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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)
December 22, 1999
THE TRIZETTO GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-27501 33-0761159
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
567 San Nicolas Drive, Suite 360, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 719-2200
Page 1 of 5
Exhibit Index on Page 5
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ITEM 2. - ACQUISITION OR DISPOSITION OF ASSETS
On December 22, 1999, The TriZetto Group, Inc., a Delaware corporation
(the "Registrant"), acquired all of the issued and outstanding capital stock of
Finserv Health Care Systems, Inc., a New York corporation ("Finserv"), in
accordance with the terms and conditions of the Agreement and Plan of Merger,
dated as of December 22, 1999 (the "Agreement") by and among the Registrant,
Finserv, Finserv Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Registrant ("Merger Sub"), the Finserv Noteholder described
therein and the Finserv Shareholders described therein (Finserv Noteholder
together with Finserv Shareholders are collectively referred to as the "Finserv
Securityholders"). The acquisition was effected by a merger (the "Merger") of
the Merger Sub with and into Finserv, with Finserv surviving the merger as a
wholly-owned subsidiary of the Registrant.
The 149 issued and outstanding shares of Finserv capital stock were
converted into an aggregate of 48,998 shares of fully paid and non-assessable
shares of common stock, $.001 par value, of the Registrant ("Registrant Common
Stock"), subject to possible adjustments as set forth in the Agreement (the
"Merger Consideration"). The aggregate number of shares of Registrant Common
Stock which the Finserv Securityholders had the right to receive was calculated
by dividing $1,500,000 by the average closing sales prices of the Registrant
Common Stock for the five days immediately preceding December 18, 1999. The
Agreement also provides that an additional amount of shares of Registrant Common
Stock, up to $750,000 in shares (the "Earnout Consideration"), may be issued to
the Finserv Securityholders if certain milestones described in the Agreement are
achieved for the fiscal year ending December 31, 2000 and fiscal year ending
December 31, 2001.
In connection with the Merger, the Registrant purchased from the
Finserv Noteholder and the Finserv Noteholder sold to the Registrant, all of the
issued and outstanding Finserv Notes described in the Agreement (except for
$25,000) for an aggregate purchase price equal to $1,224,592.21 cash, net of
certain debt owed by the Finserv Noteholder to the Registrant (the "Note
Consideration" and together with the Merger Consideration and the Earnout
Consideration, the "Consideration"). Pursuant to the Agreement, a portion of the
Note Consideration was withheld by the Registrant (the "Cash Holdback") and a
portion of the Merger Consideration was deposited into an escrow account (the
"Escrowed Shares"). Each the Cash Holdback and the Escrowed Shares are subject
to possible adjustment as set forth in the Agreement. The source of funds for
the Note Consideration was available cash. The Consideration 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 December 22, 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.
The foregoing description of the Merger does not purport to be complete
and is qualified in its entirety by reference to the Agreement, which is
incorporated herein by reference.
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ITEM 7. - FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following financial statements of Finserv 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 Balance Sheets as of December 31, 1998 and
December 31, 1997
- Audited Statements of Operations for the years ended
December 31, 1998 and 1997
- Audited Statement of Stockholders' Equity for the years
ended December 31, 1998 and 1997
- Audited Statements of Cash Flow for the years ended December
31, 1998 and 1997
- Unaudited Balance Sheets as of September 30, 1999
- Unaudited Statements of Operations for the nine months ended
September 30, 1999
- Unaudited Statements of Cash Flow for the nine months ended
September 30, 1999
(b) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial statements of Finserv 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
EXHIBIT NUMBER DESCRIPTION
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2.1 Agreement and Plan of Merger dated as of
December 22, 1999
2.2 Escrow Agreement dated as of December 22, 1999
2.3 Form of Non-Competition Agreement dated as of
December 22, 1999
2.4 Registration Rights Agreement dated as of
December 22, 1999
23.1 Consent of PricewaterhouseCoopers LLP with respect
to the financial statements of the Registrant (to
be filed by amendment)
23.2 Consent of Citrin Cooperman & Company, LLP with
respect to the financial statements of Finserv (to
be filed by amendment)
99.1 Financial Statements of Finserv 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)
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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.
January 6, 2000 /s/ JEFFREY H. MARGOLIS
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Jeffrey H. Margolis
Chief Executive Officer, President and
Chairman of the Board of Directors
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EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ----------
2.1 Agreement and Plan of Merger dated as of December 22, 1999
2.2 Escrow Agreement dated as of December 22, 1999
2.3 Form of Non-Competition Agreement dated as of
December 22, 1999
2.4 Registration Rights Agreement dated as of
December 22, 1999
23.1 Consent of PricewaterhouseCoopers LLP with respect to the *
financial statements of the Registrant (to be filed by
amendment)
23.2 Consent of Citrin Cooperman & Company, LLP with respect to *
the financial statements of Finserv (to be filed by
amendment)
99.1 Financial Statements of Finserv 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)
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* to be filed by amendment
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Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE TRIZETTO GROUP, INC.,
FINSERV ACQUISITION CORP.,
FINSERV HEALTH CARE SYSTEMS, INC.
AND
SECURITYHOLDERS OF FINSERV HEALTH CARE SYSTEMS, INC.
DATED AS OF DECEMBER 22, 1999
----------------------------------------------
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of December 22, 1999, by and among The TriZetto Group, Inc., a
Delaware corporation ("TriZetto"), Finserv Acquisition Corp, a Delaware
corporation and wholly owned subsidiary of TriZetto ("Merger Sub"), Finserv
Health Care Systems, Inc., a New York corporation ("Finserv"), the holders of
the capital stock of Finserv listed on the signature pages attached hereto
(collectively, the "Finserv Shareholders" and individually, a "Finserv
Shareholder"), and Stuart Schloss, as a holder of certain promissory notes made
by Finserv ("Finserv Noteholder" and together with Finserv Shareholders, the
"Finserv Securityholders"). Certain other capitalized terms used in this
Agreement are defined in Exhibit A attached hereto.
RECITALS
WHEREAS, the respective Boards of Directors of TriZetto, Merger Sub and
Finserv believe it is in the best interest of each company and their respective
shareholders to consummate the business combination transaction provided for
herein in which Merger Sub would merge with and into Finserv (the "Merger");
WHEREAS, the respective Boards of Directors of TriZetto, Merger Sub and
Finserv have approved the Merger, upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, the Finserv Securityholders are the record and beneficial
owners of 100% of the issued and outstanding shares of Finserv's common stock,
without par value (the "Finserv Stock"), as set forth on Schedule 1 attached
hereto;
WHEREAS, the Finserv Noteholder is the holder of the promissory notes
listed on Schedule 2 attached hereto, each made by Finserv and payable to the
Finserv Noteholder (collectively, the "Finserv Notes");
WHEREAS, at the time of the Closing, the Finserv Securityholders will
be the record and beneficial owners of 100% of the issued and outstanding shares
of Finserv Stock as set forth on Schedule 1 attached hereto;
WHEREAS, each of TriZetto, Merger Sub, Finserv and the Finserv
Securityholders desire to make certain representations, warranties, covenants
and agreements in connection with the Merger and also to prescribe various
conditions to the consummation thereof; and
WHEREAS, for Federal income tax purposes, the Merger is intended to be
qualified as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
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ARTICLE 1
THE MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL") and the New York General Corporation Law ("NYGCL"), Merger Sub
shall be merged with and into Finserv at the Effective Time of the Merger (as
defined in Section 1.3). Following the Merger, the separate corporate existence
of Merger Sub shall cease, and Finserv shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights, properties, liabilities and obligations of Merger Sub in accordance
with the DGCL and the NYGCL.
1.2. CLOSING. The closing of the Merger (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 December
22, 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 December 31, 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, Merger Sub, Finserv
and the Finserv Securityholders shall deliver the certificates and other
documents and instruments required to be delivered hereunder.
1.3. EFFECTIVE TIME. At the Closing, a certificate of merger (the
"Certificate of Merger") shall be executed in accordance with the relevant
provisions of the DGCL and the NYGCL and the parties shall make all other
filings, recordings or publications required by the DGCL and the NYGCL in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State and
the New York Secretary of State, or at such other time as may be specified in
the Certificate of Merger (the "Effective Time").
1.4. EFFECTS OF THE MERGER. Subject to the foregoing, the effects of
the Merger shall be as provided in the applicable provisions of the DGCL and the
NYGCL.
1.5. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation and Bylaws of Finserv as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or in accordance with applicable law.
1.6. DIRECTORS AND OFFICERS. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected or
appointed and qualified in accordance with applicable law or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
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ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF FINSERV AND MERGER SUB
2.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of TriZetto, Merger Sub, Finserv or
the Finserv Securityholders:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share
of capital stock of Merger Sub (the "Merger Sub Stock") shall by virtue of the
Merger and without any action on the part of any holder thereof, be converted
into one share of Finserv Stock.
(b) CONVERSION OF FINSERV COMMON STOCK. Subject to Sections 2.1(c)
and 2.1(d):
(i) Each issued and outstanding share of Finserv Stock will be
converted automatically into the right to receive, the number of validly issued,
fully paid and non-assessable shares of common stock, $0.001 par value, of
TriZetto (the "TriZetto Stock") which equals the Conversion Number, subject to
adjustment as set forth in Sections 2.5, 2.6 and 2.7. As used herein, the
"Conversion Number" shall equal the number obtained by dividing:
(A) the quotient obtained by dividing $1,500,000 by the
average of the closing sales prices of the TriZetto Stock for the five trading
days immediately preceding December 18, 1999, as reported on the Nasdaq National
Market System ("NMS"), by
(B) the number that is equal to the total number of shares
of Finserv Stock that are issued and outstanding immediately prior to the
Effective Time of the Merger.
(ii) At the Effective Time, all such shares of Finserv Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of any such certificates, certificates representing
the shares of TriZetto Stock ( the "Merger Consideration") to be issued or paid
in consideration therefor upon the surrender of such certificate in accordance
with Section 2.2, without interest.
(c) DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, shares of Finserv Stock that are outstanding immediately prior
to the Effective Time and that are held by a holder who is entitled to and has
demanded and perfected his right of appraisal for such Finserv Stock in
accordance with Article 9 of the NYGCL (the "Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration as provided in
Section 2.1(b) of this Agreement, unless and until such holder fails to perfect
or withdraws or otherwise loses his right to an appraisal of the Dissenting
Shares and payment under the NYGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to an appraisal of the
Dissenting Shares under the NYGCL, such Dissenting Shares shall thereupon be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration to which such holder is entitled, without
interest thereon. Finserv agrees to give all notices acquired under Article 9 of
the NYGCL and otherwise comply with the requirements of Article 9 of the NYGCL.
In addition, Finserv shall give TriZetto (i) prompt notice of any written
demands for appraisal of any Dissenting
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Shares, withdrawals of such demands, and any other instruments served pursuant
to the NYGCL and received by Finserv and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
NYGCL. Finserv shall not, except with the prior written consent of TriZetto,
voluntarily offer to make or make any payment with respect to any demands for
appraisal for Dissenting Shares or offer to settle any such demands.
(d) STOCK OPTIONS AND STOCK PLANS. As of the date of this Agreement
and as of the Effective Time, there will be no outstanding Finserv Derivative
Securities and no outstanding Finserv Options.
2.2. EXCHANGE OF CERTIFICATES.
(a) TRIZETTO STOCK EXCHANGE PROCEDURES. Immediately following the
Closing, upon receipt of the certificates representing all of the outstanding
shares of Finserv Stock from the Finserv Securityholders, TriZetto and Finserv
shall submit to TriZetto's registrar and transfer agent, U.S. Stock Transfer
Corporation (the "Exchange Agent"), an instruction letter including a list of
the names, addresses and social security numbers or taxpayer identification
numbers of each Finserv Securityholder who has delivered the certificate or
certificates representing all shares of Finserv Stock held by such Finserv
Securityholder to TriZetto and for which the holders thereof are not entitled to
claim dissenter's rights. As soon as reasonably practicable following the
Effective Time, TriZetto shall cause the Exchange Agent to issue in exchange
therefor (i) a certificate representing that number of whole shares of TriZetto
Stock, which such shareholder has the right to receive pursuant to the
provisions of this Article 2 (less the proportionate number of shares to placed
into Escrow as provided in Section 2.4 below) and as further described on
Exhibit B attached hereto, and (ii) the cash payment in lieu of fractional
shares, if any. Upon delivery of the above mentioned consideration, the Finserv
stock certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 2.2, each certificate shall be deemed at any time
after the Effective Time for all corporate purposes of TriZetto to represent
ownership of the number of shares of TriZetto Stock into which the number of
shares of Finserv Stock shown thereon have been converted as contemplated by
this Article 2.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to TriZetto Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered certificate
with respect to the shares of TriZetto Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid pursuant to Section 2.2(d)
until the surrender of such certificate in accordance with this Article 2.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the record holder of the certificates
representing whole shares of TriZetto Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions, if any, with a record date on or after the Effective Time which
theretofore became payable, but which were not paid by reason of the immediately
preceding sentence, with respect to such whole shares of TriZetto Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date on or after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of TriZetto Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All shares of
TriZetto Stock issued upon the surrender for exchange of certificates in
accordance with the terms of this Article 2 (including any cash paid pursuant to
Section 2.2(d)) shall be deemed to have been issued
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(and paid) in full satisfaction of all rights pertaining to the shares of
Finserv Stock represented thereby. From and after the Effective Time, the stock
transfer books of Finserv shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Finserv Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
(d) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of TriZetto Stock shall be issued upon the surrender for
exchange of certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a TriZetto stockholder. Each
holder of shares of Finserv Stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of TriZetto Stock
shall receive, in lieu thereof, cash without interest in an amount equal to such
fractional share of TriZetto Stock multiplied by $30.6125.
(e) WITHHOLDING TAXES; PAYMENTS TO PUBLIC OFFICIALS. TriZetto and
Merger Sub shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable to any Finserv Securityholder pursuant to this
Agreement such amounts as TriZetto and Merger Sub may be required to deduct or
withhold therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Finserv Securityholder to whom such amounts would otherwise have
been paid. Neither TriZetto nor Merger Sub shall be liable to any Finserv
Securityholder for any shares of TriZetto Stock (or dividends or distributions
with respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or similar law.
2.3. NOTE CONSIDERATION.
(a) NOTE PURCHASE. On the terms and subject to the conditions of
this Agreement, in reliance upon the representations, warranties and agreements
of the parties contained herein, concurrently with the Closing, the Finserv
Noteholder shall sell, transfer and deliver to TriZetto, and TriZetto shall
purchase from the Finserv Noteholder, all of the issued and outstanding Finserv
Notes except for $25,000 which shall remain outstanding; provided however, that
TriZetto shall not be obligated to pay more than $1,224,592.21 for the Finserv
Notes, net of the debt owed by the Finserv Noteholder to TriZetto pursuant to
that certain Secured Promissory Note executed by the Finserv Noteholder on
December 16, 1999 (the "Note Consideration" and together with the Merger
Consideration and Earnout Consideration, the "Consideration").
(b) PAYMENT OF THE NOTE CONSIDERATION. TriZetto will withhold
$125,000 of the Note Consideration that would otherwise be delivered to the
Finserv Noteholder at the Closing (the "Cash Holdback") and that will be held by
TriZetto for one year to secure the adjustment to the Note Consideration which
may be made pursuant to Sections 2.5 and 2.6 below; provided, however, that the
Cash Holdback will be released sooner upon the complete resolution of the
adjustments set forth in Sections 2.5 and 2.6 below. Subject to the adjustment
set forth in Sections 2.5 and 2.6, at the Closing, TriZetto will deliver the
Note Consideration minus the Cash Holdback, by wire transfer to the Finserv
Noteholder in accordance with wire instructions provided by the Finserv
Noteholder.
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2.4. DELIVERY OF TRIZETTO STOCK TO ESCROW. Pursuant to an Escrow
Agreement to be entered into on or before the Closing in substantially the form
of Exhibit C (the "Escrow Agreement"), by and among TriZetto, the Finserv
Securityholders, Bankers Trust Company of California N.A. (the "Escrow Agent")
and the Representative, TriZetto will deposit stock certificates representing
20,000 shares of TriZetto Stock that would otherwise be delivered to the Finserv
Securityholders at the Closing (the "Escrow Shares") in Escrow together with
related stock powers which will be held in escrow for one year to secure the:
(i) accounts receivable and accounts payable covenants in Section 2.5 below;
(ii) The Flex Group Excess covenant in Section 2.6 below; (iii) claims made by
or on behalf of Steven Kramer against Finserv, TriZetto or any of their
Affiliates; and (iv) indemnification obligations of Finserv and the Finserv
Securityholders with respect to claims made under Article 8 hereof and to secure
the purchase price adjustments of the Finserv Securityholders which may be made
pursuant to Sections 2.5 and 2.6 below and in accordance with the Escrow
Agreement.
