<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
HEALTH RISK MANAGEMENT, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
421935107
(CUSIP Number)
MICHAEL S. MURRAY, ESQ.
FOWLER, WHITE, GILLEN, BOGGS,
VILLAREAL AND BANKER, P.A.
P.O. BOX 1438
TAMPA, FLORIDA 33601
(813) 228-7411
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
SEPTEMBER 12, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Check the following box if a fee is being paid with the statement /X/.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7).
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
Page 1 of 10 Pages
- --------------------
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
<PAGE> 2
CUSIP No.: 421935107 Page 2 of 10
<TABLE>
<S> <C>
SCHEDULE 13D
1 NAME OF REPORTING PERSONS: HEALTHPLAN SERVICES CORPORATION
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS: 133787901
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO, WC, BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NONE
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY NONE
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING NONE
PERSON WITH
10 SHARED DISPOSITIVE POWER
850,462(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
850,462(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.3%
14 TYPE OF REPORTING PERSON*
HC, CO
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) The shares of common stock of Health Risk Management, Inc. ("HRMI")
covered by this report are subject to Support/Voting Agreements dated
September 12, 1996, and described in Item 3 of this report. Nothing
herein shall be deemed to be an admission by HealthPlan Services
Corporation ("HPS") as to the beneficial ownership of any shares of
Common Stock of HRMI, and HPS disclaims beneficial ownership of all
shares of Common Stock of HRMI which may be voted under the Voting
Agreements.
<PAGE> 3
CUSIP No.: 421935107 Page 3 of 10
Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, $0.01 par value per
share ("HRMI Common Stock"), of Health Risk Management, Inc. ("HRMI"), a
Minnesota corporation. The principal executive offices of HRMI are located at
8000 West 78th Street, Minneapolis, Minnesota 55439.
Item 2. Identity and Background.
This Schedule 13D is filed by HealthPlan Services Corporation ("HPS"),
a Delaware corporation. HPS, along with its newly acquired operating units,
Consolidated Group, Inc., and Harrington Services Corporation, is a leading
provider of managed care services to small businesses and large, self-insured
organizations. Its services include distribution, enrollment, billing and
collection, claims administration, and information reports and analysis on
behalf of healthcare payors and providers, covering over three million members
in the United States. HPS's clients include managed care organizations (health
maintenance organizations, preferred provider organizations), integrated health
care delivery systems, insurance companies, and health care purchasing
alliances. The majority of HPS's in-force business utilizes managed care
products, and substantially all of HPS's new business since October 1994
utilizes managed care products. HPS's principal executive offices are located
at 3501 Frontage Road, Tampa, Florida 33607.
All of the directors and executive officers of HPS, other than John R.
Gunn and James G. Niven, are citizens of the United States. Messrs. Gunn and
Niven are citizens of the United Kingdom. The name, business address and
present principal occupation of each executive officer and director are set
forth in Annex I to this Schedule 13D which is incorporated herein by this
reference.
During the last five years, to the best of HPS's knowledge, neither
HPS nor any of its executive officers or directors has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which HPS or such person was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation with respect to such laws, and which judgment,
decree or final order was not subsequently vacated.
Item 3. Source and Amount of Funds or Other Consideration.
This Statement relates to the execution of certain Support/Voting
Agreements (the "Voting Agreements") by each of the persons set forth in Annex
II to this Schedule 13D, which Annex II is incorporated herein by this
reference. The Voting Agreements were entered into as an inducement to HPS to
enter into the Plan and Agreement of Merger, dated September 12, 1996, among
HPS, HealthPlan Services Alpha Corporation ("Subcorp") and HRMI (the "Merger
Agreement"). Pursuant to the Merger Agreement and subject to the conditions
set forth therein (including approval by the stockholders of HRMI and various
regulatory agencies), HRMI will merge with and into Subcorp (the "Merger"), and
each issued and outstanding share of Common Stock of HRMI will be converted
into the right to receive $9.68603 in cash and 0.360208 of a share of HPS
Common Stock, par value $0.01 per share, subject to adjustment under the
circumstances described in the Merger Agreement, plus cash in lieu of
fractional shares. No
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CUSIP No.: 421935107 Page 4 of 10
monetary consideration was paid by HPS to the persons set forth in Annex II for
the Voting Agreements.
Pursuant to the terms of the Voting Agreements, each of the persons
set forth in Annex II has agreed (i) to vote all of the shares of HRMI Common
Stock beneficially owned by such person or its affiliates or over which such
person or any of its affiliates has voting power or control to approve the
Merger and the Merger Agreement, (ii) not to vote such shares in favor of any
other recapitalization, merger, consolidation or other business combination
involving HRMI, or acquisition of any capital stock or any material portion of
the assets (except for acquisitions of assets in the ordinary course of
business consistent with past practice) of HRMI and (iii) not to, and not to
permit any company, trust or other entity controlled by such person to, and not
to permit any of its affiliates to, contract to sell, sell or otherwise
transfer or dispose of any of such shares or any interest therein or securities
convertible thereinto or any voting rights with respect thereto other than
pursuant to the Merger without HPS's consent. Such persons in the aggregate
are estimated to have voting power over approximately 20.3% of the outstanding
shares of HRMI Common Stock, based upon 4,180,476 shares of HRMI Common Stock
outstanding as of September 12, 1996, as represented by HRMI. HPS may
hereafter enter into similar agreements with other holders of HRMI Common
Stock. A copy of the form of Support/Voting Agreement, dated as of September
12, 1996, executed by such persons is included as Exhibit 99.1 to this Schedule
13D and is incorporated herein by this reference. The foregoing description of
the Support/Voting Agreement is qualified in its entirety by reference to such
exhibit.
Item 4. Purpose of Transaction.
As stated above, in connection with the execution of the Voting
Agreements, HPS and HRMI entered into the Merger Agreement, pursuant to which,
among other matters and subject to the terms and conditions set forth in the
Merger Agreement, HRMI will merge with and into Subcorp. Consummation of the
Merger is subject to certain conditions, including: (i) receipt of the
approval of the Merger Agreement by the holders of a majority of the
outstanding shares of HRMI Common Stock; (ii) expiration or termination of all
waiting periods applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii)
registration of the HPS Common Shares to be issued in the Merger under the
Securities Act of 1933, as amended; (iv) receipt of an opinion of counsel as to
the tax-free nature of certain aspects of the Merger; and (v) satisfaction of
certain other conditions. Pursuant to the Merger Agreement, (a) the officers
of the surviving corporation in the Merger will be the officers of Subcorp, (b)
the directors of the surviving corporation in the Merger will be the directors
of Subcorp, and thereafter, HPS will have the authority to determine the
officers and directors of HRMI. At the effective time of the Merger, the
Certificate of Incorporation and By-laws of Subcorp as in effect immediately
prior to the effective time shall be the Certificate of Incorporation and
By-laws of the surviving corporation. If the Merger is consummated, HRMI will
become a wholly-owned subsidiary of HPS and the HRMI Common Stock will be
delisted from the Nasdaq National Market and deregistered under Section 12 of
the Securities Exchange Act of 1934, as amended.
A copy of the Merger Agreement is included as Exhibit 2.1 to this
Schedule 13D and is incorporated herein by this reference. The foregoing
description of the Merger Agreement is qualified in its entirety by reference
to such exhibit.
Other than as described above, HPS has no plans or proposals which
relate to, or may result in, any of the matters listed in paragraphs (a)
through (j) of Item 4 of Schedule 13D (although HPS reserves the right to
develop such plans).
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CUSIP No.: 421935107 Page 5 of 10
Item 5. Interest in Securities of Issuer.
As a result of the Voting Agreements, HPS may be deemed to be the
beneficial owner of 850,462 shares of Common Stock of HRMI, which would
represent approximately 20.3% of the shares of Common Stock (based on the
number of shares of Common Stock outstanding on September 12, 1996, as set
forth in the Merger Agreement).
The shares of Common Stock described herein are subject to the Voting
Agreements. Nothing herein shall be deemed to be an admission by HPS as to the
beneficial ownership of any shares of Common Stock, and HPS disclaims
beneficial ownership of all shares of Common Stock of HRMI which may be voted
under the Voting Agreements.
To the best of HPS's knowledge, no executive officer or director of
HPS beneficially owns any shares of HRMI Common Stock, nor have any
transactions in HRMI Common Stock been effected during the past 60 days by HPS
or, to the best knowledge of HPS, by any executive officer or director of HPS.
In addition, no other person, other than those listed in Annex II, is known by
HPS to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the securities covered by
this Schedule 13D.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
Except for the Merger Agreement and the Voting Agreements, none of the
persons named in Item 2 has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with respect to any
securities of the Issuer, including, but not limited to, transfer or voting of
any securities, finders fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
The following exhibits are filed as part of this Schedule 13D:
Exhibit 2.1 -- Merger Agreement.
Exhibit 99.1 -- Form of Support/Voting Agreement.
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CUSIP No.: 421935107 Page 6 of 10
Annex I
Directors and Executive Officers
Set forth below are the name and present principal occupation of each
director and executive officer of HealthPlan Services Corporation as of
September 12, 1996. The business address of each such director and executive
officer is c/o HealthPlan Services Corporation, 3501 Frontage Road, Tampa, FL
33607.
<TABLE>
<S> <C>
Name Principal Occupation
Directors of HPS:
William L. Bennett Chairman of the Board of HealthPlan
Services Corporation
Joseph A. Califano, Jr. Chairman and President of The
Center On Addiction & Substance Abuse
at Columbia University
James F. Carlin Chairman of Carlin Consolidated,
Inc., a general Management
consulting company
Joseph S. DiMartino Chairman of the Board of Noel Group, Inc.
John R. Gunn Executive Vice President & Chief
Operating Officer of Memorial Sloan-
Kettering Cancer Center
Charles H. Guy, Jr. President, Guy Corporate Partners,
Inc., a private company that invests
in emerging closely-held businesses
Nancy Kane, Ph.D. Harvard School of Public Health
Faculty, Department of Health Policy
& Management
James K. Murray, Jr. President, HealthPlan Services
Corporation
David Nierenberg President of Nierenberg Investment
Management Co., Inc., an investment
management company
James G. Niven Managing Director, Burson-
Marsteller
Samuel Pryor IV Managing Director, Noel Group, Inc.
</TABLE>
<PAGE> 7
CUSIP No.: 421935107 Page 7 of 10
<TABLE>
<S> <C>
Trevor G. Smith President, Reveley Resources, Inc., a consulting and
health-care investment management firm
Holyoke L. Whitney President and Chairman of The Whitney Group Limited,
a general investment business, and Chairman of
Atlantic AquaFoods, Inc., a business involved in
aquaculture and the marketing of lobster
Executive Officers of HPS
(that are not directors):
Richard M. Bresee Executive Vice President -- Health
Care Alliances, and COO -- Health Care
Alliances
Craig H. Cassady Executive Vice President -- Sales
Timothy T. Clifford Chairman and CEO, Consolidated Group, and
COO -- Small Group Businesses
Phillip S. Dingle Senior Vice President and General Counsel
Claudia N. Griffiths Executive Vice President --Health
Care and Information Products
Steven V. Hulslander Executive Vice President -- Human
Resources and Chief Information
Officer
George E. Lucco Executive Vice President -- ASO and
Large Group
James K. Murray, III Executive Vice President and Chief
Financial Officer
Robert R. Parker Chairman and CEO, Harrington Services
Corporation, and COO -- Large Group
Businesses
Gary L. Raeckers Executive Vice President -- TNE and
Acquisitions, and COO -- TNE
</TABLE>
<PAGE> 8
CUSIP No.: 421935107 Page 8 of 10
ANNEX II
Persons Executing Support/Voting Agreements
Gary T. McIlroy, M.D.
Marlene Travis
Thomas P. Clark
<PAGE> 9
CUSIP No.: 421935107 Page 9 of 10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
HealthPlan Services Corporation
By: /s/ James K. Murray, III
-----------------------------------
Name: James K. Murray, III
Title: Executive Vice President and
Chief Financial Officer
Date: September 23, 1996
<PAGE> 10
CUSIP No.: 421935107 Page 10 of 10
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1 Plan and Agreement of Merger
99.1 Form of Support/Voting Agreement
<PAGE> 1
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (the "Agreement"), made this
day of September, 1996, is entered into by and among HealthPlan Services
Corporation, a Delaware corporation (hereinafter referred to as the
"Purchaser"), HealthPlan Services Alpha Corporation, a Delaware corporation (the
"Merger Subsidiary"), and Health Risk Management, Inc., a Minnesota corporation
(the "Company").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the Purchaser
and the Company have approved the merger (the "Merger") of the Company with and
into the Merger Subsidiary in accordance with the Delaware General Corporation
Law and the Minnesota Business Corporation Act (the "Acts"), with the effect
that the Company will become a wholly-owned subsidiary of the Purchaser;
WHEREAS, for federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368(a)
of the Code as hereinafter defined; and
WHEREAS, concurrently with the execution of this Agreement, in
order to induce the Purchaser to enter into this Agreement, the Purchaser is
entering into a Support/Voting Agreement (the "Support/Voting Agreement") with
Gary T. McIlroy, M.D., Marlene Travis and Thomas P. Clark providing for certain
voting and other restrictions with respect to the shares of the Company Common
Stock as defined herein which are owned by such shareholders.
NOW, THEREFORE, in consideration of the premises and the
mutual promises, representations, warranties and covenants hereinafter set
forth, the parties hereto agree as follows:
I. DEFINITIONS. The capitalized terms used herein will have the
meanings ascribed to them in Exhibit 1.1 hereto. Unless the context otherwise
requires, such capitalized terms will include the singular and plural and the
term "including" shall mean "including but not limited to." Wherever in this
Agreement reference is made to the knowledge of the Company it means the
individual actual
<PAGE> 2
knowledge of Gary T. McIlroy, M.D., Marlene Travis, Thomas P. Clark and Michael
T. McKim.
II. COVENANTS AND UNDERTAKINGS.
2.1 The Merger. At the Effective Time and in accordance with the
provisions of this Agreement and the Acts, the Company will be merged with and
into the Merger Subsidiary in the Merger, the separate corporate existence of
the Company shall thereupon cease, and the Merger Subsidiary shall be the
surviving corporation (the "Surviving Corporation") which, effective with the
Effective Time, shall change its name to Health Risk Management, Inc.
2.2 Effective Time of Merger. The Merger shall become effective at
the time on the Closing Date (the "Effective Time") of filing of a Certificate
of Merger with the Department of State of the State of Delaware and Articles of
Merger with the Secretary of State of the State of Minnesota in accordance with
the provisions of the Acts.
2.3 Effects of Merger. Subject to the Acts, at the Effective Time,
the Merger shall have the following effects:
2.3.1 Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder
of any shares of capital stock of the Purchaser or the Company:
2.3.1.1 each share of Merger Subsidiary Common Stock
that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding;
2.3.1.2 each share of Company Common Stock that is
issued and outstanding immediately prior to the Effective
Time, except for Dissenting Shares, shall be converted into
the right to receive:
(i) the Per Share Stock Consideration, PLUS
(ii) the Per Share Cash Consideration,
2
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provided that (x) no fractional shares of Purchaser Common
Stock shall be issued and any holder who would otherwise have
received a fractional share of Purchaser Common Stock shall
have a right to receive cash in an amount equal to such
fraction multiplied by the Market Price.
2.3.1.3 each outstanding certificate representing
shares of Company Common Stock, except for Dissenting Shares,
shall be deemed, for all purposes, to evidence only the right
to receive upon surrender of such certificate the
consideration into which such shares of Company Common Stock
are convertible; and
2.3.1.4 each share of Company Common Stock that is
owned by the Company immediately prior to the Effective Time
as treasury stock will be canceled and retired and will cease
to exist, without any conversion thereof.
