<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to
CURRENT REPORT
Pursuant To Section 13 Or 15(d) Of the Securities Exchange Act Of 1934
Date of Report (Date of earliest event reported) July 24, 1998
--------------
VISTA Information Solutions, Inc.
--------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 0-20312 41-1293754
-------------- ------------- ----------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5060 Shoreham Place, #300, San Diego, CA 92122
- ------------------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 450-6100
--------------
Not applicable
-----------------------------------------------------------------
(Former name or former address, if changed since last report)
The undersigned Registrant hereby amends its Current Report on Form 8-K by the
addition of financial statements and exhibits as follows:
<PAGE>
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
On July 24, 1998, VISTA Information Solutions, Inc. ("Vista") entered
into two separate Stock Purchase Agreements providing in the aggregate for
the immediate acquisition (the "Initial Closing") of 80% of the issued and
outstanding shares of E/Risk Information Services ("E/Risk"), and the
acquisition no later than March 1, 2000 of the remaining 20% of the shares of
E/Risk . Vista acquired the shares of E/Risk from Eric O. Freeberg, Stuart
Solomon, Eben Calder and Bradley G. Mathews (collectively, the
"Shareholders"). In exchange for the shares of E/Risk purchased at the
Initial Closing, Vista paid $1,100,000 in cash and issued an aggregate of
842,858 shares of Vista Common Stock (having a value of $7,138,000 based on
the measurement period shortly before the closing) to the Shareholders. The
purchase price for the remaining 20% of the shares of E/Risk will be
calculated as 1.6 times the earnings of E/Risk before interest, taxes,
depreciation and amortization during the calendar year 1999 or, in the event
the closing of that purchase is accelerated, for the six full calendar months
preceding the event causing the acceleration of the purchase. The purchase
price for the remaining 20% of the shares of E/Risk will be paid in shares of
Vista Common Stock, with the number of such shares delivered being based upon
the market prices of Vista Common Stock over a measurement period shortly
before the closing of that purchase. An aggregate of 267,806 shares of
Common Stock otherwise deliverable at the Initial Closing have been, or will
be, deposited in an escrow to satisfy any claims for indemnification Vista
may have during the 180 days following the Initial Closing. In addition, for
a cash payment of $253,634.96 at the Initial Closing Vista acquired from Eric
Freeberg a Promissory Note with outstanding principal and accrued interest of
$253,634.96, representing an obligation owed to Mr. Freeberg by E/Risk. At
the Initial Closing, Vista also issued an aggregate of 49,830 shares to the
financial advisor of E/Risk in satisfaction of the amounts owed by E/Risk to
such advisor at the Initial Closing.
The amount of the consideration paid for the shares of E/Risk and the
Promissory Note was based upon arms length negotiation between Vista and the
respective Shareholders. The funds used for the acquisition were obtained
through credit facilities provided to Vista by Silicon Valley Bank.
E/RISK INFORMATION SERVICES. Financial Statements for the Year Ended December
31, 1997 and the period from June 19,1996 (date of inception) through December
31, 1996.
-2-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
E-Risk Information Services:
We have audited the accompanying balance sheets of E-Risk Information
Services as of December 31, 1997 and 1996, and the related statements of
operations, shareholders' deficit and cash flows for the year ended December 31,
1997 and for the period from June 19, 1996 (date of inception) through December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of E-Risk Information Services as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the year ended December 31, 1997 and for the period from June 19, 1996 (date
of inception) through December 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
September 2, 1998
-3-
<PAGE>
E-RISK INFORMATION SERVICES
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash $ 28,975 $ 10,868
Accounts receivable, net of allowance of $95,000 118,100
Other current assets 1,515
--------- ---------
Total current assets 148,590 10,868
PROPERTY AND EQUIPMENT - net 99,837 25,081
OTHER ASSETS - net 4,300 450
--------- ---------
TOTAL $ 252,727 $ 36,399
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 26,479 $
Accrued expenses 1,687
--------- ---------
Total current liabilities 28,166
--------- ---------
DUE TO SHAREHOLDER 192,067 80,455
NOTES PAYABLE TO BANK 96,927
--------- ---------
Total liabilities 317,160 80,455
--------- ---------
SHAREHOLDERS' DEFICIT:
Common stock, no par value, 1,000 shares authorized
300 shares issued and outstanding 3,000 3,000
Accumulated deficit (67,433) (47,056)
--------- ---------
Total shareholders' deficit (64,433) (44,056)
--------- ---------
TOTAL $ 252,727 $ 36,399
--------- ---------
--------- ---------
</TABLE>
See notes to financial statements.
-4-
<PAGE>
E-RISK INFORMATION SERVICES
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 AND
PERIOD FROM JUNE 19, 1996 (INCEPTION) TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
SALES $649,801 $
COST OF GOODS SOLD 333,236
-------- --------
Gross profit 316,565
-------- --------
OPERATING EXPENSES:
Research and development 58,174 8,000
Sales and marketing 28,274
Administrative 230,808 37,576
-------- --------
Total operating expenses 317,256 45,576
-------- --------
LOSS FROM OPERATIONS (691) (45,576)
INTEREST EXPENSE 18,086 1,480
-------- --------
LOSS BEFORE INCOME TAX (18,777) (47,056)
INCOME TAX EXPENSE 1,600
-------- --------
NET LOSS $(20,377) $(47,056)
-------- --------
-------- --------
</TABLE>
See notes to financial statements.
-5-
<PAGE>
E-RISK INFORMATION SERVICES
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
JUNE 19, 1996 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
COMMON STOCK
-------------- ACCUMULATED TOTAL
SHARES AMOUNT DEFICIT (DEFICIT)
<S> <C> <C> <C> <C>
BALANCE, JUNE 19, 1996 $ $ $
Issuance of common stock for cash 100 1,000 1,000
Issuance of common stock for property 200 2,000 2,000
Net loss (47,056) (44,056)
------ ------ ----------- --------
BALANCE, DECEMBER 31, 1996 300 3,000 (47,056) (44,056)
Net loss (20,377) (20,377)
------ ------ ----------- --------
BALANCE, DECEMBER 31, 1997 300 $3,000 $(67,433) $(64,433)
------ ------ ----------- --------
------ ------ ----------- --------
</TABLE>
See notes to financial statements.
-6-
<PAGE>
E-RISK INFORMATION SERVICES
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
JUNE 19, 1996 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1997 1996
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (20,377) $(47,056)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization 20,284 2,068
Allowance for doubtful accounts 95,000
Changes in assets and liabilities:
Accounts receivable (213,100)
Other current assets (1,515)
Accounts payable 26,479
Accrued expenses 1,687
-------- --------
Net cash used for operating activities (91,578) (44,988)
-------- --------
INVESTING ACTIVITIES:
Purchases of property (95,040) (25,099)
Increase in other assets (3,850) (500)
-------- --------
Net cash used for investing activities (98,890) (25,599)
-------- --------
FINANCING ACTIVITIES:
Proceeds from notes payable to bank 96,927
Increase in note payable to shareholder 111,612 80,455
Issuance of common stock 1,000
-------- --------
Net cash provided by financing activities 208,539 81,455
-------- --------
NET INCREASE IN CASH 18,107 10,868
CASH, BEGINNING OF PERIOD 10,868
-------- --------
CASH , END OF PERIOD $ 28,975 $ 10,868
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 4,513 $
-------- --------
-------- --------
Income taxes $ 1,600 $
-------- --------
-------- --------
NONCASH FINANCING ACTIVITIES:
Issuance of common stock for property $ $ 2,000
-------- --------
-------- --------
</TABLE>
See notes to financial statements.
-7-
<PAGE>
E-RISK INFORMATION SERVICES
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
JUNE 19, 1996 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1996
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - E-Risk Information Services (the "Company") was
incorporated in the State of California on June 19, 1996. The Company
provides geologic and environmental hazard disclosure information for
residential and commercial real estate in California.
PROPERTY AND EQUIPMENT - Property and equipment is carried at cost net of
accumulated depreciation. Depreciation expense is computed using the
straight-line method over the estimated useful lives of the assets, ranging
from three to seven years. Leasehold improvements are carried at cost less
accumulated amortization and are amortized over the lesser of their useful
lives or the term of the lease. Repair and maintenance costs are expensed
when incurred.
REVENUE RECOGNITION - Revenue from product sales is recognized at the time
of product delivery.
INCOME TAXES - The Company has elected to be treated for federal and state
income tax purposes in accordance with the regulations relating to an S
Corporation. Therefore, the Company's taxable income is reportable only in
the income tax returns of the stockholders. Accordingly, the Company
generally does not incur federal income tax, and state income tax is
incurred at a reduced rate.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
-8-
<PAGE>
2. PROPERTY AND EQUIPMENT - NET
Property and equipment consists of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Office and computer equipment $79,526 $11,419
Furniture and fixtures 2,412 1,229
Purchased software 37,618 14,451
Leasehold improvements 2,583
------- --------
122,139 27,099
Less accumulated depreciation and amortization (22,302) (2,018)
------- --------
Property and equipment - net $99,837 $25,081
------- --------
------- --------
</TABLE>
-9-
<PAGE>
3. NOTES PAYABLE TO BANK
<TABLE>
<CAPTION>
DECEMBER 31,
1997
<S> <C>
Note payable to bank - principal and interest due monthly at
the bank's base rate (11% at December 31, 1997) $ 31,177
Note payable to bank - interest due monthly at the
bank's base rate (11% at December 31, 1997) 65,750
--------
$ 96,927
--------
--------
</TABLE>
Interest expense for the year ended December 31, 1997 related to the
above obligations amounted to approximately $5,559.
