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being assigned.
2.9 GOVERNING LAW. This Agreement will be governed by, and construed
and enforced in accordance with the laws of the State of Delaware as applied to
contracts that are executed and performed in Delaware, without regard to the
principles of conflicts of law thereof. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in Orange
County, California, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
2.10 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. This Agreement shall
become effective when counterparts have been signed by each of the parties and
delivered to the other party.
2.11 GENDER. For purposes of this Agreement, references to the
masculine gender shall include feminine and neuter genders and entities.
2.12 REFERENCES. Any references to forms or schedules governed by
the 1933 Act or 1934 Act means such forms or schedules under the 1933 Act and
1934 Act as in effect on the date hereof or any successor forms or schedules
subsequently adopted by the SEC.
9
<PAGE> 10
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed and delivered by the parties as of the date first above written.
Address: THE TRIZETTO GROUP, INC.
567 San Nicholas Drive
Newport Beach, CA 92660
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
HOLDERS:
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
----------------------------------
Name: Frederick L. Bryant
Title: General Partner
BANCBOSTON INVESTMENTS INC.
By:
--------------------------------------
Name:Marcia T. Bates
Title: Vice President
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY
By:
--------------------------------------
Name: Everett V. Cox
Title: Authorized Representative
<PAGE> 11
ST. PAUL VENTURE CAPITAL V, L.L.C.`
By:
--------------------------------------
Name: Everett V. Cox
Title:
-----------------------------------
EDISON VENTURE FUND III, L.P.
By: Edison Partners III, L.P.,
its General Partner
By:
----------------------------------
Name: Gustav H. Koven
Title: General Partner
GALEN EMPLOYEE FUND, L.P.
By:
------------------------------------
Name:Bruce F. Wesson
Title: General Partner
GALEN PARTNERS II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
----------------------------------
Name: Bruce F. Wesson
Title: General Partner
GALEN PARTNERS INTERNATIONAL II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
----------------------------------
Name: Bruce F. Wesson
Title: General Partner
<PAGE> 12
SCHEDULE A
HOLDERS OF COMMON STOCK
[Omitted pursuant to Item 601 of Regulation S-K - information is not material
to an investment decision]
<PAGE> 1
EXHIBIT 2.4
SECURED PROMISSORY NOTE
$______ NOVEMBER 29, 1999
NEWPORT BEACH, CALIFORNIA
FOR VALUE RECEIVED, the undersigned, __________________ (the "Maker"),
promises to pay to Novalis Corporation, a Delaware corporation (the "Payee), on
the 30th day (or if such day is not a business day, then on the immediately
succeeding business day) following the date the Registration Statement
contemplated under the second sentence of Section 1.8 of that certain
Registration Rights Agreement entered into by and among The TriZetto Group,
Inc., a Delaware corporation ("TriZetto"), the Maker and certain other holders
of TriZetto's common stock as of November 29, 1999 has been declared effective
by the Securities and Exchange Commission (the "Maturity Date") unless sooner
paid as provided in Section 1 hereof, the principal sum of ________________,
together with interest from the date hereof on unpaid principal at the rate of
eight percent (8%); provided however that if this Note is not paid in full on
the Maturity Date or the date required pursuant to Section 3 hereof, whichever
is earlier, the unpaid balance of the Note shall bear interest therefrom and
until paid at the Default Rate (as hereinafter defined) compounded annually, but
in any case not to exceed the maximum rate permitted by law). All payments under
this Note shall be made to the order of the Payee at c/o The TriZetto Group,
Inc., 567 San Nicolas Drive, Suite 360 Newport Beach, California 92660, or such
other address as Payee may designate in writing to Maker.
THIS NOTE IS A NON-RECOURSE PROMISSORY NOTE AND SHALL BE
REPAID SOLELY OUT OF THE PROCEEDS OF THE SALE OF THE SECURITY
PROVIDED TO SECURE THE PAYMENT OF THIS NOTE. THE PAYEE SHALL
NOT HAVE ANY CLAIM OR RIGHT TO PROCEED (AT LAW OR IN EQUITY)
AGAINST THE MAKER OR ANY SUCCESSOR IN INTEREST OF THE MAKER
FOR THE PAYMENT OF ANY DEFICIENCY OR ANY OTHER SUM OWING ON
ACCOUNT OF THIS NOTE, INCLUDING PENALTIES, LATE CHARGES, AND
INTEREST THEREON, OR FOR THE PAYMENT OF ANY LIABILITY OF ANY
NATURE WHATSOEVER FROM ANY SOURCE OTHER THAN THE SECURITY
GIVEN BY THE MAKER TO SECURE THIS NOTE AND THE PAYEE WAIVES
AND RELEASES ANY LIABILITY OF THE MAKER OR SUCH SUCCESSOR FOR
AND ON ACCOUNT OF SUCH INDEBTEDNESS OR SUCH LIABILITY AND THE
PAYEE AGREES TO LOOK SOLELY TO THE SAID SECURITY FOR THE
PAYMENT OF THIS NOTE.
1. PAYMENTS. All payments on this Note shall be applied first in payment
of accrued interest and any remainder in payment of principal, and interest
shall cease upon the principal so credited. All payments of principal and
interest on this Note shall be paid in the legal currency of the United States.
Maker waives presentment for payment, demand, protest, and notice of protest and
nonpayment of this Note. The Maker reserves the right to prepay this Note (in
whole or in part) prior to the Maturity Date with no prepayment penalty.
<PAGE> 2
2. DEFAULT. The occurrence of any of the following shall constitute an
"Event of Default":
(a) Default in the payment of any installment of principal and/or
interest on this Note when due and the continuation of such default for more
than 30 days;
(b) The commission of an act of bankruptcy by Maker, the execution by
Maker of a general assignment for the benefit of creditors, the filing by or
against Maker of a petition in bankruptcy or a petition for relief under the
provisions of the federal bankruptcy act or another state or federal law for the
relief of debtors and the continuation of such petition without dismissal for a
period of 30 days or more; or
(c) The occurrence of a material event of default under the Stock
Pledge Agreement securing this Note.
Upon the occurrence of any such Event of Default, the entire unpaid
balance of principal on this Note, together with all accrued interest thereon,
shall be due and payable either immediately or at any time during the
continuance of such Event of Default, at the option of Payee. No delay or
omission on the part of Payee in exercising any rights hereunder shall operate
as a waiver of such rights or of any other right hereunder. Failure to exercise
this option shall not constitute a waiver of the right to exercise the same upon
the occurrence of any subsequent such Event of Default. Without limiting the
generality of the foregoing, upon the occurrence of an Event of Default, the
interest rate at which interest shall accrue on the principal sum and any other
amounts that are due under this Note shall increase to the lower of (i) 12% per
annum or (ii) the maximum interest rate permitted under applicable law (the
"Default Rate"), until all such amounts have been paid in full.