2.3.1.6 Notwithstanding anything in this Section 2.3
to the contrary, shares of Company Common Stock which are
issued and outstanding immediately prior to the Effective Time
and which are held by shareholders who have not voted such
shares in favor of the Merger and who shall have properly
exercised their rights of appraisal for such shares in the
manner provided by the Minnesota Business Corporation Act (the
"Dissenting Shares") shall evidence only the right to receive
the amount, if any, determined to be payable thereon pursuant
to the applicable appraisal rights statute and shall not be
converted or exchangeable for the right to receive the Merger
consideration set forth herein, unless and until such holder
shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to appraisal and
payment, as the case may be. If such shareholder shall have
failed to so perfect or shall have effectively withdrawn or
lost such right, such shareholder's shares shall thereupon be
deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive
the Merger consideration set forth herein without any interest
thereupon. The Company shall give the Purchaser prompt notice
of any Dissenting Shares (and shall also give the
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Purchaser prompt notice of any withdrawals of such demands for
appraisal rights) and the Purchaser shall have the right to
direct all negotiations and proceedings with respect to any
such demands. The Company shall not, except with the prior
written consent of the Purchaser, voluntarily make any payment
with respect to, or settle or offer to settle, any such demand
for appraisal rights.
2.4 Exchange of Certificates.
2.4.1 Exchange Agent. Promptly following the Effective
Time, the Purchaser shall deposit with the Exchange Agent for the benefit of
Company Shareholders, for exchange in accordance with this Section 2.4,
certificates representing Purchaser Common Stock issuable pursuant to Section
2.3 in exchange for outstanding shares of Company Common Stock which are not
Dissenting Shares and shall from time to time deposit cash in an amount
reasonably expected to be paid pursuant to Section 2.3 (such Purchaser Common
Stock and cash, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
2.4.2 Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive Purchaser Common Stock pursuant
to Section 2.3 (i) a letter of transmittal (which shall specify that delivery
shall be effected, and that risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as the Purchaser may reasonably
specify) and (ii) instructions for effecting the surrender of the Certificates
in exchange for certificates representing shares of Purchaser Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a certificate
representing that number of shares of Purchaser Common Stock which such holder
has the right to receive pursuant to Section 2.3 and (y) a check representing
the amount of the Per Share Cash Consideration and cash in lieu of fractional
shares, if any, and
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<PAGE> 5
unpaid dividends and distributions, if any, which such holder has the right to
receive pursuant to the provisions of this Article II, after giving effect to
any required withholding tax, and the shares represented by the Certificate so
surrendered shall be canceled forthwith. No interest will be paid or accrued on
the Per Share Cash Consideration or on the cash in lieu of fractional shares,
if any, and unpaid dividends and distributions, if any, payable to holders of
shares of Company Common Stock. In the event of a transfer of ownership of
shares of Company Common Stock which is not registered on the transfer records
of Company, a certificate representing the proper number of shares of Purchaser
Common Stock, together with a check for the Per Share Cash Consideration and
the cash to be paid in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, may be issued to such transferee if the Certificate
representing such shares of Company Common Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.4, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon surrender a certificate
representing shares of Purchaser Common Stock and Per Share Cash Consideration
and cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided in this Article II.
2.4.3 Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to shares
of Purchaser Common Stock having a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate, and no Per Share Cash
Consideration or cash payment in lieu of fractional shares shall be paid to any
such holder, until the holder shall surrender such Certificate as provided in
this Section 2.4. Subject to the effect of the Acts, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Purchaser Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Purchaser Common Stock
and not paid, less the amount of any withholding taxes which are required
thereon, and (ii) at the
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<PAGE> 6
appropriate payment date subsequent to surrender, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Purchaser Common Stock, less the amount of any withholding
taxes which are required thereon.
2.4.4 No Further Ownership Rights in Company Common Stock.
All shares of Purchaser Common Stock issued upon surrender of Certificates in
accordance with the terms hereof (including any cash paid pursuant to this
Article II) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock represented thereby,
and from and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of Company of shares of Company Common
Stock. If, after the Effective Time, Certificates are presented to the Merger
Subsidiary for any reason, they shall be canceled and exchanged as provided in
this Section 2.4. Certificates surrendered for exchange by any person
constituting an "affiliate" of the Company for purposes of Rule 145(c) under
the Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until the Purchaser has received written undertakings from such
person in the form attached hereto as Exhibit 2.28.
2.4.5 Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to Company Shareholders for six
months after the Effective Time shall be delivered to the Purchaser, upon
demand thereby, and holders of shares of Company Common Stock who have not
theretofore complied with this Section 2.4 shall thereafter look only to the
Purchaser for payment of any claim to shares of Purchaser Common Stock, Per
Share Cash Consideration, cash in lieu of fractional shares thereof, or
dividends or distributions, if any, in respect thereof.
2.4.6 No Liability. None of the Purchaser, the Merger
Subsidiary or the Exchange Agent shall be liable to any person in respect of
any shares of Company Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time of the Merger (or immediately prior to such earlier date on
which any cash, any cash in lieu of fractional
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<PAGE> 7
shares or any dividends or distributions with respect to whole shares of
Company Common Stock in respect of such Certificate would otherwise escheat to
or become the property of any governmental authority), any such cash, dividends
or distributions in respect of such Certificate shall, to the extent permitted
by the Acts, become the property of the Purchaser, free and clear of all claims
or interest of any person previously entitled thereto.
2.4.7 Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by the Purchaser, on
a daily basis. Any interest and other income resulting from such investments
shall be paid to the Purchaser upon termination of the Exchange Fund pursuant
to Section 2.4.5.
2.5 Treatment of Stock Options. Each holder of an option to
purchase shares of Company Common Stock that is outstanding at the Effective
Time (a "Company Option") shall receive a cash payment equal to (i) the total
number of shares of Company Common Stock subject to the unexercised portion of
such Company Option, determined by assuming that such Company Option is
immediately vested and exercisable in full, multiplied by (ii) the excess of
(x) the Per Share Cash Consideration plus the current fair market value of the
Per Share Stock Consideration, over (y) the per share exercise price specified
in such Company Option. For purposes of this Section 2.5, the "current fair
market value" of the Per Share Stock Consideration shall be determined using
the Market Price of Purchaser Common Stock on the New York Stock Exchange.
Prior to the Effective Time, the Company shall take such action as is legally
required to amend the 1990 Stock Option Plan and the 1992 Long-Term Incentive
Plan and the terms of all Company Options outstanding at the Effective Time
such that (i) all outstanding Company Options are immediately vested and
exercisable in full at or before the Effective Time, (ii) the holders of all
outstanding Company Options will receive the cash described in this Section
2.5, (iii) all Company Options outstanding at the Effective Time reflect the
revised exercise terms described above, (iv) no further options shall be
grantable under such plans after the Effective Time, and (v) all
change-of-control provisions contained in such plans and outstanding Company
Options shall not apply to any Company Options outstanding as of the Effective
Time. The actions to be taken by the Company with respect to the Company
Options pending the Closing, as described in this Section 2.5, shall
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specifically be deemed to be contemplated and permitted by this Agreement,
notwithstanding any other provisions of this Agreement to the contrary.
2.6 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Merger Subsidiary in effect immediately
prior to the Effective Time and in the form of Exhibit 2.6 hereto shall remain
in effect as the Certificate of Incorporation of the Surviving Corporation,
until thereafter amended as provided by law.
2.7 Bylaws. The Bylaws of the Merger Subsidiary as in effect
immediately prior to the Effective Time and in the form of Exhibit 2.7 hereto
shall be the Bylaws of the Surviving Corporation, until thereafter amended as
provided by law.
2.8 Directors. The directors of the Merger Subsidiary immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
and shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
2.9 Officers. The officers of the Merger Subsidiary immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
and shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
2.10 HSR Act Filings. As promptly as practicable after the
execution of this Agreement, and in any event not later than the fourteenth
(14) business day following the date of this Agreement, the Purchaser and the
Company shall, in cooperation with each other, make the required filings in
connection with the transactions contemplated by this Agreement under the HSR
Act with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice, and, as promptly as practicable from time to time
thereafter, each party shall make all such further filings and submissions, and
take such further action,
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as may be required in connection therewith. The Purchaser and the Company shall
each request early termination of the waiting period with respect to such
filings. Each party shall furnish the other all information in its possession
necessary for compliance by the other with the provisions of this Section 2.10.
The Purchaser and the Company shall each notify the other immediately upon
receiving any request for additional information with respect to such filings
from either the Antitrust Division of the Department of Justice or the Federal
Trade Commission and the party receiving the request shall use its best efforts
to comply with such request as soon as possible. Neither party shall withdraw
any such filing or submission without the written consent of the other party.
2.11 Compliance with Securities Laws.
2.11.1 In connection with the transactions contemplated by
this Agreement, the parties hereto agree to cooperate with one another in
complying with the provisions of the Securities Act and the General Rules and
Regulations thereunder, and all other applicable federal and state securities
laws, and each of them agrees to furnish the other, or its counsel, with such
information and to take such actions, as may be reasonably requested in respect
of such compliance.
2.11.2 Before the Closing, the Company shall obtain the
consent of Ernst & Young LLP, in form acceptable to the Purchaser's external
auditors, to the incorporation of the financial statements prepared by Ernst &
Young LLP in the Purchaser's public filings as may be required after Closing.
2.12 Conduct of the Business of the Company Prior to Closing.
2.12.1 Except (i) with the prior consent in writing of the
Purchaser, (ii) as may be required to effect the transactions contemplated by
this Agreement, (iii) as provided otherwise in this Agreement or (iv) as set
forth on Schedule 2.12.1 of the Disclosure Letter, the Company covenants that,
between the date of this Agreement and the Effective Time, the Company will
conduct its business only in the ordinary course, and that it will: (a) use
reasonable efforts to preserve the organization of the Company intact and to
preserve the goodwill of clients, customers and others having business
relations with the Company; (b) maintain the properties of the Company in the
same working order and condition
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as such properties are in as of the date of this Agreement, reasonable wear and
tear excepted; (c) keep in force at no less than their present limits all
existing bonds, letters of credit and policies of insurance insuring the
Company, its performance and its respective properties; (d) not enter into any
contract, commitment, arrangement or transaction of the type (i) required to be
listed on Schedules 3.4, 3.14.3, 3.14.6, 3.14.7, 3.14.8, 3.14.9, 3.14.10,
3.14.11, 3.18 or 3.21 of the Disclosure Letter or suffer, permit or incur any
of the transactions or events described in Section 3.11 hereof (except for the
payment of any health, disability and life insurance premiums which may become
due and except for contributions or distributions required to be made (and not
discretionary) pursuant to the terms of any Benefit Plans) (ii) required to be
listed on Schedule 3.14.1 or 3.14.2 if such contract will require the Company
to hire new employees, expand existing facilities, or acquire or lease new
facilities, or (iii) required to be listed on Schedule 3.15.1 or 3.15.2 if such
contract is other than in the ordinary course of the Company's software
licensing business in each case to the extent such events or transactions are
within the control of the Company; (e) not enter into any contracts,
commitments, arrangements or transactions of the type required to be listed on
Schedule 3.7 of the Disclosure Letter which individually exceed $500,000 or in
the aggregate exceeds $2,000,000.00; (f) not make or permit any change in the
Company's Articles of Incorporation or Bylaws, or in its authorized, issued or
outstanding securities (except upon exercise of currently outstanding options
or warrants); (g) not issue any security (except upon exercise of currently
outstanding options or warrants) or grant any stock option or right to purchase
any security of the Company, issue any security convertible into such
securities, purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing or declare, set aside or pay
any dividend or other distribution in respect of such securities; (h) not make
any contribution to or distribution on behalf of or to any employee of the
Company (except for the payment of any health, disability and life insurance
premiums which may become due and except for contributions or distributions
required to be made (and not discretionary) pursuant to the terms of any
Benefit Plans); (i) not make any capital expenditure (excluding capitalized
computer software costs of a normal and recurring nature in accordance with
past practice) which when aggregated with all other capital expenditures for
the period exceeds the sum of $500,000.00; (j) promptly advise the Purchaser in
writing of any
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matters arising or discovered after the date of this Agreement which, if
existing or known at the date hereof, would be required to be set forth or
described in this Agreement or the Disclosure Letter; and (k) not make any
distributions or commitments to charitable organizations.
2.12.2 Except after prior notification to, and with the
prior written consent of, the Purchaser, the Company will not make, between the
date of this Agreement and the Closing Date, any material change in its banking
or safe deposit arrangements or grant any powers of attorney. A list of all
bank accounts, safe deposit boxes (and the contents thereof) and powers of
attorney of the Company and of all persons authorized to act with respect
thereto is set forth in Schedule 2.12.2 of the Disclosure Letter.
2.12.3 Except with the prior consent in writing of the
Purchaser or as otherwise required by GAAP, the Company will not make, between
the date of this Agreement and the Closing Date, any changes in its accounting
methods or practices and will give the Purchaser written notice of all changes
in accounting estimates promptly upon determination thereof.
2.13 Intercompany Accounts and Services. Prior to or at the
Closing, the Company will take all actions necessary to settle as of the
Closing all cash overdrafts, loans, advances, intercompany payables or
receivables, indebtedness and other accounts between the Company, on the one
hand, and any employee or any Affiliate of any employee.
2.14 Examination of Property and Records. Between the date of this
Agreement and the Closing Date, the Company will allow the Purchaser, its
counsel and other representatives full access to all the books, records, files,
documents, assets, properties, contracts, customers and agreements of the
Company which may be reasonably requested, and shall furnish the Purchaser, its
officers and representatives during such period with all information concerning
the affairs of the Company which may be reasonably requested. The Purchaser
will conduct any investigation in a manner which will not unreasonably
interfere with the business of the Company.
2.15 Consents and Approvals. The Company and the Purchaser mutually
agree to use reasonable efforts and to cooperate to obtain
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the waiver, consent and approval of all persons whose waiver, consent or
approval (i) is required in order to consummate the transactions contemplated
by this Agreement or (ii) is required by any material agreement, lease,
instrument, arrangement, judgment, decree, order or license to which the
Company or the Purchaser or any Shareholder or any Affiliate of any Shareholder
is a party or subject to on the Closing Date and (a) which would prohibit, or
require the waiver, consent or approval of any person to such transactions or
(b) under which, without such waiver, consent or approval, such transactions
would constitute an occurrence of default under the provisions thereof, result
in the acceleration of any obligation thereunder or give rise to a right of any
party thereto to terminate its obligations thereunder. All required written
notices, waivers, consents and approvals from persons other than governmental
authorities are listed on Schedule 3.10 of the Disclosure Letter.
2.16 Employment Agreements. The Company covenants to use reasonable
efforts to cause those employees identified in writing by the Purchaser prior
to the date of this Agreement to enter into, at the Closing, Employment
Agreements or amendments to their existing employment agreements substantially
in the form and substance provided to the Company by the Purchaser prior to the
date hereof.
2.17 Supplying of SEC Documents, Financial Statements, and Other
Information. (a) Between the date of this Agreement and the Effective Time, the
Company covenants to deliver to the Purchaser (i) all Company SEC Documents as
soon as such documents are filed with the SEC; (ii) all regularly prepared
monthly, and other, unaudited
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financial statements of the Company prepared after the date of this Agreement,
in format historically utilized internally, as soon as available but not later
than the 20th of each month following each statement's date; (iii) all press
releases of the Company released after the date of this Agreement and prior to
the Effective Time prior to the time such releases are released to the public;
and (iv) such other information concerning the Company as the Purchaser shall
reasonably request.