4. DUE TO SHAREHOLDER
Due to shareholder is comprised of a revolving line of credit which
bears interest at 10%. Amounts outstanding at any time should not
exceed $500,000. Interest incurred on the obligation was $12,527 and
$1,480 during 1997 and 1996. As described in Note 7, all amounts
outstanding related to this obligation were repaid in connection with
the acquisition of the Company's outstanding shares.
5. STOCK OPTION PLAN
On September 1, 1996, the shareholders of the Company approved the 1996
Incentive Stock Option Plan (the "Plan"). The Plan provides for the
grant of an aggregate of 16 incentive stock options to eligible
individuals. The Board of Directors administers the Plan.
Participation in the Plan is limited to employees, consultants, and
directors of the Company. The option exercise price per share is fixed
by the Plan administrator in accordance with the following provisions:
(i) the exercise price per share shall be the fair market value per
share of the common stock on the option grant date, and (ii) if the
person to whom the option is granted is a 10% shareholder, then the
exercise price per share shall not be less than 110% of the fair market
value per share of the common stock on the option grant date.
There were 16 options granted to an employee during September 1996.
During 1998, the vesting of the original 16 options was accelerated and
the options were then exercised. These options vested over a term of 3
years and 3 months and were exercisable at $380 per share. There was no
compensation expense recognized for these options at the date of grant.
-10-
<PAGE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION". Had compensation cost been determined based upon the
fair value at the grant date for awards under the plan consistent with
the methodology prescribed under SFAS No. 123, the Company's results
of operations for the years ended December 31, 1997 and 1996 would not
have been materially different from that reported in the statement of
operations. Under SFAS No. 123, the fair value of stock-based awards
to employees is calculated through the use of option pricing models
even though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock
option awards. These models also require subjective assumptions,
including expected life of options. A change in those assumptions
could result in a significant change in the calculated values. The
Company's calculations were made using the Black Scholes option
pricing model recognizing forfeitures as they occur with the following
weighted average assumptions; no dividend yield or volatility rate,
risk-free interest rate of 6.5%, an assumed forfeiture rate of -0- and
expected lives of 35 years.
During July 1998 the vesting of the 16 options granted in September 1996
was accelerated. The options were then exercised by the holder as
described in Note 7.
6. COMMITMENTS
OPERATING LEASES- The Company leases its office facility and certain
office equipment under the terms of operating leases which expire at
various dates through October 2002. The facility leases require the
payment of taxes, maintenance, utilities and insurance. As of
December 31, 1997, future minimum lease commitments under operating
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1998 $105,835
1999 120,925
2000 125,312
2001 66,323
2002 14,199
--------
$432,594
--------
--------
</TABLE>
Rent expense for the years ended December 31, 1997 and 1996 was
approximately $38,600 and $5,000, respectively.
-11-
<PAGE>
LICENSE AGREEMENTS - In October 1997, the Company entered into a license
agreement with an unrelated entity (the "licensor") for a term of three
years. Pursuant to the agreement, the licensor granted to the Company a
non-exclusive, non-transferable license to (1) use certain software
products of the licensor to create a new product for use by the Company,
and (2) to use this new product developed by the Company for certain
limited purposes, as defined. Royalty expense under this license
agreement is recorded at $0.10 per transaction, as defined, during the
first year and $0.125 per transaction during years two and three, with
an annual minimum royalty of $20,000 for the first year and $37,500 in
each of the second and third years. Royalty expense for the year ended
December 31, 1997 totaled approximately $10,834.
Effective October 1997, the Company entered into a 3 year agreement with
an unrelated entity for the Company's access use of information relating
to tax, bond, and assessment liens. The Company was also required to
lease computer peripheral equipment in order to access the information.
The basic service charge for use of the information is $3,000 per month
plus $.75 for each inquiry in excess of 4,000 inquiries per month. The
rent for the equipment and related fees is approximately $600 per month.
The charges and rent are subject to annual increases not to be less than
4% or greater than 10%. The fiscal year 1997 expense related to this
agreement totaled $10,809.
-12-
<PAGE>
7. SUBSEQUENT EVENTS
ACQUISITION - Effective July 24, 1998, the Company entered into a stock
purchase agreement whereby all of the Company's outstanding shares were
acquired by Vista Information Solutions, Inc. In connection with the
acquisition, the notes payable to the bank and the balance due to
shareholder were paid in full.
EXERCISE OF OPTIONS - Options to purchase 16 shares of stock outstanding
since September 1996 (Note 5) were accelerated and exercised by the
holder during July 1998.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated statements of
operations for the six months ended June 30, 1998 and for the twelve months
ended December 31, 1997 give effect as if the acquisition of E/Risk Information
Services (E/Risk) occurred as of January 1, 1998 and 1997, respectively. The
condensed consolidated balance sheet as of June 30, 1998 gives effect to the
acquisition as if such transaction occurred on June 30, 1998.
The accompanying pro forma condensed consolidated financial statements have been
prepared by the management of the Company based on the historical financial
statements of the Company and of E/Risk and the acquisition of E/Risk using the
purchase method of accounting. Assumptions and adjustments are discussed in the
accompanying notes to the pro forma condensed consolidated financial statements.
In the opinion of the management of the Company, all pro forma adjustments
necessary to state fairly such pro forma financial information have been made.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of what actual results of operations would have been for
the periods or dates presented had the transaction occurred on the dates
indicated. In addition, such financial statements do not purport to indicate
the results of future operations of financial position of the Company from the
acquisition date forward.
The accompanying unaudited pro forma condensed consolidated financial statements
reflect the allocation of the purchase price based on a preliminary analysis of
the values of equity instruments issued and of assets acquired and liabilities
assumed. Final analysis may result in a change to the purchase price allocation.
To date, no information has been gathered that would cause the Company to
believe that the final allocation of the purchase price will be materially
different than the preliminary estimate.
-13-
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(IN 000'S)
<TABLE>
<CAPTION>
VISTA E/RISK ADJUSTMENTS TOTALS
<S> <C> <C> <C> <C>
REVENUES $ 7,260 1,560 8,820
COST OF REVENUES 1,477 567 2,044
GROSS PROFIT 5,783 993 6,776
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,365 516 2,504 ** 8,385
INCOME (LOSS) FROM
OPERATIONS 418 477 (2,504) (1,609)
OTHER INCOME (EXPENSE) (90) (54) 10 (3) (134)
INCOME (LOSS) BEFORE
INCOME TAX 328 423 (2,494) (1,743)
INCOME TAX PROVISION 2 2
NET INCOME (LOSS) 328 421 (2,494) (1,745)
PREFERRED STOCK DIVIDENDS (300) (300)
ACCRETION OF CONVERTIBLE
PREFERRED STOCK (500) (500)
NET INCOME (LOSS)
ATTRIBUTABLE TO COMMON
STOCKHOLDERS (472) 421 (2,494) (2,545)
BASIC AND DILUTED (LOSS)
PER COMMON SHARE (.05) N/A (.24)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 9,821,445 N/A 10,714,133
</TABLE>
-14-
<PAGE>
Notes to pro forma condensed consolidated financial statement of operations for
the six months ended June 30, 1998:
The following entries are made to adjust the condensed consolidated statement of
operations to give effect to the acquisition of E/Risk as if it has occurred at
the beginning of the current fiscal year, January 1, 1998.
** The entry of $2,504 is the sum of entries 1) and 2) which have been combined
for ease of presentation.
1) To record six months amortization expense of goodwill with a five year life.
Dr. Amortization expense $417
Cr. Accumulated amortization $417
2) To record the effects of acquired in-process research and development costs
charged to expense at the date of acquisition
Dr. Research and development expense $2,087
Cr. Common stock $2,087
3) To record the effect of a decrease in interest expense as a result of the
repayment in full of the note payable to a shareholder with the acquisition of
E/Risk
Dr. Note payable to shareholder $10
Cr. Interest expense $10
4) The weighted average number of shares has been recomputed to include the
shares issued in relation to the E/Risk acquisition as if they had been
outstanding since January 1, 1998. The resulting weighted average number of
shares is 10,714,133.
-15-
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN 000'S)
<TABLE>
<CAPTION>
VISTA E/RISK ADJUSTMENTS TOTALS
<S> <C> <C> <C> <C>
REVENUES $ 10,391 650 11,041
COST OF REVENUES 2,318 333 2,651
GROSS PROFIT 8,073 317 8,390
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,184 317 2,921 ** 15,422
INCOME (LOSS) FROM
OPERATIONS (4,111) 0 (2,921) (7,032)
OTHER INCOME (EXPENSE) (1,486) (18) 13 (3) (1,491)
(LOSS) BEFORE INCOME TAX (5,597) (18) (2,908) (8,523)
INCOME TAX PROVISION 2 2
NET INCOME (LOSS) (5,597) (20) (2,908) (8,525)
PREFERRED STOCK DIVIDENDS (200) (200)
ACCRETION OF CONVERTIBLE
PREFERRED STOCK (560) (560)
NET (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS (6,357) (20) (2,908) (9,285)
BASIC AND DILUTED (LOSS) PER
COMMON SHARE (.87) N/A (1.13)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,328,363 N/A 8,247,356
</TABLE>
Notes to pro forma condensed consolidated financial statement of operations for
the year ended December 31, 1997:
The following entries have been made to adjust the condensed consolidated
statement of operations for the year ended December 31, 1997 as if the
acquisition of E/Risk had taken effect as of January 1, 1997.