2.5. ADJUSTMENT TO CONSIDERATION BASED ON ACCOUNTS RECEIVABLE AND
PAYABLE SCHEDULE.
(a) ACCOUNTS RECEIVABLE AND PAYABLE SCHEDULE.
(i) No later than 60 business days after the Closing Date,
Finserv shall deliver to TriZetto a schedule of accounts receivable and accounts
payable which shall be dated as of the Closing Date and which shall be prepared
in a manner in accordance with generally accepted accounting principles
consistently applied ("GAAP"), including normal accruals through December 31,
1999 which reflects accounts receivable earned, but which were not billed as of
the Closing Date ("Accounts Receivable and Payable Schedule"). TriZetto may,
within 90 days after the Closing Date at its sole option with notice to Stuart
Schloss as the representative of the Finserv Securityholders (the
"Representative"), prepare from Finserv's books and records (in accordance GAAP
consistently applied) its own version of such Accounts Receivable and Payable
Schedule, and if the two versions vary, TriZetto's Chief Financial Officer or
his designee and the Representative shall meet to reconcile the versions and
arrive at a final Accounts Receivable and Payable Schedule. In the event the
parties cannot agree on a reconciled version, the dispute shall be determined in
accordance with Section 2.5(c) below. The Accounts Receivable and Payable
Schedule, if accepted by TriZetto, or in the alternative the reconciled Accounts
Receivable and Payable Schedule resulting from the procedure described in the
immediately preceding sentence, shall be the "Final Accounts Receivable and
Payable Schedule."
(ii) It is acknowledged that after the Closing Date all
billings and collections of Finserv will be the property of TriZetto as holder
of 100% of the Finserv Stock (except any payments received from U.S. Imaging,
U.S. Diagnostics, or their affiliates, relating to the Dow Corning breast
implant litigation, which shall be paid to the Finserv Securityholders on a pro
rata basis); provided, however, that the Representative and TriZetto's Chief
Financial Officer shall meet to determine (A) the amount of unbooked accounts
receivable related to New York Presbyterian which shall be deemed to have
accrued prior to the Closing Date and which shall be included as an accrual on
the Accounts Receivable and Payable Schedule; and (B) the amount of moving
expenses incurred by Finserv which shall be deducted from the account payable
section of the Accounts Receivable and Payable Schedule.
(b) EXCESS ACCOUNTS PAYABLE ADJUSTMENT.
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(i) If the Final Accounts Receivable and Payable Schedule
reflects accounts payable of Finserv in excess of the sum of Finserv's accounts
receivable, less a reserve for uncollectible accounts (the "Excess"), then the
Note Consideration shall be reduced dollar-for-dollar by the amount of the
Excess. The Excess shall be applied first against the Cash Holdback until it is
reduced to zero, then if necessary against the Escrow Shares at a valuation
determined pursuant to the Escrow Agreement, then if necessary, against the
TriZetto Stock held by the Finserv Securityholders.
(ii) Assuming no disputes exist regarding the Final Accounts
Receivable and Payable Schedule, the Excess shall be paid within 15 business
days of the determination of the Accounts Receivable and Payable Schedule in
accordance with Section 2.5(a).
(c) VALUATION DISPUTE RESOLUTION. To initiate a dispute between
TriZetto and the Finserv Securityholders with respect to the Accounts Receivable
and Payable Schedule, the Representative must notify TriZetto of such dispute
within ten business days of the delivery of TriZetto's version of the Accounts
Receivable and Payable Schedule. In the event the parties disagree as to the
reconciliation of the Accounts Receivable and Payable Schedule under Section
2.5(a), this Section 2.5(c) shall be triggered automatically and the parties
shall resolve the disagreement as set forth herein. In the case of such
challenge or disagreement, the amount or amounts of any line items in the
Accounts Receivable and Payable Schedule which are in dispute (the "Valuation")
shall be determined as follows: (a) first, TriZetto and the Representative shall
engage in good faith discussions of the Valuation, following which a definitive
Valuation may be agreed to; and (b) if a definitive Valuation is not determined
within 30 days of the date of the Representative's notice, the CPA shall
determine the calculation of the Valuation, in which case the amount so
determined shall control. The costs of the CPA shall be borne equally by
TriZetto and the Finserv Securityholders.
2.6. ADJUSTMENT TO CONSIDERATION BASED ON LIABILITIES OWED TO THE FLEX
GROUP, DONALD FELLNER OR THEIR AFFILIATES.
(a) LIABILITIES OWED. Based upon the representations and warranties
of Finserv and the Finserv Securityholders, TriZetto is informed and believes
that Finserv owes The Flex Group, Donald Fellner and their Affiliates
approximately $175,000, of which $100,000 is reflected on Finserv's books and
records (the "Flex Group Indebtedness"). Pursuant to Section 3.8 of the FinServ
Disclosure Schedule, Finserv and the Finserv Securityholders represent and
warrant that The Flex Group Indebtedness can be paid off, and a General Release
may be obtained upon Finserv's payment of $180,932.79 to The Flex Group.
(b) CONSIDERATION ADJUSTMENT. If The Flex Group, Donald Fellner and
their Affiliates require more than $180,932.79 in order to execute a General
Release of all claims (the "Flex Group Excess"), then the Merger Consideration
shall be reduced dollar-for-dollar by the amount of The Flex Group Excess. The
Flex Group Excess shall first be applied against the Cash Holdback until it is
reduced to zero, then if necessary against the Escrow Shares at a valuation
determined pursuant to the Escrow Agreement.
(c) DISPUTE RESOLUTION. In the event that TriZetto and the
Representative disagree on the amount of The Flex Group Excess, the CPA shall
determine The Flex Group Excess, in which case such amount so determined shall
control. The costs of the CPA shall be borne equally by TriZetto and the FinServ
Securityholders.
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2.7. ADJUSTMENT TO CONSIDERATION BASED ON FUTURE NET REVENUES.
(a) EARNOUT PROVISIONS. The Finserv Securityholders may receive an
additional $750,000 payable in shares of TriZetto Common Stock (the "Earnout
Consideration") if certain milestones are met in fiscal year ending December 31,
2000 and fiscal year ending December 31, 2001.
(i) FISCAL YEAR 2000. The maximum Earnout Consideration of
$375,000 for fiscal year 2000 shall be calculated as follows:
(A) If Finserv's Net Revenues and EBITDA for fiscal year
2000 are equal to or greater than $5,400,000 and $600,000, respectively, then
$250,000 payable in shares of TriZetto Stock shall be delivered to the Finserv
Securityholders on a pro rata basis on or before March 31, 2001;
(B) If Finserv's Net Revenues and EBITDA meet the
thresholds set forth in Section 2.7(a)(i)(A) above, and Net Revenues or EBITDA
for fiscal year 2000 are equal to or greater than $5,700,000 or $900,000,
respectively, then $62,500 payable in shares of TriZetto Stock, in addition to
any amounts payable pursuant to 2.7(a)(i)(A) above, shall be delivered to the
Finserv Securityholders on a pro rata basis on or before March 31, 2001;
(C) If Finserv's Net Revenues and EBITDA for fiscal year
2000 are equal to or greater than $5,700,000 and $900,000, respectively, then
$62,500 payable in shares of TriZetto Stock, in addition to any amounts payable
pursuant to Section 2.7(a)(i)(A) and Section 2.7(a)(i)(B) above, shall be
delivered to the Finserv Securityholders on a pro rata basis on or before March
31, 2001;
(ii) FISCAL YEAR 2001. The maximum Earnout Consideration of
$375,000 for fiscal year 2001 shall be calculated as follows:
(A) If Finserv's Net Revenues or EBITDA for fiscal year
2001 are equal to or greater than $6,000,000 or $900,000, respectively, then
$125,000 payable in shares of TriZetto Stock shall be delivered to the Finserv
Securityholders on a pro rata basis on or before March 31, 2002;
(B) If Finserv's Net Revenues and EBITDA for fiscal year
2001 are equal to or greater than $6,000,000 and $900,000, respectively, then
$125,000 payable in shares of TriZetto Stock, in addition to any amounts payable
pursuant to Section 2.7(a)(ii)(A) above, shall be delivered to the Finserv
Securityholders on a pro rata basis on or before March 31, 2002;
(C) If Finserv's Net Revenues and EBITDA meet the
thresholds set forth in Section 2.7(a)(ii)(B) above, and Net Revenues or EBITDA
for fiscal year 2001 are equal to or greater than $6,600,000 or $1,020,000,
respectively, then $62,500 payable in shares of TriZetto Stock, in addition to
any amounts payable pursuant to Section 2.7(a)(ii)(A) and Section 2.7(a)(ii)(B)
above, shall be delivered to the Finserv Securityholders on a pro rata basis on
or before March 31, 2002;
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(D) If Finserv's Net Revenues and EBITDA for fiscal year
2001 are equal to or greater than $6,600,000 and $1,020,000, respectively, then
$62,500 payable in shares of TriZetto Stock, in addition to any amounts payable
pursuant to Section 2.7(a)(ii)(A), Section 2.7(a)(ii)(B) and Section
2.7(a)(ii)(C) above, shall be delivered to the Finserv Securityholders on a pro
rata basis on or before March 31, 2002;
(iii) As used here, "Net Revenues" shall mean Finserv's
revenues less subsequent adjustments determined in accordance with GAAP and
consistent with the practices used in preparing the FinServ Financial Statements
certified by PricewaterhouseCoopers LLP or such other independent certified
public accountant as chosen by TriZetto.
(iv) As used here, "EBITDA" shall mean Finserv's earnings
before interest, taxes, depreciation and amortization, determined in accordance
with GAAP and consistent with the practices used in preparing the FinServ
Financial Statements certified by PricewaterhouseCoopers LLP or such other
independent certified public accountant as chosen by TriZetto. The calculation
for EBITDA shall not include the following items: (A) expenses attributable to
TriZetto or any of the TriZetto Subsidiaries (other than Finserv), except to the
extent that such expenses are directly related to Finserv or are required to be
entered into the books and records of Finserv pursuant to GAAP; and (B) any
costs relating to any claim or liability which was ultimately paid to TriZetto
pursuant to Article 8 of this Agreement. In the event that TriZetto expenses
costs relating to the implementation of Finserv's computer system, including
without limitation, system interfaces, such expenses shall be deducted from
EBITDA as if they were amortized over the longest term permitted by GAAP.
(b) REVENUE CALCULATION. As soon as reasonably practicable, but not
later than March 1, 2001 and March 1, 2002, as applicable, TriZetto shall
deliver to the Representative a calculation of Finserv's Net Revenues for (i)
the 12 months and six months ended December 31, 2000 and (ii) the 12 months and
six months ended December 31, 2001, respectively, determined in accordance with
GAAP and consistent with the practices used in preparing the Finserv Financial
Statements certified by PricewaterhouseCoopers LLP or such other independent
certified public accountant as chosen by TriZetto (the "Revenue Calculation").
The cost of such accounting firm shall be borne by TriZetto. The Representative
shall have 30 days to review and approve the Revenue Calculation. If the
Representative does not notify TriZetto in writing within such 30 day period
that it disputes any matter set forth in the Revenue Calculation, the Revenue
Calculation shall be deemed to have been accepted by the Finserv Securityholders
and shall be binding upon the Finserv Securityholders and TriZetto. If any
disputes arise regarding the Revenue Calculation which the Finserv
Securityholders and TriZetto cannot resolve between themselves within 30 days,
such questions shall be referred to the CPA, and the CPA shall be directed to
resolve such questions within 7 days thereafter, and the CPA's decision shall be
final and binding on all parties. The cost of the CPA shall be borne equally by
the Finserv Securityholders and TriZetto.
(c) DELIVERY OF SHARES. Upon any final determination of the Revenue
Calculation pursuant to Section 2.7(b), TriZetto shall promptly 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 equal to the applicable amount of the Earnout Consideration, to
the Finserv Securityholders for such fiscal year, if any, as set forth in
Section 2.7(a). The shares delivered in satisfaction of the Earnout
Consideration, if any, shall be
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based upon the average closing sales price for the 5 trading days preceding
March 31, 2000 or March 31, 2001, as applicable.
(d) STRATEGIC AND OPERATIONAL DECISIONS. It is acknowledged that
after the Closing Date TriZetto shall, in its sole discretion, have complete
control over all strategic and operational decisions concerning the operation of
Finserv, notwithstanding that such decisions may or will impact the amount of
the Net Revenues. TriZetto agrees to exercise its discretion in making such
decisions in good faith and without regard to any effect such decisions may have
on the Net Revenues and the Earnout Consideration, if any, to be paid hereunder.
TriZetto shall introduce such of its customers to Finserv as it shall deem
appropriate in its reasonable business judgment in order to increase Finserv's
business. TriZetto shall provide Finserv with adequate working capital as it
shall determine in its reasonable business judgment.
(e) NET REVENUE STATEMENTS. TriZetto shall provide to the
Representative, as soon as reasonably practicable, but not later than 20 days
after the end of each month (except the month of December 2000) ending after the
Closing until November 30, 2001, a statement setting forth (i) Net Revenues for
such month and (ii) Net Revenues for the fiscal year to date. The revenue
statements shall be delivered upon receipt by TriZetto of a Confidentiality
Agreement in substantially the form of Exhibit D attached hereto
("Confidentiality Agreement") executed by the Representative.
2.8. ADJUSTMENT TO TRIZETTO STOCK. If 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 $30.6125, then 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 Finserv Securityholders such that the total
market value of all the shares of TriZetto Stock issued and delivered by
TriZetto, as required this Section 2.8 as well as by Section 2.1(b) is
$1,500,000, 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 12,249 shares of TriZetto Stock. The adjustment
called for by this Section 2.8 shall be made after shares of TriZetto Stock are
returned from Escrow to TriZetto or otherwise sold in satisfaction of claims
under Article 8 or for adjustments in pursuant to Sections 2.5 and 2.6, or for
any other purpose.
2.9. LOST CERTIFICATES. In the event any certificate representing any
shares of Finserv Stock shall have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and upon satisfaction of the conditions set forth
below, the holder of such lost, stolen or destroyed certificate shall be
entitled to receive, in accordance with the terms of this Agreement, the Merger
Consideration payable in respect of the Finserv Stock evidenced by such
certificate. When authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the person to whom the Merger Consideration is to be paid
shall, as a condition precedent to the payment thereof, give Finserv a bond
satisfactory to TriZetto in such sum as it may direct or otherwise indemnify
Finserv and TriZetto in a manner satisfactory to TriZetto against any claim that
may be made against Finserv or TriZetto with respect to the certificate alleged
to have been lost, stolen or destroyed.
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2.10. DELIVERY OF CONSIDERATION. By executing this Agreement, each of
the Finserv Securityholders agrees to the method and timing of the delivery of
the Consideration as set forth herein and in the Flow of Funds Memorandum
attached hereto as Exhibit J.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FINSERV AND THE
FINSERV SECURITYHOLDERS
Finserv and the Finserv Securityholders, jointly and severally,
represent and warrant to TriZetto and Merger Sub that, except as set forth in
the Finserv Disclosure Schedule:
3.1. CORPORATE EXISTENCE AND POWER. Finserv is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York, and has all 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 Finserv. Finserv 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 Finserv. Finserv has heretofore
delivered to TriZetto true and complete copies of Finserv's Articles of
Incorporation and Bylaws as currently in effect.
3.2. CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by Finserv of this
Agreement and the consummation of the transactions contemplated hereby are
within Finserv's corporate powers and, except for the required approval of the
holders of Finserv Stock in connection with the consummation of the Merger, have
been duly authorized by all necessary corporate action. The affirmative vote of
the holders of two-thirds of the outstanding shares of Finserv Stock is the only
vote of the holders of any of Finserv's capital stock necessary in connection
with the consummation of the Merger.
(b) Finserv's Board of Directors, at a meeting duly called and
held, has unanimously (i) determined that this Agreement and the transactions
contemplated hereby (including the Merger) are fair to and in the best interests
of the Finserv Shareholders, (ii) approved and adopted this Agreement and the
transactions contemplated hereby (including the Merger), which approval
satisfies in full any applicable requirements of the NYGCL, and (iii) resolved
to recommend approval and adoption of this Agreement by the holders of Finserv
Stock.