(b) Between the date of this Agreement and the Effective Time, the
Purchaser covenants to deliver to the Company (i) all Purchaser SEC Documents
as soon as such documents are filed with the SEC; (ii) all regularly prepared
monthly, and other, unaudited financial statements of the Purchaser prepared
after the date of this Agreement, in format historically utilized internally,
as soon as available but not later than the 20th of each month following each
statement's date; (iii) all press releases of the Purchaser released after the
date of this Agreement and prior to the Effective Time prior to the time such
releases are released to the public; and (iv) such other information concerning
the Purchaser as the Company shall reasonably request.
2.18 Access to Business Records. Prior to Closing, the
Company shall cause any officer or director of the Company who possesses
material documents required or incident to the performance of the Company's
businesses which are not in the Company's possession to transfer such documents
to the Company. Such officer or director may make copies or extracts from such
books and records prior to transfer at their sole expense if they have a
legitimate business need for such copies.
2.19 Employee Matters.
2.19.1 After the Closing and until such date as the
Company's employees commence participation in the Purchaser's employee benefit
plans, as described in the next sentence (the "Plan Transfer Date" which shall
vary from plan to plan), the Purchaser shall cause the Surviving Corporation to
take whatever action is necessary or appropriate to cause the Surviving
Corporation to maintain the participation, sponsorship and/or maintenance of
the Company's employee benefit plans except those identified on Exhibit 2.19.1.
All employees of the Surviving Corporation shall be eligible to become
participants in the employee benefit plans and programs maintained by the
Purchaser for similarly situated employees of the Purchaser. Such employee
benefit plans that are health benefit plans shall (i) recognize expenses and
claims that were incurred by such employees in the Plan Year in which the Plan
Transfer Date occurs and recognized for similar purposes under the Company's
plans as of the Plan Transfer Date and (ii) provide coverage (without any
required waiting period) for pre-existing health conditions to the extent
covered under the applicable plans or benefit programs of the Company as of the
Plan Transfer Date. In addition, such employee benefit plans and programs shall
credit such employees with years of service with the Company and any businesses
acquired by the Company for all plan purposes, provided that no such crediting
shall be required to the
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extent that it would result in a duplication of benefits or require
contributions for years prior to the Effective Time.
2.19.2 The Company shall provide the Purchaser with any
information which the Purchaser shall reasonably request concerning the
employees of the Company (the "Employees"), and shall cooperate with, and
assist, the Purchaser with respect to the commencement of participation of any
Employee in the Surviving Corporation's benefit plans or arrangements.
2.20 Affiliated Contracts. At or prior to Closing, the Company
shall cause the Company's officers and directors and their Affiliates to
transfer to the Company without payment of consideration any contracts the
revenues from which are included in the revenues of the Company but which are
in the name of the officers and directors or their Affiliates and any assets
which have been paid for by the Company, other than life insurance policies
(except where such payment has been includible in the income of the particular
officer or director or Affiliate), but which are owned by the officers and
directors or their Affiliates, as opposed to the Company. All such assets and
contracts are listed on Schedule 2.20 of the Disclosure Letter.
2.21 Shareholders' Tax Free Reorganization Treatment. The Company
understands that the Purchaser is making no representation as to the tax-free
status of the Merger or the gain or loss, if any, which the Shareholders will
experience upon consummation of the Merger. The Company represents and warrants
that it has consulted with its own tax advisers concerning the tax consequences
(except that the Company's counsel may be relying on reasonably requested
customary certificates provided by the Purchaser in connection with its tax
opinion) of the proposed transactions and is not relying on any representation
of the Purchaser as to such consequences. Further, the Company represents that
its tax advisers have indicated that they will be able to render the opinion
required by Sections 5.2.10 and 5.3.4 subject to receipt of reasonably
requested representation letters. Notwithstanding the foregoing, the Purchaser
covenants and agrees that it will treat the Merger, for federal income tax
purposes, as a tax-free reorganization under Section 368(a)(1)(A) and (a)(2)(D)
of the Code. Following the Merger, neither the Purchaser, the Surviving
Corporation nor any Affiliate of the Purchaser or the Surviving Corporation
shall take, or cause to be taken, any action which,
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after consultation with counsel, it reasonably believes would jeopardize the
status of the merger as a tax-free reorganization within the meaning of Section
368(a) of the Code.
2.22 Shareholder Vote. As promptly as practical after the execution of
this Agreement but in no event later than five days after the SEC clears the
Company's proxy statement related thereto, the Company shall call a
shareholders meeting to vote upon the Merger, which shareholders meeting shall
be held as soon as permitted by the Company's Bylaws and applicable law after
mailing of such notice. The Board of Directors of the Company shall recommend
to the Shareholders the approval of the Merger and the Company shall use
reasonable efforts to obtain the affirmative vote of all Shareholders for
approval of the Merger.
2.23 Conduct of the Business of the Purchaser Prior to the Closing.
Except with the prior written consent of the Company, the Purchaser covenants
that, between the date of this Agreement and the Effective Time, (a) the
Purchaser will not adopt or propose any change in its Certificate of
Incorporation or Bylaws; (b) the Purchaser will not and will not allow any of
its subsidiaries to lease, license or dispose of any assets or property, which
assets or property are material to the Purchaser and its subsidiaries taken as
a whole; (c) the Purchaser will not declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property or otherwise
with respect to any of its capital stock; (d) the Purchaser will not and will
not allow any of its subsidiaries to merge or consolidate with any other Person
if, as a result thereof, the stockholders of the Purchaser immediately prior
thereto cease to own directly or indirectly at least a majority of the
outstanding stock of the Purchaser; (e) the Purchaser will ensure that the
persons currently serving as the Chairman and the President of the Purchaser
will continue to retain such positions and will ensure that persons currently
serving as directors of the Purchaser will continue to comprise a majority of
the Board of Directors of the Purchaser; (f) the Purchaser will not issue any
securities if such issuance requires the vote of its stockholders; and (g) the
Purchaser will not agree or commit to do any of the foregoing.
2.24 Continuation of Indemnification; Director Compensation. On or
prior to Closing, the Purchaser will purchase tail coverage under the Company's
existing directors and officers liability
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insurance policy affording coverage for a period of twelve (12) months to the
Company's directors and officers for periods prior to the Closing. From and
after Closing the Purchaser and the Surviving Corporation will indemnify (and,
to the extent permitted by Minnesota Statutes, advance expenses to) the officers
and directors of the Company who served in such capacity prior to the Effective
Time for any and all claims related to matters occurring prior to the Effective
Time to the same extent that such persons are entitled to indemnity under
Minnesota Law and the Company's Articles of Incorporation and Bylaws in effect
immediately prior to the Effective Time. From and after the Effective Time for
so long as he or she is a director, each director of the Surviving Corporation
shall receive for his or her services as a director the compensation described
in writing as furnished by Purchaser to the Company prior to the date of this
Agreement.
2.25 Takeover Statutes. If any "fair price", "moratorium", "control
share acquisition", or other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated hereby or the transactions
contemplated by the Support/Voting Agreement, the Company and the members of
the Board of Directors of the Company and the Purchaser (if applicable), shall
grant such approvals and take such actions as are reasonably necessary so that
the transactions contemplated hereby and the transactions contemplated by the
Support/Voting Agreement may be consummated as promptly as practicable on the
terms contemplated hereby and thereby and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated hereby and thereby. The Company represents that the Support/Voting
Agreements being entered into concurrently herewith has been approved by the
affirmative vote of a majority of a committee of the Company's disinterested
directors formed in accordance with The Minnesota Business Combination Act and
will not prohibit the Company from engaging in the Merger under the Minnesota
Business Combination Act at Closing or require any Shareholder approval in
order to preserve the voting rights of the shares of the Company represented
thereby under the Minnesota Control Share Acquisitions Act, provided that for
purposes of such Acts, Purchaser and any groups of which Purchaser may be
deemed to be a member do not beneficially own any securities of the Company
other than those that may be deemed to be beneficially owned by them by reason
of the Support/Voting Agreements.
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2.26 Preparation of Registration Statement and Proxy. The Purchaser
and the Company shall cooperate and promptly prepare and the Purchaser shall
file with the SEC as soon as practicable a Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act, with respect to the
Purchaser Common Stock issuable in the Merger, a portion of which Registration
Statement shall also serve as the proxy statement with respect to the meeting
of the shareholders of the Company to consider the Merger (the "Proxy
Statement/Prospectus"). In connection therewith, the Company shall promptly
furnish the Purchaser with all information concerning it as may be required for
inclusion in the Registration Statement. If at any time prior to the Effective
Time, any information pertaining to the Company contained in or omitted from
the Registration Statement makes such statements contained in the Registration
Statement false or misleading, the Company shall promptly so inform the
Purchaser and provide the Purchaser with the information necessary to make
statements contained therein not false and misleading. The respective parties
will cause the Proxy Statement/Prospectus and the Registration Statement to
comply as to form in all material respects with the applicable provisions of
the Securities Act, the Securities Exchange Act and the rules and regulations
thereunder. The Purchaser shall use all reasonable efforts, and the Company
will cooperate with the Purchaser, to have the Registration Statement declared
effective by the SEC as promptly as practicable and to maintain the
effectiveness of the Registration Statement through the Effective Time. The
Purchaser also shall take such other reasonable actions (other than qualifying
to do business in any jurisdiction in which it is not so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of the Purchaser Common Stock in the Merger.
2.27 Alternative Proposals. Prior to the Effective Time, the Company
agrees (a) that neither it nor any of its Subsidiaries shall, nor shall it or
any of its Subsidiaries authorize their respective officers, directors,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) to initiate or solicit, directly or indirectly, the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or purchase of (i) all or any
significant
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portion of the assets of the Company and its Subsidiaries taken as a whole, or
of any Subsidiary of the Company, (ii) 25% or more of the outstanding shares of
Company Common Stock or (iii) 25% of the outstanding shares of the capital
stock of any Subsidiary of the Company (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal") or engage in any
negotiations with, or provide any confidential information or data to, or have
any discussions with, any person relating to an Alternative Proposal (excluding
the Merger contemplated by this Agreement); and (b) that it will notify the
Purchaser immediately if it provides any such information or conducts any such
negotiations or discussions or receives any bona fide proposal or offer;
provided, however, that nothing contained in this Section 2.27 shall prohibit
the Board of Directors of the Company from (i) furnishing information to or
entering into discussions or negotiations with, any person or entity, if, and
only to the extent that (A) the Board of Directors of the Company, based upon
the advice of outside counsel, determines in good faith that such action is
required for the Board of Directors to comply with its fiduciary duties to
shareholders imposed by law, (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity relating
to an Alternative Proposal, the Company provides written notice to the
Purchaser to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity relating to an
Alternative Proposal, and (C) the Company keeps the Purchaser reasonably
informed of the status and all material information with respect to any such
discussions or negotiations; (ii) to the extent applicable, complying with Rule
14e-2 promulgated under the Securities Exchange Act with regard to an
Alternative Proposal; and (iii) making any statement required by applicable law
or the requirements of Nasdaq. Nothing in this Section 2.27 shall (x) permit
the Company to terminate this Agreement (except as specifically provided in
Article VIII hereof), (y) permit the Company to enter into any agreement with
respect to an Alternative Proposal for as long as this Agreement remains in
effect (it being agreed that for as long as this Agreement remains in effect,
the Company shall not enter into any agreement with any person that provides
for, or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)), or (z) affect any other
obligation of the Company under this Agreement.
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2.28 Affiliate Undertakings Letters. At least 35 days prior to the
date of the meeting of the Company Shareholders to approve the Merger, the
Company shall use reasonable efforts to provide to the Purchaser affiliate
undertakings letters in substantially the form of Exhibit 2.28 ("Affiliate
Undertakings Letters") from each such person who may be at the Effective Time,
or was on the date of this Agreement, an "affiliate" of the Company for
purposes of Rule 145 under the Securities Act. On or prior to such date, the
Company, with the advice of outside counsel, shall provide the Purchaser with a
letter (reasonably satisfactory to counsel to the Purchaser) specifying all of
the persons or entities who may be deemed to be "affiliates" of the Company
under the preceding sentence.
2.29 Listing Application. The Purchaser shall promptly prepare and
submit to the New York Stock Exchange a listing application covering the
Purchaser Common Stock to be issued in connection with the Merger and shall use
reasonable efforts to obtain, prior to the Effective Time, approval for the
listing of such Purchaser Common Stock, subject to official notice of issuance.
2.30 Funding/Development. After the Effective Time, it is the
intention of the Purchaser to continue development and funding of the Company's
risk management and health care informatics business pursuant to business plans
to be jointly developed by the management of the Company and the management of
the Purchaser.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser as
follows:
3.1 Organization, Standing and Foreign Qualification.
3.1.1 The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation as set forth in Schedule
3.1.1 of the Disclosure Letter and has full corporate power and authority to
carry on its business as it is now being conducted and to own and lease the
properties and assets which it now owns or leases.
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3.1.2 The Company and each of its Subsidiaries is now, and
will be at Closing, duly qualified and/or licensed to transact business and in
good standing as a foreign corporation in the jurisdictions listed in Schedule
3.1.2 of the Disclosure Letter, and the character of the property owned or
leased by the Company and each of its Subsidiaries and the nature of the
business conducted by them do not require such qualification and/or licensing
in any other jurisdiction, except where the failure to be so qualified or
licensed would not have a Company Material Adverse Effect.
3.1.3 Except as disclosed in the Company SEC Documents or in
Schedule 3.1.1 of the Disclosure Letter, the Company has no Subsidiaries.
3.2 Authority and Status. The Company has the corporate capacity
and authority to execute and deliver this Agreement, to perform hereunder and,
subject to the terms and conditions hereof, to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement and each and every agreement, document and instrument provided
for herein have been duly authorized and approved by the Board of Directors of
the Company. Subject to Shareholder approval as contemplated by Section 2.22,
this Agreement and each and every agreement, document and instrument to be
executed, delivered and performed by the Company in connection herewith
constitute or will, when executed and delivered, constitute the valid and
legally binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. Attached as Schedule
3.2 of the Disclosure Letter are true, correct and complete copies of the
Certificate or Articles of Incorporation and Bylaws of each Subsidiary of the
Company. The Articles of Incorporation and Bylaws of the Company filed as
exhibits to the Company's SEC Documents are the true, correct and complete
copies of such documents and have not been amended or rescinded except as
indicated in such filings.
3.3 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 share of common stock, par value $.01 per share, of
which 4,180,476 are issued and outstanding as of
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the date of this Agreement, 250,000 shares of 9-1/2% Convertible Preferred
Stock, none of which are issued and outstanding and 9,750,000 shares of
undesignated stock, par value $.01 per share, none of which are issued and
outstanding. All outstanding securities of each Subsidiary of the Company, the
entire authorized capital stock, the amount of shares issued and outstanding
and the amount of shares held in treasury for each such Subsidiary are as set
forth on Schedule 3.3 of the Disclosure Letter. All of the outstanding shares
of the Company and each Subsidiary are duly authorized, validly issued, fully
paid, nonassessable and free of any preemptive rights. Except as set forth on
Schedule 3.3 of the Disclosure Letter, all of the outstanding shares of each
Subsidiary are owned by the Company, in each case free and clear of all liens,
claims, charges and encumbrances of any nature whatsoever except those
disclosed in Schedule 3.7 of the Disclosure Letter and except Permitted Liens,
and, subject to Shareholder approval as contemplated by Section 2.22, the
authorization or consent of no other person or entity is required in order to
consummate the transactions contemplated herein by virtue of any such person or
entity having an equitable or beneficial interest in the Company or the capital
stock of the Company. Except for options covering 539,014 shares of Company
Common Stock as set forth in Schedule 3.3 of the Disclosure Letter, there are
no outstanding options, warrants, calls, commitments or plans by the Company or
any Subsidiary to issue any additional shares of its capital stock, to pay any
dividends on such shares or to purchase, redeem, or retire any outstanding
shares of its capital stock, nor are there outstanding any securities or
obligations which are convertible into or exchangeable for any shares of
capital stock of the Company or any such Subsidiary.