-16-
<PAGE>
** The entry of $2,921 is the sum of entries 1) and 2) which have been combined
for ease of presentation.
1) To record amortization expense of goodwill with a five year life.
Dr. Amortization expense $834
Cr. Accumulated amortization $834
2) To record the effects of acquired in-process research and development costs
charged to expense at the date of acquisition
Dr. Research and development expense $2,087
Cr. Common stock $2,087
3) To record the effect of a decrease in interest expense as a result of the
repayment in full of the note payable to a shareholder with the acquisition of
E/Risk
Dr. Note payable to shareholder $13
Cr. Interest expense $13
4) The weighted average number of shares has been recomputed to include the
shares issued in relation to the E/Risk acquisition as if they had been
outstanding since January 1, 1997. The resulting weighted average number of
shares is 8,247,356.
-17-
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN 000'S)
<TABLE>
<CAPTION>
VISTA E/RISK ADJUSTMENTS TOTALS
<S> <C> <C> <C> <C>
ASSETS
Cash 151 216 (1,354) (2) 367
1,354 (1)
Accounts receivable, net 3,566 590 4,156
Other current assets 375 15 1,268
Total Current Assets 4,092 821 4,913
Equipment, Furniture and Purchased Software 1,991 186 2,177
Cost in excess of net assets acquired, net 3,878 (2) 3,878
Acquired Technology and Environmental
Databases 521 521
Other Assets 268 7 275
Total Assets 6,872 1,014 3,878 11,764
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses 790 38 828
Other current liabilities 1,155 271 1,426
Note payable 400 1,354 (1) 1,754
Total Current Liabilities 2,345 309 1,354 4,008
Notes Payable 452 338 (338) (2) 452
Total Liabilities 2,797 647 1,016 4,460
Minority Interest 83 (2) 83
Preferred stock 8 8
Common stock 190 3 (3) (2) 1,083
893 (2)
Additional paid-in capital 38,524 4,340 (2) 42,864
Retained earnings (accumulated deficit) (34,647) 364 (364) (2) (36,734)
(2,087) (2)
Total Stockholders' Equity (Deficit) 4,075 367 2,779 7,221
Total Liabilities and Stockholders' Equity 6,872 1,014 3,878 11,764
</TABLE>
-18-
<PAGE>
Notes to pro forma condensed consolidated balance sheet:
1) To reflect increase in borrowings to fund acquisition
Dr. Cash 1,354
Cr. Note payable 1,354
2) To record purchase of E/Risk
Dr. Goodwill 3,878
Acquired in-process R&D expense 2,087
Common Stock - E/Risk 3
Accumulated Earnings - E/Risk 364
Note Payable 338
Cr.
Common stock 893
APIC 4,340
Cash 1,354
Minority Interest 83
-19-
<PAGE>
(c) Exhibits.
EXHIBIT DESCRIPTION
Exhibit 2.1 Stock Purchase Agreement entered into as of July 24, 1998 by
and among Vista Information Solutions, E/Risk Information
Services, Stuart Solomon, Eben Calder and Bradley Mathews,
as amended. Schedules and similar attachments to this Exhibit
have not been filed; upon request, Vista will furnish
supplementally to the Commission a copy of any omitted
schedule.
Exhibit 2.2 Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VISTA INFORMATION SOLUTIONS, INC.
Date: October 7, 1998 By:
------------------------------------------
E. S. Hamilton
Chief Financial Officer
-20-
<PAGE>
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
Exhibit 2.1 Stock Purchase Agreement entered into as of July 24, 1998 by
and among Vista Information Solutions, E/Risk Information
Services, Stuart Solomon, Eben Calder and Bradley Mathews,
as amended. Schedules and similar attachments to this
Exhibit have not been filed; upon request, Vista will
furnish supplementally to the Commission a copy of any
omitted schedule.
Exhibit 2.2 Previously filed
-21-
<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as
of July 24, 1998 (the "Agreement Date") by and among Vista Information
Solutions, Inc., a Delaware corporation ("Buyer"), E/Risk Information Systems,
a corporation organized under the laws of California (the "Company"), and Stuart
Solomon, Eben Calder and Bradley G. Mathews (each a "Shareholder" and together
the "Shareholders"). Buyer, the Company and the Shareholders are referred to
collectively herein as the "Parties."
RECITALS
A. The Shareholders own an aggregate of two hundred sixteen (216)
outstanding shares of the capital stock of the Company (the "Company Shares").
B. Buyer and all shareholders of the Company other than the
Shareholders are simultaneously entering into a Stock Purchase Agreement of
even date herewith (the "Concurrent Agreement") pursuant to which Buyer is
acquiring all issued and outstanding shares of the Company's Common Stock
other than the Company Shares to be sold to Buyer hereunder.
C. The Company desires to facilitate the transactions contemplated
by this Agreement and the Concurrent Agreement, and Buyer desires to purchase,
and the Shareholders desires to sell, the Company Shares for the consideration
set forth below subject to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties
and covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 THE CLOSINGS.
(a) The initial closing of the transactions contemplated by
this Agreement (the "Initial Closing") shall take place at the offices of
Gray Cary Ware & Freidenrich LLP, 4365 Executive Drive, Suite 1600, San
Diego, California 92121 commencing at 11:00 a.m., local time, on July 24,
1998, or, if all of the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby have not been satisfied or
waived by such date, on such mutually agreeable later date as soon as
practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "Initial Closing Date"). The subsequent closing of the transactions
contemplated by this Agreement (the "Subsequent Closing") shall take place at
the offices of Gray Cary Ware & Freidenrich LLP, 4365 Executive Drive, Suite
1600, San Diego, California
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92121 commencing at 10:00 a.m., local time, on the earlier to occur of (i)
March 1, 2000 or such mutually agreeable later date as soon as practicable
thereafter or (ii) within five business days prior to the closing of a Change
of Control Transaction of Buyer (as defined below) (the "Subsequent Closing
Date").
(b) Unless otherwise agreed by Buyer and the Shareholders,
the Initial Closing shall take place simultaneously with the closing of the
acquisition by Buyer of the additional shares of the issued and outstanding
capital stock of the Company pursuant to the Concurrent Agreement.
1.2 PURCHASE OF THE COMPANY SHARES FROM THE SHAREHOLDERS. Upon
and subject to the terms and conditions of this Agreement, at the Initial
Closing each Shareholder shall sell, transfer, convey, assign and deliver to
Buyer, and Buyer shall purchase, acquire and accept from such Shareholder,
that number of Company Shares set forth opposite such Shareholder's name on
SCHEDULE 1 hereto. Upon and subject to the terms and conditions of this
Agreement, at the Subsequent Closing each Shareholder shall sell, transfer,
convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and
accept from such Shareholder, that number of Company Shares set forth
opposite such Shareholder's name on SCHEDULE 1 hereto.
1.3 ACTIONS AT THE INITIAL CLOSING. At the Initial Closing:
(a) The Company and the Shareholders shall deliver to Buyer
the various certificates, instruments and documents referred to in Section
6.2 below;
(b) Buyer shall deliver to the Company the various
certificates, instruments and documents referred to in Section 6.3 below;
(c) Each Shareholder shall deliver to Buyer a stock
certificate(s) representing the Company Shares to be sold by such Shareholder
at the Initial Closing, duly endorsed for transfer;
(d) Buyer shall issue and deliver to each Shareholder a
certificate, registered in the name of such Shareholder and bearing the
legend set forth in Section 3.2, representing that number of shares of Common
Stock of Buyer as is determined by dividing (a) the respective Purchase
Prices set forth on SCHEDULE 1 by (b) the Fair Market Value (as defined
below) of one share of Common Stock of Buyer PROVIDED, HOWEVER, that the
number of shares issuable to each Shareholder hereunder shall be reduced by
(x) a number determined by dividing (i) the Clareity Allocation for the
respective Shareholder (as set forth in SCHEDULE 1) by (ii) the Fair Market
Value of one share of Buyer Common Stock (the aggregate number of shares
which are not issued to the Shareholders as a result of the operation of this
proviso (x) are hereinafter referred to as the "Initial Clareity Shares")
plus (y) the allocation among the Shareholders as set forth on SCHEDULE 1 of
a total of 15% of the total number of shares of Buyer Common Stock issuable
pursuant to this Section 1.3(d) (the "Escrow Shares");
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(e) Subject to receipt of an appropriate investment
representation letter, Buyer shall issue and deliver to Clareity a
certificate, registered in the name of Clareity and bearing the legend set
forth in Section 3.2(b), representing the Initial Clareity Shares;
(f) Buyer, the Shareholders and the Escrow Agent (as defined
therein) shall execute and deliver the Escrow Agreement in substantially the
form attached hereto as EXHIBIT A (the "Escrow Agreement"), and Buyer shall
deposit certificates representing the Escrow Shares with the Escrow Agent; and
(g) Upon surrender of the Certificates set forth in Section
1.3(c) the Company shall issue and deliver to Buyer a certificate
representing the One Hundred Fifty Two and Eight Tenths (152.8) shares of the
Company's Common Stock sold and transferred to Buyer hereunder, and Buyer
shall be entered into the share register of the Company as the owner of the
Company Shares sold by the Shareholders at the Initial Closing pursuant to
this Agreement.