3. SECURITY. Payment of this Note shall be secured by a Stock Pledge
Agreement (the "Stock Pledge Agreement") to be executed by Maker covering ____
shares of the common stock of TriZetto (the "Shares"). Anything herein to the
contrary notwithstanding, in the event of any Event of Default under this Note,
Payee agrees to pursue to the fullest extent its rights and remedies to
foreclose upon and dispose of the Shares pledged as collateral under the Stock
Pledge Agreement and hereby agrees and acknowledges that, because this Note is
non-recourse, it has no right or remedy as to the personal liability or other
assets of Maker.
4. ENFORCEABILITY. If any one or more of the provisions of this Note is
determined to be unenforceable, in whole or in part, for any reason, the
remaining provisions shall remain fully operative. No renewal or extension of
this Note, delay in enforcing any right of the Payee under this Note, or
assignment by Payee of this Note shall affect the liability of the Maker. All
rights of the Payee under this Note are cumulative and may be exercised
concurrently or consecutively at the Payee's option.
5. ATTORNEYS FEES. In the event this Note is placed in the hands of an
attorney for collection, the prevailing party, or its successors and assigns,
will be entitled to all costs and expenses, including a reasonable amount as
attorneys' fees incurred in connection with the collection thereof and in
connection with the enforcement of all rights and remedies with respect to any
judgment obtained against Maker.
2
<PAGE> 3
6. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the Maker has caused this Secured Promissory Note to
be executed on its behalf as of the date first above written.
----------------------------------
3
<PAGE> 1
EXHIBIT 2.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
QCA HEALTH PLAN, INC.
(AN ARKANSAS CORPORATION)
COMMON STOCK PURCHASE WARRANT
No. 1999-1 November __, 1999
This certifies that, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Silavon, Inc., a Delaware
corporation or registered assigns (hereinafter, the "HOLDER"), is entitled to
purchase, subject to the further provisions of this Warrant, 9,009 shares (the
"WARRANT SHARES") of fully paid and nonassessable common stock, par value $.10
per share (the "COMMON STOCK"), of QCA HEALTH PLAN, INC., an Arkansas
corporation (the "COMPANY"). The price per share for which all or any of the
Warrant Shares may be purchased shall be Ten Cents ($.10), or $900.90 in the
aggregate (the "WARRANT PRICE").
Upon exercise of this Warrant, the Holder shall pay, in accordance with
the terms hereof, the Warrant Price for the number of Warrant Shares being
purchased. All Warrant Shares shall be duly authorized, and when issued upon
such exercise, shall be validly issued, fully paid and non-assessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale or transfer, except as provided in the Amended and Restated
Shareholders' Agreement among the Company and the stockholders named therein
dated as of November __, 1999, as the same be amended, restated or otherwise
modified from time to time (the "AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT").
1. EXERCISE OF WARRANT
1.1 Warrant Exercise Period. This Warrant is exercisable, in whole or in
part, during the five year period (the "WARRANT EXERCISE PERIOD") commencing
upon the earliest to occur of the following: (i) the closing of the Company's
initial public offering of its equity
<PAGE> 2
securities; (ii) a "change of control" of the Company; or (iii) November ___,
2004. For purposes hereof, a "change of control" with respect to the Company
shall mean (a) the sale of all or substantially all of the assets of the
Company, (b) a merger, acquisition or other transaction or series of
transactions in which the Company is the surviving corporation that results in
any person (or group of affiliated persons) acquiring beneficial ownership of
more than fifty percent (50%) of the combined voting power of all classes of
stock of the Company, or (c) a merger, consolidation, or reorganization of the
Company with one or more other persons where, the Company is not the surviving
entity.
1.2 Manner of Exercise; Warrant Price. The exercise of this Warrant
shall be effected by the surrender of the Warrant (or any new warrant issued
pursuant to Section 1.3), together with a duly executed copy of the Notice of
Exercise and Certificate attached hereto as Exhibit A, to the Secretary of the
Company at its principal executive office, upon payment to the Company in an
amount equal to the Warrant Price for the number of Warrant Shares being
purchased. Payment of the Warrant Price shall be by (A) cash, wire transfer of
immediately available funds to a bank account specified by the Company, or by
certified or bank cashier's check in lawful money of the United States of
America, or (B) by cancellation by the Holder of indebtedness of the Company to
the Holder, or (C) by a combination of (A) and (B), of the Warrant Price for the
number of Warrant Shares specified in the Notice of Exercise.
1.3 Certificate for Warrant Shares. This Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above. As promptly as practicable on or after
such date and in any event within ten (10) days thereafter, the Company at its
expense shall issue and deliver to the Holder a certificate for the number of
Warrant Shares issuable upon such exercise and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Warrant Shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the Holder within such ten (10) day
period. Each person in whose name any certificate for Warrant Shares is to be
issued shall for all purposes be deemed to have become the holder of record of
such Warrant Shares on the date on which this Warrant was surrendered and
payment of the Warrant Price was made, irrespective of the date of delivery of
such stock certificate.
2. TRANSFERS
2.1 Consent Required. Except as otherwise set forth herein, this Warrant
may not be transferred or assigned in whole or in part without the prior written
consent of the Company; provided, however, that upon prior notice to the
Company, Holder may transfer or assign this Warrant in whole or in part to The
TriZetto Group, Inc., a Delaware corporation, or any of its subsidiaries,
without the consent of the Company.
2.2 Legal Restrictions on Transfers. This Warrant and the Warrant Shares
may not be sold, hypothecated, assigned, pledged, encumbered or otherwise
disposed of, directly
2
<PAGE> 3
or indirectly, except in accordance with the provisions of the Securities Act
and the provisions of any applicable state securities laws and the rules and
regulations thereunder.
2.3 Registered Holder. The Holder agrees that until such time as any
permitted transfer of this Warrant is recorded on the books of the Company, the
Company may treat the registered Holder of this Warrant as the absolute owner.
2.4 Assignment. Upon the permitted transfer of all or part of this
Warrant, the Holder shall submit to the Company an Assignment in the form
attached as Exhibit B.
2.5 Amended and Restated Shareholders' Agreement. The Warrant Shares
shall be subject to the Amended and Restated Shareholders' Agreement (the
"SHAREHOLDERS' AGREEMENT") and the Holder agrees to execute a joinder agreement
thereto simultaneously with the exercise hereof.