3.4 Absence of Equity Investments. Except as described in Schedule
3.4 of the Disclosure Letter or in the Company SEC Documents, the Company does
not, either directly or indirectly, own of record or beneficially any shares or
other equity interests in any corporation, partnership, limited partnership,
joint venture, trust or other business entity. Except as disclosed in the
Company SEC Documents or in Schedule 3.4 of the Disclosure Letter, to the
knowledge of the Company, no officer or director of the Company or any
Subsidiary or other Affiliate of such person, directly or indirectly, owns of
record or beneficially any shares or other equity interests in any corporation
(except as a stockholder holding less than one percent (1%) interest in a
corporation whose
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shares are traded on a national or regional securities exchange or in the
over-the-counter-market), partnership, limited partnership, joint venture,
trust or other business entity, all or any portion of the business of which is
competitive with that of the Company.
3.5 Company SEC Documents. The Company has filed with the SEC
all forms, reports, schedules, statements and other documents required to be
filed by it since July 1, 1993 under the Securities Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "Company SEC Documents"). The Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a 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, and (b) complied in all material respects with
the applicable requirements of the Securities Exchange Act and the Securities
Act, as the case may be. The financial statements of the Company included in
the Company SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the date of effectiveness and the date of
mailing, respectively) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC), and fairly present (subject in the case of unaudited
statements to normal, recurring audit adjustments) the consolidated financial
position of the Company as at the dates thereof and the consolidated results of
its operations and cash flows for the periods then ended.
3.6 Taxes. Except as disclosed on Schedule 3.6 of the Disclosure
Letter, the Company has duly filed all federal and material state, local and
foreign income, franchise, excise, real and personal property and other Tax
returns and reports (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by the
Company prior to the date hereof. Except as disclosed in Schedule 3.6 of the
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Disclosure Letter, all of the foregoing returns and reports are true and
correct in all material respects, and the Company has paid or, prior to the
Effective Time, will pay all material Taxes, interest and penalties required to
be paid in respect of the periods covered by such returns or reports to any
federal, state, foreign, local or other taxing authority. Except as disclosed
in Schedule 3.6 of the Disclosure Letter, the Company has paid or made adequate
provision in the financial statements of the Company included in the Company
SEC Documents for all material Taxes payable in respect of all periods ending
on or prior to the date of the financial statements contained therein. Except
as disclosed in Schedule 3.6 of the Disclosure Letter, neither the Company nor
any of its Subsidiaries have any material liability for any Taxes in excess of
the amounts so paid or reserves so established and neither the Company nor any
of its subsidiaries is delinquent in the payment of any material Tax,
assessment or governmental charge and none of them has requested any extension
of time within which to file any returns in respect of any fiscal year which
have not since been filed. Except as disclosed in Schedule 3.6 of the
Disclosure Letter, to the knowledge of the Company, no deficiencies for any
Tax, assessment or governmental charge have been proposed in writing, asserted
or assessed (tentatively or definitely), in each case, by any taxing authority,
against the Company or any of its Subsidiaries for which there are not adequate
reserves. Except as disclosed in Schedule 3.6 of the Disclosure Letter, to the
knowledge of the Company, neither the Company nor any of its Subsidiaries is
currently the subject of any Tax audit. To the knowledge of the Company, as of
the date of this Agreement, there are no pending requests for waivers of the
time to assess any such Tax, other than those made in the ordinary course and
for which payment has been made or there are adequate reserves. The Company has
not filed an election under Section 341(f) of the Code to be treated as a
consenting corporation.
3.7 Ownership of Assets and Leases.
3.7.1 Real Estate and Personal Property. Schedule 3.7 of the
Disclosure Letter is a complete and correct list and brief description as of
the date of this Agreement of all real property and items of personal property
which are owned and have a book value in excess of $100,000 net of the reserve
for depreciation, and all real property and all material items of personal
property which are leased or licensed by the Company under leases relating
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<PAGE> 24
to assets which are material to the operation of the Company or which provide
for payments throughout the lease term of more than $100,000. The Company has
good and marketable title to all of its property and assets, other than leased
or licensed property, including those listed and described in Schedule 3.7 of
the Disclosure Letter as owned property and assets, in each case free and clear
of any liens, security interests, claims, charges, options, rights of tenants
or other encumbrances, except as disclosed or reserved against in Schedule 3.7
of the Disclosure Letter (to the extent and in the amounts so disclosed or
reserved against) and except for Permitted Liens. Each of the leases, licenses
and agreements described in Schedule 3.7 of the Disclosure Letter is in full
force and effect and constitutes a legal, valid and binding obligation of the
Company and the other respective parties thereto and is enforceable in
accordance with its terms, except as enforceability may be limited by
applicable equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally, and there is not under any of such
leases, licenses or agreements existing any material default of the Company or
(to the knowledge of the Company) any other parties thereto (or, to the
knowledge of the Company, event or condition which, with notice or lapse of
time, or both, would constitute a default). Neither the Company nor any officer
or director has received any payment from a lessor or licensor in connection
with or as inducement for entering into a lease or license under which the
Company is a lessee or a licensee. All buildings, machinery and equipment owned
or leased by the Company are in all material respects in good operating
condition and reasonable state of repair, subject only to ordinary wear and
tear. The Company has not received any notice of a violation of any applicable
zoning regulation, ordinance or other law, regulation or requirement relating
to its operations and properties, whether owned or leased, and there is no such
violation or grounds therefor which could reasonably be expected to have a
Company Material Adverse Effect. Except pursuant to this Agreement (or pursuant
to customer contracts insofar as such contracts grant customers the rights to
their records on termination), the Company is not a party to any contract or
obligation whereby there has been granted to anyone an absolute or contingent
right to purchase, obtain or acquire any rights in any material assets,
properties or operations which are owned by the Company or which are used in
connection with the business of the Company.
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3.8 Accounts Receivable. All of the accounts receivable of the
Company as of the date hereof are and as of the Closing Date will have arisen
in the ordinary course of business and represent valid accounts which are not
subject to offset or dispute except as otherwise disclosed to the Purchaser in
the Disclosure Letter. The accounts receivables reserves reflected on the
balance sheet as of June 30, 1996 included in the Company SEC Documents are as
of such date established in accordance with GAAP consistently applied and any
reserves established after such date and prior to the Effective Time will
likewise be established in accordance with GAAP consistently applied. To the
knowledge of the Company, the accounts receivable of the Company are
collectible in full net of any reserves thereon.
3.9 Registration Statement. None of the information provided by
the Company for inclusion in the Registration Statement at the time it becomes
effective or, in the case of the Proxy Statement, at the date of mailing, will
contain any untrue statement of a 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. The portions of the Registration Statement and Proxy Statement that
relate to the Company and its Subsidiaries will each comply as to form in all
material respects with the provisions of the Securities Act and the Securities
Exchange Act.
3.10 Required Filings and Absence of Conflicts. Except as listed in
Schedule 3.10 of the Disclosure Letter, the execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the Certificate of
Incorporation, as amended, Articles of Incorporation, as amended, or Bylaws, as
amended, of the Company or any Subsidiary or violate or constitute an
occurrence of default under any provision of, or conflict with, or result in
acceleration of any obligation under, or give rise to a right by any party to
terminate its obligations under, any material mortgage, deed of trust,
conveyance to secure debt, note, loan, lien, lease, agreement, instrument, or
any order, judgment, decree or other material arrangement to which the Company
or any Subsidiary is a party or is bound or by which the Company's assets are
affected. Except for (i) Shareholder approval as noted in Section 2.22 hereof,
(ii) the pre-merger notification requirements under the HSR Act, (iii) filing
and recordation of appropriate
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merger and similar documents under Delaware and Minnesota law, (iv) applicable
requirements, if any, under the Securities Exchange Act, the Securities Act and
applicable blue sky laws and (iv) applicable requirements, if any, under the
Code and state, local and foreign tax laws and except as listed or described on
Schedule 3.10 of the Disclosure Letter, no material consent, approval, order or
authorization of, or material registration, declaration or filing with, any
governmental entity is required to be obtained or made by or with respect to
the Company, any Shareholder or any assets, properties or operations of the
Company or any Shareholder, in connection with the execution and delivery by
the Company of this Agreement or the consummation of the transactions
contemplated hereby.
3.11 Absence of Changes. Since June 30, 1996, the Company has not,
nor has anyone on its behalf, except as disclosed on Schedule 3.11 of the
Disclosure Letter or in the Company SEC Documents or as permitted by Section
2.12 hereof:
3.11.1 Transferred, assigned, conveyed or liquidated into
current assets any of its material assets or business or entered into any
material transaction or incurred any material liability or obligation, other
than in the ordinary course of its business;
3.11.2 Suffered any Company Material Adverse Effect or
become aware of any event or state of facts which would result in a Company
Material Adverse Effect;
3.11.3 Suffered any destruction, damage or loss to a
material asset or a group of assets that in the aggregate cause a Company
Material Adverse Effect, whether or not covered by insurance;
3.11.4 Suffered, permitted or incurred the imposition of any
material lien, charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure debt or security
interest) or claim upon any of its assets, except for Permitted Liens;
3.11.5 Committed, suffered, permitted or incurred any
material default in any liability or obligation;
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3.11.6 Made or agreed to any materially adverse change in
the terms of any material contract or instrument to which it is a party;
3.11.7 Waived, canceled, sold or otherwise disposed of, for
materially less than the face amount thereof, any material claim or right which
it has against others or deviated from its normal collection activities
consistent with historic practice in any materially adverse respect;
3.11.8 Declared, promised or made any distribution or other
payment to its shareholders (other than reasonable compensation for services
actually rendered in accordance with past practice) or issued any additional
shares (except upon the exercise of outstanding options which are disclosed in
the Disclosure Letter) or rights, options or calls with respect to the
Company's shares (except options disclosed in Schedule 3.3 of the Disclosure
Letter, or redeemed, purchased or otherwise acquired the Company's shares, or
made any change in the Company's capital structure;
3.11.9 Paid, agreed to pay or incurred any obligation for
any payment for, any contribution or other amount to, or with respect to, any
employee benefit plan (except for the payment of health, disability and life
insurance premiums which had become due and except for contributions or
distributions required to be made (and not discretionary) pursuant to any
Benefit Plans), or paid or agreed to pay any bonus to, or granted or agreed to
grant any increase in the compensation of, the Company's directors, officers,
agents or employees, or made any increase in the pension, retirement or other
benefits of its directors, officers, agents or other employees (except for
regularly scheduled periodic increases in employees' compensation at times and
in amounts consistent with historic practice);
3.11.10 Committed, suffered, permitted or incurred any
transaction or event which would materially increase its Tax liability for any
prior taxable year;
3.11.11 Incurred any other material liability or obligation
or entered into any significant transaction other than in the ordinary course
of business;
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3.11.12 To the knowledge of the Company, received any notices
that any material customer has taken or contemplates any steps which could
reasonably be expected to materially disrupt the business relationship of the
Company with said person or could result in the material diminution in the
value of the Company as a going concern;
3.11.13 Paid, agreed to pay or incurred any material
obligation for any payment of any indebtedness except current liabilities
incurred in the ordinary course of business and except for payments as they
become due pursuant to governing agreements which were included or described in
the Company SEC Documents as such agreements existed on June 30, 1996; or
3.11.14 Delayed or postponed the payment of any material
liabilities, whether current or long term, or failed to pay in the ordinary
course of business any material liability on a timely basis consistent with
prior practice.
3.12 Litigation. Except as otherwise set forth in Schedule 3.12 of the
Disclosure Letter (with such Schedule 3.12 separately identifying litigation
arising in the ordinary course in the Company's third party administrator
business involving denied coverage or claims administration and claims relating
to the Company's care management business), there is no suit, action,
proceeding, claim or investigation pending with respect to which the Company
has been served or as to which the Company has knowledge or, to the knowledge
of the Company, threatened against or affecting the Company and, to the
knowledge of the Company, there exists no basis or grounds for any such suit,
action, proceeding, claim or investigation. None of the items described in
Schedule 3.12 of the Disclosure Letter, individually or in the aggregate, if
pursued and/or resulting in a judgment, would have a Company Material Adverse
Effect.
3.13 Licenses and Permits; Compliance With Law. The Company holds all
material licenses, certificates, permits, franchises and rights from all
appropriate federal, state or other public authorities necessary for the
conduct of its business and the use of its assets. All such licenses,
certificates, permits, franchises and rights are listed in Schedule 3.13 of the
Disclosure Letter. Except as noted in Schedule 3.13 of the Disclosure Letter,
the Company is presently conducting its business
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so as to comply in all material respects with all applicable statutes,
ordinances, rules, regulations and orders of any governmental authority. All
necessary records demonstrating such compliance will become the property of the
Surviving Corporation subsequent to the Closing. Further, except as set forth
on Schedule 3.12 or 3.13 of the Disclosure Letter, the Company is not presently
charged with, or, to the knowledge of the Company, under governmental
investigation with respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation, nor presently the subject of any pending or, to
the knowledge of the Company, threatened material adverse proceeding by any
regulatory authority having jurisdiction over its business, properties or
operations. Except as set forth on Schedule 3.12 or 3.10 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in the
termination of any material license, certificate, permit, franchise or right
held by the Company.
3.14 Contracts, Etc. Schedule 3.14 of the Disclosure Letter sets forth a
true and complete list of all contracts, agreements and other instruments to
which the Company is a party which are not listed on Schedules 3.7, 3.15.2(ii),
3.18 or 3.21 of the Disclosure Letter and which involve the payment by or to
the Company of more than $500,000.00 over the term of the agreement remaining
after June 30, 1996, and contemporaneously with the delivery of the Disclosure
Letters, the Company has delivered a true and complete copy of each contract,
agreement or instrument listed in Schedules 3.7, 3.14, 3.15.2(ii), 3.18 or 3.21
of the Disclosure Letter which is not filed as an Exhibit to the Company's SEC
Documents and is written and a summary of the terms of each such contract or
agreement which is oral, certified as such by a duly authorized officer of the
Company, except that, with respect to the contracts listed on Schedule 3.14.1,
3.14.2, 3.14.4, and 3.14.5 of the Disclosure Letter, the Company has provided
access to such contracts to the Purchaser but has not provided copies thereof.