1.4 ACTIONS AT THE SUBSEQUENT CLOSING. At the Subsequent Closing:
(a) each Shareholder Selling Company shares at the subsequent
closing shall deliver to Buyer a stock certificate(s) representing the
Company Shares to be sold by such Shareholder at the Subsequent Closing (as
set forth in SCHEDULE 1), duly endorsed for transfer;
(b) Buyer shall deliver a total number of shares of Common
Stock of Buyer as is determined by dividing the Aggregate Earnout Amount (as
defined below) by the Fair Market Value (as defined below) of one share of
Common Stock of Buyer. The total number of shares of Common Stock of Buyer
delivered at the Subsequent Closing shall be allocated between the
Shareholders selling Company Shares at the Subsequent Closing based on the
ratio of the number of Company Shares being sold by a Shareholder at the
Subsequent Closing divided by the total number of Company Shares being sold
at the Subsequent Closing. Each Shareholder selling Company Shares at the
Subsequent Closing shall receive a certificate, registered in the name of
such Shareholder and bearing the legend set forth in Section 3.2(b),
representing that number of shares of Common Stock of Buyer resulting from
the foregoing calculation; PROVIDED, HOWEVER, that the number of shares
issuable to each Shareholder at the Subsequent Closing shall be reduced by
the relative percentages as set forth in SCHEDULE 1 (the aggregate number of
shares which are not issued to the Shareholders as a result of the operation
of this proviso are hereinafter referred to as the "Subsequent Clareity
Shares");
(c) Subject to receipt of an appropriate investment
representation letter, Buyer shall issue and deliver a certificate,
registered in the name of Clareity and bearing the legend set forth in
Section 3.3(b), representing the Subsequent Clareity Shares; and
(d) Upon surrender of the certificates acquired pursuant to
Section 1.4(a) the Company shall issue and deliver to Buyer a certificate
representing the Sixty Three and Two Tenths (63.2) shares of the Company's
Common Stock sold and transferred to Buyer hereunder, and Buyer shall be
entered into the share register of the Company as the owner of the Company
Shares sold by the Shareholders at the Subsequent Closing pursuant to this
Agreement.
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1.5 FAIR MARKET VALUE. For purposes of this Agreement, the Fair
Market Value of a share of the Common Stock of Buyer shall be the average
closing sale price of the Buyer's Common Stock as reported on the Nasdaq
Stock Market over the ten trading day period ending three days prior to the
applicable Closing Date.
1.6 EARNOUT AMOUNT. The Aggregate Earnout Amount shall mean the
number determined by multiplying 1.6 by either (i) the EBITDA of the Company
during calendar year 1999 or (ii) in the event that the Subsequent Closing
Date is accelerated pursuant to Section 1.1(a)(ii) above, the annualized
EBITDA of the Company over the six full calendar months preceding the date of
the Change of Control Transaction of Buyer. For purposes of this Agreement,
EBITDA shall mean the earnings of the Company before interest, taxes,
depreciation and amortization all as determined in accordance with generally
accepted accounting principles ("GAAP") by the outside independent auditors
of Buyer.
1.7 CHANGE OF CONTROL TRANSACTION. As used in this Agreement, a
Change of Control Transaction shall be deemed to have occurred in the event
any of the following occurs with respect to the Buyer: (a) the direct or
indirect sale or exchange by the shareholders of the Buyer of all or
substantially all of the stock of the Buyer; (b) a merger or consolidation in
which the Buyer is a party (other than a merger or consolidation in which
Buyer is the surviving corporation or a parent corporation of the surviving
corporation and the shareholders of the Buyer before such merger or
consolidation retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the surviving corporation (or the
parent corporation) after such transaction); or (c) the sale, exchange, or
transfer of all or substantially all of the assets of the Buyer (other than a
sale, exchange, or transfer to one or more subsidiary corporations of the
Buyer).
1.8 ESCROW FUND. On the Initial Closing Date, Buyer shall deposit
with the Escrow Agent certificates representing the Escrow Shares as
described in Section 1.3(d), for the purpose of securing the indemnification
obligations of the Shareholders set forth in Article VII of this Agreement.
The Escrow Shares shall be held by the Escrow Agent under the Escrow
Agreement pursuant to the terms thereof for a period of 180 days after the
Initial Closing, subject to retention until then pending claims are resolved.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In this Agreement, any reference to a "Material Adverse Effect"
with respect to any entity or group of entities means a material adverse
effect on the business, assets (including intangible assets), financial
condition, prospects, or results of operations of such entity and its
subsidiaries, taken as a whole which is individually in excess of $10,000,
or, in the aggregate with other individual items, in excess of $25,000.
In this Agreement, any reference to a Party's "knowledge," unless
otherwise qualified, means such Party's actual knowledge after reasonable
inquiry of its directors, officers, and other management level employees
reasonably believed to have knowledge of such matters.
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In this Agreement, any reference to the "prospects" of the Company
or its business, or to the Company's business "as proposed to be conducted,"
means such prospects or business without taking into account the effects of
the transactions contemplated by this Agreement and the Concurrent Agreement.
As used in this Agreement, the word "Subsidiary" means, with
respect to any Party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such Party or any other
Subsidiary of such Party is a general partner (excluding partnerships, the
general partnership interests of which held by such Party or any Subsidiary
of such Party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board
of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such Party or by any one or more of its Subsidiaries, or by
such Party and one or more of its Subsidiaries.
Except as disclosed in the disclosure schedule which references the
specific representations and warranties as to which the exception is made and
which is provided to Buyer on or before the date of this Agreement (the
"E/Risk Disclosure Schedule"), the Company and the Shareholders jointly and
severally represent and warrant to Buyer as follows:
2.1 ORGANIZATION, STANDING AND POWER. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has
all requisite corporate power to own, lease and operate its properties and to
carry on its business as currently being conducted and as currently proposed
to be conducted, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the nature of its operations requires
such qualification, except where the failure to so qualify has not and will
not have a Material Adverse Effect on the Company. The Company has delivered
true and correct copies of the Articles of Incorporation and Bylaws of the
Company and each of its Subsidiaries, each as amended to date, to Buyer.
Neither the Company nor any of its Subsidiaries is in violation of any of the
provisions of its [Articles] of Incorporation, Bylaws or other charter
documents. Except as set forth on the E/Risk Disclosure Schedule, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
2.2 THE COMPANY'S CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists
of One Thousand (1,000) shares of the Company Common Stock. As of the date
hereof and the Initial Closing Date, Three Hundred Sixteen (316) shares of
the Company's Common Stock are and will be issued and outstanding. All such
outstanding shares of the Company Common Stock (i) are free and clear of all
liens, claims and encumbrances created by the Company, (ii) have been duly
authorized, validly issued, fully paid and are nonassessable, (iii) have been
issued in compliance with all applicable federal and state securities laws,
and (iv) are subject to no
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preemptive rights or rights of first refusal created by statute, the charter
documents of the Company or any agreement to which the Company is a party or
by which it is bound.
Other than the Three Hundred Sixteen (316) issued and outstanding
shares of the Company's Common Stock, there are (i) no equity securities of
any class of the Company, or any securities exchangeable into or exercisable
for such equity securities, issued, reserved for issuance, or outstanding and
(ii) no outstanding subscriptions, options, warrants, puts, calls, rights, or
other commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any equity securities of the Company or obligating the Company to
grant, extend, accelerate the vesting of, change the exercise price of, or
otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. Except for the Concurrent Agreement, there are no
contracts, commitments or agreements relating to voting, purchase or sale of
the Company's capital stock to which the Company is a party.
2.3 AUTHORITY; REQUIRED FILINGS AND CONSENTS.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, its
Board of Directors and its shareholders. This Agreement and all other
documents expressly required to be executed and delivered by the Company
hereunder, (collectively, the "Transaction Documents"), have been or will be
duly executed and delivered by the Company and constitute or will constitute
the valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and
general principles of equity.
(b) The execution and delivery by the Company of this
Agreement and the other Transaction Documents to which it is or will be a
party do not, and the consummation of the transactions contemplated hereby
and thereby will not, (i) conflict with, or result in any violation or breach
of any provision of, the [Articles] of Incorporation or Bylaws of the
Company, (ii) result in any violation or breach of or constitute (with or
without notice or lapse of time, or both) a default under, or give rise to a
right of termination, cancellation or acceleration of any obligation or loss
of any benefit under, any note, mortgage, indenture, lease, contract or other
agreement or obligation to which the Company is a party or by which the
Company, or any of its properties or assets may be bound, or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or any of its properties or assets, except in the case of (ii) and (iii)
above for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not have a Material Adverse Effect
on the Company.
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(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for such consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would
not prevent or materially alter or delay any of the transactions contemplated
by this Agreement or have a Material Adverse Effect on the Company.
2.4 FINANCIAL STATEMENTS. The Company has delivered to Buyer its
unaudited financial statements as of and for each of the years ended December
31, [1995,] 1996, and 1997 and for the six months ended June 30, 1998
(collectively, the "E/Risk Financial Statements"). The E/Risk Financial
Statements are correct in all material respects and were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved. The E/Risk Financial Statements present fairly the financial
position of the Company in all material respects as of the respective dates
and the results of its operations and cash flows for the periods indicated.