3. FRACTIONAL SHARES
The Company shall not be required to issue fractions of Warrant Shares
upon exercise of this Warrant or to distribute certificates that evidence
fractional shares nor shall the Company be required to make any cash payments in
lieu thereof upon exercise of this Warrant. If a fractional share shall result
from adjustments in the number of Warrant Shares purchasable hereunder, the
number of Warrant Shares purchasable hereunder shall, on an aggregate basis
taking into account all adjustments hereunder, be rounded up to the next whole
number.
4. CERTAIN ADJUSTMENTS
The provisions of this Section 4 shall apply in the event that any of
the events described in this Section 4 shall occur with respect to the Common
Stock at any time on or after the original issuance date of this Warrant.
4.1 Reclassification, Exchanges or Substitutions. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of stock, whether by
reclassification, exchange, substitution, or otherwise, then the Holder
exercising this Warrant shall receive, for the same aggregate Warrant Price paid
upon such exercise, in lieu of the Common Stock which the Holder would have been
entitled to purchase but for such change, a number of shares of such other class
or classes of stock which the Holder would have received if this Warrant had
been exercised immediately prior to such change.
4.2 Reclassification, Reorganizations, Mergers, Consolidation or Sale of
Assets. If at any time there shall be a capital reorganization of the Common
Stock (other than a combination, reclassification, exchange or substitution of
shares provided for elsewhere above) or merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all of the
Company's properties and assets, in one or a series of related transactions,
3
<PAGE> 4
to any other person or group of persons acting in concert then, as a part of
such reorganization, merger, consolidation or sale, lawful provision shall be
made so that the Holder shall thereafter be entitled to receive upon exercise of
this Warrant, the number of Warrant Shares or other securities or property of
the Company, or of the successor corporation resulting from such capital
reorganization, merger, consolidation or sale to which a holder of the Warrant
Shares deliverable upon exercise of this Warrant would have been entitled in
such capital reorganization, merger, or consolidation or sale if this Warrant
had been exercised immediately before that capital reorganization, merger,
consolidation, or sale.
4.3 Split, Subdivision or Combination of Shares. If at any time the
Company shall (i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of additional Common Stock, (ii) subdivide its outstanding shares
of Common Stock into a larger number of shares of Common Stock, or (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event. The aggregate Warrant Price of this
warrant following such event shall remain as in effect immediately prior such
event. Any adjustment under this subsection (c) shall become effective when the
dividend, split, subdivision or combination becomes effective.
4.4 Reservation of Stock Issuable Upon Exercise. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, in addition to such other remedies as shall
be available to the Holder of this Warrant, the Company will use its best
efforts to take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes.
5. RIGHTS PRIOR TO EXERCISE OF WARRANT
This Warrant does not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to receive
dividends or other distributions, to vote, or to consent or to receive notice as
a stockholder of the Company.
6. SUCCESSORS AND ASSIGNS
4
<PAGE> 5
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and the Holder and their respective successors
and permitted assigns.
7. LEGEND
The Holder acknowledges that this Warrant and the Warrant Shares are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of any shares of the Common Stock to be issued upon exercise
of the Warrant except under circumstances that will not result in a violation of
the Securities Act or any applicable state securities laws or regulations. The
Holder acknowledges that this Warrant is, and each share of Common Stock
issuable upon the exercise hereof will be a restricted security and subject to
the Amended and Restated Shareholders' Agreement. All stock certificates
representing the shares of Common Stock issued upon exercise hereof shall be
stamped or imprinted with a legend as required by the Shareholders' Agreement.
8. LOSS OR MUTILATION OF WARRANT
Upon receipt by the Company of satisfactory evidence of the ownership of
and the loss, theft, destruction, or mutilation of any Warrant, and (i) in the
case of loss, theft, or destruction, upon receipt by the Company of indemnity
satisfactory to it, or (ii) in the case of mutilation, upon receipt of such
Warrant and upon surrender and cancellation of such Warrant, the Company shall
execute and deliver in lieu thereof a new warrant containing the same terms of
this Warrant.
9. NOTICES
All notices, requests, demands and other communications under this
Warrant ("NOTICES") shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom Notice is
to be given, or on third business day following the date of mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed; provided, however, that
Notice of any exercise of this Warrant shall only be effective on the date
actually received by the Company. Notices shall be addressed as follows: if to
the Holder, at his address as shown in the Company records; and if to the
Company, at its principal executive office. Any party may change its address for
purposes of this subsection by giving the other party written notice of the new
address in the manner set forth above.
10. AMENDMENTS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the Company and the
Holder.
11. GOVERNING LAW
5
<PAGE> 6
This Warrant and any dispute, disagreement or issue of construction of
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the internal laws of the State of Arkansas without
regard to conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
and delivered on its behalf as of the date first above written, by one of its
duly authorized officers.
QCA HEALTH PLAN, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE> 8
EXHIBIT A
PURCHASE FORM
[To be executed only upon exercise of warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this warrant for the purchase of ______ shares of common stock, $.10 par value
(the "COMMON STOCK") of QCA Health Plan, Inc., and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Common Stock hereby
purchased be issued in the name of and delivered to _____________ whose address
is_________________ and, if such shares of Common Stock shall not include all of
the shares of Common Stock issuable as provided in this Warrant, that a new
warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
Dated: ______________, 19__
------------------------------------------
(Name of Registered Owner)
------------------------------------------
(Signature of Registered Owner)
------------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
<PAGE> 9
EXHIBIT B
ASSIGNMENT FORM
For value received, the undersigned hereby sells, assigns and transfers
unto __________ [the "Transferee"] [all] [that portion] of the within Warrant
exercisable for __________ shares of Common Stock of QCA Health Plan, Inc. (the
"Warrant"), together with all related right, title and interest therein, and
does hereby irrevocably constitute and appoint __________ attorney-in-fact to
transfer the Warrant, with full power of substitution in the premises.
The undersigned makes no representations or warranties regarding any of
the transactions contemplated by Section 1.1(d)(1) of that certain Stock
Purchase Agreement dated as of November 19, 1999 by and among The TriZetto
Group, Inc. ("TriZetto"), Novalis Corporation ("Novalis") and the
securityholders of Novalis and that certain Warrant Escrow Agreement dated as of
November 19, 1999 by and among TriZetto, Silavon, Inc., certain securityholders
of Novalis, ABS Capital Partners, L.P. and Stradling Yocca Carlson & Rauth, a
Professional Corporation (the "Transactions"); it being understood and agreed
that the Transferee shall have no right of offset as to such matters that are
not the subject of representations and warranties.