(c) This Agreement has been duly executed and delivered by Finserv
and the Finserv Securityholders and is a legal, valid and binding obligation of
Finserv and the Finserv Securityholders, enforceable against Finserv and the
Finserv Securityholders, as applicable, in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
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3.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Finserv and the Finserv Securityholders of this Agreement and the
consummation by Finserv and the Finserv Securityholders of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency, official or authority, other than (a) the filing of
the Certificate of Merger and other documents in accordance with the DGCL and
the NYGCL, (b) compliance with the Securities Act of 1933 (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act"), or foreign or state securities
or blue sky laws, and (c) any other filings, approvals or authorizations which,
if not obtained, would not, individually or in the aggregate, have a Material
Adverse Effect on Finserv or materially impair the ability of Finserv and the
Finserv Securityholders to consummate the transactions contemplated by this
Agreement.
3.4. NON-CONTRAVENTION. The execution, delivery and performance by
Finserv and the Finserv Securityholders of this Agreement and the consummation
by Finserv and the Finserv Securityholders of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the Articles of
Incorporation or Bylaws of Finserv, (ii) assuming compliance with the matters
referred to in Section 3.3, 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 Finserv or the Finserv Securityholder,
(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 Finserv or to a loss of any benefit
to which Finserv is entitled under any provision of any agreement or other
instrument binding upon Finserv or any license, franchise, permit, certificate,
approval or other similar authorization affecting, or relating in any way to,
the assets or business of Finserv, or (iv) result in the creation or imposition
of any Lien on any asset of Finserv, 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 Finserv or materially impair the ability of Finserv
to consummate the transactions contemplated by this Agreement.
3.5. COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. Finserv holds 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 Finserv of any
such license, permit or authorization or any such statute, law, ordinance, rule
or regulation.
3.6. CAPITALIZATION.
(a) The authorized capital stock of Finserv consists of 200 shares
of Finserv Stock. As of the date hereof, there are outstanding (i) 149 shares of
Finserv Stock, (ii) no employee stock options to purchase shares of Finserv
Stock, (iii) no warrants to purchase shares of Finserv Stock, and (iv) no shares
of Finserv Stock issued or relating to restricted stock awards, or other stock
based compensation arrangements.
(b) All outstanding shares of capital stock of Finserv have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in this Section 3.6, there are no outstanding (i) shares of capital
stock or other voting securities of Finserv, (ii) securities of Finserv
convertible into or exchangeable for shares of capital stock or voting
securities of Finserv, or (iii) options, restricted stock, other stock based
compensation awards or other rights to acquire from Finserv, or other obligation
of Finserv to issue, any capital stock, voting securities or securities
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convertible into or exchangeable for capital stock or voting securities of
Finserv. There are no outstanding obligations of Finserv 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 Finserv having the right to vote (or
convertible into or exercisable for Finserv Stock having the right to vote) on
any matters on which the Finserv Securityholders may vote.
3.7. SUBSIDIARY. Finserv has no Subsidiaries and does not own any stock
or equity interest in any other Person.
3.8. COMPANY FINANCIAL STATEMENTS. Finserv has delivered to TriZetto
(a) the audited balance sheet of Finserv as of December 31, 1997, the unaudited
balance sheet of Finserv as of December 31, 1998 and the related statements of
income and shareholders equity for the fiscal years ended December 31, 1997 and
1998, together with an unaudited balance sheet as of October 31, 1999 and the
related statement of income and shareholder's equity for the ten months then
ended (collectively the "Financial Statements"). The Finserv Financial
Statements present fairly, in conformity with GAAP applied on a consistent basis
(subject, in the case of the October 31, 1999 financial statements, to normal
year end adjustments none of which individually or in the aggregate are
material), the financial condition and results of operations of as of the dates
and for the periods indicated therein. For purposes of this Agreement, "Finserv
Balance Sheet" means the balance sheet of Finserv as of October 31, 1999.
3.9. ABSENCE OF CERTAIN CHANGES. Since the date of the Finserv Balance
Sheet, the business of Finserv has been conducted in the ordinary course
consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which would, individually or in the aggregate, have a
Material Adverse Effect on Finserv (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);
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Finserv, or
any repurchase, redemption or other acquisition by Finserv of any outstanding
shares of capital stock or other securities of, or other ownership interests in
the Finserv;
(c) any amendment of any term of any outstanding security of
Finserv;
(d) any incurrence, assumption or guarantee by Finserv of any
indebtedness for borrowed money other than in the ordinary course and in amounts
and on terms consistent with past practices;
(e) any creation or other incurrence by Finserv of any Lien on any
asset other than in the ordinary course consistent with past practices;
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(f) any making of any loan, advance or capital contribution to or
investment in any person other than loans, advances or capital contributions to
or investments in wholly-owned subsidiaries of Finserv made in the ordinary
course consistent with past practices;
(g) any transaction or commitment made, or any contract or
agreement entered into, by Finserv relating to its assets or business (including
the acquisition or disposition of any assets) or any relinquishment by Finserv
of any contract or other right, in either case, material to Finserv, taken as a
whole, other than transactions and commitments in the ordinary course consistent
with past practices and those contemplated by this Agreement;
(h) any change in any method of accounting, method of tax
accounting or accounting practice by Finserv, except for any such change
required by reason of a concurrent change in GAAP;
(i) any (i) grant of any severance or termination pay to any
current or former director, officer or employee of Finserv, (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 Finserv, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iv)
increase in compensation, bonus or other benefits payable or otherwise made
available to current or former directors, officers or employees of Finserv
(other than in the ordinary course of business salary increases for employees
other than officers and directors), (v) the declaration or payment of any
bonuses or year-end payments to any current or former directors, officers or
employees of Finserv, or (vi) establishment, adoption, or amendment (except as
required by applicable law), of any collective bargaining, bonus, profit
sharing, thrift, pension, retirement, deferred compensation, compensation, stock
option, restricted stock or other benefit plan or arrangement covering any
current or former director, officer or employee of Finserv;
(j) any material labor dispute, other than routine individual
grievances, or, to the Knowledge of Finserv or the Finserv Securityholders, any
activity or proceeding by a labor union or representative thereof to organize
any employees of Finserv, which employees were not subject to a collective
bargaining agreement on the date of the Finserv Balance Sheet, or any material
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees;
(k) any tax election or any settlement of tax liability, in either
case that is material to Finserv; or
(l) any incurrence of any indebtedness by Finserv to any Finserv
Securityholder.
3.10. LITIGATION. There is no action, suit, investigation, audit or
proceeding pending against, or to the Knowledge of Finserv or the Finserv
Securityholders threatened against or affecting, Finserv, its officers or
directors or any of its properties before any court or arbitrator or any
governmental body, agency or official. No former shareholder, employee, officer
or director of Finserv has any claim pending or to the Knowledge of Finserv or
the Finserv Securityholders threatened against Finserv, its officers or
directors or any of its properties relating to sales of Finserv Stock by Finserv
or any of Finserv's current or former stockholders. Neither Finserv nor any of
its officers and directors nor any of its properties are subject to any order,
writ, judgment, decree or injunction of any court or arbitrator or any
governmental body, agency or official. Section 3.10 of
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the Finserv Disclosure Schedule contains a complete list of all claims brought
against Finserv, or pending since January 1, 1997, together with a brief
statement of the nature and amount of the claim, the court and jurisdiction in
which the claim was brought, the resolution (if resolved), and the availability
of insurance to cover the claim. To the Knowledge of Finserv or the Finserv
Securityholders, there are no facts or circumstances that could reasonably be
expected to give rise to any actions set forth in this Section 3.10.
3.11. TAXES.
(a) TAX RETURNS. Finserv has filed all material Tax returns
required to have been filed on or before the date hereof, and all Taxes shown to
be due on such Tax returns have been timely paid. Finserv has not agreed in
writing to waive any statute of limitations in respect of Taxes of Finserv. No
issues that have been raised in writing by the relevant Taxing Authority in
connection with the examination of such Tax returns are currently pending,
except for any written notice of such issues the subject matter of which has
either been substantially resolved or would otherwise not have a Material
Adverse Effect on Finserv. The amounts provided for taxes on the Finserv
Financial Statements are sufficient for the payment of all accrued and unpaid
U.S. federal, state, provincial, or local Taxes, interest, penalties,
assessments and deficiencies for all periods prior to the dates of such balance
sheets to the extent such taxes are obligations of Finserv. Section 3.11 of the
Finserv Disclosure Schedule lists all unresolved audits, examinations, contests
and proceedings (including written notices of intent to audit or examine) with
respect to United States federal and state income Tax returns of Finserv for
periods beginning on or after January 1, 1995.
(b) TAX MATTERS. The Merger is intended to qualify as a
reorganization under Section 368(a)(1)(A) of the Code. In respect thereof, the
following representations are made: (i) the liabilities of Finserv were incurred
by Finserv in the ordinary course of business; (ii) Finserv is not under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code; (iii) Finserv continues to operate at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of Section
1.368-1(d) of the United States Treasury Regulations; and (iv) Finserv is not an
"investment company" as defined in Section 368(a)(2)(F) of the Code.
3.12. FINSERV EMPLOYEE BENEFIT PLANS.
(a) The attachment to Section 3.12 of the Finserv Disclosure
Schedule sets forth a list of all employee benefit plans, as defined in Section
3(3) of ERISA, of Finserv; and
(b) Section 3.12(b) of the Finserv 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 Finserv 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 Finserv's obligations under the plan arise by
reason of its being a "successor employer" under applicable law.
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(c) Finserv has delivered or made available to TriZetto a true and
complete copy of each Benefit Plan and any related funding agreements (e.g.,
trust agreements or insurance contracts), including all amendments (and Section
3.12(b) of the Finserv Disclosure Schedule includes a description of any such
amendment that is not in writing);
(d) Except as set forth in Section 3.12(d) of the Finserv
Disclosure Schedule, Finserv does not maintain or contribute 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 Finserv 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 Finserv 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 3.12(g)(i) of the Finserv
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
3.12(g)(ii) of the Finserv 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 Finserv has not 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 3.12(j) of the Finserv
Disclosure Schedule, Finserv does not maintain 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 3.12(k) of the Finserv
Disclosure Schedule, there are no proceedings or lawsuits, pending or, to the
Knowledge of Finserv or the Finserv Securityholders, threatened, and, to the
Knowledge of Finserv or the Finserv Securityholders, are no investigations,
either currently in progress or expected to be instituted in the future,
relating to any
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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 3.12(l) of the Finserv
Disclosure Schedule, none of the Benefit Plans or any other employment agreement
or arrangement entered into by Finserv 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 3.12(n) of the Finserv
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 3.12(o) of the Finserv Disclosure Schedule lists each
individual who (i) has elected to continue participating in a group health plan
of Finserv pursuant to an election under COBRA, or (ii) has not made an election
under COBRA but who is still eligible to make such election.
3.13. BANKING AND FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Finserv who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
3.14. ENVIRONMENTAL COMPLIANCE
(a) Finserv is in compliance with Environmental Laws and all
Environmental Permits.
(b) Since January 1, 1996, Finserv has not received any written
notice regarding any violation of any Environmental Laws, or any Finserv
Environmental Liabilities, including any investigatory, remedial or corrective
obligations, relating to Finserv or its 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 Finserv.
(c) Except as set forth in Section 3.14 of the Finserv Disclosure
Schedule:
(i) Finserv has not caused, and is not causing or threatening
to cause, any disposals or releases of any Hazardous Material on or under any
properties which it (A) leases, occupies or operates or (B) previously owned,
leased, occupied or operated and, to the Knowledge of Finserv or the Finserv
Securityholders, no such disposals or releases occurred prior to Finserv having
taken title to, or possession or operation of, any of such properties; and to
the Knowledge of Finserv or the Finserv Securityholders no such disposals or
releases are migrating or have migrated off of such properties in subsurface
soils, groundwater or surface waters after Finserv has taken title to, or
possession or operation of any such properties and, to the Knowledge of Finserv
or the Finserv
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Securityholders, 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) Finserv has neither (A) arranged for the disposal or
treatment of Hazardous Material at any facility owned or operated by another
person, or (B) accepted any Hazardous Material for transport to disposal or
treatment facilities or other sites selected by Finserv from which facilities or
sites there has been a release or there is a release or threatened release of a
Hazardous Material; any facility identified in Section 3.14(c)(ii)(A) was duly
licensed in accordance with law and has not been listed in connection with the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
by the United States Environmental Protection Agency's Comprehensive
Environmental Response, Compensation, and Liability Information System (CERCLIS)
or National Priorities List (NPL) or any equivalent or like listing of sites
under state or local law (whether for potential releases of substances listed in
CERCLA or other substances);
(iii) Neither Finserv nor the Finserv Securityholders have
actual Knowledge of, or any reason to believe or suspect that, any release or
threatened release of any Hazardous Material originating from a property other
than those leased or operated by Finserv has come to be (or may come to be)
located on or under properties leased, occupied or operated by Finserv;
(iv) Finserv has never installed, used, buried or removed any
surface impoundment or underground tank or vessel on properties owned, leased,
occupied or operated by Finserv;
(v) Finserv is and has 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 Finserv or the Finserv Securityholders no condition
exists on any of the real property owned by or used in the business of Finserv
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
Finserv, threatened against Finserv or any settlement reached by it with any
person or persons alleging the presence, disposal, release or threatened release
of any Hazardous Material on, from or under any of such properties or as
otherwise relating to potential environmental liabilities.
(d) This Section 3.14 contains the sole and exclusive
representations and warranties of Finserv and the Finserv Securityholders with
respect to any Environmental, Health and Safety Matters, including, without
limitation, any arising under any Environmental Laws.
3.15. COLLECTIVE BARGAINING ARRANGEMENTS. Finserv is not a party to or
bound by any employee collective bargaining agreement, nor is Finserv a party to
or affected by or, to the Knowledge of Finserv or the Finserv Securityholders,
threatened with, any dispute or controversy
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with a union or with respect to unionization or collective bargaining involving
the employees of Finserv.
3.16. ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
Finserv Balance Sheet are owned free and clear by Finserv and are based on
Finserv's reasonable judgment and its normal credit review procedures, business
practices and GAAP, collectible in accordance with their terms in an amount not
less than their aggregate book value. "Aggregate book value", for this purpose,
shall mean the recorded amounts of such accounts receivable, less any recorded
allowance for doubtful accounts, trade allowances and return allowances, all as
established in accordance with GAAP consistently applied. Except as set forth in
Section 3.16 of the Finserv Disclosure Schedule, all accounts receivable for
customer collections and billings prior to the Closing Date have been properly
recorded on the Finserv's books and records on a timely basis and in the month
in which Finserv's efforts and activities generating such income were expended.
3.17. INVENTORIES. The consolidated inventories reflected on the
Finserv Balance Sheet have been valued in accordance with GAAP consistently
applied at the lower of cost or market value and consists solely of merchandise
usable or salable in the ordinary course of business at not less than the value
thereof reflected on the Finserv Balance Sheet. The inventory conforms to
customary trade standards for such inventory, and proper recognition has been
given in the Finserv Balance Sheet to damaged, obsolete, slow-moving, irregular
or defective inventory. Since the Finserv Balance Sheet, there have been no
changes to the inventory reflected therein, except in the ordinary course of
business.
3.18. INTERESTS IN REAL PROPERTY. Section 3.18 of the Finserv
Disclosure Schedule is the complete and correct list and brief description of
all real property leased by Finserv on the Closing Date. Finserv does not own
any real property. All real property leases to which Finserv is a party are
valid and in full force and effect and are valid and binding on the parties
thereto, assuming enforceability as to the parties other than Finserv and
Finserv is not in default of any material provision thereof. All improvements
and fixtures made by or at the direction of Finserv on real properties leased by
Finserv conform in all material respects to all applicable health, fire, safety,
environmental, zoning and building laws and ordinances; and all materials,
buildings, structures (or the space used by Finserv in such buildings or
structures) and fixtures used by Finserv in the conduct of its business are in
good operating condition and repair, ordinary wear and tear excepted, and are
sufficient for the type and magnitude of their respective operations.