The Company has maintained a standard system of accounting established and
administered in accordance with GAAP.
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have
any liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with GAAP), and whether due
or to become due, other than (i) liabilities reflected or provided for on the
balance sheet as of June 30, 1998 (the "E/Risk Balance Sheet") contained in
the E/Risk Financial Statements, (ii) liabilities specifically described in
this Agreement or the E/Risk Disclosure Schedule, and (iii) normal or
recurring liabilities incurred since June 30, 1998 in the ordinary course of
business consistent with past practices.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1998,
the Company has conducted its business in the ordinary course and in a manner
consistent with past practices and, since such date, the Company has not:
(a) suffered any event or occurrence that has had a Material
Adverse Effect on the Company;
(b) suffered any damage, destruction or loss, whether covered
by insurance or not, which in the aggregate has had a Material Adverse Effect
on the Company;
(c) granted any material increase in the compensation payable
or to become payable by the Company to its officers or employees other than
increases in the ordinary course of business to employees who are not
officers;
(d) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of its capital stock or
declared any direct or indirect redemption, retirement, purchase or other
acquisition of such shares;
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(e) issued any shares of its capital stock or any warrants,
rights, or options for, or entered into any commitment relating to such
capital stock;
(f) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of any real
property, machinery, equipment or other operating property other than in the
ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise
disposed of any patent, patent right, trademark, trade name, brand name,
copyright (or pending application for any patent, trademark or copyright),
invention, work of authorship, process, know-how, formula or trade secret or
interest thereunder or other material intangible asset;
(i) entered into any material commitment or transaction
(including without limitation any borrowing) other than commitments or
transactions entered into in the ordinary course of business that are not
reasonably likely to have a Material Adverse Effect on the Company;
(j) permitted or allowed any of its property or assets to be
subjected to any new mortgage, deed of trust, pledge, lien, security interest
or other encumbrance of any kind, except for liens for current taxes not yet
due and purchase money security interests incurred in the ordinary course of
business;
(k) made any capital expenditure or commitment for additions
to property, plant or equipment individually in excess of $5,000, or, in the
aggregate, in excess of $25,000;
(l) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any
agreement or arrangement with, any of its officers, directors or shareholders
or any affiliate of any of the foregoing, other than employee compensation
and benefits and reimbursement of employment related business expenses
incurred in the ordinary course of business; or
(m) agreed to take any action described in this Section 2.6
or which would constitute a breach of any of the representations or
warranties of the Company contained in this Agreement.
2.7 TAXES.
(a) For purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all federal, state and local taxes of any country,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property
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taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) The Company has prepared and timely filed all returns,
estimates, information statements and reports required to be filed with any
taxing authority ("Returns") relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns are true and
correct in all respects and have been completed in all respects in accordance
with applicable law.
(c) The Company, as of the Closing Date, (i) will have paid
all Taxes it is required to pay prior to the Closing Date and (ii) will have
withheld with respect to its employees all Taxes required to be withheld.
(d) There is no Tax deficiency outstanding or assessed or
proposed against the Company that is not reflected as an estimated liability
on the E/Risk Balance Sheet or set forth on the E/Risk Disclosure Schedule,
nor has the Company executed any agreements or waivers extending any statute
of limitations on or extending the period for the assessment or collection of
any Tax.
(e) The Company has no liabilities for unpaid Taxes that have
not been accrued for or reserved on the E/Risk Balance Sheet, whether
asserted or unasserted, contingent or otherwise, except for any liabilities
arising out of the change from cash to accrual accounting.
(f) The Company is not a party to any tax-sharing agreement
or similar arrangement with any other party, or any contractual obligation to
pay any Tax obligations of, or with respect to any transaction relating to,
any other person or to indemnify any other person with respect to any Tax.
2.8 TANGIBLE ASSETS AND REAL PROPERTY.
(a) The Company owns or leases all tangible assets and
properties which are used in the conduct of its business as currently
conducted or which are reflected on the E/Risk Balance Sheet or were acquired
since the date of the E/Risk Balance Sheet (the "Material Tangible Assets").
The Material Tangible Assets are in good operating condition and repair. The
Company has good and marketable title to all Material Tangible Assets that it
owns (except properties, interests in properties and assets sold or otherwise
disposed of since the date of the E/Risk Balance Sheet in the ordinary course
of business), free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except as reflected in the E/Risk
Financial Statements and except for liens for current taxes not yet due and
payable. Assuming the due execution and delivery thereof by the other parties
thereto, all leases of Material Tangible Assets to which the Company is a
party are in full force and effect and valid, binding and enforceable in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to creditors' rights generally, and general principles of equity
and except where failure of such
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leases to be in full force and effect and valid, binding and enforceable
would not have a Material Adverse Effect on the Company. The E/Risk
Disclosure Schedule sets forth a true and correct list of all such leases,
and true and correct copies of all such leases have been provided to Buyer.
(b) The Company owns no real property. The E/Risk Disclosure
Schedule sets forth a true and complete list of all real property leased by
the Company. Assuming the due execution and delivery thereof by the other
parties thereto, all such real property leases are in full force and effect
and valid, binding and enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and general principles of equity. True and correct copies all such
of real property leases have been provided to Buyer.
2.9 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks and copyrights, and any applications for and registrations of
such patents, trademarks, trade names, service marks, and copyrights and all
processes, formulas, methods, schematics, technology, know-how, computer
software programs, data or applications and tangible or intangible
proprietary information or material that are used in the business of the
Company as currently conducted, or as currently proposed to be conducted,
free and clear of all liens, claims or encumbrances (all of which are
referred to as the "E/Risk Intellectual Property Rights"). The foregoing
representation as it relates to Licensed Intellectual Property (as defined
below) is limited to the Company's interest pursuant to licenses from third
parties, each of which is in full force and effect, is valid, binding and
enforceable and grants the Company such rights to such intellectual property
as are used in the business of the Company as currently conducted or
currently proposed to be conducted.
(b) The E/Risk Disclosure Schedule contains an accurate and
complete description of (i) all patents and patent applications and all
trademarks, trade names, service marks and registered copyrights included in
the E/Risk Intellectual Property Rights, including the jurisdictions in which
each such E/Risk Intellectual Property Right has been issued or registered or
in which any such application for such issuance and registration has been
filed, (ii) all licenses and sublicenses, distribution agreements and other
agreements to which the Company is a party and pursuant to which any person
is authorized to use any E/Risk Intellectual Property Rights or has the right
to manufacture, reproduce, market or exploit any product of the Company (a
"E/Risk Product") or any adaptation, translation or derivative work based on
any E/Risk Product or any portion thereof, other than nonexclusive end-user
licenses entered into in the ordinary course of business pursuant to the
Company's standard forms of license agreement, (iii) all material licenses,
sublicenses and other agreements to which the Company is a party and pursuant
to which the Company is authorized to use any third party technology, trade
secret, know-how, process, patent, trademark or copyright, including software
("Licensed Intellectual Property"), which is used in the manufacture of,
incorporated in or forms a part of any E/Risk Product (other than licenses
for off-the-shelf software used in the conduct of the Company's
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business), (iv) all joint development agreements to which the Company is a
party, and (v) all agreements with Governmental Entities or other third
parties pursuant to which the Company has obtained funding for research and
development activities.
(c) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any material license,
sublicense or other agreement relating to the E/Risk Intellectual Property
Rights or Licensed Intellectual Property.
(d) All patents and registered trademarks, service marks and
copyrights claimed by or issued to the Company which relate to any E/Risk
Product are valid and subsisting. The manufacturing, marketing, licensing or
sale of any E/Risk Product does not infringe any patent, trademark, service
mark, copyright, trade secret or other proprietary right of any third party.
The Company (i) has not received notice that it has been sued in any suit,
action or proceeding which involves a claim of infringement of any patent,
trademark, service mark, copyright, trade secret or other proprietary right
of any third party and (ii) has no knowledge of any claim challenging or
questioning the validity or effectiveness of any license or agreement
relating to any E/Risk Intellectual Property Rights or Licensed Intellectual
Property.
(e) All designs, drawings, specifications, source code,
object code, documentation, flow charts, data and diagrams incorporated,
embodied or reflected in any E/Risk Product at any stage of its development
(the "E/Risk Components") were written, developed and created solely and
exclusively by (i) employees of the Company without the assistance of any
third party or (ii) third parties who assigned ownership of their rights with
respect thereto to the Company by means of valid and enforceable agreements,
which are listed and described in the E/Risk Disclosure Schedule and copies
of which have been provided to Buyer. The Company has at all times used
commercially reasonable efforts to protect its trade secrets and has not
acted in such a manner as to cause the loss of such trade secrets by their
release into the public domain.
(f) The Company has used its best efforts to cause each
person currently or formerly employed by the Company (including independent
contractors, if any) that has or had access to confidential information of
the Company to execute and deliver, and each of the Shareholders has executed
and delivered, to the Company a confidentiality and non-disclosure agreement
in one of the Company's standard forms. Neither the execution or delivery of
any such agreement by any such person, nor the carrying on of the Company's
business as currently conducted and as currently proposed to be conducted,
has or will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such persons is obligated.
2.10 BANK ACCOUNTS. The E/Risk Disclosure Schedule sets forth the
names and locations of all banks and other financial institutions at which
the Company maintains accounts of any nature, the type of accounts maintained
at each such institution and the names of all persons authorized to draw
thereon or make withdrawals therefrom.