Dated:
-----------------------, ----
By:
------------------------------------
<PAGE> 1
EXHIBIT 2.6
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made this 29th day
of November 1999 (the "Closing Date"), by and between Chester E. Burrell (the
"Employee"), and The TriZetto Group, Inc., a Delaware corporation ("TriZetto" or
the "Company"), with reference to the following:
A. The Company provides Internet-enabled application services and
business portals for the healthcare industry within all of the states of the
United States of America and the District of Columbia (the "Business"). The
Company has three wholly-owned subsidiaries, Croghan & Associates, Inc., a
Colorado corporation, Margolis Health Enterprises, Inc., a California
corporation, and Creative Business Solutions, Inc., a Texas corporation, which
also engage in the Business. The four entities are hereinafter referred to
collectively as "TriZetto."
B. The Company , Novalis Corporation, a Delaware corporation in which
Employee is a stockholder ("Novalis"), and the Novalis Securityholders named as
such therein, have entered into a Stock Purchase Agreement, dated as of November
29, 1999 (the "Stock Purchase Agreement"), pursuant to which the Company will
purchase all of the outstanding capital stock of Novalis.
C. It is a condition precedent to the obligations of the Company under
the Stock Purchase Agreement that Employee enter into a Non-Competition
Agreement in the form of this Agreement with the Company, including the covenant
not to compete contained herein, and Employee understands and acknowledges that
this Agreement is a material inducement to the Company upon which it is relying
in consummating the transactions contemplated by the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, warranties and
representations contained herein, the parties hereby agree as follows:
1. Employee covenants that during Employee's employment with the
Company, and through December 31, 2001, Employee shall not directly, or
indirectly through one or more other persons or entities, engage in, or have any
financial or other interests (whether as a principal, partner, shareholder,
director, officer, agent, employee, consultant or otherwise) in or provide
assistance to any person, firm, corporation or business that engages in, any
activity which is the same as or directly competes with, any activity now
engaged in by TriZetto that comprises a part of the Business, in, from, at or
into any of the states of the United States of America or the District of
Columbia. Notwithstanding the foregoing, nothing contained in this Agreement
shall prevent or otherwise limit Employee from holding, for investment purposes
only, no more than two percent (2%) of any class of equity securities of a
company engaged in activities that are competitive with the Business if such
class of equity securities is traded on a national securities exchange or on the
NASDAQ National Market System.
2. Employee agrees not to solicit or engage any of the employees of
TriZetto at any time during Employee's employment with the Company, and for a
period of two (2) years following the termination thereof; provided, that
nothing herein shall restrict or preclude the right of Employee or any future
employer of Employee to make generalized searches for employees by use of
advertisements in the media (including without limitation trade media) or by
engaging search firms
<PAGE> 2
to engage in searches which are not targeted or focused on the employees of the
Company or engaging employees as a consequence thereof.
3. Employee covenants that neither Employee, nor any affiliate of
Employee, shall use for his, her or their benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or company, other than TriZetto, any confidential information
regarding the business methods, business policies, procedures, techniques, trade
secrets, software, products, customer lists or other knowledge or processes used
or developed, prior to the Closing Date, by TriZetto, or other information
concerning the Business of which TriZetto or Employee became aware prior to the
Closing Date (collectively, the "Confidential Information"). The foregoing
restrictions shall not apply to: (a) information which is or becomes, other than
as a result of a breach of this Agreement, generally available to the public;
(b) information that was available to Employee on a non-confidential basis prior
to receipt from the Company or is received thereafter from a third party without
restriction and without breach of this Agreement; (c) information that is
independently developed by Employee without use of, or reference to, the
Confidential Information; or (d) the disclosure of information required to be
disclosed pursuant to a subpoena or other legal process; provided that the party
required to disclose such information shall notify the Company, in writing, of
the receipt of any such subpoena or other legal process requiring such
disclosure as soon as reasonably practicable after receipt thereof, as permitted
by applicable law, and the Company shall have a reasonable opportunity to quash
such subpoena or other legal process prior to any disclosure by Employee.
4. Employee acknowledges that the restrictions contained in Paragraphs 1
and 2, in view of the nature of the Business and the involvement of Employee in
the Business, are reasonable and necessary in order to protect the legitimate
interests of TriZetto, and that any violation thereof would result in
irreparable injuries to TriZetto. Therefore, Employee acknowledges and agrees
that, in the event of a violation by Employee of any of the restrictions
contained in Paragraphs 1 or 2 above, the Company shall be entitled to seek and
obtain from any court of competent jurisdiction (and without having to join any
other party in such action) temporary, preliminary and permanent injunctive
relief, in addition to any other rights or remedies to which it or they may be
entitled and Employee hereby consents to the issuance of such injunction or
grant of such specific performance. In any action or proceeding to enforce the
provisions of this Agreement, Employee expressly waives the defense that a
remedy of damages will be adequate for a breach of Employee's duties under this
Agreement.
5. It is expressly agreed by Employee that if in any judicial proceeding
the geographic coverage of the covenant contained in Paragraph 1 hereof or
either of the respective periods of time specified in Paragraphs 1 and 2 hereof
should be adjudged unreasonable, then such geographic coverage or such period or
periods of time, as the case may be, shall be reduced to the extent necessary to
enable the court to enforce the restrictions in Paragraph 1 and 2 to the fullest
extent permitted under applicable law.
6. The rights of the Company hereunder shall inure to, and the
obligations of Employee hereunder shall be binding on, their respective heirs,
representatives, successors and assigns.
7. In the event of a controversy, claim or dispute between any of the
parties hereto arising out of or relating to this Agreement, or the breach
thereof, the prevailing party shall be entitled to recover its reasonable
attorneys' fees, expenses and costs.
2
<PAGE> 3
8. This Agreement shall be covered by and construed in accordance with
the laws of the State of California, without regard to its conflicts of law
rules. This Agreement may be executed by facsimile and in counterparts, each of
which shall be deemed an original and all of which when taken together shall
constitute on and the same instrument.
9. Neither this Agreement, nor any of the terms or conditions of this
Agreement, may be waived, amended or modified except by means of a written
instrument duly executed by the parties to be charged therewith. No waiver of
any provision, performance or default hereunder in any instance shall be
construed as a continuing waiver of such provision, performance or default or a
waiver of any other provision, performance or default or a waiver of any future
performance or default.