3.19. PERSONAL PROPERTY. Finserv has good and marketable title, free
and clear of all title defects, security interests, pledges, options, claims,
liens, encumbrances and restrictions of any nature whatsoever to all inventory
and receivables and to any item of machinery, equipment, or tangible personal
property reflected on the Finserv Balance Sheet or used in the business by
Finserv (regardless of whether reflected on the Finserv Balance Sheet). All the
machinery, equipment and other tangible personal property used in the business
by Finserv is in good operating condition and repair, normal wear and tear
excepted. At the Closing Date, Finserv will possess all of the personal property
wherever located used to conduct its business as conducted prior to the Closing.
3.20. EMPLOYEES, DIRECTORS AND OFFICERS. Section 3.20 of the Finserv
Disclosure Schedule comprises a complete and correct list of all of Finserv's
present employees, officers and directors ("Employees"), which includes the job
position and compensation payable to each of the Employees.
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3.21. PATENTS, INTELLECTUAL PROPERTY; SOFTWARE; AND YEAR 2000
COMPLIANCE.
(a) INTELLECTUAL PROPERTY, SOFTWARE AND PRODUCTS.
(i) Section 3.21(a)(i) of the Finserv Disclosure Schedule
contains (a) a complete and correct list of all Intellectual Property, Software
and Products relating to or used in the business or operations of the business
of Finserv, and (b) a complete and correct list of all persons who have
contributed to the creation or development of the Intellectual Property,
Software and Products. No Finserv 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) Finserv owns all right, title and interest in and to all
Intellectual Property and Software used in or necessary for the conduct of
Finserv's business as presently conducted, including, without limitation, all
Intellectual Property and Software developed or discovered in connection with or
contained in or related to Finserv's Products, free and clear of all liens,
mortgages, charges, pledges, claims and encumbrances (including without
limitation any distribution rights and royalty rights). All persons who have
contributed to the creation or development of the Intellectual Property,
Software and Products, including, without limitation, all employee, independent
contractors and consultants, have executed an Assignment of Rights Agreement
transferring any and all ownership rights to Finserv. None of the Products
contain any codes or modules which have been created or developed by third
parties. Such Intellectual Property and Software constitutes all Intellectual
Property and Software necessary for the conduct of its business in the manner
conducted immediately prior to the Closing. To the Knowledge of Finserv or the
Finserv Securityholders, Finserv has not infringed, nor is infringing, upon any
Intellectual Property or Software rights of others. Finserv has the exclusive
right to use, sell, license and dispose of, and has the right to bring actions
for infringement of, all Intellectual Property, Software and Products. To the
Knowledge of Finserv or the Finserv Securityholders, the Products do not include
any Intellectual Property or Software that is in the public domain.
(iii) No claims have been asserted against Finserv by any
person challenging Finserv's use or distribution (including manufacture,
marketing license, or sale) of any Product or products utilized by Finserv
(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 Finserv or the Finserv Securityholders, there is no valid basis for
any claim of the type specified in this Section 3.21.
(iv) Finserv has valid copyrights in all material
copyrightable material whether or not registered with the U.S. copyright office,
including all copyrights in the Products containing material copyrightable
material. Consummation of the transactions contemplated hereby will not alter or
impair the validity of any copyrights or copyright registrations.
(v) (A) No third party (including any OEM or site license
customer) has any right to manufacture, reproduce, distribute, sell, sublicense,
market or exploit any of the Products or any adaptations, translations, or
derivative works based on the Products, or any portion thereof; (B) Finserv has
not granted to any third party any exclusive rights of any kind with respect to
any of the Products, including territorial exclusivity or exclusivity with
respect to particular versions, implementations or translations of any of the
Products; and (C) Finserv has not granted any third
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<PAGE> 22
party any right to market any product utilizing any Product under any "private
label" arrangements pursuant to which Finserv is not identified as the source of
such goods. Each document or instrument identified pursuant to this Section is
listed in Section 3.21 of the Finserv Disclosure Schedule and true and correct
copies of such documents or instruments have been furnished to TriZetto. No
third party has any right to manufacture, reproduce, distribute, sublicense,
market or exploit any works or materials of which any of the Products are a
derivative work.
(vi) Each of the Products: (A) substantially complies with all
specifications set forth therefor in any contract, agreement, advertisement or
other promotional material for such products and with all other warranty
requirements, other than bugs or fixes required or expected in the ordinary
course of business and not otherwise material to Finserv's business; and (B) can
be recreated from its associated source code and related documentation by
reasonably experienced technical personnel without undue burden.
(vii) Finserv has furnished TriZetto with all end user
documentation relating to the use, maintenance or operation of each of the
Products, all of which is true and accurate in all material respects.
(viii) To the Knowledge of Finserv or the Finserv
Securityholders, no employee of Finserv 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 Finserv or any
other party because of the nature of the business conducted by Finserv or
proposed to be conducted by Finserv.
(ix) No Third Party Technology is included in the Products.
(b) YEAR 2000 COMPLIANCE.
(i) PRODUCTS AND SERVICES.
(A) To the Knowledge of Finserv or the Finserv
Securityholders, all of Finserv's products and services are Year 2000 Compliant
in all material respects.
(B) If Finserv is obligated to repair or replace products
or services previously provided by Finserv that are not Year 2000 Compliant in
order to meet Finserv's contractual obligations, to avoid personal injury or
other liability, to avoid misrepresentation claims, or to satisfy any other
obligations or requirements, to the Knowledge of Finserv or the Finserv
Securityholders, Finserv has repaired or replaced those products and services to
make them Year 2000 Compliant in all material respects.
(C) Finserv has furnished TriZetto with true, correct and
complete copies of any customer agreements and other materials and
correspondence in which Finserv has furnished (or could be deemed to have
furnished) assurances as to the performance and/or functionality of Finserv's
products or services on or after January 1, 2000.
(ii) COMPUTER SOFTWARE AND SYSTEMS. To the Knowledge Finserv
or the Finserv Securityholders, all of Finserv's computer software and systems
are Year 2000 Compliant in all material respects.
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(iii) SUPPLIERS. To the Knowledge of Finserv or the Finserv
Securityholders, all vendors of products or services to Finserv, and its
respective products, services and operations, are Year 2000 Complaint in all
material respects. To the Knowledge of Finserv or the Finserv Securityholders
after a reasonably diligent investigation, each such vendor will continue to
furnish its products or services to Finserv, without interruption or material
delay, on and after January 1, 2000.
3.22. CONTRACTS. Section 3.22 of the Finserv Disclosure Schedule
describes, and Finserv has caused to be delivered to TriZetto complete and
correct copies of, all currently effective contracts to which Finserv is a party
or by which Finserv or any of its respective properties or assets are bound
which (i) involve the payment or receipt by Finserv of more than $75,000 over
the remaining term of the contract; (ii) are financing documents, loan
agreements or promissory notes; (iii) are otherwise material to the business of
Finserv and are not for the purchase or sale of goods or services in the
ordinary course of business; (iv) have a remaining term of more than one year
from the date of this Agreement; or (v) are distributorship or other agreements
relating to the marketing of products. To the Knowledge of Finserv or the
Finserv Securityholders, all of the other parties to such agreements are in
compliance with all material provisions of all such agreements and no fact
exists which is, or with the passage of time could become, a default under any
of the aforementioned contracts.
3.23. INSURANCE AND BANKING FACILITIES. Section 3.23 of the Finserv
Disclosure Schedule comprises a complete and correct list of (i) all contracts
of insurance and indemnity of or relating to Finserv (except insurance related
to employee benefits) in force at the date of this Agreement (including name of
insurer or indemnitor, agent, annual charge, coverage and expiration date); (ii)
the names and locations of all banks in which Finserv has accounts; and (iii)
the names of all persons authorized to draw on such accounts. All premiums and
other payments due with respect to all contracts of insurance or indemnity in
force at the date hereof have been or will be paid, and Finserv knows of no
circumstance (including without limitation the consummation of the transactions
contemplated by this Agreement) which has caused, or might cause, any such
contract to be canceled or terminated.
3.24. PERSONNEL. Section 3.24 of the Finserv Disclosure Schedule
comprises a complete and correct list of, and Finserv has caused TriZetto to be
furnished with complete and correct copies of (or, if not in writing, a
description of the terms of), (i) all employment contracts, collective
bargaining agreements, and all compensation plans, agreements, programs,
practices, commitments or other arrangements of any type, including stock,
bonus, profit sharing, incentive compensation, pension and retirement agreements
respecting or affecting any employees of Finserv; and (ii) all insurance,
health, medical, hospitalization, dependent care, severance, fringe or other
employee benefit plans, agreements, programs, practices, commitments or other
arrangements of any type in effect for employees of Finserv. Section 3.24 of the
Finserv Disclosure Schedule includes a list of all employees of Finserv. Finserv
has been and are in compliance in all material respects with the terms of, and
any laws or regulations applicable to, all such plans, agreements, practices,
commitments or programs.
3.25. POWERS OF ATTORNEY AND SURETYSHIPS. Finserv does not have any
powers of attorney outstanding (other than a power of attorney issued in the
ordinary course of business with respect to tax matters or to customs agents and
customs brokers), and, except for obligations as an endorser of negotiable
instruments incurred in the ordinary course of business, Finserv does not have
any
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obligations or liabilities (absolute or contingent) as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise respecting the obligation
of any other person.
3.26. MINUTES AND STOCK RECORDS. Finserv has caused TriZetto to be
given access to complete and correct copies of the minute books and stock
records of Finserv. Such items contain a complete and correct record in all
material respects of all proceedings and actions taken at all meetings of, and
all actions taken by written consent by, the holders of capital stock of Finserv
and its Board of Directors, and all original issuances and subsequent transfers
and repurchases of its capital stock.
3.27. INVESTMENT REPRESENTATIONS. Each Finserv Securityholder
represents and warrants, severally, but not jointly, that:
(a) He is acquiring the TriZetto Stock for his own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the 1933 Act.
(b) He understands that (i) the TriZetto Stock has not been
registered under the 1933 Act by reason of a specific exemption therefrom, that
they must be held by him indefinitely, and that he must, therefore, bear the
economic risk of such investment indefinitely, unless a subsequent disposition
thereof is registered under the 1933 Act or is exempt from such registration;
(ii) 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 (iii) 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 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 Finserv 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) He acknowledges that he 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 he is capable of evaluating the merits and
risks of the investment in the TriZetto Stock.
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(d) He understands that the share of TriZetto Stock he is acquiring
are "restricted securities" under the federal securities laws inasmuch as they
are being acquired from TriZetto in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the 1933 Act, only in certain limited
circumstances, and he represents that he is familiar with SEC Rule 144 and Rule
144A, as presently in effect, and understands the resale limitations imposed
thereby and by the 1933 Act.
(e) He is an "accredited investor" within the meaning of SEC Rule
501 of Regulation D as presently in effect.
3.28. FULL DISCLOSURE. All of the representations and warranties made
by Finserv and the Finserv Securityholders in this Agreement, and all statements
set forth in the certificates delivered by Finserv and the Finserv
Securityholders 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. The copies of all documents furnished by
Finserv and the Finserv Securityholders pursuant to the terms of this Agreement
are complete and accurate copies of the original documents.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TRIZETTO AND MERGER SUB
TriZetto and Merger Sub, jointly and severally, represent and warrant
to Finserv and the Finserv Securityholders that, except as set forth in TriZetto
Disclosure Schedule or in TriZetto's SEC Filings which have been provided to
Finserv and the Finserv Securityholders prior to the date hereof:
4.1. CORPORATE EXISTENCE AND POWER. Each of TriZetto and Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of TriZetto and Merger Sub 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. TriZetto has
heretofore delivered to Finserv 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
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hereby and thereby (including the Merger) are in the best interests of
TriZetto's stockholders, and (ii) approved and adopted this Agreement and the
Transaction Documents and the transactions contemplated hereby and thereby
(including the Merger), which approval satisfies in full any applicable
requirements of Subchapter 9 of the DGCL.
(c) This Agreement has been duly executed and delivered by TriZetto
and Merger Sub and is a legal, valid and binding obligation of TriZetto and
Merger Sub, enforceable against TriZetto and Merger Sub, as applicable, in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(d) At the Closing Date and at the time of issuance, the TriZetto
Stock issued pursuant to this Agreement will be duly authorized, validly issued,
fully paid and nonassessable and will not be subject to preemptive rights.
4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by TriZetto and Merger Sub of this Agreement and the Transaction
Documents and the consummation by TriZetto and Merger Sub 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) the
filing of the Certificate of Merger and other documents in accordance with the
DGCL and the NYGCL, (b) compliance with the 1933 Act, the 1934 Act, or foreign
or state securities or blue sky laws; and (c) any other filings, approvals or
authorizations which, if not obtained, would not, individually or in the
aggregate, have a Material Adverse Effect on TriZetto or Merger Sub or
materially impair the ability of TriZetto or Merger Sub to consummate the
transactions contemplated by this Agreement.
4.4. NON-CONTRAVENTION. The execution, delivery and performance by
TriZetto and Merger Sub of this Agreement and the Transaction Documents and the
consummation by TriZetto and Merger Sub of the transactions contemplated hereby
and thereby do not and will not (i) contravene or conflict with the Certificate
of Incorporation or Bylaws of TriZetto and Merger Sub 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 and Merger Sub 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 and Merger Sub or the
TriZetto Subsidiaries or to a loss of any benefit to which TriZetto and Merger
Sub or the TriZetto Subsidiaries is entitled under any provision of any
agreement or other instrument binding upon TriZetto and Merger Sub 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 and Merger Sub to consummate the transactions
contemplated by this Agreement.
4.5. COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. TriZetto and the
TriZetto Subsidiaries hold all material licenses, permits and authorizations
necessary for the lawful conduct of its business as now being conducted pursuant
to all applicable statutes, laws, ordinances, rules and
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<PAGE> 27
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 Stock and 5,000,000 shares of TriZetto Preferred Stock. As of
November 30, 1999, there were outstanding (i) 20,309,014 shares of TriZetto
Stock, (ii) zero shares of preferred stock of TriZetto, (iii) employee stock
options to purchase an aggregate of 3,382,168 shares of TriZetto Stock, (iv)
warrants to purchase an aggregate of zero shares of TriZetto Stock, and (v) an
aggregate of zero shares of TriZetto Stock issued or relating to restricted
stock awards, or other stock based compensation arrangements. 4,600,000 shares
of TriZetto 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 November 30,
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 the TriZetto 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 TriZetto stockholders may vote.
4.7. SEC FILINGS OF TRIZETTO. TriZetto has furnished Finserv and the
Finserv Securityholders copies of the reports of TriZetto filed with the
Securities and Exchange Commission (the "SEC") after October 7, 1999 ("SEC
Filings"). TriZetto has timely filed with the SEC all reports required to be
filed by it since its initial public offering in October 1999. The SEC Filings
(a) complied in all material respects with the requirements of the 1933 Act and
the 1934 Act as the case may be at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) and (b) did not as of the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. TriZetto has timely filed all required forms, reports and
documents required to be filed with the SEC and the NASD.
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 GAAP, consistently applied.
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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, its officers or directors, the TriZetto
Subsidiaries nor 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.
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 Finserv or any of the TriZetto Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
4.12. TAX MATTERS. The Merger is intended to qualify as a
reorganization under Section 368(a)(1)(A) of the Code. In respect thereof, the
following representations are made: (i) TriZetto has no plan or intention to
reacquire, directly or indirectly, any of its stock issued in the Merger; (ii)
TriZetto has no plan or intention to sell or otherwise dispose of or to cause
Finserv to sell or otherwise dispose of any of the assets of Finserv acquired in
the Merger, except for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C) of the Code; (iii) following the
Merger, TriZetto will continue the historic business of Finserv or use a
significant portion of Finserv's historic business assets in a business; (iv)
the payment of cash in lieu of fractional shares of TriZetto stock is solely for
the purpose of avoiding the expense and inconvenience to TriZetto of issuing
fractional shares and does not represent separately bargained for consideration;
(v) the total cash consideration to be paid in the Merger to the Finserv
Shareholders instead of issuing fractional shares of TriZetto Stock will not
exceed one percent of the total consideration that will be issued in the Merger
to the Finserv Shareholders in exchange for their shares of Finserv Stock; (vi)
TriZetto will pay the expenses incurred in connection with the Merger which is
allocated to it pursuant to Section 10.4, if any; (vii) TriZetto is not an
"investment company" as defined in Section 368(a)(2)(F) of the Code; (viii)
TriZetto has no plan or intention to take any action that would result in
TriZetto losing control of Finserv within the meaning of Section 368(c) of the
Code; (ix) immediately prior to and at the Effective Time, TriZetto will be in
control of Merger Sub within the meaning of Section 368(c) of the Code; and (x)
neither TriZetto nor Merger Sub is under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
4.13. MERGER SUB. Merger Sub is and will be at all times prior to the
Effective Time a wholly-owned subsidiary of TriZetto newly formed for the sole
purpose of effecting the Merger. Merger Sub will engage in no other material
activities or operations not related to such purpose.