The foregoing notwithstanding, Schedule 3.14 of the Disclosure Letter includes
all of the following:
3.14.1 Any contract or commitment which requires services
over the term remaining after June 30, 1996 in excess of $500,000 to be
provided or performed by the Company or which authorizes others to perform
services in excess of $500,000 over the term remaining after June 30, 1996 for
a third party for,
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through or on behalf of the Company, other than those services performed for
customers and clients set forth on Schedule 3.19 of the Disclosure Letter;
3.14.2 Any contract or commitment involving an obligation by
the Company in excess of $500,000 over the term remaining after June 30, 1996
which cannot, or in reasonable probability will not, be performed or terminated
within one year from the date as of which these representations are made;
3.14.3 Any note receivable;
3.14.4 Any contract or commitment providing for payments
based in any manner upon the sales, purchases, receipts, income or profits of
the Company including, without limitation, any agreements with general agents
or with agents;
3.14.5 Any franchise agreement, marketing agreement or
royalty agreement (and with respect to each such agreement Schedule 3.14 of the
Disclosure Letter sets forth the aggregate royalties or similar payment paid or
payable thereunder by the Company as of the date hereof);
3.14.6 Any material contract or agreement with a creditor not
made in the ordinary course of business;
3.14.7 Any employment contract or arrangement regarding an
employee or independent contractors which is not terminable by the Company
within thirty (30) days without payment of any amount for any reason whatsoever,
or without any continuing payment of any type or nature, including, without
limitation, any bonuses and vested commissions;
3.14.8 Any contract, agreement, understanding or arrangement
materially restricting the Company from carrying on its business anywhere in the
world;
3.14.9 Any material instrument or arrangement evidencing or
related to indebtedness for money borrowed or to be borrowed, whether directly
or indirectly, by way of purchase money obligation, guaranty, subordination,
conditional sale, lease-purchase or otherwise;
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3.14.10 Any contract with any labor organization; and
3.14.11 Any material bond, suretyship arrangement, guarantee,
letter of credit or other performance guarantee document pursuant to which any
obligation of the Company is guaranteed or secured or pursuant to which the
Company has guaranteed or secured the performance or obligation of another
person.
All of the contracts, agreements, policies of insurance or instruments
described in Schedules 3.7, 3.14, 3.15.2(i), 3.15.2(ii), 3.18 or 3.21 of the
Disclosure Letter are valid and binding upon the Company and, to the knowledge
of the Company, the other parties thereto and are in full force and effect and
enforceable in accordance with their terms, except as enforceability may be
limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. Neither the Company
nor, to the knowledge of the Company, any other party to any such contract,
commitment or arrangement has materially breached any material provision of, or
is in material default under, the terms thereof.
3.15 Intellectual Property; Computer Software.
3.15.1 Schedule 3.15.1 of the Disclosure Letter sets forth a
complete and correct list and summary description of all material trademarks,
trade names, service marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefor, applicable to or used in the
business of the Company, together with a complete list of all licenses granted
by or to the Company with respect to any of the above. All such trademarks,
trade names, service marks, service names, brand names, copyrights and patents
are owned by the Company, free and clear of all liens, claims, security
interests and encumbrances of any nature whatsoever except those disclosed in
Schedule 3.7 of the Disclosure Letter and except Permitted Liens. The Company
is not currently in receipt of any notice of any violation of, and, to the
knowledge of the Company, it is not violating, the rights of others in any
trademark, trade name, service mark, copyright, patent, trade secret, know-how
or other intangible asset.
3.15.2 (i) Schedule 3.15.2(i) of the Disclosure Letter
contains a complete and accurate list of all material computer
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software owned by the Company (the "Owned Software"). Except as set forth on
Schedule 3.15.2(i) of the Disclosure Letter, the Company has exclusive title to
the Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, customers, licensees or other parties involved
in the development, creation, marketing, maintenance, enhancement or licensing
of such computer software, except those disclosed in Schedule 3.7 of the
Disclosure Letter, except Permitted Liens, and except licenses to customers in
the ordinary course of business. Except as set forth on Schedule 3.15.2(i) of
the Disclosure Letter, the Owned Software is not dependent on any Licensed
Software (as defined in subsection (ii) below) in order to fully operate in the
manner in which it is intended. No Owned Software has been published or
disclosed to any other parties, except as set forth on Schedule 3.15.2(i) of
the Disclosure Letter, and except pursuant to contracts requiring such other
parties to keep the Owned Software confidential. To the knowledge of the
Company, no such other party has breached any such obligation of
confidentiality.
(ii) Schedule 3.15.2(ii) of the Disclosure
Letter contains a complete and accurate list of all material software under
which the Company is a licensee, lessee or otherwise has obtained the right to
use software, other than licenses relating to standard "off the shelf" software
that is generally available from vendors and software made generally available
from such vendors on a "shrink-wrap license" basis (the "Licensed Software").
Schedule 3.15.2(ii) of the Disclosure Letter also sets forth a list of all
license fees, rents, royalties or other charges that the Company is required or
obligated to pay with respect to Licensed Software. The Company has the right
and license to use, sublicense, modify and copy Licensed Software, free and
clear of any limitations or encumbrances except as may be set forth in any
license agreements listed in Schedule 3.15.2(ii) of the Disclosure Letter. The
Company is in compliance in all material respects with all material provisions
of any license, lease or other similar agreement pursuant to which it has
rights to use the Licensed Software. Except as disclosed on Schedule 3.15.2(ii)
of the Disclosure Letter, none of the Licensed Software has been incorporated
into or made a part of any Owned Software or any other Licensed Software. The
Company has not published or disclosed any Licensed Software to any other
party.
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(iii) The Owned Software and Licensed
Software constitute all material software necessary for use in the businesses
of the Company, other than licenses relating to standard "off the shelf"
software that is generally available from vendors and software made generally
available from such vendors on a "shrink-wrap license" basis, (the "Company
Software"). Schedule 3.15.2(iii) of the Disclosure Letter sets forth a list of
all contract programmers, independent contractors, nonemployee agents and
persons or other entities (other than employees) who have performed material
computer programming services for the Company and identifies all material
contracts and agreements pursuant to which such services were performed. Except
as disclosed on Schedule 3.10 of the Disclosure Letter, the transactions
contemplated herein will not cause a material breach or default under any
licenses, leases or similar agreements relating to the Company Software or
materially impair the Surviving Corporation's ability to use the Company
Software in the same manner as such computer software is currently used by the
Company. The Company is not infringing any intellectual property rights of any
other person or entity with respect to the Company Software, and to the
knowledge of the Company, no other person or entity is infringing any
intellectual property rights of the Company with respect to the Company
Software.
3.16 Product Warranties and Liabilities. Except as listed on
Schedule 3.16 of the Disclosure Letter, the Company has no forms of warranties
or guarantees of its products and services that are in effect or proposed to be
used by it. Schedule 3.16 of the Disclosure Letter sets forth a description of
each pending or, to the knowledge of the Company, threatened material action
under any warranty or guaranty against the Company. The Company has not
incurred, nor does the Company know or have any reason to believe there is any
basis for alleging, any material liability, damage, loss, cost or expense (in
excess of any reserves therefor) as a result of any material defect or other
deficiency (whether of design, materials, workmanship, labeling instructions or
otherwise) ("Product Liability") with respect to any product sold or services
rendered by or on behalf of the Company prior to the Effective Time, whether
such Product Liability is incurred by reason of any express or implied warranty
(including, without limitation, any warranty of merchantability or fitness),
any doctrine of common law (tort, contract or other), any statutory provision
or otherwise and
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irrespective of whether such Product Liability is covered by insurance.
3.17 Labor Matters. Schedule 3.17 of the Disclosure Letter sets
forth a list of all employees, consultants and independent contractors of the
Company whose compensation for 1995 or expected compensation for 1996 exceeds
$100,000.00 per annum and lists the compensation per annum for such persons.
Except as set forth on Schedule 3.17 of the Disclosure Letter, within the last
three (3) years, to the knowledge of the Company, the Company has not been the
subject of any union activity or labor dispute, nor has there been any strike
of any kind called or (to the knowledge of the Company) threatened to be
called, against the Company. Except as set forth on Schedule 3.17 of the
Disclosure Letter, the Company has not violated in any material respect any
applicable federal or state law or regulation relating to labor, labor
practices or immigration matters. The Company has no knowledge that there will
be any materially adverse change in relations with employees and independent
contractors of the Company as a result of the transactions contemplated by this
Agreement.
3.18 Benefit Plans.
3.18.1 The Company's SEC Documents or, to the extent not
disclosed therein, Schedule 3.18 of the Disclosure Letter lists every pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other incentive plan, any other
written or unwritten employee program, arrangement, agreement or understanding,
(whether arrived at through collective bargaining or otherwise), any medical,
vision, dental or other health plan, any life insurance plan or any other
employee benefit plan or fringe benefit plan, including, without limitation,
any "employee benefit plan," as that term is defined in Section 3(3) of ERISA,
or any other plan, program, agreement, arrangement, commitment and/or method of
compensation, whether funded or unfunded, currently maintained, sponsored in
whole or in part or contributed to by the Company or any Affiliate of the
Company for the benefit of employees, retirees, dependents, spouses, directors,
officers, independent contractors or other beneficiaries of the Company or an
Affiliate of the Company and under which employees, retirees, dependents,
spouses, directors, officers, independent contractors or other beneficiaries of
the Company or an Affiliate of the Company are
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eligible to participate or under or in connection with which the Company may
reasonably be expected to have any contingent or noncontingent liability of any
kind (collectively, the "Benefit Plans"). Any of the Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, or an "employee welfare benefit plan" as that term is defined in Section
3(1) of ERISA, is referred to herein as an "ERISA Plan." No Benefit Plan is or
has been a "multiemployer plan" within the meaning of Section 3(37) of ERISA.
Neither the Company nor any Subsidiary has ever contributed to or had an
obligation to contribute to any multiemployer plan.
3.18.2 Schedule 3.18 of the Disclosure Letter also lists:
(a) where applicable, with respect to any such plans or plan amendments, the
most recent determination letters issued by the United States Internal Revenue
Service, (b) all rulings, opinion letters, information letters or advisory
opinions issued by the United States Department of Labor, the United States
Internal Revenue Service or the Pension Benefit Guaranty Corporation after
December 31, 1974, with respect to such Benefit Plan, (c) annual reports or
returns and audited or unaudited financial statements for the most recent three
plan years and any amendments thereto, and (d) the most recent summary plan
descriptions and any material modifications thereto, and any other material
written communications to employees or to any governmental agency with respect
to such Benefit Plans during the three most recent plan years. Contemporaneous
with the delivery of the Disclosure Letter, the Company has delivered a true
and complete copy of each such Benefit Plan or summary description if such
Benefit Plan is not in writing, agreements, rulings, opinions, reports,
returns, financial statements and summary plan descriptions described in
Sections 3.18.1 or 3.18.2 hereof which has not been filed as a part of the
Company SEC Documents, certified as such by a duly authorized officer of the
Company.
3.18.3 All the Benefit Plans and the related trusts subject
to ERISA comply with and have been administered in compliance in all material
respects with the provisions of ERISA, all provisions of the Code relating to
qualification and tax exemption under Code Sections 401(a) and 501(a) or
otherwise applicable to secure intended Tax consequences, all applicable state
or federal securities laws and all other applicable laws, rules and regulations
and collective bargaining agreements, and
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neither the Company nor any Affiliate has received any notice from any
governmental agency or instrumentality questioning or challenging such
compliance. All necessary governmental approvals for the Benefit Plans have
been obtained, including, but not limited to, timely determination letters on
the qualification of the ERISA Plans and tax exemption of related trusts, as
applicable, under the Code and timely registration and disclosure under
applicable securities laws, and all such governmental approvals continue in
full force and effect. No event has occurred which will or could reasonably be
expected to give rise to disqualification of any such plan under sections
401(a) or 501(a) of the Code, adversely affect the qualified status of the Plan
of any such plan under Sections 401(a) or 501(a) of the Code or to a tax under
Section 511 of the Code. All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each Benefit Plan and have been paid on a timely basis.
3.18.4 Neither the Company, any Affiliate nor (to the
knowledge of the Company) any administrator or fiduciary of any such Benefit
Plan (or agent or delegate of any of the foregoing) has engaged in any
transaction or acted or failed to act in any manner which could reasonably be
expected to subject the Company to any direct or indirect material liability
(by indemnity or otherwise) for a breach of any fiduciary, co-fiduciary or
other duty under ERISA. No oral or written representation or communication with
respect to any aspect of the Benefit Plans has been or will be made by the
Company to employees of the Company prior to the Closing Date which is not in
accordance with the written or otherwise preexisting terms and provisions of
such Benefit Plans in effect immediately prior to the Closing Date. There are
no unresolved material claims or disputes under the terms of, or in connection
with, the Benefit Plans, and the Company has not been served with respect to or
given written notice of or have knowledge of the commencement of any legal or
administrative action with respect to any claim.
3.18.5 All annual reports or Returns, audited or unaudited
financial statements, actuarial valuations, summary annual reports and summary
plan descriptions issued with respect to the Benefit Plans are correct and
accurate in all material respects as of the dates thereof, and have been timely
filed or disseminated, as appropriate or required by applicable law, and the
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Company has not failed to file any amendments to any of such reports, returns,
statements, valuations or descriptions that are required to make the
information therein true and accurate in all material respects.
3.18.6 No "party in interest" (as defined in Section 3(14)
of ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of the
Code) of any Benefit Plan has engaged in any "prohibited transaction" (within
the meaning of Section 4975(c) of the Code or Section 406 of ERISA). There has
been no (a) "reportable event" (as defined in Section 4043 of ERISA), or event
described in Section 4062(f) or Section 4063(a) of ERISA or (b) termination or
partial termination, withdrawal or partial withdrawal with respect to any of
the ERISA Plans which the Company or an Affiliate of the Company maintains or
contributes to or has maintained or contributed to or was required to maintain
or contribute to or for the benefit of employees of the Company or any
Affiliate of the Company now or formerly in existence.
3.18.7 The Company does not have any ERISA Plan which is an
employee pension benefit plan as defined in ERISA Section 3(2).
3.18.8 Except as set forth on Schedule 3.18.8 of the
Disclosure Letter, as of the date of the Company's most recent SEC Document
which was a quarterly or annual report, the Company did not have any current or
future material liability under any Benefit Plan that was not reflected in such
filing, and the liability of the Company in connection with any Benefit Plan as
of Closing will not exceed in any material respects the amount recorded
therefor on the books of the Company.
3.18.9 Except as set forth on Schedule 3.18.9 of the
Disclosure Letter, the Company does not maintain any Benefit Plan providing
deferred or stock based compensation which is not reflected in the Company SEC
Documents.
3.18.10 The Company has not maintained a Benefit Plan
providing welfare benefits (as defined in ERISA Section 3(1)) to employees
after retirement or other separation of service except to the extent required
under Part 6 of Title I of ERISA and Code Section 4980B, or except as set forth
in the Company SEC Documents or on Schedule 3.18.10 of the Disclosure Letter.
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3.18.11 Except as disclosed in the Company SEC Documents or
on Schedule 3.18.11 of the Disclosure Letter and except for the acceleration of
the vesting of outstanding options, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of the Company to severance pay, unemployment compensation or any
payment contingent upon a change in control or ownership of the Company, or
(ii) accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such employee or former employee.
3.18.12 All Benefit Plans subject to section 4980B of the
Code from time to time or Part 6 of Title I of ERISA or both have been
maintained in substantial compliance with the requirements of such laws and any
regulations (proposed or otherwise) issued thereunder.
3.19 Customers and Clients. Schedule 3.19 of the Disclosure Letter
consists of a true and correct list of all of the customers and clients of the
Company during the 1996 fiscal year who generated revenues of more than
$1,000,000 during the 1996 fiscal year, setting forth as to each customer or
client its name and address. Except as set forth on Schedule 3.19 of the
Disclosure Letter, the Company has not received any notice, and does not have
reason to believe, that any such customer or client has taken or will take any
steps which could reasonably be expected to materially disrupt the business
relationship of the Company with such customer or client, or could reasonably
be expected to result in the material diminution in the value of the business
of the Company as a going concern.