10. This Agreement, together with the provisions of the Stock Purchase
Agreement making reference hereto, contain all of the agreements of the parties
with respect to, and supersede all other agreements, written or oral, between
the parties relating to, the subject matter of this Agreement.
11. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them as set forth in the Stock Purchase Agreement.
3
<PAGE> 4
THIS NON-COMPETITION AGREEMENT has been duly executed and delivered by
the parties hereto as of the date and year first above written.
"EMPLOYEE"
-------------------------------
Chester E. Burrell
"COMPANY"
THE TRIZETTO GROUP, INC.,
a Delaware corporation
By:
---------------------------
Its:
---------------------------
<PAGE> 1
EXHIBIT 2.7
WARRANT ESCROW AGREEMENT
This WARRANT ESCROW AGREEMENT made as of November 29, 1999
("Agreement"), by and among The TriZetto Group, Inc., a Delaware corporation
with an office at 567 San Nicolas Drive, Suite 360, Newport Beach, California
92660 (the "Company"), the Novalis Securityholders listed on the signature pages
attached hereto ("Novalis Securityholders"), Silavon, Inc., a Delaware
corporation ("Silavon"), ABS Capital Partners, L.P. (the "Representative"), and
Stradling Yocca Carlson & Rauth, a Professional Corporation (the "Escrow
Agent").
WHEREAS, the Company is purchasing from the Novalis Securityholders all
of the issued and outstanding capital stock of Novalis Corporation, a Delaware
corporation ("Novalis") which immediately prior to the Closing, will consist of
(i) 1,186,559 shares of Series A Stock, (ii) 235,000 shares of Series B Stock,
(iii) 92,749.03 shares of Series C Stock, and (iv) 938,519 shares of Common
Stock, pursuant to a Stock Purchase Agreement dated as of the date hereof (the
"Stock Purchase Agreement"), the terms of which (including the capitalized terms
not otherwise defined herein) are specifically incorporated by reference herein;
and
WHEREAS, the Company, the Novalis Securityholders and Silavon desire to
provide for the deposit with the Escrow Agent of $5,000,000 of the Cash Portion
of the Purchase Price (such amount referred to herein as the "Escrowed Funds")
until the release of the Escrowed Funds to QCA Health Plan, Inc. ("QCA") in
connection with the consummation of the QCA Transactions (as defined in the
Supplement to the Novalis Disclosure Schedule), or otherwise, in the manner
contemplated by this Agreement; and
WHEREAS, the Novalis Securityholders have caused the organization of
Silavon, which is expected to be wholly-owned by the Novalis Securityholders
upon consummation of the QCA Transactions, and desire to assign all of their
right, title and interest in and to the Escrowed Funds to Silavon pursuant to
the terms of this Agreement as consideration for the purchase of shares of
common stock of Silavon as previously approved by the Board of Directors of
Silavon; and
WHEREAS, the Escrow Agent has consented to act as escrow agent and to
receive and hold the Escrowed Funds to be deposited pursuant to the Stock
Purchase Agreement in escrow for the account of the Company, upon the terms set
forth therein and herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. ASSIGNMENT OF ESCROWED FUNDS. As consideration for the purchase by
the Novalis Securityholders of shares of common stock of Silavon in accordance
with the terms previously approved by the Board of Directors of Silavon, the
Novalis Securityholders hereby assign all of their right, title and interest in
and to the Escrowed Funds to Silavon.
2. ESCROW DEPOSIT. Pursuant to the Stock Purchase Agreement, the Escrow
Agent shall receive and hold in escrow the Escrowed Funds paid by the Company,
in a non-interest bearing account for Silavon (the "Escrow Account"). Upon the
payment of the Escrowed Funds to the Escrow Agent, the Escrow Agent shall
deposit the Escrowed Funds in the Escrow Account that shall be maintained on
behalf of the Company at Wells Fargo Bank, 5 Corporate Plaza, Newport Beach,
California 92660 (Account No. 0643108848).
<PAGE> 2
3. LIMITATION OF ESCROW AGENT'S DUTIES. All parties hereto acknowledge
that the duties of the Escrow Agent hereunder are solely ministerial in nature,
and have been requested for their convenience. The Escrow Agent shall not be
deemed to be the agent of any party hereto, or to have any legal or beneficial
interest in the Escrow Account. The parties agree that the Escrow Agent shall
not be liable for any act or omission taken or suffered in good faith with
respect to this Agreement unless such act or omission is the result of the gross
negligence or willful misconduct of the Escrow Agent. The parties acknowledge
and agree that the Escrow Agent is counsel for the Company.
4. BOOKS. The Escrow Agent shall keep accurate books and records of all
transactions hereunder. The Company and the Representative shall have access to
such books and records at all reasonable times.
5. RELEASE OF ESCROWED FUNDS. If, on or before 11:59 p.m. (Newport
Beach, California time), November 30, 1999 (or such later date as determined by
the Company in its sole discretion) the Company and the Representative deliver
to the Escrow Agent release notices in the forms attached hereto as Exhibit A
and Exhibit B stating that the Escrow Agent is authorized to release the
Escrowed Funds to QCA on behalf of Silavon (the "Release Notice"), then the
Escrow Agent shall continue to hold the Escrowed Funds on behalf of Silavon
until such time as the Representative provides wire transfer instructions for
the transfer of the Escrowed Funds to QCA on behalf of Silavon; provided
however, that, if the Escrow Agent does not receive wire transfer instructions
from the Representative for the transfer of the Escrowed Funds to QCA on behalf
of Silavon by the close of business (Newport Beach, California time) on the
third business day following November 30, 1999, the Escrow Agent shall contact
QCA directly to obtain appropriate wire transfer or other delivery instructions.
The Company, the Novalis Securityholders and Silavon acknowledge and agree that
the Company shall retain all right, title and interest in and to the Escrowed
Funds unless and until the Escrow Agent receives a fully executed Release Notice
pursuant to the terms of this Section 5, and that the Company shall have no
right, title or interest in and to the Escrowed Funds following receipt by the
Escrow Agent of a fully executed Release Notice.
6. RETURN OF ESCROWED FUNDS. If by 11:59 p.m. (Newport Beach, California
time), November 30, 1999 (or such later date as determined by the Company in its
sole discretion) the Escrow Agent has not received a Release Notice from the
Company and the Representative, the Escrow Agent shall return to the Company, by
wire transfer on the next business day, an amount equal to the Escrowed Funds.