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4.14. FULL DISCLOSURE. All of the representations and warranties made
by TriZetto and Merger Sub in this Agreement, and all statements set forth in
the certificates delivered by TriZetto and Merger Sub 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. The copies of all documents furnished by TriZetto pursuant to the
terms of this Agreement are complete and accurate copies of the original
documents.
ARTICLE 5
COVENANTS OF FINSERV AND THE FINSERV SECURITYHOLDERS
5.1. CONDUCT OF BUSINESS. Finserv agrees that from the date hereof
until the Effective Time, except with the prior written consent of TriZetto, as
set forth in the Finserv Disclosure Schedule or as contemplated by this
Agreement, (a) Finserv shall conduct its business 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, Finserv will not:
(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, (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 Finserv or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(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, to acquire, any such shares, voting
securities or convertible;
(c) amend its Articles 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;
(e) amend, modify or waive any material term of any outstanding
security of Finserv;
(f) incur, assume, guarantee or become obligated with respect to
any indebtedness other than drawings on existing revolving credit facilities
listed in the Finserv 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;
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(g) make or agree to make any new capital expenditures or
acquisitions of assets or property or other acquisitions or commitments in
excess of $25,000 individually or $25,000 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 Finserv 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 vesting of
shares of Finserv Stock (or other property) 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 take any actions that would make any representation
and warranty of Finserv hereunder inaccurate in any material respect at the
Effective Time; or
(j) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.2. NO SOLICITATION. Finserv shall not, directly or indirectly,
through any officer, director, employee, representative or agent of Finserv, (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 Finserv other than the transactions contemplated herein
(any of the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning,
or provide any nonpublic information to any person relating to, any Acquisition
Proposal or (iii) agree to approve or recommend any Acquisition Proposal.
5.3. CONSENTS AND FILINGS. Upon the terms and subject to the conditions
hereof, Finserv and the Representative agree to shall use all reasonable efforts
to (a) obtain the consents required under Finserv's two real property leases;
(b) take all actions to file UCC-3 Termination Statements, or other required
documents, in order to obtain release of liens held by its creditors; and (c)
take all other actions necessary to effect the transactions contemplated hereby.
ARTICLE 6
COVENANTS OF TRIZETTO
6.1. OBLIGATIONS OF MERGER SUB. TriZetto shall take all action to
incorporate Merger Sub and cause it to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
6.2. SEC FILINGS. TriZetto shall, prior to the Closing, provide Finserv
and each Finserv Securityholder 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.
6.3. EMPLOYEE BENEFIT PLANS. As soon as practicable after the Closing,
TriZetto shall cause Finserv to terminate all of its Benefit Plans in accordance
with their terms but without any
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liability to Finserv 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 Finserv, employee benefit plans under
which such persons shall receive benefits comparable to those offered to
TriZetto employees.
6.4. REGISTRATION STATEMENT. TriZetto shall use its commercially
reasonable best efforts to qualify for registration on Form S-3, subject to the
availability of audited financial statements of Finserv, if required. Without
any request necessary from the Finserv Securityholders, TriZetto shall file a
registration statement covering the shares of TriZetto Stock issued pursuant to
Sections 2.1 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 Finserv Securityholders pursuant to this Agreement within one business day
after the Effective Time. TriZetto shall use its commercially reasonable best
efforts to have such shares approved for listing on the Nasdaq National Market.
6.6. STOCK OPTIONS. TriZetto shall execute and deliver option
agreements within 30 days of the Effective Time representing options to purchase
(a) 50,000 shares to each of Stuart Schloss and Franc Richardson and (b) 10,000
shares to each of Olga Pizzo and William Nice, at an exercise price equal to the
fair market value of the TriZetto Stock on December 20, 1999, the date of the
grant, and pursuant to the standard terms and provisions of the option
agreements.
6.7. PAYOFF OF BANK OBLIGATIONS. Concurrently with the Closing,
TriZetto shall payoff the bank obligations set forth in Section 6.7 of the
Finserv Disclosure Schedule (the "Bank Debt"), the sum of which shall not exceed
$250,000, and to have the Finserv Securityholders released from any personal
guaranties related to the Bank Debt.
ARTICLE 7
COVENANTS OF TRIZETTO AND FINSERV
7.1. ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice and
subject to restrictions contained in confidentiality agreements to which such
party is subject, Finserv 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 Effective Time to all its properties, books, contracts, commitments and
records and, during such period, Finserv 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 Finserv may reasonably request. TriZetto will treat and
hold all such information confidential and will not use such information except
in connection with this Agreement; and if this Agreement is terminated for any
reason whatsoever, TriZetto will return to Finserv all tangible embodiments if
such information is in its possession. This covenant shall survive termination
of this Agreement.
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7.2. CONSENTS; APPROVALS. Prior to Closing, each of Finserv 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
transactions 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.
Finserv 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 Finserv and
TriZetto and the consummation by them of the transactions contemplated hereby.
7.3. NOTICES OF CERTAIN EVENTS. Finserv and TriZetto shall promptly
notify the other party of:
(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 Articles 2, 3 or 4 or that
relate to the consummation of the transactions contemplated by this Agreement or
any other development causing a breach of any representation or warranty made by
a party hereunder.
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 Finserv shall consult with each
other before issuing any press release with respect to this Agreement or the
transactions contemplated herein, 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 Finserv shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time. TriZetto, Merger Sub,
Finserv and the Finserv Securityholders agree that each of the Finserv
Securityholders on a pro rata basis according to their ownership of Finserv
Stock (prior to
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the Merger) and the Surviving Corporation (following the Merger) will pay any
real property, transfer or gains tax, stamp tax, stock transfer tax, or other
similar tax imposed on the Merger or the surrender of the Finserv Stock pursuant
to the Merger (collectively, "Transfer Taxes"), excluding any Transfer Taxes as
may result from the transfer of beneficial interests in the Finserv Stock other
than as a result of the Merger, and any penalties or interest with respect to
the Transfer Taxes. The Finserv Securityholders agree to cooperate with TriZetto
in the filing of any returns with respect to the Transfer Taxes.
7.7. FURTHER ACTION. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use 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, and to the extent practicable, on or before December 31, 1999, 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 to otherwise satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. The forgoing
covenant shall not include any obligation by TriZetto to agree to divest,
abandon, license or take similar action with respect to any assets (tangible or
intangible) of TriZetto or Finserv.
ARTICLE 8
INDEMNIFICATION
8.1. INDEMNIFICATION OF TRIZETTO AND MERGER SUB.
(a) Subject to the limitations contained in this Article 8, the
Finserv Securityholders shall severally defend, indemnify and hold harmless
TriZetto and Merger Sub and their respective officers, directors, stockholders,
employees and agents from and against any and all losses, claims, judgments,
liabilities, demands, charges, suits, penalties, costs or expenses, including
court costs and attorneys' fees ("Claims and Liabilities") with respect to or
arising from (i) the breach of any warranty or any inaccuracy of any
representation made by Finserv or such Finserv Securityholder in this Agreement
(as each such representation or warranty would read if all qualifications as to
knowledge or materiality, including without limitation the definition of
Material Adverse Effect were deleted therefrom), or (ii) the breach of any
covenant or agreement made by Finserv or such Finserv Securityholder in this
Agreement.
(b) With respect to Subsection 8.1(a), the Finserv Securityholders
shall be liable to TriZetto for any Claims and Liabilities only if the aggregate
amount of all Claims and Liabilities exceeds $50,000 (the "Basket Amount"), in
which case the Finserv Securityholders shall be obligated to indemnify TriZetto
for all such Claims and Liabilities without regard to the Basket Amount;
provided, however, that the Basket Amount shall not apply to the indemnification
obligations for breach of any representations and warranties set forth in
Section 3.6 and 3.11 hereof. Further, the Finserv Securityholders' aggregate
liability under Subsection 8.1(a) (other than with respect to any intentional or
willful breach or failure to perform) shall in no event exceed the aggregate
Consideration.
8.2. LIMITATIONS. Anything to the contrary notwithstanding, TriZetto
shall not be indemnified and held harmless in respect of any Claims and
Liabilities which are covered by insurance owned by Finserv to the extent that
any net loss is reduced by such insurance. To the
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extent quantifiable, the parties shall make appropriate adjustments to take into
account the tax benefits in determining the amount of indemnification to be
provided hereunder.
8.3. INDEMNIFICATION OF FINSERV. TriZetto shall defend, indemnify and
hold harmless Finserv, and its officers, directors, shareholders, employees and
agents against and in respect to all Claims and Liabilities with respect to or
arising from (i) breach of any warranty or any inaccuracy of any representation
made by TriZetto or Merger Sub, or (ii) breach of any covenant or agreement made
by TriZetto or Merger Sub in this Agreement; provided, however, notwithstanding
anything to the contrary TriZetto's liability hereunder shall be limited to
$250,000; provided, however, that this dollar limit shall not apply to any
Finserv Securityholders' claims for failure of TriZetto to perform or comply
with its obligations pursuant to Article 2, its covenants in Article 6 or the
breach of its representations and warranties in Section 4.12 of this Agreement.
8.4. CLAIMS PROCEDURE. Promptly after the receipt by any indemnified
party (the "Indemnitee") of notice of the commencement of any action or
proceeding against such Indemnitee, such Indemnitee shall, if a claim with
respect thereto is or may be made against any indemnifying party (the
"Indemnifying Party") pursuant to this Article 8, give such Indemnifying Party
written notice of the commencement of such action or proceeding and give such
Indemnifying Party a copy of such claim and/or process and all legal pleadings
in connection therewith. The failure to give such notice shall not relieve any
Indemnifying Party of any of his or its indemnification obligations contained in
this Article 8, except where, and solely to the extent that, such failure
actually and materially prejudices the rights of such Indemnifying Party. Such
Indemnifying Party shall have, upon request within thirty (30) days after
receipt of such notice, but not in any event after the settlement or compromise
of such claim, the right to defend, at his or its own expense and by his or its
own counsel reasonably acceptable to the Indemnitee, any such matter involving
the asserted liability of the Indemnitee; provided, however, that if the
Indemnitee determines that, as a result of an existing or prospective business
relationship between TriZetto or any of the TriZetto Subsidiaries on the one
hand and any other party or parties to such claim on the other hand, or as a
result of other reasonable circumstances, there is a reasonable probability that
a claim may materially and adversely affect him or it, other than solely as a
result of money payments required to be reimbursed in full by such Indemnifying
Party under this Article 8, the Indemnitee shall have the right to defend,
compromise or settle such claim or suit; and, provided, further, that such
settlement or compromise shall not, unless consented to in writing by such
Indemnifying Party, which should not be unreasonably withheld, be conclusive as
to the liability of such Indemnifying Party to the Indemnitee. In any event, the
Indemnitee, such Indemnifying Party and his or its counsel shall cooperate in
the defense against, or compromise of, any such asserted liability, and in cases
where the Indemnifying Party shall have assumed the defense, the Indemnitee
shall have the right to participate in the defense of such asserted liability at
the Indemnitee's own expense. In the event that such Indemnifying Party shall
decline to participate in or assume the defense of such action, prior to paying
or settling any claim against which such Indemnifying Party is, or may be,
obligated under this Article 8 to indemnify an Indemnitee, the Indemnitee shall
first supply such Indemnifying Party with a copy of a final court judgment or
decree holding the Indemnitee liable on such claim or, failing such judgment or
decree, the terms and conditions of the settlement or compromise of such claim.
An Indemnitee's failure to supply such final court judgment or decree or the
terms and conditions of a settlement or compromise to such Indemnifying Party
shall not relieve such Indemnifying Party of any of his or its indemnification
obligations contained in this Article 8, except where, and solely to the extent
that, such failure actually and materially prejudices the rights of such
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Indemnifying Party. If the Indemnifying Party is defending the claim as set
forth above, the Indemnifying Party shall have the right to settle the claim
only with the consent of the Indemnitee; provided, however, that if the
Indemnitee shall fail to consent to the settlement of such a claim by the
Indemnifying Party, which settlement (i) the claimant has indicated it will
accept, and (ii) includes an unconditional release of the Indemnitee and its
Affiliates by the claimant and imposes no material restrictions on the future
activities of the Indemnitee and its affiliates, the Indemnifying Party shall
have no liability with respect to any payment required to be made to such
claimant in respect of such claim in excess of the proposed amount of
settlement. If the Indemnitee is defending the claim as set forth above, the
Indemnitee shall have the right to settle or compromise any claim against it
after consultation with, but without the prior approval of, any Indemnifying
Party, provided, however, that such settlement or compromise shall not, unless
consented to in writing by such Indemnifying Party, which shall not be
unreasonably withheld, be conclusive as to the liability of such Indemnifying
Party to the Indemnitee.
8.5. TREATMENT OF INDEMNITY PAYMENTS. Any payment made to an
Indemnified Person pursuant to this Article 8 or the Escrow Agreement shall
first be paid out of the Escrow Shares, then if necessary, out of the TriZetto
Stock held by the Finserv Securityholders, then out of any other Consideration
paid hereunder; any payment shall be treated as a reduction in the Consideration
paid by TriZetto in connection with the transactions contemplated herein.
8.6. AGREEMENT OF FINSERV SECURITYHOLDERS. By virtue of the acceptance
by Finserv Securityholders of the consideration payable by TriZetto to the
Finserv Securityholders upon the Closing and consummation of the transactions
contemplated herein, the Finserv Securityholders will, without the need for any
further action on their part, have agreed and consented to (i) their
indemnification and other obligations under this Article 8; (ii) all of the
terms and conditions of the Escrow Agreement and the establishment of the Escrow
pursuant to the terms and conditions of this Agreement and the Escrow Agreement
to secure their indemnification obligations under this Article 8; and (iii) the
appointment of the Representative as the Finserv Securityholders' representative
for purposes of this Article 8 and the Escrow Agreement and as attorney-in-fact
and agent for and on behalf of each Finserv Securityholder, and the taking by
the Representative of any and all actions and making of any decisions required
or permitted to be taken or made by the Representative on their behalf under
this Article 8 or the Escrow Agreement. Each Finserv Securityholder agrees that
the provisions of this Article 8 and the Escrow Agreement will be personally
binding on such Finserv Securityholder.
8.7. 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 indemnification provisions set forth in this
Article 8, 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 MERGER
9.1. CONDITION TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of TriZetto, Merger Sub, Finserv and Finserv
Securityholders to consummate the
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transactions contemplated herein are subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the Finserv Shareholders in
accordance with Finserv's Articles of Incorporation and the NYGCL; and
(b) 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.
9.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF TRIZETTO AND MERGER SUB.
The obligations of TriZetto and the Merger Sub to consummate the transactions
contemplated herein are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Finserv and the Finserv Securityholders contained in this
Agreement and in any certificate or other writing delivered to TriZetto pursuant
hereto shall be true and correct on and as of the Effective Time with the same
force and effect as if made on and as of the Effective Time, and TriZetto and
Merger Sub shall have received a certificate to such effect signed by the
President and the Chief Executive Officer of Finserv;
(b) AGREEMENTS AND COVENANTS. Finserv and each of the Finserv
Securityholders shall have performed or complied with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Effective Time, and TriZetto shall have received a certificate
to such effect signed by the President and Chief Executive Officer of Finserv;
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Finserv 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 Finserv;
(d) FINSERV SHAREHOLDERS. At or prior to the Closing, the Finserv
Shareholders shall hold 100% of the issued and outstanding shares of the Finserv
Stock;
(e) FINSERV STOCK OPTIONS AND FINSERV DERIVATIVE SECURITIES. As of
the Closing, there shall be no outstanding Finserv Derivative Securities and no
outstanding Finserv Options;
(f) ESCROW AGREEMENT. The Escrow Agreement in the form of Exhibit C
shall have been entered into by TriZetto and each of the Finserv
Securityholders;
(g) NON-COMPETITION AGREEMENT. The Non-Competition Agreement in the
form of Exhibit E shall have been entered into by TriZetto and each of Stuart
Schloss and Franc Richardson;
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<PAGE> 37
(h) OUTSTANDING FINSERV INDEBTEDNESS. The Finserv Notes and all
other outstanding notes payable including the notes issued to The Flex Group,
Donald G. Felner and their Affiliates, shall be marked cancelled and delivered
to TriZetto at Closing;
(i) NOTE CONTRIBUTION AGREEMENT. The Note Contribution Agreement in
the form of Exhibit F shall have been entered into by Finserv and the Finserv
Noteholder;
(j) RESIGNATIONS. At the Closing, Finserv shall cause to be
delivered to TriZetto duly signed resignations, effective immediately after the
Closing, of all directors and officers of Finserv (other than those directors
and officers designated in writing by TriZetto to Finserv 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 Finserv after the
Closing;
(k) OPINION OF COUNSEL. TriZetto shall have received the opinion of
Lasser Hochman, L.L.C, counsel to Finserv, dated as of the Closing Date, in the
form attached hereto as Exhibit G;
(l) 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 Finserv Securityholders; and
(m) INTELLECTUAL PROPERTY AND TECHNICAL INFORMATION AGREEMENT. The
Intellectual Property and Technical Information Agreement in the form attached
hereto as Exhibit K shall have been entered into by TriZetto and each of the
Finserv Securityholders.