3.20 Environmental Matters. Except as set forth in Schedule 3.20 of
the Disclosure Letter, no real property now or previously used by the Company
or now or previously owned or leased by the Company (the "Real Property") has
been used by the Company, or to the knowledge of the Company, any other party
for the handling, treatment, storage or disposal of any Hazardous Substance (as
hereinafter defined) except in compliance in all material respects with
applicable environmental laws. To the knowledge of the Company, except as set
forth in Schedule 3.20 of the Disclosure Letter, no release, discharge,
spillage or disposal by the Company into the environment of any Hazardous
Substance and no soil, water or air contamination by the Company of any
Hazardous Substance has
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occurred or is occurring in, from or on the Real Property. Except as set forth
in Schedule 3.20 of the Disclosure Letter, the Company has complied in all
material respects with all reporting requirements under any applicable federal,
state or local environmental laws and permits, and, to the knowledge of the
Company there are no existing violations by the Company of any such
environmental laws or permits. To the knowledge of the Company, there are no
claims, actions, suits, proceedings or investigations related to the presence,
release, production, handling, discharge, spillage, transportation or disposal
of any Hazardous Substance or ambient air conditions or contamination of soil,
water or air by any Hazardous Substance pending or, to the knowledge of the
Company, threatened with respect to the Real Property or otherwise against the
Company in any court or before any state, federal or other governmental agency
or private arbitration tribunal and, to the knowledge of the Company, there is
no basis for any such claim, action, suit, proceeding or investigation. To the
knowledge of the Company, there are no underground storage tanks on any Real
Property which is or was owned by the Company or is currently leased by the
Company. To the knowledge of the Company, no building or other improvement
included in any Real Property which is or was owned by the Company or is
presently leased by the Company contains any asbestos, and such buildings and
improvements are free from radon contamination. For the purposes of this
Agreement, "Hazardous Substance" shall mean any hazardous or toxic substance or
waste as those terms are defined by any applicable federal, state or local law,
ordinance, regulation, policy, judgment, decision, order or decree, including,
without limitation, the Comprehensive Environmental Recovery Compensation and
Liability Act, 42 U.S.C. 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et. seq. and the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et seq., and petroleum, petroleum products and oil.
3.21 Insurance. Set forth in Schedule 3.21 of the Disclosure Letter
is a complete list of all insurance policies which the Company maintained, or
was an insured party under, with respect to its businesses, properties or
employees which are currently in force and effect together with a list of all
such policies which have been in effect during the last 36 months but have
expired. Schedule 3.21 of the Disclosure Letter lists the annual premium and
renewal date of all such insurance policies. Except as set forth in Schedule
3.21 of the Disclosure Letter, since July 1, 1996,
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there has not been any change in the Company's relationship with its insurers
or in the premiums payable pursuant to such policies.
3.22 Related Party Relationships. Except as set forth in Schedule
3.22 of the Disclosure Letter, to the Company's knowledge, no officer or
director of the Company or any Affiliate thereof possesses, directly or
indirectly, any beneficial interest in, or is a director, officer or employee
of, any corporation, partnership, firm, association or business organization
which is a material client, supplier, customer, lessor, lessee, lender,
creditor, borrower, debtor or contracting party with or of the Company (except
as a stockholder holding less than a one percent interest in a corporation
whose shares are traded on a national or regional securities exchange or in the
over-the-counter market).
3.23 Opinion of Financial Advisor. The Company has received the
opinion of Robertson, Stephens & Company LLC, its financial advisor, to the
effect that, as of September 11, 1996, the consideration to be received by the
Company Shareholders in the Merger is fair to the Company Shareholders from a
financial point of view. The Company has heretofore provided a copy of such
opinion to the Purchaser and such opinion has not been withdrawn, revoked or
modified.
3.24 Schedules. All Schedules set forth in the Disclosure Letter
are true, correct and complete in all material respects as of the date of this
Agreement. Matters disclosed on each Schedule in the Disclosure Letter shall be
deemed disclosed only for purposes of the matters to be disclosed on such
Schedule and shall not be deemed to be disclosed for any other purpose unless
expressly provided therein.
3.25 Disclosure and Absence of Undisclosed Liabilities. No
statement contained herein or in any certificate, Schedule of the Disclosure
Letter, list, Exhibit or other instrument furnished by the Company to the
Purchaser or its agents pursuant to the provisions hereof contains or will
contain any untrue statement of any material fact or omits or will omit to
state a material fact necessary in order to make the statements, taken as a
whole, contained herein or therein, in light of the circumstances under which
they were made, not misleading.
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IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE
MERGER SUBSIDIARY.
The Purchaser and the Merger Subsidiary represent and warrant
to the Company for the benefit of the Shareholders as follows:
4.1 Organization and Standing. The Purchaser and the
Merger Subsidiary are duly organized and validly existing corporations in good
standing under the laws of the State of Delaware.
4.2 Corporate Power and Authority. The Purchaser and the
Merger Subsidiary have the capacity and authority to execute and deliver this
Agreement, to perform hereunder and to consummate the transactions contemplated
hereby without the necessity of any act or consent of any other Person
whomsoever. The execution, delivery and performance by the Purchaser and the
Merger Subsidiary of this Agreement and each and every agreement, document and
instrument provided for herein have been duly authorized and approved by the
respective Board of Directors (or Executive Committee thereof pursuant to
properly delegated authority) of the Purchaser and the Merger Subsidiary. This
Agreement and each and every other agreement, document and instrument to be
executed, delivered and performed by the Purchaser or the Merger Subsidiary in
connection herewith, constitute or will, when executed and delivered,
constitute the valid and legally binding obligation of the Purchaser or the
Merger Subsidiary (whichever is applicable) enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
4.3 Agreement Does Not Violate Other Instruments. The
execution and delivery of this Agreement by the Purchaser and the Merger
Subsidiary do not, and the consummation of the transactions contemplated hereby
will not, violate any provisions of the Certificate of Incorporation, as
amended, or Bylaws, as amended, of the Purchaser or the Merger Subsidiary, or
violate or constitute an occurrence of default under any provision of, or
conflict with, result in acceleration of any obligation under, or give rise to a
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right by any party to terminate its obligations under, any mortgage, deed of
trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument or any order, judgment, decree or other arrangement to which the
Purchaser or the Merger Subsidiary is a party or is bound or by which it or its
assets are affected.
4.4 Capitalization. The authorized capital stock of the
Purchaser consists of 100,000,000 shares of common stock, par value $0.01 per
share, 14,908,847 shares of which are issued and outstanding as of the date
hereof, and 25,000,000 shares of preferred stock, par value $0.01 per share,
none of which is issued and outstanding as of the date hereof. All of the
issued and outstanding shares of common stock of the Purchaser have been duly
authorized and validly issued, and all such shares are fully paid,
nonassessable and free of preemptive rights. All of the outstanding shares of
the Merger Subsidiary are owned by the Purchaser. Except for options covering
795,000 shares of Purchaser Common Stock, as of the date hereof there are no
outstanding options, warrants, calls, commitments or plans by the Purchaser or
the Merger Subsidiary to issue any additional shares of its capital stock, to
pay any dividends on such shares or to purchase, redeem or retire any
outstanding shares of its capital stock, nor are there outstanding any
securities or obligations that are convertible into or exchangeable for any
shares of capital stock of the Purchaser or the Merger Subsidiary.
4.5 HealthPlan Services Corporation Shares. The Purchaser
Common Stock when issued in connection with the Merger will be duly and validly
issued, fully paid and nonassessable and will be issued to the Shareholders in
accordance with the terms of this Agreement free and clear of any preemptive
rights or any lien charge or encumbrance arising through the Purchaser or the
Merger Subsidiary.
4.6 Purchaser SEC Documents. The Purchaser has filed with
the SEC all forms, reports, schedules, statements and other documents required
to be filed by it since the date of its initial public offering under the
Securities Exchange Act or the Securities Act (such documents, as supplemented
and amended since the time of filing through the date hereof, collectively, the
"Purchaser SEC Documents"). The Purchaser SEC Documents, including, without
limitation, any financial statements or schedules included therein, at the time
filed (and, in the case of registration statements and
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proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a 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, and (b) complied in all material respects with
the applicable requirements of the Securities Exchange Act and the Securities
Act, as the case may be. The financial statements of the Purchaser included in
the Purchaser SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC), and fairly present (subject in the case of unaudited
statements to normal, recurring audit adjustments) the consolidated financial
position of the Purchaser as at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended. Since the date of
the most recent Form 10-Q or Form 10-K of the Purchaser filed with the SEC
prior to the date hereof, no event or series of events has occurred that has
resulted or could reasonably be expected to result in a Purchaser Material
Adverse Effect. The Purchaser has heretofore made available to the Company in
the form filed with the SEC (excluding any exhibits thereto, unless otherwise
specifically requested by the Company), the Purchaser SEC Documents.
4.7 Registration Statement. None of the information provided by
the Purchaser for inclusion in the Registration Statement, including the
prospectus relating to the Purchaser Common Stock to be issued in the Merger
and the Proxy Statement and form of proxy relating to the vote of the Company
Shareholders with respect to the Merger, contained therein, at the time the
Registration Statement becomes effective or, in the case of the Proxy
Statement, at the date of mailing, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Each of the
Registration Statement and Proxy
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Statement, except for such portions thereof that relate only to the Company,
will comply as to form in all material respects with the provisions of the
Securities Act and Securities Exchange Act.
4.8 Disclosure and Absence of Undisclosed Liabilities. No
statement contained herein or in any certificate, list, Exhibit or other
instrument furnished by the Purchaser or the Merger Subsidiary to the Company,
or its agents, pursuant to the provisions hereof contains or will contain any
untrue statement of any material fact or omits or will omit to state a material
fact necessary in order to make the statements, taken as a whole, contained
herein or therein, in light of the circumstances under which they were made,
not misleading.
V. CONDITIONS.
5.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
5.1.1 This Agreement and the transactions contemplated
hereby shall have been approved in the manner required by applicable law or by
the applicable regulations of any stock exchange or other regulatory body, as
the case may be, by the holders of the issued and outstanding shares of capital
stock of the Company.
5.1.2 The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
5.1.3 Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the event
any such order or injunction shall have been issued, each party agrees to use
its reasonable efforts to have any such injunction lifted.
5.1.4 The Registration Statement shall have become
effective and shall be effective at the Effective Time, and no stop order
suspending effectiveness of the Registration Statement shall
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have been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be continuing,
or, to the knowledge of the Purchaser or the Company, threatened, and all
necessary approvals under state securities laws relating to the issuance or
trading of the Purchaser Common Stock to be issued to the Company stockholders
in connection with the Merger shall have been received.
5.1.5 All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or registration
would not have a Company Material Adverse Effect or a Purchaser Material
Adverse Effect.
5.1.6 The Purchaser's Common Stock to be issued to the
Company Stockholders in connection with the Merger shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
5.2 Conditions to Obligations of the Purchaser and Merger Subsidiary
to Effect the Merger. All of the obligations of the Purchaser and the Merger
Subsidiary to consummate the transactions contemplated by this Agreement are
contingent upon and subject to the satisfaction, on or before the Closing Date,
of each and every one of the following conditions, all or any of which may be
waived, in whole or in part, by the Purchaser for purposes of consummating such
transactions, but without prejudice to any other right or remedy which the
Purchaser may have hereunder:
5.2.1 Representations True at Closing. The representations
and warranties made by the Company to the Purchaser in this Agreement, the
Schedules contained in the Disclosure Letter or any document or instrument
delivered to the Purchaser hereunder shall be true and correct in all material
respects on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such time, except for
changes contemplated by this Agreement; provided, however, that the failure of
any such representations and warranties to be true and
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correct in all material respects shall not permit the Purchaser to terminate
this Agreement or not consummate the Merger unless such failure shall constitute
a Company Material Adverse Effect.
5.2.2 Covenants of the Company. The Company shall have duly
performed in all material respects all of the covenants, acts and undertakings
to be performed by it on or prior to the Closing Date, and the President of the
Company shall deliver to the Purchaser a certificate dated as of the Closing
Date certifying to the fulfillment of this condition and the condition set
forth in Section 5.2.1.
5.2.3 Opinion of Counsel. An opinion of Fredrikson & Byron,
P.A., counsel for the Company, shall have been delivered to the Purchaser dated
as of the Closing Date, in form and substance acceptable to the Purchaser and
its lenders.
5.2.4 Consents, Approvals, and Waivers. The Purchaser shall
have received a true and correct copy of each and every consent, approval and
waiver required on the part of the Company that is (a) referred to in Section
2.15 hereof, or (b) otherwise required for the execution of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby; provided, however, that the failure to deliver any such
consents, approvals and waivers shall not permit the Purchaser to terminate
this Agreement or not consummate the Merger unless such failure shall
constitute a Company Material Adverse Effect.
5.2.5 Absence of Adverse Changes. The Company and/or its
Subsidiaries shall not have suffered a Company Material Adverse Event which
continues as of the Effective Time or any series of events which when taken in
the aggregate have a Company Material Adverse Effect which continues as of the
Effective Time and which is not disclosed in a Company SEC Document filed prior
to the date of this Agreement or in the Disclosure Letter.
5.2.6 Employment Agreements. Each individual referenced in
Section 2.16 shall, unless disabled or deceased, have executed an Employment
Agreement, substantially in the form required by Section 2.16.
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5.2.7 Shareholder Approval/Dissenter's or Statutory Rights.
Such shareholders of the Company as are required by applicable law to have
approved the Merger shall have in fact approved the Merger and Shareholders
holding not more than 5% of the outstanding stock of the Company shall not have
notified the Company that such Shareholders intend to elect nor shall have
taken any other action to perfect any dissenter's or similar statutory rights
under the provisions of any state statute affording such Shareholder such
rights as a result of the Merger.
5.2.8 Company Options. After the Effective Time, no person
shall, by action of the Company taken prior to the Effective Time, have any
right to acquire any equity securities of the Company or any Subsidiary under
any stock option plan (or any option granted thereunder) or other plan, program
or arrangement in existence prior to or triggered by the Effective Time.
5.2.9 Affiliate Undertakings Letters. Each person who may
be at the Effective Time or was on the date of this Agreement an "affiliate" of
the Company for purposes of Rule 145 under the Securities Act, shall have
executed and delivered to the Purchaser at least 35 days prior to the date of
the meeting of the Company Shareholders to approve the Merger the written
undertakings in the form attached hereto as Exhibit 2.28.
5.2.10 Receipt of Tax Opinion. The Company shall have
received the opinion of Fredrikson & Byron, P.A., dated as of the Closing in
form and substance acceptable to the Purchaser, (based upon reasonably
requested representation letters) to the effect that the Merger should be
treated as a tax free reorganization pursuant to the provisions of Section
368(a)(1)(A) and (a)(2)(D) of the Code, and the Company's Shareholders should
recognize no gain on the exchange of their shares, except to the extent that
they receive consideration other than the Per Share Stock Consideration.
5.2.11 Support/Voting Agreement to Remain In Effect. The
Support/Voting Agreement shall have remained in full force and effect through
the Effective Time.
5.3 Conditions Precedent To The Obligations Of The Company To
Close. All of the obligations of the Company to consummate the transactions
contemplated by this Agreement shall be contingent upon and subject to the
satisfaction, on or before the Closing
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Date, of each and every one of the following conditions, all or any of which
may be waived, in whole or in part, by the Company for purposes of consummating
such transactions, but without prejudice to any other right or remedy which
they may have hereunder:
5.3.1 Representations True at Closing. The representations
and warranties made by the Purchaser and the Merger Subsidiary to the Company in
this Agreement or any document or instrument delivered to the Company hereunder
shall be true and correct in all material respects on the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of such date, except for changes contemplated by this Agreement;
provided, however, that the failure of any such representation and warranties to
be true and correct in all material respects shall not permit the Company to
terminate this Agreement or not consummate the Merger unless such failure shall
constitute a Purchaser Material Adverse Effect.