7. TERMINATION. This Agreement and the obligations of the Escrow Agent
hereunder shall cease in case the provisions of Paragraph 5 hereof become
operative on the date such provisions become operative and the Escrow Agent
takes all steps therein required to be performed by it, or in case the
provisions of paragraph 6 hereof become operative on the date such provisions
become operative and the Escrow Agent fully complies therewith.
8. LIABILITY OF ESCROW AGENT. Nothing herein contained shall be deemed
to obligate the Escrow Agent to pay or transfer any moneys hereunder, unless the
provisions of this Agreement and the Stock Purchase Agreement have been complied
with by the parties hereto. The Escrow Agent shall not be responsible in any
manner for obtaining confirmation as to the consummation of the QCA
Transactions. The Escrow Agent shall use reasonable diligence in the performance
of its obligations hereunder, but shall be fully protected and indemnified by
the Company with respect to any action taken or suffered under this Agreement in
good faith by the Escrow Agent, and the Company hereby agrees to so indemnify
the Escrow Agent from and against any and all costs, claims, expenses and
liabilities
2
<PAGE> 3
(including reasonable attorneys' fees and expenses and amounts paid in
settlement). The Escrow Agent may consult with other counsel, and shall be fully
protected in respect to any action taken or suffered under this Agreement in
good faith by the Escrow Agent in accordance with the opinion of such counsel.
The Escrow Agent shall not be bound or in any way affected by any notice of any
modification, cancellation, abrogation, or rescission of this Agreement, or of
any fact or circumstance affecting or alleged to affect the rights or
liabilities of the parties hereto other than as in this Agreement set forth, or
affecting or alleged to affect the rights or liabilities or any other person,
unless such modification, cancellation, abrogation, rescission, fact or
circumstance is signified to it in writing, delivered to the Escrow Agent,
signed by all the parties to this Agreement, and by all such other persons, nor,
in the case of a modification, unless such modification shall be satisfactory
to, and assented to in writing by, the Escrow Agent. The Escrow Agent may resign
effective upon notice to the Company and the Representative.
9. COMPENSATION. The Escrow Agent is acting as such as an accommodation
to the Company, and is not receiving any separate fees as compensation for its
services hereunder, other than indemnification as provided herein and
reimbursement of its expenses.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Warrant Escrow Agreement as of the date first set forth above.
"ESCROW AGENT"
STRADLING, YOCCA, CARLSON & RAUTH, a
professional corporation
By:
------------------------------------
K.C. Schaaf, Vice President
"COMPANY"
THE TRIZETTO GROUP, INC.
By:
------------------------------------
"REPRESENTATIVE"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
-------------------------------
Name: Frederick L. Bryant
Title: General Partner
"NOVALIS SECURITYHOLDERS"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
-------------------------------
Name: Frederick L. Bryant
Title: General Partner
4
<PAGE> 5
BANCBOSTON INVESTMENTS INC.
By:
-------------------------------
Name: Marcia T. Bates
Title: Vice President
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY
By:
------------------------------------
Name: Everett V. Cox
Title: Authorized Representative
ST. PAUL VENTURE CAPITAL V, L.L.C.`
By:
------------------------------------
Name: Everett V. Cox
Title:
---------------------------------
EDISON VENTURE FUND III, L.P.
By: Edison Partners III, L.P.,
its General Partner
By:
-------------------------------
Name: Gustav H. Koven
Title: General Partner
GALEN EMPLOYEE FUND, L.P.
By:
------------------------------------
Name: Bruce F. Wesson
Title: General Partner
5
<PAGE> 6
GALEN PARTNERS II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
-------------------------------
Name: Bruce F. Wesson
Title: General Partner
GALEN PARTNERS INTERNATIONAL II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
-------------------------------
Name: Bruce F. Wesson
Title: General Partner
6
<PAGE> 7
"SILAVON"
SILAVON, INC.
By:
-------------------------------
Name: Frederick L. Bryant
Title: President and Chief Executive
Officer
7
<PAGE> 8
Exhibit A
RELEASE NOTICE
Pursuant to Section 5 of that certain Warrant Escrow Agreement made as
of November 29, 1999 ("Escrow Agreement") by and among The TriZetto Group, Inc.,
a Delaware corporation (the "Company"), the Novalis Securityholders listed on
the signature pages thereto ("Novalis Securityholders"), Silavon, Inc., a
Delaware corporation ("Silavon"), ABS Capital Partners, L.P. (the
"Representative"), and Stradling Yocca Carlson & Rauth, a Professional
Corporation (the "Escrow Agent"), the undersigned hereby certifies: (1) the
Assignment of Warrant in the form of Exhibit A has been executed and delivered;
and (2) the Note Option Agreement in the form of Exhibit B has been executed and
delivered.
Accordingly, the undersigned hereby instructs the Escrow Agent to
release the Escrowed Funds to QCA Health Plan, Inc. ("QCA") on behalf of Silavon
in accordance with the terms of Section 5 of the Escrow Agreement and to hold
such Escrowed Funds on behalf of Silavon until such time as the Escrowed Funds
are delivered to QCA on behalf of Silavon in accordance with the terms of the
Escrow Agreement. Capitalized terms not defined herein shall have the meanings
ascribed to them in the Escrow Agreement.
"REPRESENTATIVE"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
-------------------------------
Name: Frederick L. Bryant
Title: General Partner
APPROVED:
"Company"
THE TRIZETTO GROUP, INC.
By:
-------------------------------
Its:
------------------------------
8
<PAGE> 9
Exhibit B
RELEASE NOTICE
Pursuant to Section 5 of that certain Warrant Escrow Agreement made as
of November 29, 1999 ("Escrow Agreement") by and among The TriZetto Group, Inc.,
a Delaware corporation (the "Company"), the Novalis Securityholders listed on
the signature pages thereto ("Novalis Securityholders"), Silavon, Inc., a
Delaware corporation ("Silavon"), ABS Capital Partners, L.P. (the
"Representative"), and Stradling Yocca Carlson & Rauth, a Professional
Corporation (the "Escrow Agent"), the undersigned hereby certifies: (1) the
filings and approvals contained in paragraphs two through six of that certain
Consent Order dated November 19, 1999 of the Insurance Commissioner of the State
of Arkansas shall have been satisfied.
Accordingly, the undersigned hereby instructs the Escrow Agent to
release the Escrowed Funds to QCA Health Plan, Inc. ("QCA") on behalf of Silavon
in accordance with the terms of Section 5 of the Escrow Agreement and to hold
such Escrowed Funds on behalf of Silavon until such time as the Escrowed Funds
are delivered to QCA on behalf of Silavon in accordance with the terms of the
Escrow Agreement. Capitalized terms not defined herein shall have the meanings
ascribed to them in the Escrow Agreement.