9.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF FINSERV. The obligations
of Finserv to consummate the transactions contemplated herein are also subject
to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TriZetto and Merger Sub contained in this Agreement and in any
certificate or other writing delivered to TriZetto pursuant hereto shall be true
and correct in all respects on and as of the Effective Time, with the same force
and effect as if made on and as of the Effective Time and Finserv shall have
received a certificate to such effect signed by the President and the Chief
Executive Officer of TriZetto;
(b) AGREEMENTS AND COVENANTS. TriZetto and Merger Sub shall have
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
and Finserv shall have received a certificate to such effect signed by the
President and the Chief Executive Officer of TriZetto;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by TriZetto and Merger Sub 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 and Merger Sub, except
where the failure to receive such consents, etc. would not reasonably be
expected to have a Material Adverse Effect on TriZetto; and
36
<PAGE> 38
(d) OPINION OF COUNSEL. Finserv 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 H.
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
Effective Time (notwithstanding any approval of this Agreement by the board of
directors of TriZetto or Finserv or Finserv's Shareholders):
(a) by mutual written agreement duly authorized by the board of
directors of TriZetto and Finserv;
(b) by the board of directors of TriZetto if any condition to the
obligation of TriZetto or Merger Sub under this Agreement to be complied with or
performed by Finserv at or before the Closing shall not have been complied with
or performed at the time required for such compliance or performance and such
noncompliance or nonperformance shall not have been waived by TriZetto;
(c) by the board of directors of Finserv if any condition to the
obligation of Finserv under this Agreement to be complied with or performed by
TriZetto at or before the Closing shall not have been complied with or performed
at the time required for such compliance or performance and such noncompliance
or nonperformance shall not have been waived by Finserv; or
(d) by either TriZetto or Finserv if the Merger 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, shareholders or Affiliates except (i) as set forth in
Article 7 hereof, and (ii) that, except as otherwise provided in Article 8,
nothing herein shall relieve any party from liability for any breach by such
party.
10.3. OPTION AGREEMENT. Notwithstanding anything to the contrary herein,
if Steven Kramer ("Kramer") refuses to abide by the terms and provisions of that
certain Option Agreement between him and Stuart Schloss, dated November 12,
1999, and as a result Kramer remains a stockholder of Finserv, TriZetto's sole
remedy under this Agreement in said event shall be to terminate this Agreement
and there shall be no liability on the part of Finserv or the Finserv
Securityholders.
10.4. 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
37
<PAGE> 39
by the party incurring such expenses, whether or not the Merger is consummated.
Without limiting the generality of the foregoing, the Finserv Securityholders
will pay, on a pro rata basis according to their ownership of Finserv Stock, all
of the fees and expenses incurred in connection with the transactions
contemplated by this Agreement for Finserv's and the Finserv Securityholders'
legal, financial and accounting, and other advisors, including, without
limitation, Lasser Hochman, L.L.C. and Alan Goldman and his Affiliates. TriZetto
will pay all the fees and expenses incurred in connection with the transaction
contemplated by the Agreement for TriZetto's legal, financial and accounting
advisors, including without limitation Stradling Yocca Carlson & Rauth and
PricewaterhouseCoopers LLP.
ARTICLE 11
GENERAL PROVISIONS
11.1. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
KNOWLEDGE, ETC. The representations, warranties and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time and shall continue in full force and effect for a period of one
year following the Effective Time. The covenants and agreements of the parties
contained in this Agreement shall survive the Effective Time 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 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 or Merger Sub:
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
E-mail: [email protected]
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
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<PAGE> 40
Fax: (949) 725-4100
(b) If to Finserv:
Finserv Health Care Systems, Inc.
29 Delwick Lane
Short Hills, New Jersey 07078
Attn: Stuart Schloss
Ph: (973) 467-8154
Fax: (973) 467-4734
with a copy to (which shall not constitute notice):
Lasser Hochman, L.L.C.
75 Eisenhower Parkway
Roseland, New Jersey 07068
Attn: David Silver
Ph: (973) 226-2700
Fax: (973) 226-0844
(c) If to the Finserv Securityholders:
To the address set forth on Schedule 1 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) 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 rights. Except as otherwise provided hereunder, 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
39
<PAGE> 41
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 Finserv Disclosure
Schedule and the TriZetto Disclosure Schedule together with the Transaction
Documents and the exhibits and schedules attached hereto and thereto and the
certificates referenced herein) constitutes the entire agreement and supersedes
all prior agreements and undertakings 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 8.4 (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 8.4, 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. 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.
11.12. 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.
11.13. ATTORNEYS FEES. If any action or proceeding relating to this
Agreement or the Escrow Agreement, or the enforcement of any provision of this
Agreement or the Escrow Agreement is brought by a party hereto against any party
hereto, the prevailing party shall be entitled to recover
40
<PAGE> 42
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.14. GENDER. For purposes of this Agreement, references to the masculine
gender shall include feminine and neuter genders and entities.
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<PAGE> 43
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be executed as of the date first written above by their respective
officers thereunto duly authorized.
THE TRIZETTO GROUP, INC., a Delaware
corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
FINSERV ACQUISITION CORP., a Delaware
corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
FINSERV HEALTH CARE SYSTEMS, INC., a New
York corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
"FINSERV STOCKHOLDERS":
_______________________________________
Stuart Schloss
_______________________________________
Franc Richardson
S-1
<PAGE> 44
_______________________________________
Olga Pizzo
_______________________________________
William Nice
FINSERV NOTEHOLDER:
_______________________________________
Stuart Schloss
S-2
<PAGE> 45
SCHEDULE 1
FINSERV SHAREHOLDERS
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 46
SCHEDULE 2
FINSERV NOTES
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material
to an investment decision]
<PAGE> 47
EXHIBIT A
CERTAIN DEFINITIONS
The following terms, as used in the Purchase Agreement, have the following
meanings:
"1933 ACT" shall have the meaning as set forth in Section 3.3 of the
Agreement.
"1934 ACT" shall have the meaning as set forth in Section 3.3 of the
Agreement.
"ACCOUNTS RECEIVABLE AND PAYABLE SCHEDULE" shall have the meaning as set
forth in Section 2.5(a)(i) of the Agreement.
"ACQUISITION PROPOSAL" shall have the meaning as set forth in Section 5.2
of the Agreement.
"ADJUSTED SHARES CLOSING" shall have the meaning as set forth in Section
2.8 of the Agreement.
"ADJUSTMENT DATE" shall have the meaning as set forth in Section 2.8 of
the Agreement.
"AFFILIATE" shall mean any individual, corporation, partnership, firm,
joint venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or Governmental Entity, or person directly or
indirectly controlling, controlled by or under common control with Finserv,
including all officers and directors of Finserv.
"AGREEMENT" shall have the meaning as set forth in the Preamble.
"BANK DEBT" shall have the meaning as set forth in Section 6.7 of the
Agreement.
"BASKET AMOUNT" shall have the meaning as set forth in Section 8.1(b) of
the Agreement.
"BENEFIT PLANS" shall have the meaning as set forth in Section 3.12(b) of
the Agreement.
"CASH HOLDBACK" shall have the meaning as set forth in Section 2.3(b)(i)
of the Agreement.
"CERTIFICATE OF MERGER" shall have the meaning as set forth in Section 1.3
of the Agreement.
"CLOSING" shall have the meaning as set forth in Section 1.2 of the
Agreement.
"CLOSING DATE" shall have the meaning as set forth in Section 1.2 of the
Agreement.
"CLAIMS AND LIABILITIES" shall have the meaning as set forth in Section
8.1 of the Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"CODE" shall have the meaning as set forth in the Recitals.
<PAGE> 48
"CONFIDENTIALITY AGREEMENT" shall have the meaning as set forth in Section
2.7(d) of the Agreement.
"CONSIDERATION" shall have the meaning as set forth in Section 2.3(a) of
the Agreement.
"CPA" means KPMG LLP.
"DGCL" shall have the meaning as set forth in Section 1.1 of the
Agreement.
"DISSENTING SHARES" shall have the meaning as set forth in Section 2.1(c)
of the Agreement.
"EARNOUT CONSIDERATION" shall have the meaning set forth in Section 2.7(a)
of the Agreement.
"EFFECTIVE TIME" shall have the meaning as set forth in Section 1.3 of the
Agreement.
"EMPLOYEES" shall have the meaning as set forth in Section 3.20 of the
Agreement.
"ENVIRONMENTAL LAWS" mean any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions, relating to
human health, the environment or to emissions, discharges or releases of
pollutants, contaminants or other Hazardous 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" shall have the meaning as set forth in Section 2.4 of the
Agreement.
"ESCROW AGENT" shall have the meaning as set forth in Section 2.4 of the
Agreement.
"ESCROW AGREEMENT" shall have the meaning as set forth in Section 2.4 of
the Agreement.
"ESCROW SHARES" shall have the meaning as set forth in Section 2.4 of the
Agreement.
"EXCESS" shall have the meaning as set forth in Section 2.5(b)(i) of the
Agreement.
"EXCHANGE AGENT" shall have the meaning as set forth in Section 2.2(a) of
the Agreement.
"FINAL ACCOUNTS RECEIVABLE AND PAYABLE SCHEDULE" shall have the meaning as
set forth in Section 2.5(a)(i) of the Agreement.
<PAGE> 49
"FINANCIAL STATEMENTS" shall have the meaning as set forth in Section 3.8
of the Agreement.
"FINSERV" shall have the meaning as set forth in the Preamble.
"FINSERV BALANCE SHEET" shall have the meaning as set forth in Section 3.8
of the Agreement.
"FINSERV CONVERTIBLE SECURITY" means any note, evidence of indebtedness,
stock or other security that is convertible into or exchangeable for any shares
of the capital stock of Finserv.
"FINSERV DERIVATIVE SECURITY" shall mean (a) any Finserv Warrant, (b) any
Finserv Convertible Security, (c) any warrant, option, right or other security
that entitles the holder thereof to purchase or otherwise acquire any Finserv
Convertible Security; and (d) any note, evidence of indebtedness, stock or other
security that is convertible into or exchangeable for any Finserv Warrant.
"FINSERV DISCLOSURE SCHEDULE" shall mean the written disclosure schedule
delivered on or prior to the date hereof by Finserv 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.
"FINSERV ENVIRONMENTAL LIABILITIES" mean any and all liabilities of or
relating to Finserv, 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.
"FINSERV NOTES" shall have the meaning as set forth in the Recitals.
"FINSERV 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 Finserv or any
predecessor thereof to purchase Finserv Stock.
"FINSERV SECURITYHOLDER" shall have the meaning as set forth in the
Preamble.
"FINSERV SHAREHOLDERS" shall have the meaning as set forth in the
Preamble.
"FINSERV STOCK" shall have the meaning as set forth in Section 2.1(b)(i)
of the Agreement.
"FINSERV WARRANT" means any warrant, option, right or other security that
entitles the holder thereof to purchase or otherwise acquire any shares of the
capital stock of Finserv.
"GAAP" shall have the meaning as set forth in Section 2.5(a) of the
Agreement.
"HAZARDOUS MATERIAL" means any toxic, radioactive, corrosive or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, which in any event is regulated under any
Environmental Law.
"INDEMNIFYING PARTY" shall have the meaning as set forth in Section 8.4 of
the Agreement.
<PAGE> 50
"INDEMNITEE" shall have the meaning asset forth in Section 8.4 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 (insofar as it is practical to list or describe such rights).
"KNOWLEDGE OF FINSERV" means the actual knowledge of the officers of
Finserv, and knowledge that a reasonable person in such capacity should have
after due inquiry.
"KNOWLEDGE OF THE FINSERV SECURITYHOLDER" means the actual knowledge of
such person and knowledge that a reasonable person should have after due
inquiry.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect to such asset.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the condition (financial or otherwise), business, assets or
liabilities of such Person and its Subsidiaries taken as a whole.
"MERGER" shall have the meaning as set forth in the Recitals.
"MERGER CONSIDERATION" shall have the meaning as set forth in Section
2.1(b)(ii) of the Agreement.
"MERGER SUB" shall have the meaning as set forth in the Preamble.
"NASD" means National Association of Securities Dealers, Inc.
"NET REVENUE" shall have the meaning as set forth in Section 2.7(a)(iii)
of the Agreement.
"NOTE CONSIDERATION" shall have the meaning as set forth in Section
2.3(a).
"NYGCL" shall have the meaning as set forth in Section 1.1 of the
Agreement.
"NMS" shall have the same meaning as set forth in Section 2.1(b)(i)(A) of
the Agreement.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"PRODUCTS" means the proprietary software applications developed or owned
by Finserv and all related products, including any Intellectual Property related
thereto.
"REPRESENTATIVE" shall have the meaning as set forth in Section 2.5(a) of
the Agreement.
"REVENUE CALCULATION" shall have the meaning as set forth in Section
2.7(b) of the Agreement.
"SEC" shall have the meaning as set forth in Section 4.7 of the Agreement.
<PAGE> 51
"SEC FILINGS" shall have the meaning as set forth in Section 4.7 of the
Agreement.
"SELLING SHAREHOLDER" shall have the meaning as set forth in Section
6.__(b) of the Agreement.
"SOFTWARE" means software programs and rights in any thereof (insofar as
it is practical to list or describe such rights).
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) 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).
"SURVIVING CORPORATION" shall have the meaning as set forth in Section 1.1
of the Agreement.
"TAXES" shall mean all income, gross receipts, sales, transfer, use,
employment, franchise, profits, property and other taxes, fees, stamp taxes and
duties, assessments, and charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest thereof and any
penalties, additions to tax or additional amounts imposed by any Taxing
Authority.
"TAXING AUTHORITY" shall mean any governmental authority responsible for
the imposition of Taxes.
"THIRD PARTY LICENSES" means all licenses and other agreements with third
parties relating to any Intellectual Property or products that Finserv is
licensed or otherwise authorized by such third parties to use, market,
distribute or incorporate into products marketed and distributed by Finserv.
"THIRD PARTY TECHNOLOGY" means all Intellectual Property and products
owned by third parties and licensed pursuant to Third Party Licenses.
"TRANSFER TAXES" shall have the meaning as set forth in Section 7.6 of
this Agreement.
"TRANSACTION DOCUMENTS" means the Agreement, the Escrow Agreement, the
Non-Competition Agreement, the Note Contribution Agreement, the Registration
Rights Agreement, the Confidentiality Agreement, the Intellectual Property and
Technical Information Agreement, and any other document executed and delivered
pursuant hereto together with any exhibits or schedules to such documents.
"TRIZETTO" shall have the meaning as set forth in the Preamble.
"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.
<PAGE> 52
"TRIZETTO STOCK" shall have the meaning as set forth in Section 1.1(a) of
the Agreement.
"VALUATION" shall have the meaning as set forth in Section 2.5(c) of the
Agreement.