5.3.2 Covenants of the Purchaser. The Purchaser and the
Merger Subsidiary shall have duly performed in all material respects all of the
covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, and a duly authorized officer of the Purchaser shall deliver a
certificate dated as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth under Section 5.3.1 above.
5.3.3 Opinion of Counsel. An opinion of Fowler, White,
Gillen, Boggs, Villareal & Banker, P.A. counsel for the Purchaser and Merger
Subsidiary, shall have been delivered to the Company dated as of the Closing
Date, substantially in form and substance acceptable to the Company.
5.3.4 Receipt by Shareholders of Tax Opinion. The Company
shall have received the opinion of Fredrikson & Byron, P.A., dated as of the
Closing in form and substance acceptable to the Company, (based upon reasonably
requested representation letters) to the effect that the Merger should be
treated as a tax free reorganization pursuant to the provisions of Section
368(a)(1)(A) and (a)(2)(D), and the Company's Shareholders should recognize no
gain on the exchange of their shares, except to the extent that they receive
Consideration other than the Per Share Stock Consideration.
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5.3.5 Absence of Adverse Changes. The Purchaser shall not
have suffered a Purchaser Material Adverse Event which continues as of the
Effective Time or any series of events which when taken in the aggregate have a
Purchaser Material Adverse Effect which continues as of the Effective Time and
which is not disclosed in a Purchaser SEC Document filed prior to the date of
this Agreement.
5.3.6 Election of Directors. The Purchaser and/or the
Merger Subsidiary shall have taken such action as is necessary to elect Robert
L. Montgomery, Raymond G. Schultze, M.D., and Gary L. Damkoehler as directors
of the Surviving Corporation following the Merger and Gary L. McIlroy, M.D., as
a director of Purchaser following the Closing.
VI. CLOSING.
6.1 Time and Place of Closing. The Closing shall be held
at the offices of Fowler, White, Gillen, Boggs, Villareal & Banker P.A., 501
East Kennedy Blvd., Tampa, Florida, commencing at 10:00 a.m. Eastern Daylight
Time, on the third business day after the last to be fulfilled or waived of the
conditions set forth in Article V shall be fulfilled or waived in accordance
with the provisions hereof but in no event earlier than January 1, 1997, or
such other date, time and place as the parties shall mutually agree.
6.2 Transactions at Closing. At the Closing, each of the
parties shall deliver to the others such certificates and other documents as
called for by the terms of this Agreement or as otherwise reasonably requested
by such parties and their respective counsel. At the Closing, the Purchaser
shall cause to be paid the transactional fees and expenses of the Company,
including but not limited to the amount payable to the Company's financial
advisor and the Company's reasonable legal and accounting fees and expenses.
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VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, AGREEMENTS AND COVENANTS
AFTER CLOSING.
7.1 Survival of Representations and Warranties. All
representations and warranties of the parties in this Agreement or in any
document or instrument executed and delivered pursuant hereto, are only
conditions to the Closing of the transactions contemplated hereby and shall not
survive the Closing hereunder.
7.2 Survival of Agreements and Covenants. All
agreements, covenants and obligations made or undertaken by the parties in this
Agreement that require performance on or before the Closing Date shall be
deemed to have been performed or waived upon Closing, if Closing occurs, and
shall not survive the Closing. The foregoing notwithstanding, the provisions of
the Certificate of Merger and Articles of Merger, the Employment Agreements,
the Affiliate Undertakings Letters and the Legal Opinions delivered at Closing,
and the agreements, covenants and obligations contained herein that anticipate
or require actions following the Closing, shall survive the Closing for the
term set forth therein or herein.
VIII. TERMINATION.
8.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the Stockholders of the
Purchaser or the Company, by the mutual consent of the Purchaser and the
Company.
8.2 Termination by Either Purchaser or Company. This Agreement may
be terminated and the Merger may be abandoned by action of the Board of
Directors of either the Purchaser or the Company if (a) the Merger shall not
have been consummated by January 31, 1997, or (b) the approval of the Company's
Shareholders required by Section 5.1.1 shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof, or (c) a United
States federal or state court of competent jurisdiction or United States
federal or state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by
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<PAGE> 51
this Agreement and such order, decree, ruling, or other action shall have
become final and non-appealable; provided that the party seeking to terminate
this Agreement pursuant to this clause (c) shall have used all reasonable
efforts to remove such injunction, order or decree; and provided, in the case
of a termination pursuant to clause (a) above, that the terminating party shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the Merger by January 31, 1997.
8.3 Termination by Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the shareholders of the Company referred to
in Section 8.2(b), by action of the Board of Directors of the Company, if (a)
in the exercise of its good faith judgment as to fiduciary duties to its
shareholders imposed by law, as advised by outside counsel, the Board of
Directors of the Company determines that such termination is required by reason
of an Alternative Proposal being made; provided that the Company shall notify
the Purchaser promptly of its intention to terminate this Agreement or enter
into a definitive agreement with respect to any Alternative Proposal; or (b)
there has been a breach by the Purchaser of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Purchaser Material Adverse Effect; or (c) there has been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of the Purchaser, which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by the Company to
the Purchaser. Notwithstanding the foregoing, the Company's ability to
terminate this Agreement pursuant to Section 8.2 or this Section 8.3 is
conditioned upon the payment by the Company of any amounts owed by it pursuant
to Section 8.5(a)(i) within 10 days after the date of termination.
8.4 Termination by Purchaser. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of the Company referred to in Section
8.2(b), by action of the Board of Directors of the Purchaser, if (a) the Board
of Directors of the Company shall have withdrawn or modified in a manner
materially adverse to the Purchaser its approval or recommendation of this
Agreement or the Merger or shall have recommended an Alternative
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<PAGE> 52
Proposal to the Company stockholders, or (b) there has been a breach by the
Company of any representation or warranty contained in this Agreement which
would have or would be reasonably likely to have a Company Material Adverse
Effect, or (c) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the Company, which breach
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by the Purchaser to the Company.
8.5 Effect of Termination and Abandonment.
(a) In the event that any person shall have made an Alternative
Proposal for the Company and thereafter (i) this Agreement is terminated by the
Company pursuant to Section 8.3(a), or by the Purchaser pursuant to Section
8.4(a) or (ii) this Agreement is terminated by the Company for any other reason
(other than (A) as permitted by Section 8.2(c), (B) the occurrence of a
Purchaser Material Adverse Event, (C) pursuant to Section 8.2(a) because of (x)
the failure of a condition in Section 5.3 (other than the condition set forth
in Section 5.3.4, unless the failure of such condition is caused by the failure
of the Company's counsel to receive reasonably requested representation letters
from Purchaser), (y) the failure of a condition in Section 5.1, other than the
condition set forth in Section 5.1.1, which is not caused by a failure of the
Company to respond to any inquiry of the Justice Department or to file its
portion of the HSR Notice or (D) pursuant to 8.2(b) if, at the time of the
Shareholder meeting there is not then pending and publicly announced an
Alternative Proposal and the Company has fulfilled all of its covenants with
respect to the calling of such meeting, has not withdrawn its endorsement and
recommendation of the transactions contemplated hereby and has actively
solicited approval of the transactions contemplated hereby at and prior to such
meeting) and, in the case of this clause (ii) only, a definitive agreement with
respect to such Alternative Proposal is executed within one year after such
termination, then the Company shall pay the Purchaser the sum of $1,000,000
which amount shall be payable by wire transfer of same day funds either on the
date contemplated in the last sentence of Section 8.3 if applicable or,
otherwise, within two business days after such amount becomes due if under
clause (ii) above plus an additional payment of the sum of $3,000,000 upon the
tenth day following consummation of a transaction with the person making the
Alternative Proposal or an affiliate thereof giving rise to the
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<PAGE> 53
initial $1,000,000 termination payment. The Company acknowledges that the
agreements contained in this Section 8.5(a) are an integral part of the
transactions contemplated in this Agreement, and that, without these
agreements, the Purchaser would not enter into this Agreement; accordingly, if
the Company fails to promptly pay the amount due pursuant to this Section
8.5(a), and, in order to obtain such payment, the Purchaser commences a suit
which results in a judgment against the Company for the fee set forth in this
Section 8.5(a), the Company shall pay to the Purchaser its costs and expenses
(including reasonable attorneys' fees) in connection with such suit, together
with interest on the amount of the fee at the rate of 12% per annum.
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 8.5 and except for the provisions of Article IX. Moreover, in
the event of termination of this Agreement pursuant to Section 8.3 or 8.4
(except in the event that the termination payment described in Section 8.5(a)
is payable), nothing herein shall prejudice the ability of the non-breaching
party from seeking damages from any other party for any willful and knowing
material breach of this Agreement, including without limitation, attorneys'
fees and the right to pursue any remedy at law or in equity.
8.6 Extension, Waiver. At any time prior to the Effective Time,
any party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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<PAGE> 54
IX. GENERAL PROVISIONS.
9.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand or
mailed by certified mail, return receipt requested, first class postage
prepaid, or sent by Federal Express or similarly recognized national overnight
delivery service with receipt acknowledged, addressed as follows:
9.1.1 If to the Company:
Health Risk Management, Inc.
8000 West 78th Street
Minneapolis, Minnesota 55439
Attn: Chief Executive Officer
and to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402
Attn: David C. Grorud, Esq.
9.1.2 If to Purchaser or Merger Subsidiary:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
Attn: President
and to:
Fowler, White, Gillen, Boggs,
Villareal and Banker, P.A.
501 East Kennedy Blvd., Suite 1700
Tampa, FL 33602
Attn: David C. Shobe, Esq.
9.1.3 If delivered personally, the date on which a
notice, request, instruction or document is delivered shall be the date on
which such delivery is made and, if delivered by mail or by overnight delivery
service, the date on which such notice,
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<PAGE> 55
request, instruction or document is received shall be the date of delivery. In
the event any such notice, request, instruction or document is mailed or
shipped by overnight delivery service to a party in accordance with this
Section 10.1 and is returned to the sender as nondeliverable, then such notice,
request, instruction or document shall be deemed to have been delivered or
received on the fifth day following the deposit of such notice, request,
instruction or document in the United States mail or the delivery to the
overnight delivery service.
9.1.4 Any party hereto may change its address
specified for notices herein by designating a new address by notice in
accordance with this Section 9.1.
9.2 Brokers. The Purchaser represents and warrants to the
Company, and the Company represents and warrants to the Purchaser that no
broker or finder has acted for it or them or any entity controlling, controlled
by or under common control with it or them in connection with this Agreement
other than Bear Stearns, which has acted as the Purchaser's broker, and
Robertson, Stephens & Company LLC, which has acted as the Company's advisor.
The Purchaser agrees to indemnify and hold harmless the Company against any
fee, loss or expense arising out of any claim by any broker or finder employed
or alleged to have been employed by it, including the fees of Bear Stearns, and
the Company agrees to indemnify and hold harmless the Purchaser against any
fee, loss, or expense arising out of any claim by any broker or finder employed
or alleged to have been employed by it, including the fees of Robertson,
Stephens & Company LLC.
9.3 Waiver. Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions hereunder may
be waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
9.4 Expenses. Except as otherwise provided herein, all
costs incurred by the parties hereto in connection with or related to the
authorization, preparation and execution of this Agreement and the Closing of
the transactions contemplated hereby, including, without limitation of the
generality of the foregoing, all fees and
55
<PAGE> 56
expenses of agents, representatives, counsel and accountants employed by any
such party, shall be borne solely and entirely by the party which has incurred
the same; provided, however, that the Purchaser shall be responsible for and
shall promptly pay the fees and expenses incurred by the Company if the
transactions contemplated by this Agreement are not consummated, because the
Company terminates this Agreement pursuant to Section 8.2(a) because of the
failure of a condition set forth in Section 5.3.1, 5.3.2 or 5.3.5 hereof when
no Alternative Proposal is outstanding, or Section 8.3(b) or (c) when no
Alternative Proposal is outstanding.
9.5 Public Announcements. At all times at or before the
Closing, the Company, on the one hand, and the Purchaser, on the other hand,
will consult with one another before issuing or making any reports, statements,
or releases to the public with respect to this Agreement or the transactions
contemplated hereby and will use good faith efforts to agree on the text of a
joint public report, statement, or release or will use good faith efforts to
obtain the other parties' approval of the text of any public report, statement,
or release to be made solely on behalf of a party. If such parties are unable
to agree on or approve any such public report, statement, or release and such
report, statement, or release is, based on the advice of legal counsel to a
party, required by law or appropriate to discharge such party's disclosure
obligations, then such party may make or issue the legally required or
appropriate report, statement, or release upon prior notice to the other
parties hereto.
9.6 Confidentiality. (a) The Company, its respective
officers, directors, employees, agents, and other representatives, will refrain
from disclosing to any other Person (i) any documents or information concerning
the Purchaser or its Affiliates furnished to it in connection with this
Agreement or the transactions contemplated hereby, and (ii) any documents or
information concerning the Company, unless (A) such disclosure is compelled by
judicial or administrative process or by other requirements of law and notice
of such disclosure is furnished to the Purchaser; or (B) such confidential
documents or information can be shown to have been (x) previously known by the
Person receiving such documents or information, or (y) in the public domain
through no fault of such Persons. If for any reason the contemplated Merger is
not consummated, the Purchaser and the Company agree that they will
56
<PAGE> 57
return any and all such confidential information provided by any of them to the
other party so providing such information.
(b) The Purchaser, its respective officers, directors,
employees, agents, and other representatives, will refrain from disclosing to
any other Person (i) any documents or information concerning the Company or its
Affiliates furnished to it in connection with this Agreement or the
transactions contemplated hereby, and (ii) any documents or information
concerning the Purchaser, unless (A) such disclosure is compelled by judicial
or administrative process or by other requirements of law and notice of such
disclosure is furnished to the Company; or (B) such confidential documents or
information can be shown to have been (x) previously known by the Person
receiving such documents or information, or (y) in the public domain through no
fault of such Persons. If for any reason the contemplated Merger is not
consummated, the Company and the Purchaser agree that they will return any and
all such confidential information provided by any of them to the other party so
providing such information.
9.7 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, executors, administrators, successors and assigns. The
officers and directors of the Company shall be third-party beneficiaries of
this Agreement with respect to the provisions of Section 2.24 hereof, the
employees of the Company as of the Effective Time shall be third-party
beneficiaries of this Agreement with respect to the provisions of Section 2.19
hereof, and the holders of Company Options shall be third-party beneficiaries
of this Agreement with respect to the provisions of Section 2.5 hereof, in each
case with the right to enforce such provisions of this Agreement, and no
amendment to this Agreement shall affect any such third-party beneficiary not
agreeing thereto in writing.
9.8 Headings; Construction. The section and other
headings in this Agreement are inserted solely as a matter of convenience and
for reference, and are not a part of this Agreement. The Company may, at its
option and for purposes of convenience or otherwise, include in its Schedules
to this Agreement items that are not material, and such inclusion shall not be
an agreement or admission by the Company that such items are material or be
otherwise used to interpret the meaning of such term
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<PAGE> 58
for purposes of this Agreement and the transactions contemplated herein.
9.9 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
agreement in writing signed by the party against whom or which the enforcement
of such change, waiver, discharge or termination is sought.