THE "COMPANY"
THE TRIZETTO GROUP, INC.
By:
-------------------------------
Its:
------------------------------
APPROVED:
"REPRESENTATIVE"
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners, L.P.,
its General Partner
By:
-------------------------------
Name: Frederick L. Bryant
Title: General Partner
9
<PAGE> 1
EXHIBIT 2.8
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Agreement"), is made and entered into as
of November 29, 1999, by and between Novalis Corporation, a Delaware corporation
("Secured Party"), and ___________________. ("Debtor"). In order to secure
payment of that certain promissory note (the "Note") dated as of the date
hereof, payable to the order of Secured Party in the principal amount of
_______________, Debtor hereby grants Secured Party a security interest in, and
assigns, transfers to and pledges Secured Party the following securities and
other property:
(i) the ________ shares of the common stock of The TriZetto
Group, Inc., a Delaware corporation, ("Common Stock") deposited with Secured
Party as Collateral for the Note;
(ii) any and all new, additional or different securities or other
property subsequently distributed with respect to the shares identified in
subparagraph (i) that are to be delivered to and deposited with Secured Party
pursuant to the requirements of paragraph 3 of this Agreement;
(iii)any and all other property and money that is delivered to or
comes into the possession of Secured Party pursuant to the terms and provisions
of this Agreement; and
(iv) the proceeds of any sale, exchange or disposition of the
property and securities described in subparagraphs (i), (ii) or (iii) above.
All securities, property and money so assigned, transferred to and
pledged to Secured Party shall be herein referred to as the "Collateral" and
shall be accompanied by one or more stock power assignments properly endorsed by
the Debtor. Secured Party shall hold the Collateral in accordance with the
following terms and provisions:
1. WARRANTIES. The Debtor hereby warrants that the Debtor is the owner
of the Collateral and has the right to pledge the Collateral and that the
Collateral is free from all liens, adverse claims and other security interests
(other than those created hereby).
2. RIGHTS AND POWERS. Secured Party may without obligation to do so,
exercise one or more of the following rights and powers with respect to the
Collateral:
(a) accept in its discretion, but subject to the applicable
limitations of paragraph 6(c), other property of the Debtor in exchange for all
or part of the Collateral and release Collateral to the Debtor to the extent
necessary to effect such exchange, and in such event the money, property or
securities received in the exchange shall be held by Secured Party as substitute
security for the Note and all other indebtedness secured hereunder,
(b) perform such acts as are necessary to preserve and protect
the Collateral and the rights, powers and remedies granted with respect to such
Collateral by this Agreement; and
(c) transfer record ownership of the Collateral to Secured Party
or its nominee and receive, endorse and give receipt for, or collect by legal
proceedings or otherwise, dividends or other distributions made or paid with
respect to the Collateral, provided and only if there exists at the time an
outstanding event of default under paragraph 7 of this Agreement.
<PAGE> 2
Secured Party will notify the Debtor of any action taken by it
pursuant to the provisions of this Section 2. Expenses reasonably incurred in
connection with such action shall be payable by the Debtor and form part of the
indebtedness secured hereunder as provided in paragraph 9.
So long as there exists no event of default under Section 7 of
this Agreement, the Debtor may exercise all stockholder voting rights and be
entitled to receive any and all regular cash dividends paid on the Collateral.
Accordingly, until such time as an event of default occurs under this Agreement,
all stockholder materials pertaining to the Collateral shall be delivered to the
Debtor at the address indicated below.
Any cash sums that Secured Party may receive in the exercise of
his rights and powers under paragraph 2(c) above shall be applied to the payment
of the Note and any other indebtedness secured hereunder, in such order of
application as Secured Party deems appropriate. Any remaining cash shall be paid
over to the Debtor.
3. DUTY TO DELIVER. Any new, additional or different securities that may
now or hereafter become distributable with respect to the Collateral by reason
of (i) any stock dividend, stock split or reclassification of the Common Stock,
or (ii) any merger, consolidation or other reorganization affecting the capital
structure of The TriZetto Group, Inc., a Delaware corporation ("TriZetto")
shall, upon receipt by the Debtor, be promptly delivered to and deposited with
Secured Party as part of the Collateral hereunder. Such securities shall be
accompanied by one or more properly endorsed stock power assignments.
4. CARE OF COLLATERAL. Secured Party shall exercise reasonable care in
the custody and preservation of the Collateral, but shall have no obligation to
initiate any action with respect to any conversion, call, exchange right,
preemptive right, subscription right, purchase offer or other right or privilege
relating to or affecting the Collateral. Secured Party shall have no duty to
preserve the rights of the Debtor against adverse claims or to protect the
Collateral against the possibility of a decline in market value. Secured Party
shall not be obligated to take any action with respect to the Collateral
requested by the Debtor unless the request is made in writing and Secured Party
determines that the requested action will not unreasonably jeopardize the value
of the Collateral as security for the Note and other indebtedness secured
hereunder.
Secured Party may at any time release and deliver all or part of the
Collateral to the Debtor, and the receipt thereof by the Debtor shall constitute
a complete and full acquittance for the Collateral so released and delivered.
Secured Party shall accordingly be discharged from any further liability or
responsibility for the Collateral, and the released Collateral shall no longer
be subject to the provisions of this Agreement. However, any and all release of
the Collateral shall be effected in compliance with the applicable limitations
of paragraph 6(c).
5. PAYMENT OF TAXES AND OTHER CHANGES. The Debtor shall pay, prior to
the delinquency date, all taxes, liens, assessments and other charges against
the Collateral, and in the event of the Debtor's failure to do so, Secured Party
may at its election pay any or all of such taxes and charges without contesting
the validity or legality thereof. The payment so made shall become a part of the
indebtedness secured hereunder and until paid shall bear interest at the per
annum rate equal to the minimum per annum rate, compounded annually, required to
avoid the imputation of interest income to Secured Party and compensation income
to the Debtor under federal tax laws.
2
<PAGE> 3
6. RELEASE OF COLLATERAL. Provided (i) all indebtedness secured
hereunder shall at the time have been paid in full or cancelled and (ii) there
does not otherwise exist any event of default under Section 7, the pledged
shares of Common Stock together with any additional Collateral that may
hereafter be pledged and deposited hereunder, shall be released from pledge and
returned to the Debtor in accordance with the following provisions:
(a) Upon payment or prepayment of principal under the Note,
together with payment of all accrued interest to date, one or more shares of the
Common Stock held as Collateral hereunder shall (subject to the applicable
limitations of paragraph 6(c) below) be released to the Debtor within three days
after such payment or prepayment. The number of the shares to be so released
shall be equal to the number obtained by multiplying (i) the total number of
shares of Common Stock held under this Agreement at the time of the payment or
prepayment, by (ii) a fraction the numerator of which shall be the amount of the
principal paid or prepaid and the denominator of which shall be, the unpaid
principal balance of the Note immediately prior to such payment or prepayment.