"YEAR 2000 COMPLIANT" means that (1) the products, services, or other
item(s) at issue accurately process, provide and/or receive all date/time data
(including calculating, comparing, sequencing, processing and outputting)
within, from, into, and between centuries (including the twentieth and
twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (2) neither the performance nor the functionality of Finserv's
provision of the products, services, and other item(s) at issue will be affected
by any dates/times prior to, on, after, or spanning January 1, 2000. The design
of the products, services, and other item(s) at issue to ensure compliance with
the foregoing warranties and representations includes proper date/time data
century recognition and recognition of 1999 and 2000, calculations that
accommodate single century and multi-century formulae and date/time values
before, on, after, and spanning January 1, 2000, and date/time data interface
values that reflect the century, 1999, and 2000. In particular, but without
limitation, (i) no value for current date/time will cause any error,
interruption, or decreased performance in or for such product(s), service(s),
and other item(s), (ii) all manipulations of date and time related data
(including calculating, comparing, sequencing, processing, and outputting) will
produce correct results for all valid dates and times when used independently or
in combination with other products, services, and/or items, (iii) date/time
elements in interfaces and data storage will specify the century to eliminate
date ambiguity without human intervention, including leap year calculations,
(iv) where any date/time element is represented without a century, the correct
century will be unambiguous for all manipulations involving that element, (v)
authorization codes, passwords, and zaps (purge functions) will function
normally and in the same manner during, prior to, on and after January 1, 2000,
including the manner in which they function with respect to expiration dates and
CPU serial numbers, and (vi) Finserv's supply of the product(s), service(s), and
other item(s) will not be interrupted, delayed, decreased, or otherwise affected
by the advent of the year 2000.
<PAGE> 53
EXHIBIT B
ALLOCATION OF STOCK PORTION OF MERGER CONSIDERATION
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 54
EXHIBIT C
FORM OF ESCROW AGREEMENT
See Exhibit 2.2 filed with the Company's Form 8-K
<PAGE> 55
EXHIBIT D
FORM OF CONFIDENTIALITY AGREEMENT
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 56
EXHIBIT E
FORM OF NON-COMPETITION AGREEMENT
See Exhibit 2.3 filed with the Company's Form 8-K
<PAGE> 57
EXHIBIT F
FORM OF NOTE CONTRIBUTION AGREEMENT
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 58
EXHIBIT G
FORM OF OPINION OF SELLERS' COUNSEL
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 59
EXHIBIT H
FORM OF SYCR OPINION
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 60
EXHIBIT I
FORM OF REGISTRATION RIGHTS AGREEMENT
See Exhibit 2.4 filed with the Company's Form 8-K
<PAGE> 61
EXHIBIT J
FLOW OF FUNDS MEMORANDUM
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 62
EXHIBIT K
INTELLECTUAL PROPERTY AND TECHNICAL INFORMATION AGREEMENT
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
<PAGE> 1
Exhibit 2.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
December 22, 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 "Finserv Securityholders," and each individually, a
"Finserv Securityholder"), Stuart Schloss as the representative of the Finserv
Securityholders (the "Representative"), and Bankers Trust Company of California,
N.A. as escrow agent (the "Escrow Agent").
RECITALS
WHEREAS, TriZetto, Finserv Health Care Systems, Inc., a New York
corporation ("Finserv"), and the Finserv Securityholders have entered into an
Agreement and Plan of Merger dated as of December 22, 1999 (the "Merger
Agreement"), pursuant to which Finserv Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of TriZetto ("Merger Sub"), shall be merged with and
into Finserv (the "Merger"), with Finserv to be the surviving corporation of the
Merger.
WHEREAS, the Merger Agreement provides that 20,000 shares of the Merger
Consideration (as defined in the Merger Agreement) will be withheld from the
Finserv Securityholders and will be placed in an escrow established in
accordance with this Agreement to secure the indemnification obligations under
Article 8 of the Merger Agreement and to secure adjustments to the Consideration
pursuant to Sections 2.5 and 2.6 of the Merger Agreement.
WHEREAS, the parties desire to enter into this Agreement to establish the
terms and conditions under which the escrow will be established and maintained.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. CERTAIN DEFINED TERMS.
1.1 TERMS DEFINED IN MERGER AGREEMENT. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the same meanings
given to such terms in the Merger Agreement.
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 indemnification obligations of the Finserv Securityholders
in accordance with Article 8 of the Merger Agreement and to secure adjustments
to the Consideration pursuant to Sections 2.5 and 2.6 of the Merger Agreement.
1.3 ESCROWED PROPERTY. As used herein, the "Escrowed Property"
means, collectively: (a) 20,000 shares of TriZetto Common Stock issued in
respect of the conversion of all outstanding shares of Finserv Stock in the
Merger (the "Escrow Shares") and the Stock Powers (as defined in Section 3.1
below) executed and delivered by the Finserv Securityholders; and the Stock
<PAGE> 2
Powers executed and delivered by the Finserv Securityholders; (b) all interest
or other amounts paid with respect to such Escrow Shares; and (c) all other
property (not including cash dividends but 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 Finserv Securityholder that will be placed in the Escrow Account
is equal to each Finserv Securityholder's proportionate share of the Escrowed
Property set forth on Exhibit A hereto (the "Pro Rata Share").
1.4 TERMINATION DATE. "Termination Date" means the one year
anniversary of the Effective Time of the Merger.
2. AGREEMENT.
2.1 INDEMNIFICATION BY FINSERV SECURITYHOLDERS. By virtue of the
Finserv Securityholders' execution and delivery of the Merger Agreement, the
Finserv Securityholders have agreed, and by executing this Agreement each
Finserv Securityholder hereby confirms that such Finserv Securityholder agrees,
subject to the terms and conditions of this Agreement, Article 8 of the Merger
Agreement and Sections 2.5 and 2.6 of the Merger Agreement:
(a) to indemnify and hold harmless TriZetto, its officers, directors,
stockholders, employees and agents from and against any and all Claims and
Liabilities to the extent provided in Article 8 of the Merger Agreement;
(b) to establish the Escrow pursuant to this Agreement to secure the
indemnification obligations of the Finserv Securityholders under Article 8 of
the Merger Agreement and to secure the adjustment to the Consideration which may
be made under Sections 2.5 and 2.6 of the Merger Agreement;
(c) without limiting such Finserv Securityholder's obligations under
paragraphs (a) and (b) above, that:
(i) in the event TriZetto, its officers, directors,
stockholders, employees and agents (hereinafter, collectively, "TriZetto")
incurs any Claims and Liabilities provided in Article 8 of the Merger Agreement,
the Escrowed Property shall, subject to the provisions of the Merger Agreement
and this Agreement, be transferred to TriZetto to compensate TriZetto for such
Claims and Liabilities, with the portion of the Escrowed Property to be so
transferred pro rata as to each Claim and Liability among the Finserv
Securityholders according to each Finserv Securityholder's Pro Rata Share; and
(ii) to the extent necessary under Sections 2.5 and 2.6 of the
Merger Agreement, the Escrowed Property with a value equal to the amount of the
necessary adjustment to the Consideration, subject to the provisions of the
Merger Agreement and this Agreement, shall be transferred to TriZetto to adjust
the Consideration accordingly, which Escrowed Property shall be pro rata based
on each Finserv Securityholder's Pro Rata Share;
(d) to appoint the Representative as the Finserv Securityholders'
representative, attorney-in-fact and agent for purposes of this Agreement to act
for and on behalf of each Finserv Securityholder as provided herein, and to the
taking by the Representative of any and all
2
<PAGE> 3
actions and the making of any decisions required or permitted to be taken or
made by the Representative on the Finserv Securityholders' behalf under this
Agreement; and
(e) to all of the other terms and conditions of this Agreement.
3. FORMATION OF ESCROW ACCOUNT.
3.1 DELIVERY AND DEPOSIT OF ESCROWED PROPERTY. Upon the execution of
this Agreement by all parties hereto: (a) 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 Finserv Securityholders,
representing each Finserv Securityholder's Pro Rata Share of the Escrow Shares
and (b) each Finserv Securityholder will promptly deliver to the Escrow Agent
duly executed Assignments Separate From Certificate for such Finserv
Securityholder's Escrow Shares in the form of Exhibit B ("Stock Powers"), signed
in blank by such Finserv Securityholder. The Escrow Agent agrees to accept
delivery of the above-mentioned Escrowed Property, which shall be clearly
designated by TriZetto 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 to Finserv Securityholders, or
other distributions of any kind (including without limitation shares of TriZetto
Stock issued in connection with a subdivision, split or recapitalization of
TriZetto 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 Finserv 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 Finserv Securityholders) to be held in the Escrow
as Escrowed Property pursuant to this Agreement. As used herein, the terms
"Escrowed Property" includes all Distributions and Secondary Distributions on
Escrowed Property and the term "Escrow Shares" includes all Distributions and
Secondary Distributions on Escrowed Property consisting of stock or other
securities. The Finserv 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 Finserv 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 Finserv 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 Finserv Securityholder to promptly execute and
3
<PAGE> 4
deliver replacement Stock Powers as herein provided, the Representative, acting
as attorney-in-fact for each Finserv Securityholder, shall promptly execute on
behalf of such Finserv 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
Finserv Securityholder or be taken or reached by any legal or equitable process
in satisfaction of any debt or other liability of a Finserv Securityholder
(other than such Finserv Securityholder's obligations under this Agreement)
prior to the delivery and release to the Finserv Securityholders of the Escrowed
Property by the Escrow Agent in accordance with the provisions of Section 6
hereof; provided, however, that any Finserv Securityholder may transfer its
share of the Escrowed Property hereunder so long as such transfer is by (I)
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 a Finserv Securityholder that
is a partnership, provided that all of such partners 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
Finserv Securityholders in accordance with each Finserv Securityholder's Pro
Rata Share. Subject to the provisions of Section 9, 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 Property or any earnings thereon.
4. ADMINISTRATION OF ESCROW ACCOUNT. The Escrow Agent shall administer the
Escrow Account as follows:
4.1 CLAIM NOTICE. If TriZetto asserts a claim for indemnification under
Article 8 of the Merger Agreement or a claim for adjustment to the Consideration
under Section 2.5 or 2.6 of the Merger Agreement on or prior to the Termination
Date, then TriZetto shall promptly give written noticeof such claim (a "Claim
Notice"), including a copy of such claim and/or process and all legal pleadings
in connection therewith, to the Representative in accordance with Article 8 of
the Merger
4
<PAGE> 5
Agreement and the Escrow Agent in accordance with this Section 4. Each Claim
Notice shall state the amount of claimed Claims and Liabilities (the "Claimed
Amount") and the basis for such claim.
4.2 RESPONSE NOTICE. Within 30 days after delivery of a Claim Notice
to the Representative, the Representative shall give to TriZetto, with a copy to
the Escrow Agent, a written response (the "Response Notice") in which the
Representative shall either:
(a) agree that such portions of the Escrowed Property having a
value (computed in accordance with Section 4.4 below) equal to the full Claimed
Amount may be released from the Escrow Account and delivered to TriZetto; or
(b) agree that a portion of the Escrowed Property having a value
(computed in accordance with Section 4.4 below) equal to a specified part, but
not all, of the Claimed Amount (the "Agreed Amount") may be released from the
Escrow Account to TriZetto and contest the remaining portion of the Escrowed
Property; or
(c) contest that any of the Escrowed Property may be released
from the Escrow Account to TriZetto.
The Representative may contest the release of Escrowed Property only based
upon a good faith belief that all or such portion of the Claimed Amount (I) does
not constitute Claims and Liabilities, or does not constitute the actual amount
of Claims and Liabilities incurred for which TriZetto is entitled to
indemnification under Article 8 of the Merger Agreement or (ii) does not
constitute an adjustment to the Consideration to which TriZetto is entitled
under Section 2.5 or 2.6 of the Merger Agreement. If no Response Notice is
delivered by the Representative within such 30 day period, then the
Representative shall be deemed to have agreed that the full Claimed Amount may
be released and delivered from the Escrow Account to TriZetto.
4.3 RELEASE WITHOUT CONTEST.
(a) If in his Response Notice the Representative agrees (or if
the Representative fails to deliver a Response Notice within the required time
period and as such is deemed to have agreed) that the Escrowed Property having a
value (computed in accordance with Section 4.4 below) equal to the full Claimed
Amount may be released from the Escrow Account to TriZetto, then the Escrow
Agent shall promptly thereafter deliver to TriZetto from the Escrow Account
Escrowed Property having a value (computed in accordance with Section 4.4 below)
equal to the Claimed Amount (or such lesser amount as is then held in the Escrow
Account).
(b) If the Representative in the Response Notice agrees that
Escrowed Property having a value (computed in accordance with Section 4.4 below)
equal to the Agreed Amount may be released from the Escrow Account to TriZetto
in the respective amounts set forth in the Response Notice, then the Escrow
Agent shall promptly thereafter deliver to TriZetto such Agreed Amount or such
lesser amount as is then held in the Escrow Account, and the provisions of
Section 5 shall apply to the contested portion of the Claimed Amount. The
amounts of Escrowed Property equal to the Agreed Amount that are to be released
by the Escrow Agent to TriZetto from the Escrow Account under this Section 4.3
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 subject to whether such Claim and
Liability is assessed against the indemnification obligations of the Finserv
Securityholders set forth in Article 8
5
<PAGE> 6
of the Merger Agreement or the adjustments to the Consideration set forth in
Section 2.5 or 2.6 of the Merger Agreement).
4.4 VALUE OF ESCROWED PROPERTY. For purposes of determining the
amount of Escrowed Property to be delivered out of the Escrow to TriZetto as all
or part of any Claimed Amount hereunder and determining the value of any
Escrowed Property for any other purpose hereunder Escrowed Property that is cash
will be deemed to have a value equal to the amount of such cash in U.S. Dollars.
The Escrowed Shares of TriZetto Stock will be deemed to have a fair market value
determined as follows: (I) the average of the closing sales prices of TriZetto
Stock for the 20 trading days immediately preceding the anticipated date of
transfer of such shares as reported on the Nasdaq National Market System ("NMS")
(or such other exchange or similar market on which TriZetto Stock is regularly
traded if not then traded on the NMS), or (ii) if not traded on an exchange or
similar market, then as determined by the Board of Directors of TriZetto in good
faith. If the Representative disagrees with the fair market value as determined
by the Board of Directors, then the Representative may submit the dispute to
Arbitration pursuant to Section 5 below.
5. ARBITRATION OF CONTESTED RELEASES.
5.1 ARBITRATION OF DISPUTES OVER ESCROW RELEASE. If the Representative
gives a Response Notice contesting the release of Escrowed Property equal to all
or any part of the Claimed Amount set forth in the applicable Claim Notice, as
provided in Section 4.2 above (the "Contested Amount"), then such dispute shall
be settled by mandatory binding arbitration in Orange County, California in
accordance with the provisions of this Section 5 and the Commercial Arbitration
Rules of the American Arbitration Association then in effect (the "AAA Rules"),
unless TriZetto and the Representative settle such dispute in a written
settlement agreement executed by TriZetto and the Representative on behalf of
and binding on each of the Finserv Securityholders and TriZetto. Theprovisions
of this Section 5 shall prevail and govern in the event of any conflict between
such provisions and the AAA Rules.
5.2 ARBITRATOR. Unless otherwise mutually agreed by TriZetto and the
Representative, the arbitration will be heard and decided by a single arbitrator
who shall be selected as provided in Section 5.3.
5.3 SELECTION OF ARBITRATOR. TriZetto and the Representative will
mutually agree on an arbitrator selected from a list of arbitrators who are
attorneys-at-law who practice business law and have significant experience with
respect to the representation of companies which develop computer services and
technology; provided that the arbitrator cannot have represented either TriZetto
or any of the Finserv Securityholders in any previous matter. If TriZetto and
the Representative cannot agree on the selection of the arbitrator from the
above list of arbitrators, then the arbitrator shall be chosen by the American
Arbitration Association.
5.4 TIME FOR ARBITRATION DECISION; EFFECT. The arbitrator shall decide
each dispute to be arbitrated pursuant hereto within 90 days after the selection
of the arbitrator. The arbitrator's decision shall relate solely to whether
TriZetto is entitled to receive the Contested Amount (or a portion thereof)
pursuant to the applicable terms of the Merger Agreement and this Agreement. The
final decision of the arbitrator shall provide directions to the Escrow Agent as
provided in Section 5.5 and shall be furnished to TriZetto, the Representative,
and the Escrow Agent in writing and shall constitute a conclusive determination
of all issues in question, binding upon TriZetto, the Representative, the
Finserv Securityholders, and the Escrow Agent and shall not be
6
<PAGE> 7
contested by any of them. Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator will render findings of fact and conclusions of law
and a written opinion setting forth the basis and reasons for any decision
reached and instructions (if applicable) to the Escrow Agent as to the release
of Escrowed Property and will deliver such documents to TriZetto, the
Representative and the Escrow Agent, along with a signed copy of the award and
the instructions (if any) to the Escrow Agent. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of this Section 5 or the provisions of this Agreement
or the Merger Agreement. Judgment upon the award rendered by the arbitrator may
be entered in any court having competent jurisdiction over the subject matter
thereof.