9.10 Governing Law; Forum. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware (regardless
of the laws that might be applicable under principles of conflicts of law) as
to all matters including, but not limited to, matters of validity,
construction, effect and performance. The venue for any suit or other action or
proceeding brought pursuant to or in connection with this Agreement shall be
the County of Hennepin, State of Minnesota, and the parties hereto consent to
the jurisdiction of the state and federal courts located therein.
9.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.12 Pronouns. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires.
9.13 Exhibits Incorporated. All Exhibits attached hereto are
incorporated herein by reference, and all blanks in such Exhibits, if any, will
be filled in as required in order to consummate the transactions contemplated
herein and in accordance with this Agreement.
9.14 Time of Essence. Time is of the essence in this Agreement.
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<PAGE> 59
IN WITNESS WHEREOF, each party hereto has executed or caused
this Agreement to be executed on its behalf, all on the day and year first
above written.
HEALTHPLAN SERVICES CORPORATION
--------------------------------------
"PURCHASER"
By:
------------------------------------
Title:
HEALTH RISK MANAGEMENT, INC.
---------------------------------------
"COMPANY"
By:
------------------------------------
Title:
HEALTHPLAN SERVICES ALPHA CORPORATION
---------------------------------------
"MERGER SUBSIDIARY"
By:
------------------------------------
Title:
<PAGE> 60
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
1.1 Definitions.
2.6 Form of Certificate of Incorporation of Merger Subsidiary.
2.7 Form of Bylaws of Merger Subsidiary.
2.19.1 Employee Benefit Plans to be terminated.
2.28 Affiliate Undertakings Letter Form.
</TABLE>
(i)
<PAGE> 61
EXHIBIT 1.1
DEFINED TERMS
As used herein, the following terms shall have the following meanings unless
the context otherwise requires:
1. "Acts" shall mean the Delaware General Corporation Law and the
Minnesota Business Corporation Act.
2. "Affiliate" shall mean, with respect to a Person, any other Person
which is required to be aggregated with such Person under Code Section
414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
3. "Affiliate Undertakings Letter" shall have the meaning ascribed
thereto in Section 2.28 hereof.
4. "Agreement" shall mean this Plan and Agreement of Merger.
5. "Alternative Proposal" shall have the meaning ascribed thereto in
Section 2.27.
6. "Benefit Plans" shall have the meaning set forth in Section 3.18.
7. "Certificates" shall have the meaning ascribed thereto in Section
2.4.2.
8. "Closing" shall mean the consummation of the transactions provided for
in this Agreement.
9. "Closing Date" shall mean the date on which the Closing occurs
pursuant to Section 6.1 hereof.
10. "Code" shall mean the Internal Revenue Code of 1986, as amended.
11. "Company" shall mean Health Risk Management, Inc., a Minnesota
corporation, and unless otherwise specified, shall be deemed to
include all of its Subsidiaries.
(i)
<PAGE> 62
12. "Company Common Stock" shall mean the common stock of the Company.
13. "Company Material Adverse Effect" shall mean a material adverse effect
on the business, prospects, results of operation or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, or on the ability of the Company to consummate the
transactions contemplated hereby, provided that the following shall not
be considered as a material adverse effect: (i) changes relating to the
economy in general or to the Company's industry in general, (ii)
changes relating to cancellations, terminations or nonrenewals by
Company customers, employees, representatives or others having similar
relationships with the Company, that occur from and after the date of
announcement of the transactions contemplated by this Agreement unless
such cancellations, terminations or nonrenewals are attributable to
factors other than the transactions contemplated hereby such as but not
limited to loss of a material customer through the normal bid process.
14. "Company Material Adverse Event" shall mean an event which causes a
Company Material Adverse Effect.
15. "Company Option" shall mean the options to purchase Company Common
Stock which are outstanding prior to the Effective Time pursuant to
Section 2.5 hereof.
16. "Company SEC Documents" shall have the meaning ascribed thereto in
Section 3.5.
17. "Company Shareholders" or "Shareholders" shall mean the shareholders
of the Company at the Effective Time, each of which may be referred to
individually as a "Shareholder."
18. "Company Shares" shall mean shares of Company Common Stock.
19. "Company Software" shall have the meaning set forth in Section
3.15.2(iii).
20. "Disclosure Letter" shall mean the letter delivered to the Purchaser
by the Company simultaneously with the execution of this Agreement
containing certain requested disclosures concerning the Company.
(ii)
<PAGE> 63
21. "Dissenting Shares" shall have the meaning set forth in Section
2.3.1.6.
22. "Effective Time" shall have the meaning set forth in Section 2.2
hereof.
23. "Employees" shall have the meaning set forth in Section 2.19.2.
24. "Employment Agreements" shall mean those Employment Agreements
referenced in Section 2.16, each of which may be referred to
individually as an "Employment Agreement."
25. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
26. "ERISA Plan" shall have the meaning set forth in Section 3.18.
27. "Exchange Agent" shall mean First Union National Bank of North
Carolina or such other exchange agent as shall be designated by the
Purchaser.
28. "Exchange Fund" shall have the meaning specified in Section 2.4.1
hereof.
29. "GAAP" shall mean Generally Accepted Accounting Principles formulated
by the American Institute of Certified Public Accountants as in effect
from time to time during the term of this Agreement.
30. "Hazardous Substance" shall have the meaning set forth in Section 3.20.
31. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1978, as amended.
32. "IRS" shall mean the United States Internal Revenue Service.
33. "Licensed Software" shall have the meaning set forth in Section
3.15.2(ii).
34. "Market Price" shall mean the weighted (by the daily trading volume)
average closing price of the Purchaser Common Stock on the New York
Stock Exchange Composite Tape for the five full trading days ending on
the last full
(iii)
<PAGE> 64
trading day immediately prior to the Effective Time.
35. "Merger" shall mean the merger of the Company with and into the Merger
Subsidiary.
36. "Merger Subsidiary" shall mean HealthPlan Services Alpha Corporation,
a Delaware corporation.
37. "Merger Subsidiary Common Stock" shall mean the common stock of the
Merger Subsidiary.
38. "Merger Subsidiary Shares" shall mean shares of Merger Subsidiary
Common Stock.
39. "Owned Software" shall have the meaning set forth in Section
3.15.2(i).
40. "PBGC" shall mean the Pension Benefit Guaranty Corporation.
41. "Per Share Cash Consideration" shall mean an amount of cash equal to
$9.68603.
42. "Per Share Stock Consideration" shall mean 0.360208 shares of
Purchaser Common Stock; provided, however, that (i) if the Market
Price is less than $17.93, then the Per Share Stock Consideration
shall be equal to 0.360208 multiplied by a fraction, the numerator of
which is $17.93 and the denominator of which is the Market Price, and
(ii) if the Market Price is greater than $30.00, then the Per Share
Stock Consideration shall be equal to 0.360208 multiplied by a
fraction, the numerator of which is $30.00 and the denominator of
which is the Market Price.
43. "Permitted Liens" means
(a) liens for taxes, assessments and other governmental
charges or levies (excluding any lien imposed pursuant to any of the
provisions of ERISA or environmental laws) not yet due or as to which
the period of grace (not to exceed thirty (30) days), if any, related
thereto has not expired or which are being contested in good faith and
by appropriate proceedings if
(iv)
<PAGE> 65
adequate reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials, supplies
or rentals incurred in the ordinary course of business (i) which are
not overdue for a period of more than thirty (30) days or (ii) which
are being contested in good faith and by appropriate proceedings;
(c) liens consisting of deposits or pledges made in
the ordinary course of business in connection with, or to secure
payment of, obligations under workers' compensation, unemployment
insurance or similar claims or to secure the performance of tenders,
bids, contracts, statutory obligations and other similar obligations
incurred in the ordinary course of business;
(d) liens constituting encumbrances in the nature of
zoning restrictions, easements, and rights or restrictions of record on
the use of real property, which in the aggregate are not substantial in
amount and which do not, in any case, materially detract from the value
of such property or impair the use thereof in the ordinary conduct of
business; and
(e) extensions, renewals or replacements of any lien
disclosed in the Agreement or in the Disclosure Letter.
44. "Person" shall include, but is not limited to, an individual, a trust,
an estate, a partnership, an association, a company, a corporation, a
limited liability company, a sole proprietorship, a professional
corporation or a professional association.
45. "Plan Transfer Date" shall have the meaning set forth in Section
2.19.1.
46. "Product Liability" shall have the meaning ascribed thereto in Section
3.16.
47. "Proxy Statement/Prospectus" shall have the meaning ascribed thereto
in Section 2.26.
(v)
<PAGE> 66
48. "Purchaser" shall mean HealthPlan Services Corporation, a Delaware
corporation.
49. "Purchaser Common Stock" shall mean the common stock of the Purchaser.
50. "Purchaser Material Adverse Effect" shall mean a material adverse
effect on the business, prospects, results of operation or condition
(financial or otherwise) of the Purchaser and its Subsidiaries, taken
as a whole, provided that changes relating to the economy in general
or to the Purchaser's industry in general shall not be considered as a
material adverse effect.
51. "Purchaser Material Adverse Event" shall mean an event which causes a
Purchaser Material Adverse Effect.
52. "Purchaser SEC Documents" shall have the meaning ascribed thereto in
Section 4.6.
53. "Real Property" shall have the meaning set forth in Section 3.20.
54. "Registration Statement" shall have the meaning set forth in Section
2.26.
55. "Schedule" shall mean the schedules contained in the Disclosure
Letter.
56. "SEC" shall mean the Securities and Exchange Commission.
57. "Securities Act" shall mean the Securities Act of 1933, as amended.
58. "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
59. "Subsidiary" shall mean any entity, the controlling interest in which
is owned either directly or indirectly by the Company or the
Purchaser, as applicable.
60. "Surviving Corporation" shall have the meaning set forth in Section
2.1 hereof.
(vi)
<PAGE> 67
61. "Surviving Corporation Common Stock" shall mean common stock of the
Surviving Corporation.
62. "Surviving Corporation Shares" shall mean shares of Surviving
Corporation Common Stock.
63. "Tax Return" or "Return" shall mean any report, return, statement or
other written information required to be supplied to a taxing
authority in connection with Taxes.
64. "Taxes" or "Tax" shall mean all taxes, charges, fees, levies, or other
similar assessments or liabilities including without limitation
income, gross receipts, inventory, ad valorem, excise, real property,
personal property, sales, use, transfer, withholding, deed, license,
employment, payroll, and franchise taxes imposed by any governmental
authority (including any interest, fines, penalties, or additions
attributable to any such tax or any contest or dispute thereof).
(vii)
<PAGE> 1
September 12, 1996
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
RE: SUPPORT/VOTING AGREEMENT
Dear Sirs:
The undersigned understands that HealthPlan Services Corporation
("HPS"), HealthPlan Services Alpha Corporation, a wholly owned subsidiary of
HPS ("Subcorp"), and Health Risk Management, Inc. ("HRMI") are entering into an
Agreement and Plan of Merger dated the date hereof (the "Agreement") providing
for, among other things, a merger between Subcorp and HRMI (the "Merger"), in
which all of the outstanding shares of capital stock of HRMI will be exchanged
for shares of common stock, $.01 par value, of HPS.
The undersigned is a shareholder of HRMI (the "Shareholder") and is
entering into this letter agreement to induce you to enter into the Agreement
and to consummate the transactions contemplated thereby.
The Shareholder confirms its agreement with you as follows:
1. The Shareholder represents, warrants and agrees that Schedule I
annexed hereto sets forth the shares of the capital stock of HRMI of which the
Shareholder or its affiliates (as defined under the Securities Exchange Act of
1934, as amended) is the record or beneficial owner (the "Shares") and that the
Shareholder and its affiliates are on the date hereof the lawful owners of the
number of Shares set forth in Schedule I, free and clear of all liens, charges,
encumbrances, voting agreements and commitments of every kind, except as
disclosed in Schedule I. Except as set forth in Schedule I, neither the
Shareholder nor any
<PAGE> 2
of its affiliates own or hold any rights to acquire any additional shares of
the capital stock of HRMI (by exercise of stock options or otherwise) or any
interest therein or any voting rights with respect to any additional shares.
2. The Shareholder agrees that it will not, will not permit any
company, trust or other entity controlled by the Shareholder to, and will not
permit any of its affiliates to, contract to sell, sell or otherwise transfer
or dispose of any of the Shares or any interest therein or securities
convertible thereinto or any voting rights with respect thereto, other than (i)
pursuant to the Merger or (ii) with your prior written consent, except for any
transfer by gift to family members, charitable organizations, or trusts for the
benefit of such persons or the Shareholder.
3. The Shareholder agrees to, will cause any company, trust or other
entity controlled by the Shareholder to, and will cause its affiliates to,
cooperate fully with you in connection with the Agreement and the transactions
contemplated thereby. The Shareholder agrees that it will not, will not permit
any such company, trust or other entity to, and will not permit any of its
affiliates to, directly or indirectly (including through its officers,
directors, employees or other representatives) solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving HRMI, or
acquisition of any capital stock or any material portion of the assets (except
for acquisition of assets in the ordinary course of business consistent with
past practice) of HRMI, or any combination of the foregoing (a "Competing
Transaction"), or negotiate, explore or otherwise engage in discussions with any
person (other than HPS, Subcorp or their respective directors, officers,
employees, agents and representatives) with respect to any Competing Transaction
or enter into any agreement, arrangement or understanding with respect to any
Competing Transaction or agree to or otherwise assist in the effectuation of any
Competing Transaction; provided, however, that nothing herein shall prevent the
Shareholder from taking any action or omitting to take any action (i) as a
member of the Board of Directors of HRMI necessary so as not to violate such
Shareholder's fiduciary obligations as a Director or which action is otherwise
not taken in violation of any of the terms of the Agreement, or (ii) as an
officer of HRMI at the direction or request of or
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authorized by the Board of Directors of HRMI so long as such direction or
request or authorization was not made in violation of any of the terms of the
Agreement.
4. The Shareholder agrees that all of the Shares beneficially owned
by the Shareholder or its affiliates, or over which the Shareholder or any of
its affiliates has voting power or control, directly or indirectly (including
any common shares of HRMI acquired after the date hereof), at the record date
for any meeting of stockholders of HRMI called to consider and vote to approve
the Merger and the Agreement and/or the transactions contemplated thereby will
be voted by the Shareholder or its affiliates in favor thereof and that neither
Shareholder nor any of its affiliates will vote such Shares in favor of any
Competing Transaction.
5. The Shareholder has all necessary power and authority to enter
into this letter agreement. This agreement is the legal, valid and binding
agreement of the Shareholder, and is enforceable against the Shareholder in
accordance with its terms.
6. The Shareholder agrees that damages are an inadequate remedy for
the breach by Shareholder of any term or condition of this letter agreement and
that you shall be entitled to a temporary restraining order and preliminary and
permanent injunctive relief in order to enforce our agreements herein.
This letter agreement shall terminate automatically at the earlier of
(i) termination of the Agreement and (ii) the Effective Time (as defined in the
Agreement). Please confirm that the foregoing correctly states the
understanding between us by signing and returning to me a counterpart hereof.
Very truly yours,
/s/ Gary T. McIlroy, M.D.
------------------------------
Gary T. McIlroy, M.D.
"Shareholder"
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Confirmed on the date
first above written.
HealthPlan Services Corporation
By: /s/ Phillip S. Dingle
-------------------------------------
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SCHEDULE I
Stock Ownership
of
Gary T. McIlroy, M.D.
Owned of Record (including Stock Options):
Owned Beneficially (including Stock Options):