In no event, however, shall any fractional shares be released.
(b) Any additional Collateral that may hereafter be pledged and
deposited with Secured Party (pursuant to the requirements of Section 3) with
respect to the shares of Common Stock pledged hereunder shall be released at the
same time the particular shares of Common Stock to which the additional
Collateral relates are to be released in accordance with the applicable
provisions of paragraph 6(a). Under no circumstances, however, shall any shares
of Common Stock or any other Collateral be released if previously applied to the
payment of any indebtedness secured hereunder.
(c) In no event, however, shall any shares of Common Stock be
released pursuant to the provisions of paragraph 6(a) or 6(b) if, and to the
extent, the fair market value of the Common Stock and all other Collateral that
would otherwise remain in pledge hereunder after such release were effected
would be less than the unpaid balance of the Note (principal and accrued
interest).
(d) For all valuation purposes under this Agreement, the fair
market value per share of Common Stock on any relevant date shall be determined
in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded in the
over-the-counter market, the fair market value shall be the mean between
the highest bid and lowest asked prices (or, if such information is
available, the closing selling price) per share of Common Stock on the
date in question in the over-the-counter market, as such prices are
reported by the National Association of Securities Dealers on the NASDAQ
National Market or any successor system. If there are no reported bid
and asked prices (or closing selling price) for the Common Stock on the
date in question, then the mean between the highest bid price and lowest
asked price (or the closing selling price) on the last preceding date
for which such quotations exist shall be determinative of fair market
value.
(ii) If the Common Stock is at the time listed or admitted
to trading on any stock exchange, then the fair market value shall be
the closing selling price per share of Common Stock on the date in
question on the stock exchange serving as the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no reported sale of Common
Stock on such exchange on the
3
<PAGE> 4
date in question, then the fair market value shall be the closing
selling price on the exchange on the last preceding date for which such
quotation exists.
(iii) If the Common Stock at the time is neither listed
nor admitted to trading on any stock exchange nor traded in the
over-the-counter market, then the fair market shall be the most current
value per share determined in good faith by the TriZetto Board of
Directors.
(e) In the event the Debtor desires to sell any of the Shares,
(in which event, pursuant to the Note all of the gross proceeds shall be payable
to the Secured Party) the Secured Party shall cooperate with the Debtor to
deliver such Shares to a broker of the Debtor with instructions from the Debtor
to sell such Shares and to deliver the gross proceeds thereof (before deduction
of any commissions or other costs of sale) to the Secured Party as payment on
the Note.
7. EVENTS OF DEFAULT. The occurrence of one or more of the following
events shall constitute an event of default under this Agreement:
(a) the failure of the Debtor to pay the principal and accrued
interest when due under the Note and the continuation of such default for more
than 30 days;
(b) the occurrence of any acceleration event specified in the
Note;
(c) the failure of the Debtor to perform a material obligation
imposed upon the Debtor by reason of this Agreement and the failure to cure such
default within 60 days of written notice by Secured Party to the Debtor; or
(d) the breach of any warranty of the Debtor contained in this
Agreement.
Upon the occurrence of any such event of default, Secured Party may, at
its election, declare the Note and all other indebtedness secured hereunder to
become immediately due and payable and may exercise any or all of the rights and
remedies granted to a secured party under the provisions of the California
Uniform Commercial Code (as now or hereafter in effect), including (without
limitation) the power to dispose of the Collateral by public or private sale or
to accept the Collateral in full payment of the Note and all other indebtedness
secured hereunder. Anything herein to the contrary notwithstanding, Secured
Party acknowledges that because the Note is non-recourse, its sole remedy is to
pursue its rights to foreclose and dispose of the Collateral pursuant to the
applicable provisions of the California Uniform Commercial Code.
Any proceeds realized from the disposition of the Collateral pursuant to
the foregoing power of sale shall be applied first to the payment of reasonable
expenses incurred by Secured Party in connection with the disposition and then
to the payment of the Note and finally to any other indebtedness secured
hereunder. Any surplus proceeds shall be paid over to the Debtor.
8. NO OTHER REMEDIES. The rights, powers and remedies granted to Secured
Party and the Debtor pursuant to the provisions of this Agreement shall be
exclusive. Any forbearance, failure or delay by Secured Party or the Debtor in
exercising any right, power or remedy under this Agreement shall not be deemed
to be a waiver of such right, power or remedy. Any single or partial exercise of
any right, power or remedy under this Agreement shall not preclude the further
exercise thereof, and every right, power and remedy of Secured Party and the
Debtor under this Agreement
4
<PAGE> 5
shall continue in full force and effect unless such right power or remedy is
specifically waived by an instrument executed by Secured Party or the Debtor, as
the case may be.
9. TRANSFER OF COLLATERAL. In connection with the transfer or assignment
of the Note (whether by renegotiation, discount or otherwise), Secured Party may
transfer all or any part of the Collateral, and the transferee shall thereupon
succeed to all rights, powers and remedies granted hereunder with respect to the
Collateral so transferred. Upon such transfer, Secured Party shall be fully
discharged from all liability and responsibility for the transferred Collateral.
10. COSTS AND EXPENSES. All reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Secured Party in the exercise or
enforcement of any right, power or remedy granted it under this Agreement shall
become part of the indebtedness secured hereunder and shall bear interest until
paid at the per annum rate equal to the minimum per annum rate, compounded
annually, required to avoid the imputation of interest income to Secured Party
and compensation income to the Debtor under the federal tax laws.
11. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California and shall be binding upon
the executors, administrators, heirs and assigns of the Debtor.
12. SEVERABILITY. If any provision of this Agreement is held to be
invalid under applicable law, then such provision shall be ineffective only to
the extent of such invalidity, and neither the remainder of such provision nor
any other provisions of this Agreement shall be affected thereby.
5
<PAGE> 6
IN WITNESS WHEREOF, this Stock Pledge Agreement has been executed by the
Debtor as of November 29, 1999.
DEBTOR
Address:
By:
-------------------------------
Agreed to and Accepted by:
NOVALIS CORPORATION, as Secured Party
By:
-------------------------------
Its:
-------------------------------
6