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2.11 CONTRACTS.
(a) The Company is not a party or subject to any agreement,
obligation or commitment, written or oral:
(i) that calls for any fixed or contingent payment or
expenditure or any related series of fixed or contingent payments or
expenditures by or to the Company totaling more than $20,000 in any
twelve-month period;
(ii) with agents, advisors, salesmen, sales
representatives, independent contractors or consultants;
(iii) that restricts the Company from carrying on
anywhere in the world its business or any portion thereof as currently
conducted;
(iv) to provide funds to or to make any investment in
any other person or entity (in the form of a loan, capital contribution or
otherwise);
(v) with respect to obligations as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person or entity;
(vi) for any line of credit, standby financing,
revolving credit or other similar financing arrangement; or
(vii) with any distributor, original equipment
manufacturer, value added remarketer or other person for the distribution of
any of the E/Risk Products.
(b) No party to any such contract, agreement or instrument
has expressed its intention to any officer of the Company to cancel,
withdraw, modify or amend such contract, agreement or instrument, nor does
the Company otherwise know of such an intention.
(c) To the best of its knowledge after diligent inquiry by
its executive officers and directors, the Company is not in default under or
in breach or violation of, nor is there any valid basis for any claim of
default by the Company under, or breach or violation by the Company of, any
contract, commitment or restriction to which the Company is a party or by
which the Company or any of its properties or assets is bound or affected,
except where such default or breach would not have a Material Adverse Effect
on the Company. To the Company's knowledge and to the knowledge of each
Shareholder, no other party is in default under or in breach or violation of,
nor is there any valid basis for any claim of default by any other party
under, or any breach or violation by any other party of, any contract,
commitment, or restriction to which the Company is a party or by which the
Company or any of its properties or assets is bound or affected. The Company
has no reason to believe that it will not be able to comply with the terms or
conditions of any contract to which it is a party without an increase in its
technical or personnel resources allocated to such contract compared to the
resources budgeted by the Company as of the date of this Agreement or any
other increase in the cost of satisfying any
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covenants or conditions under such contract compared to the costs budgeted by
the Company as of the date of this Agreement.
2.12 LABOR DIFFICULTIES. The Company is not engaged in any unfair
labor practice or in violation of any applicable laws respecting employment,
employment practices or terms and conditions of employment, except where such
practice or violation would not have a Material Adverse Effect on the
Company. There is no unfair labor practice complaint against the Company
pending or threatened before any Governmental Entity. There is no strike,
labor dispute, slowdown, or stoppage pending or threatened against the
Company. The Company is not now and has never been subject to any union
organizing activities. The Company has not experienced any work stoppage or
other labor difficulty.
2.12 TRADE REGULATION. The Company has not terminated its
relationship with or refused to ship E/Risk Products to any dealer,
distributor, third party marketing entity or customer which had theretofore
paid or been obligated to pay the Company in excess of $10,000 over any
consecutive twelve month period. All of the prices charged by the Company in
connection with the marketing or sale of any of its products or services have
been in compliance with all applicable laws and regulations, except for such
noncompliance that would not have a Material Adverse Effect on the Company.
No claims have been asserted or, to the Company's knowledge, threatened
against the Company with respect to the wrongful termination of any dealer,
distributor or any other marketing entity, discriminatory pricing, price
fixing, unfair competition, false advertising, or any other material
violation of any laws or regulations relating to anti-competitive practices
or unfair trade practices of any kind, and, to the Company's knowledge and to
the knowledge of each Shareholder, no specific situation, set of facts, or
occurrence provides any basis for any such claim.
2.14 ENVIRONMENTAL MATTERS.
(a) As of the date hereof, no amount of any substance that
has been designated by applicable law or regulation to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, excluding
office, janitorial and similar substances (a "Hazardous Material"), is
present, as a result of the actions of the Company or, to the Company's
knowledge and to the knowledge of each Shareholder, as a result of any
actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water, that
the Company has at any time owned, operated, occupied or leased. To the
knowledge of the Company, no underground storage tanks are present under any
property that the Company has at any time owned, operated, occupied or leased.
(b) At no time has the Company transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials (collectively, "Hazardous Materials Activities") in
violation of any law, rule, regulation or treaty promulgated by any
Governmental Entity which has had or is likely to have a Material Adverse
Effect on the Company.
(c) The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the
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conduct of its business as such businesses is currently being conducted, the
absence of which would have a Material Adverse Effect on the Company.
(d) No action, proceeding, writ, injunction or claim is
pending or, to the knowledge of the Company and to the knowledge of each
Shareholder, threatened concerning any Environmental Permit or any Hazardous
Materials Activity of the Company. The Company is not aware of any fact or
circumstance which could reasonably be expected to involve the Company in any
environmental litigation or impose upon the Company any liability concerning
Hazardous Materials Activities.
2.15 EMPLOYEE BENEFIT PLANS.
(a) The Company has set forth in the E/Risk Disclosure
Schedule (i) all employee benefit plans, (ii) all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and (iii) all unexpired
severance agreements, written or otherwise, for the benefit of, or relating
to, any current or former employee of the Company (individually, an "E/Risk
Employee Plan," and collectively, the "E/Risk Employee Plans").
(b) With respect to each E/Risk Employee Plan, the Company
has made available to Buyer a true and correct copy of (i) such E/Risk
Employee Plan and (ii) each trust agreement and group annuity contract, if
any, relating to such E/Risk Employee Plan.
(c) With respect to the E/Risk Employee Plans, individually
and in the aggregate, no event has occurred, and there exists no condition or
set of circumstances in connection with which the Company could be subject to
any liability which would have a Material Adverse Effect on the Company.
(d) With respect to the E/Risk Employee Plans, individually
and in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with GAAP, on the financial
statements or books of the Company.
(e) The Company is not a party to any oral or written (i)
union or collective bargaining agreement, (ii) agreement with any officer or
other key employee of the Company, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving the Company of the nature contemplated by this
Agreement, (iii) agreement with any officer of the Company providing any term
of employment or compensation guarantee or for the payment of compensation in
excess of $100,000 per annum, or (iv) agreement or plan, including any stock
option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
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2.16 COMPLIANCE WITH LAWS. The Company has complied with, is not
in violation of, and has not received any notices of violation with respect
to, any statute, law or regulation applicable to the ownership or operation
of its business, except where such non-compliance or violations would not
have a Material Adverse Effect on the Company.
2.17 EMPLOYEES AND CONSULTANTS. The E/Risk Disclosure Schedule
contains a list of the names of all employees and consultants of the Company
as of the date of this Agreement and their salaries or wages, other
compensation, dates of employment and positions.
2.18 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or known investigation pending before any agency, court or
tribunal or, to the Company's knowledge, threatened against the Company or
any of its properties or officers or directors (in their capacities as such).
There is no judgment, decree or order against the Company or, to the
Company's knowledge or the knowledge of any Shareholder, any of the Company's
directors or officers (in their capacities as such) that could prevent,
enjoin or materially alter or delay any of the transactions contemplated by
this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on the Company. All litigation to which the Company is a party
(or, to its knowledge, threatened to become a party) is disclosed in the
E/Risk Disclosure Schedule.
2.19 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon the Company which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any current or currently proposed business practice of the Company
or the conduct of business by the Company as currently conducted or as
currently proposed to be conducted.
2.20 GOVERNMENTAL AUTHORIZATION. The Company has obtained each
governmental consent, license, permit, grant or other authorization of a
Governmental Entity that is required for the operation of the business of the
Company (collectively, the "E/Risk Authorizations"), and all of such E/Risk
Authorizations are in full force and effect, except where failure to obtain
such consent, license, permit, grant, or other authorization would not have a
Material Adverse Effect on the Company.
2.21 INSURANCE. The E/Risk Disclosure Schedule contains a list and
description of all insurance policies in effect which are maintained by the
Company or as to which it is an insured party. There is no material claim
pending under any of such policies as to which coverage has been questioned,
denied or disputed by the underwriters of such policies. All premiums due and
payable under all such policies have been paid, and the Company is otherwise
in compliance with the terms of such policies. The Company has no knowledge
of any threatened termination of, or material premium increase with respect
to, any of such policies.
2.22 INTERESTED PARTY TRANSACTIONS.
(a) No director, officer or shareholder of the Company has
any interest in (i) any material equipment or other material property or
asset, real or personal, tangible or intangible, including, without
limitation, any of the E/Risk Intellectual Property Rights, used in
connection with or pertaining to the business of the Company, (ii) any
creditor, supplier,
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customer, manufacturer, agent, representative, or distributor of any of the
E/Risk Products, (iii) any entity that competes with the Company, or with
which the Company is affiliated or has a business relationship, or (iv) any
material agreement, obligation or commitment, written or oral, to which the
Company is a party; PROVIDED, HOWEVER, that no such person shall be deemed to
have such an interest solely by virtue of ownership of less than five percent
(5%) of the outstanding stock or debt securities of any company whose stock
or debt securities are traded on a recognized stock exchange or on the Nasdaq
Stock Market.