5.5 ACTIONS OF ESCROW AGENT PENDING ARBITRATION. After delivery of a
Response Notice in which any or all of the Claimed Amount is contested by the
Representative, the Escrow Agent shall continue to hold in the Escrow Account
Escrowed Property having a value (computed in accordance with Section 4.4 of
this Agreement) sufficient to cover the Contested Amount (but only to the extent
that there is Escrowed Property remaining in the Escrow after payment to
TriZetto of all uncontested Claimed Amounts), notwithstanding the occurrence of
the Termination Date, until: (a) delivery of a copy of a settlement agreement
executed by TriZetto and the Representative setting forth instructions to the
Escrow Agent as to the release of such Escrowed Property that shall be made with
respect to the Contested Amount; (b) delivery of a copy of the final decision of
the arbitrator setting forth instructions to the Escrow Agent as to the release
of Escrowed Property that shall be made with respect to the Contested Amount; or
(c) receipt of a court order or judgment directing Escrow Agent to act with
respect to the distribution of any Escrowed Property. The Escrow Agent shall
thereupon release Escrowed Property from the Escrow Account (to the extent
Escrowed Property is then held in the Escrow Account) in accordance with such
settlement agreement, arbitrator's instructions, court order or judgment, as
applicable. The Escrowed Property released by the Escrow Agent to TriZetto from
the Escrow Account shall be in such proportions of Escrow Shares and/or other
Escrowed Property, as may be requested by the Representative (subject to the
availability of such type(s) of Escrowed Property at such time).
5.6 NO RESPONSIBILITY OF ESCROW AGENT TO RESOLVE DISPUTE. If any
controversy arises involving any party to this Agreement (other than the Escrow
Agent) concerning the subject matter of this Agreement, including a Contested
Amount, the Escrow Agent will not be required to determine the controversy or to
take any action until such dispute has been resolved.
5.7 RIGHT TO COUNSEL. TriZetto (on behalf of itself and any
Indemnified Person(s)) and the Representative shall each have the right to
employ its or his own legal counsel to at its own expense represent such person
in any disputes arising under this Agreement.
5.8 COMPENSATION OF ARBITRATOR; ATTORNEYS' FEES. The arbitrator will
be compensated for his or her services at a rate to be determined by the parties
or by the American Arbitration Association, but based upon reasonable hourly or
daily consulting rates for the arbitrator in the event the parties are not able
to agree upon his or her rate of compensation. TriZetto, on the one hand, and
the Finserv Securityholders, on the other hand, will each pay 50% of the
compensation to be paid to the arbitrator in any such arbitration and 50% of the
costs of transcripts and other normal and regular expenses of the arbitration
proceedings (collectively, the "Arbitration Expenses"), with the portion of such
Arbitration Expenses required to be borne by the Finserv Securityholders to be
shared by the Finserv Securityholders based on the Finserv Securityholder's
respective Pro Rata Share of the Escrowed Property. Unless the Arbitrator
provides to the contrary in the decision, each side shall pay its own attorneys'
fees.
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<PAGE> 8
5.9 BURDEN OF PROOF. For any claim submitted to an arbitration
hereunder, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
5.10 EXCLUSIVE REMEDY. Except to the extent provided in Article 8 of
the Merger Agreement, and except as specifically otherwise provided in this
Agreement, arbitration in accordance with this Section 5 will be the sole and
exclusive remedy of the parties for any dispute arising over the release of
Escrowed Property from the Escrow hereunder.
6. PAYMENT OF REMAINING ESCROWED PROPERTY TO FINSERV SECURITYHOLDERS.
6.1 ON TERMINATION DATE. On the Termination Date, the Escrow Agent
shall deliver to TriZetto and the Representative a statement of the value
(computed in accordance with Section 4.4 hereof) of the remaining balance of the
Escrowed Property then remaining in the Escrow Account, and the total amount of
all claims made pursuant to Sections 4 or 5 hereof in connection with the Escrow
Account which remain unresolved and unpaid (the excess, if any, of such
remaining balance in such Escrow Account over the total amount of such claims
against such Escrow Account shall be referred to as the "Final Escrow Balance").
TriZetto and the Representative each shall review the accuracy of the Final
Escrow Balance and notify the Escrow Agent and each other of any asserted
discrepancy within ten business days of receipt of the foregoing statement. If
the Escrow Agent has not been notified of any discrepancy by TriZetto or the
Representative within the ten business day period specified in the preceding
sentence, then within 20 business days after receipt by TriZetto and the
Representative of such statement, the Escrow Agent shall deliver to each of the
Finserv Securityholders an amount of the Escrowed Property representing such
Finserv Securityholder's Pro Rata Share of the Final Escrow Balance constituting
Escrowed Property, free and clear of the Escrow created by this Agreement. After
the last claim shall have been resolved pursuant to Sections 4 and 5 hereof and
all Escrowed Property deliverable to TriZetto upon the resolution of all such
claims has been delivered to TriZetto, the remaining balance, if any, of the
Escrowed Property shall promptly be delivered by the Escrow Agent to each
Finserv Securityholder pro rata, based on each Finserv Securityholder's Pro Rata
Share, free and clear of the Escrow created by this Agreement.
6.2 DISTRIBUTION OF THE ESCROWED PROPERTY. All distributions of
Escrowed Property to the Finserv Securityholders to be made by the Escrow Agent
under this Section shall be made so that each Finserv Securityholder receives
his Pro Rata Share of the total amount of each type of property (principally
TriZetto Stock) constituting the Escrowed Property held in the Escrow Account
immediately before such distribution.
6.3 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.
6.4 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.
7. FEES AND EXPENSES OF ESCROW AGENT AND REPRESENTATIVE.
7.1 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
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<PAGE> 9
fees and expenses referred to in Section 7.3 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 Finserv Securityholders.
7.2 REPRESENTATIVE. The Representative will not be entitled to
receive any compensation from TriZetto or the Finserv Securityholders in
connection with this Agreement; however, the Finserv Securityholders shall
indemnify and promptly reimburse the Representative for all reasonable expenses
actually incurred by the Representative in connection with the performance of
his 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 his duties hereunder) pro rata
according to the Finserv Securityholders' respective Pro Rata Share. TriZetto
shall not have any obligation to reimburse the Representative for any expenses
whatsoever.
7.3 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 reasonably compensated for such extraordinary services (except to the extent
the Escrow Agent is not entitled to indemnification pursuant to Section 9.3
hereof) and reimbursed for all reasonable costs, attorney's fees and expenses
incurred by the Escrow Agent in rendering such extraordinaryservices, which
costs, fees and expenses shall be borne by TriZetto and the Finserv
Securityholders as provided in Section 7.1 above.
8. LIABILITY AND AUTHORITY OF REPRESENTATIVE; SUCCESSORS AND ASSIGNEES.
8.1 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 him in good faith to be genuinely and
duly authorized, nor for other action or inaction except his 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.
8.2 SUCCESSOR REPRESENTATIVES. In the event of the death or
permanent disability of the Representative, or the resignation of Representative
as the representative of the Finserv Securityholders hereunder, a successor
Representative shall be elected by a majority vote of the Finserv
Securityholders, with each such Finserv Securityholder (or his or her successors
or assigns) to be given a weighted vote based on such Finserv 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.
8.3 AUTHORITY OF REPRESENTATIVE. The Representative shall have full
power and authority to represent the Finserv 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 Finserv Securityholders and
their
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<PAGE> 10
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 Finserv
Securityholders and their successors. The Finserv Securityholders have consented
to the appointment of the Representative as representative of the Finserv
Securityholders and as the attorney-in-fact and agent for and on behalf of each
Finserv Securityholder for the purposes of taking actions and executing
agreements and documents on behalf of any of the Finserv 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
Finserv 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 Finserv
Securityholders are treated in the same manner (unless the Finserv
Securityholders otherwise consent). The Finserv 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.
9. LIMITATION OF ESCROW AGENT'S RESPONSIBILITY AND LIABILITY.
9.1 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 Merger Agreement. 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 Escrow
Agreement or of any agreement mandatory or supplemental hereto.
9.2 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 Finserv Securityholder. The Escrow Agent makes no
representation or warranty with respect to, and is not responsible for, the
Escrowed Property, other than any losses resulting from its gross negligence or
willful misconduct. The Escrow Agent will have no duty to
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<PAGE> 11
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 Finserv Securityholders, or (iii) release the Escrowed Property
to TriZetto, as the case may be, to the extent expressly provided in this
Agreement.
9.3 INDEMNITY. TriZetto and each of the Finserv Securityholders
(each an "Indemnifying Party" and together the "Indemnifying Parties"), each
hereby jointly and severally 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 the
liability of any Finserv Securityholder shall be limited to such Finserv
Securityholder's pro rata share of the liability of all of the Finserv
Securityholders hereunder, based on the number of shares of Finserv stock held
by such Finserv Securityholder. 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.
9.4 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 9.3. 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.
9.5 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 ten 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 9;
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 9.
9.6 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
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<PAGE> 12
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.
9.7 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 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.
10. 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 and the Representative 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 $500,000,000 which has no direct depository or lending relationship
with TriZetto or any of the Finserv Securityholders and which is qualified to do
business in the State of California, and may appoint any other successor Escrow
Agentwith 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 10 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.
11. TERMINATION. This Agreement shall terminate upon the earlier of (a)
the Termination Date, assuming there are no contests regarding the Escrowed
Property, or (b) the release by the Escrow Agent of all of the Escrowed Property
in accordance with this Agreement. 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 5.
12. MISCELLANEOUS.
12.1 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; 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
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<PAGE> 13
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 business days advance written notice to the other parties
hereto):
(a) If to the Escrow Agent:
Bankers Trust Company of California N.A.
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Alan Sueda
(b) If to TriZetto or Merger Sub, to:
The TriZetto Group, Inc.
567 San Nicolas Drive, Suite 360
Newport Beach, CA 92660
Attention: Jeffrey H. Margolis
Ph: (949) 718-4940
Fax: (949) 718-4944
Email: [email protected]
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.
Ph: (949) 725-4155
Fax: (949) 725-4100
(c) If to Finserv, to:
Finserv Health Care Systems, Inc.
29 Delwick Lane
Short Hills, New Jersey 07078
Attn: Stuart Schloss
Ph: (973) 467-8154
Fax: (973) 467-4734
with a copy to (which shall not constitute notice):
Lasser Hochman, L.L.C.
75 Eisenhower Parkway
Roseland, New Jersey 07068
Attn: David Silver, Esq.
Ph: (973) 226-2700
Fax: (973) 226-0844
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(d) If to the Finserv Securityholders:
To the address set forth on Exhibit A.
Any party hereto may designate a different address by providing written
notice of such new address to the other parties hereto.
12.2 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 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 10 hereof. No such amendment may treat any one Finserv Securityholder
differently from the other Finserv Securityholders unless consented to in
writing by Finserv Securityholders having beneficial ownership of a majority of
the outstanding Escrowed Property, including the consent of any Finserv
Securityholder who is to be treated differently.
12.3 WAIVER. At any time prior to the Termination Date, 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.
12.4 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.
12.5 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.
12.6 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.
12.7 ENTIRE AGREEMENT. Except as otherwise set forth in the Merger
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.
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12.8 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 3.3).
12.9 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.
12.10 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.
12.11 GENDER. For purposes of this Agreement, references to the
masculine gender shall include feminine and neuter genders and entities.
12.12 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.
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IN WITNESS WHEREOF, the parties have duly executed this 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: __________________________________
STUART SCHLOSS, "REPRESENTATIVE" AND
"FINSERV SECURITYHOLDER"
________________________________________
"FINSERV SECURITYHOLDERS"
________________________________________
Franc Richardson
________________________________________
Olga Pizzo
________________________________________
William Nice
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Exhibit A
LISTING OF FINSERV SECURITYHOLDERS AND ESCROWED AMOUNTS
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material
to an investment decision]
<PAGE> 18
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 Bankers Trust of California N.A.
The undersigned further does hereby irrevocably constitute and appoint
_____________, its attorney-in-fact, with full power of substitution, to
transfer said stock on the books of the Company.
Dated: _______________________ _________________________________
<PAGE> 1
Exhibit 2.3
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made this 22nd day
of December 1999 (the "Closing Date"), by and between ____________________ (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 four wholly-owned subsidiaries, Croghan & Associates, Inc., a
Colorado corporation, Margolis Health Enterprises, Inc., a California
corporation, Creative Business Solutions, Inc., a Texas corporation, and Novalis
Corporation, a Delaware corporation, which also engage in the Business. The five
entities, along with Merger Sub (as defined below), are hereinafter referred to
collectively as "TriZetto."
B. The Company, Finserv Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Company ("Merger Sub"), Finserv Health Care
Systems, Inc., a New York corporation ("Finserv"), and the shareholders of
Finserv have entered into an Agreement and Plan of Merger dated December 22,
1999 (the "Merger Agreement"), pursuant to which the Merger Sub shall be merged
with and into Finserv (the "Merger"), with Finserv to be the surviving
corporation of the Merger.
C. It is a condition precedent to the obligations of the Company under
the Merger 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 Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, warranties
and representations contained herein, the parties hereby agree as follows:
1. Except as provided hereafter, Employee covenants that during
Employee's employment with the Company, and for a period of an additional two
consecutive years commencing on the later to occur of (a) the date of
termination of Employee's employment with the Company, and (b) the second
anniversary of the date hereof, 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, similar to, or competitive with the Business in, from, at or into
(a) any of the states of the United States of America or the District of
Columbia, or (b) any of the countries, territories or areas of the world.
Notwithstanding the foregoing, nothing contained in this Agreement shall prevent
or otherwise limit Employee from holding, for investment purposes only, no more
than 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.
In the event the Company terminates Employee's employment without Cause
(as hereafter defined), the reference to two consecutive years appearing in the
preceding sentence shall be changed
<PAGE> 2
to nine consecutive months. For purposes of this letter agreement "Cause" shall
mean (i) the commission of a felony or a crime involving moral turpitude or the
commission of any other act or omission involving dishonesty, disloyalty or
fraud with respect to the Company or any of its customers or suppliers, (ii)
conduct tending to bring the Company substantial public disgrace or disrepute,
(iii) substantial and repeated refusal to perform duties as reasonably directed
by the Board, or (iv) gross negligence or willful misconduct with respect to the
Company.
2. Employee agrees not to solicit the employment of or engage or employ
any of the employees of TriZetto at any time during Employee's employment with
the Company, and for a period of three years following the termination 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. 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, or (b) the disclosure of information required
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.
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<PAGE> 3
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.
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 Merger
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 Merger Agreement.
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THIS NON-COMPETITION AGREEMENT has been duly executed by the parties
hereto as of the date and year first above written.
"EMPLOYEE"
_____________________________________________
"COMPANY"
THE TRIZETTO GROUP, INC.,
a Delaware corporation
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
<PAGE> 1
Exhibit 2.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of December 22, 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, Finserv Health Care Systems, Inc., a Delaware
corporation ("Finserv"), and the Securityholders of Finserv, entered into an
Agreement and Plan of Merger on December 22, 1999 (the "Merger Agreement"),
pursuant to which the Securityholders of Finserv were issued shares of
TriZetto's Common Stock;
WHEREAS, it is a condition precedent to the obligations of the
Securityholders of Finserv under the Merger 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 Finserv upon which they are relying in
consummating the transactions contemplated by the Merger 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 Merger 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 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
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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 all of the Holders under this Agreement or similar agreements and
the Venture Capitalists under the Investor Rights Agreement, 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 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 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
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<PAGE> 4
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 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
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<PAGE> 5
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 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.
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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 financial statements of
Finserv, if required. 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; (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 commercially reasonable 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 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
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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
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 Schedule A attached hereto.
WITH A COPY TO (which shall not constitute notice):
Lasser Hochman, LLC
75 Eisenhower Parkway
Roseland, New Jersey 07068
Attention: David Silver, Esq.
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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 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
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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.
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IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed and delivered by the parties as of the date first above written.
THE TRIZETTO GROUP, INC.
By: _____________________________________
Name: ___________________________________
Title: ___________________________________
HOLDERS:
__________________________________________
Stuart Schloss
__________________________________________
Franc Richardson
__________________________________________
Olga Pizzo
__________________________________________
William Nice
10
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SCHEDULE A
HOLDERS OF COMMON STOCK
[Omitted pursuant to Item 601 of Regulation S-K - Information is not material to
an investment decision]