(b) Except as contemplated by the Transaction Documents and
the Concurrent Agreement, the Company is not a party to any (i) agreement
with any officer or other employee of the Company the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence
of a transaction involving the Company in the nature of any of the
transactions contemplated by this Agreement, or (ii) agreement or plan,
including, without limitation, any stock option plan, stock appreciation
right plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
2.23 NO EXISTING DISCUSSIONS. As of the date hereof, the Company
is not engaged, directly or indirectly, in any discussions or negotiations
with any party other than Buyer with respect to any merger, consolidation,
sale of substantial assets, sale of shares of capital stock or similar
transactions.
2.24 REAL PROPERTY HOLDING CORPORATION. The Company is not a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
2.25 CORPORATE DOCUMENTS. The Company has furnished to Buyer, or
its representatives, for its examination (i) copies of its minute book
containing all records required to be set forth of all proceedings, consents,
actions, and meetings of the shareholders, the Board of Directors and any
committees thereof and (ii) to the extent requested by Buyer, all permits,
orders, and consents issued by any Governmental Entity with respect to the
Company. The corporate minute books and other corporate records of the
Company are complete and accurate in all material respects, and the
signatures of all officers and directors of the Company and the signatures of
all shareholders and other persons appearing on all documents contained
therein are the true signatures of the persons purporting to have signed the
same. All actions reflected in such books and records were duly and validly
taken in material compliance with the laws of the applicable jurisdiction.
2.26 SECTION 338(H)(10) ELECTION. The Company has been an S
Corporation since inception. Neither the Company nor any Subsidiary of the
Company has, in the past ten years, (A) acquired assets from another
corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or an other property) in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
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2.27 NO MISREPRESENTATION. No representation or warranty by the
Company or the Shareholders in this Agreement, or any written statement,
certificate or schedule furnished or to be furnished by or on behalf of the
Company or the Shareholders pursuant to this Agreement, when taken together,
contains or shall contain any untrue statement of a material fact or omits or
shall omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances
under which they were made, not misleading. The Company has delivered or made
available to Buyer or its representatives true and complete copies of all
documents which are referred to in this Article II or in the E/Risk
Disclosure Schedule.
ARTICLE III
FURTHER REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, represents and
warrants to Buyer as follows:
3.1 OWNERSHIP OF STOCK; AUTHORITY.
(a) Such Shareholder has good and marketable title, free and
clear of any and all liens and encumbrances, to all of the Company Shares.
The Shareholder has the full right, power and authority to transfer, convey
and sell to Buyer at each Closing the Company Shares to be sold at such
Closing and, upon consummation of the purchase contemplated hereby, Buyer
will acquire from such Shareholder good and marketable title to the Company
Shares to be sold by such Shareholder hereunder, free and clear of all
covenants, conditions, restrictions, voting trust arrangements, liens,
charges, encumbrances, options and adverse claims or rights whatsoever.
(b) Such Shareholder has all requisite power and authority to
execute and deliver the Transaction Agreements to which such Shareholder is a
party and to perform his obligations under such Transaction Agreements. Such
Transaction Agreements have each been duly and validly executed and delivered
by such Shareholder, and each constitutes a valid and binding obligation of
such Shareholder, enforceable against such Shareholder in accordance with its
terms, subject to the effect of bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
except as the availability of equitable remedies may be limited by general
principles of equity.
(c) Neither the execution and delivery of any or all of the
Transaction Agreements to which such Shareholder is a party by such
Shareholder, nor the consummation by such Shareholder of the transactions
contemplated hereby or thereby, will (i) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default
under, or require any notice, consent or waiver under, any instrument, contract,
agreement or arrangement to which such Shareholder is a party or by which such
Shareholder is bound, (ii) result in the
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imposition of any lien or encumbrance upon the Company Shares, or (iii)
violate any order, writ, injunction or decree applicable to such Shareholder
or to the Company Shares.
3.2 INVESTMENT REPRESENTATIONS.
(a) Such Shareholder has been advised that (i) the issuance
of shares of Buyer Common Stock in connection with this Agreement is expected
to be effected pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "Act"), and the resale of such shares
will be subject to the restrictions set forth in Rule 144 promulgated under
the Act unless otherwise transferred pursuant to an effective registration
statement under the Act or an appropriate exemption from registration, and
(ii) such Shareholder is an affiliate of the Company. Such Shareholder
accordingly agrees not to sell, pledge, transfer or otherwise dispose of any
Buyer Common Stock issued to Shareholder pursuant to this Agreement unless
(i) such sale, transfer or other disposition is made in conformity with the
requirements of Rule 144, (ii) such sale, pledge, transfer or other
disposition is made pursuant to an effective registration statement under the
Act or an appropriate exemption from registration or (iii) such Shareholder
delivers to Buyer a written opinion of counsel, reasonably acceptable to
Buyer in form and substance, that such sale, pledge, transfer or other
disposition is otherwise exempt from registration under the Act.
(b) Buyer will issue stop transfer instructions to its
transfer agent with respect to any Buyer Common Stock received by such
Shareholder pursuant to this Agreement, and there will be placed on the
certificates representing such Buyer Common Stock, or any substitutions
therefor, a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS
DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR
(ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN
OPINION OF COUNSEL, THAT SUCH REGISTRATION OR COMPLIANCE
IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend), and Buyer shall so instruct its transfer
agent, (i) if a registration statement respecting the sale of shares has been
declared effective under the Act and the shares of Buyer Common Stock have
been sold pursuant to such registration statement or (ii) if such Shareholder
delivers to Buyer (A) satisfactory written evidence that the shares have been
sold in compliance with Rule 144 (in which case, the substitute certificate
will be issued in the name of the transferee), or
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(B) an opinion of counsel, in form and substance reasonably satisfactory to
Buyer, to the effect that public sale of the shares by the holder thereof is
no longer subject to Rule 144.
(c) Such Shareholder will hold the Buyer Common Stock for
investment for Shareholder's own account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of
the Act.
(d) Such Shareholder understands that the Buyer Common Stock
has not been registered under the Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of such Shareholder's investment intent as expressed herein.
3.3 CLAREITY SHARES. The issuance of the Initial Clareity Shares
and the Subsequent Clareity Shares satisfies in full the obligations of the
Shareholders and the Company to Clareity for finders fees or similar fees
which arise or may arise as a result of the consummation of the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and to the
Shareholders as follows:
4.1 ORGANIZATION. Each of Buyer and Buyer's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate
power to own, lease and operate its property and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Buyer. Neither Buyer nor any of its Subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation,
Bylaws or other charter documents. Except as set forth in the Vista SEC
Reports (as defined in Section 4.4), neither Buyer nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or
entity.
4.2 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Buyer has all requisite corporate power and authority to
enter into this Agreement and the other Transaction Documents to which it is
or will be a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other
Transaction Documents to which Buyer is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of Buyer. This
Agreement and the other Transaction Documents to which Buyer is a party have
been or will be duly executed and delivered by Buyer and constitute or will
constitute the valid and binding obligations of Buyer, enforceable in
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accordance with their terms, except as such enforceability may be limited by
bankruptcy laws and other similar laws affecting creditors' rights generally
and general principles of equity.
(b) The execution and delivery by Buyer of this Agreement and
the other Transaction Documents to which it is or will be a party do not, and
the consummation of the transactions contemplated hereby and thereby will
not, (i) conflict with, or result in any violation or breach of any provision
of the Certificate of Incorporation or Bylaws of Buyer, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or loss of any
material benefit under, any note, mortgage, indenture, lease, contract or
other agreement, instrument or obligation to which Buyer is a party or by
which it or any of its properties or assets may be bound, or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Buyer or
any of its properties or assets, except in the case of (ii) and (iii) for any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not have a Material Adverse Effect on Buyer.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to Buyer or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would
not prevent or materially alter or delay any of the transactions contemplated
by this Agreement or would not have a Material Adverse Effect on Buyer.
4.3 NO MISREPRESENTATION. No representation or warranty by Buyer
in this Agreement, or any written statement, certificate or schedule
furnished or to be furnished by or on behalf of Buyer pursuant to this
Agreement when taken together, contains or shall contain any untrue statement
of a material fact or omits or shall omit to state a material fact required
to be stated therein or necessary in order to make such statements, in light
of the circumstances under which they were made, not misleading. Buyer has
delivered or made available to the Company and the Shareholders and their
respective representatives true and complete copies of all documents which
are referred to in this Article IV.
4.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Buyer has timely filed and made available to the
Shareholders all forms, reports and documents required to be filed by Buyer
with the Securities and Exchange Commission (the "SEC") since December 31,
1996 other than registration statements on Form S-8 (collectively, the "Vista
SEC Reports"). The Vista SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Act, and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Vista SEC Reports or
necessary in order to make the
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statements in such Vista SEC Reports, in the light of the circumstances under
which they were made, not misleading. None of Buyer's Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes) contained in the Vista SEC Reports, complied
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-QSB promulgated by the SEC) and
presented fairly or will present fairly, in all material respects, the
consolidated financial position of Buyer and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The unaudited
consolidated balance sheet of Buyer as of June 30, 1998 is referred to herein
as the "Vista Balance Sheet."
(c) Vista is eligible to use Form S-3 for registration of
outstanding shares to be sold for the account of any person other than Vista.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 REGISTRATION RIGHTS.
(a) Upon receipt after August 24, 1998 of a request by the
holders of a majority of the Buyer Common Stock issued at the Initial Closing
other than the Escrow Shares (the "Registrable Securities") to register such
shares for resale, Buyer shall notify any other persons receiving shares at
the Initial Closing of such request and permit such other persons to join in
such registration. Within 30 days, Buyer shall file with the SEC a
registration statement (the "Registration Statement") on Form S-3 or on such
other form as is then available under the Securities Act covering the
Registrable Securities; with respect to such shares, together with any shares
held by persons who requested (within 10 business days of receipt of the
notice set forth in the first sentence hereof) their shares to be included in
such registration, and shall cause such shares of Buyer Common Stock to be
registered under the Securities Act so as to permit the resale thereof,
PROVIDED, HOWEVER, that each holder of Registrable Securities ("Holder")
desiring to participate shall provide all such information and materials to
Buyer and take all such action as may be reasonably required in order to
permit Buyer to comply with all applicable requirements of the SEC and to
obtain any desired acceleration of the effective date of such Registration
Statement. Such provision of information and materials is a condition
precedent to the obligations of Buyer pursuant to this Section 5.1. Buyer
shall not be required to effect more than one registration under this Section
5.1. The offering made pursuant to such registration shall not be
underwritten.
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(b) Notwithstanding Section 5.1(a), Buyer shall be entitled
to postpone the declaration of effectiveness of the Registration Statement
prepared and filed pursuant to Section 5.1(a) for a reasonable period of time
up to thirty (30) calendar days if the Board of Directors of Buyer, acting in
good faith, determines that there exists material nonpublic information about
Buyer which the Board does not wish to disclose in a registration statement,
which information would otherwise be required by the Securities Act to be
disclosed in the Registration Statement to be filed pursuant to Section
5.1(a) above. Buyer shall have the right to extend such 30-day postponement
for up to 10 additional days; PROVIDED, HOWEVER, that Buyer will use all
reasonable efforts to limit the initial postponement and any extension to as
short a period as possible. In each case, Buyer shall furnish the
Shareholders with a written notice summarizing in reasonable detail the
material nonpublic information upon which the postponement or extension of
such postponement is based, which information the Shareholders shall treat as
confidential.
(c) Buyer shall (i) prepare and file with the SEC the
Registration Statement in accordance with Section 5.1(a) hereof with respect
to the shares of Registrable Securities desired for inclusion in the
Registration Statement and shall use all reasonable efforts to cause the
Registration Statement to become effective as promptly as practicable after
filing and to keep the Registration Statement effective until one year after
the Initial Closing Date; and (ii) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary, and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all securities proposed to be registered in the Registration
Statement until one year after the Initial Closing Date, (iii) furnish to
each Holder such number of copies of any prospectus (including any
preliminary prospectus and any amended or supplemented prospectus) in
conformity with the requirements of the Securities Act, and such other
documents, as each Holder may reasonably request in order to effect the
offering and sale of the shares of the Registrable Securities to be offered
and sold, but only while Buyer shall be required under the provisions hereof
to cause the Registration Statement to remain current. In addition, unless
such sales satisfy applicable exemptions, Buyer shall register or qualify the
sale of the securities covered by the Registration Statement under the
California Corporate Securities Law and under the Blue Sky laws of such other
jurisdictions as may be reasonably requested by any Holder.
(d) Notwithstanding any other provision of this Section 5.1,
Buyer shall have the right at any time to require that all Holders suspend
further open market offers and sales of Registrable Securities whenever, and
for so long as, in the reasonable judgment of Buyer in good faith after
consultation with counsel, there is or may be in existence material
undisclosed information or events with respect to Buyer (the "Suspension
Right"). In the event Buyer exercises the Suspension Right, such suspension
will continue for the period of time reasonably necessary for disclosure to
occur at a time that is not materially detrimental to Buyer and its
stockholders or until such time as the information or event is no longer
material, each as determined in good faith by Buyer after consultation with
counsel. Buyer will promptly give each Holder participating in such
registration notice of any such suspension, summarizing in reasonable detail
the information or events on which such suspension is based, PROVIDED that
the Holder participating in such registration shall maintain the
confidentiality of the contents of such
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<PAGE>
summary. Buyer will use all reasonable efforts to limit the length of the
suspension to no more than thirty calendar days, and in no event shall the
total time during which the Suspension Right is invoked by Buyer exceed 75
days during the one-year period following the effectiveness of the
Registration Statement. Buyer agrees to notify the Shareholders promptly upon
termination of the suspension.
(e) If any Holder shall propose to sell any Registrable
Securities pursuant to the Registration Statement, it shall notify the Chief
Financial Officer of Buyer of his intent to do so (including the proposed
manner and timing of all sales) at least two full trading days prior to such
sale. At any time within such two-trading-day period, Buyer may refuse to
permit the Holder to resell any Registrable Securities pursuant to Section
5.1(d).
(f) Buyer shall pay all of the out-of-pocket expenses (other
than underwriting discounts and commissions, if any, and any fees or
disbursements of counsel retained by a Holder of Registrable Securities)
incurred in connection with any registration or qualification of Registrable
Securities pursuant to this Section 5.1, including, without limitation, all
registration or qualification and filing fees, Blue Sky fees and expenses,
printing expenses, transfer agents' and registrars' fees, and the reasonable
fees and disbursements of Buyer's outside counsel and independent accountants.
(g) For any Registrable Securities included in the
Registration Statement, to the maximum extent permitted by law, Buyer will
indemnify and hold harmless each Shareholder from and against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect of them) arise out of or are based on any of the following
statements, omissions, or violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement and any
amendments or supplements to the Registration Statement;
(ii) The omission or alleged omission to state in the
Registration Statement a material fact required to be so stated or necessary
to make the statements in the Registration Statement not misleading; or
(iii) Any violation or alleged violation by Buyer of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation promulgated thereunder.
Buyer will either assume the defense of any action or reimburse
each Shareholder for any legal or other expenses reasonably incurred by the
Shareholder in connection with investigating or defending any such loss,
claim, damage, liability, or action ("Loss"); provided that the indemnity
agreement contained in this Section 5.1(g) shall not apply to a Shareholder
to the extent that the Loss arises out of or is based on a Violation that
occurs in reliance on and in
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<PAGE>
conformity with written information furnished expressly for use in connection
with the Registration Statement by such Shareholder.
(h) Buyer agrees to use its best efforts to:
(i) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date of the Registration Statement;
(ii) Use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Buyer under the
Securities Act and the Exchange Act and to otherwise continue to qualify for
the continued use of Form S-3 for the resale of the Registrable Securities;
and
(iii) So long as any Shareholder owns any Registrable
Securities which are not subject to an effective Registration Statement and
until any sale would be eligible under Rule 144(k) promulgated under the
Securities Act, to furnish to the Shareholder forthwith upon request a
written statement by Buyer as to its compliance with the reporting
requirements of Rule 144 under the Securities Act, a copy of the most recent
annul or quarterly report of Buyer and such other reports and documents of
Buyer and other information in the possession of or reasonably obtainable by
Buyer as a Shareholder may reasonably request in availing itself of any rule
or regulation of the SEC allowing a Shareholder to sell any Registrable
Securities without registration.
(i) The right to cause Buyer to register the Buyer Common
Stock under this Section 5.1 may be assigned to a transferee or assignee of
at least 25,000 shares of Buyer Common Stock reasonably acceptable to Buyer
in connection with any transfer or assignment of Registrable Securities by a
Shareholder provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, (ii) written notice is promptly
given to Buyer and (iii) such transferee agrees to be bound by the provisions
of this Section 5.1. Notwithstanding the foregoing, the registration rights
under this Section 5.1 may be assigned to any Shareholder's spouse, children,
siblings, ancestors and descendants and any trust established solely for the
Shareholder's benefit or for the benefit of the Shareholder's spouse,
children, siblings, ancestors or descendants, without compliance with item
(ii) above, provided written notice thereof is promptly given to Buyer.
(j) Buyer shall provide reasonable assistance to the
Shareholders in establishing a relationship with one of Buyer's banks which
will permit the Shareholders to borrow against their Registrable Securities.
Buyer shall also provide reasonable assistance to the Shareholders in
arranging private sales of Registrable Securities, consistent with applicable
securities law requirements.
5.2 BROKERS OR FINDERS. Each of Buyer, the Shareholders and the
Company represents, as to itself, its Subsidiaries and its Affiliates, that,
other than Clareity, no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's
fee or any other commission or similar fee in connection with any of the
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<PAGE>
transactions contemplated by this Agreement; and each of Buyer, the
Shareholders and the Company agrees to indemnify and hold the other harmless
from and against any and all claims, liabilities or obligations with respect
to any fees, commissions or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or its
Affiliate. The Shareholders agree to indemnify and hold the Company and
Buyer harmless from and against any and all claims, liabilities or
obligations with respect to such fees due to Clareity by the Shareholders or
the Company.
5.3 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS; TAX ELECTION;
DISTRIBUTIONS. Subject to the terms and conditions of this Agreement, each of
the parties agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including
cooperating fully with the other party, including by provision of
information. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Buyer with full title to all the Company Shares, the Shareholders shall
take all such necessary action. The Shareholders agree to cooperate with
Buyer and the Company in providing any necessary information and taking any
reasonably necessary actions in order to effect the filing of a Section
338(h)(10) Election under the Internal Revenue Code. Buyer shall cause the
Company to notify the Internal Revenue Service and the California Franchise
Tax Board of the fact that the Company ceased to be an S Corporation as of
the Closing Date and to prepare all tax filings necessary in connection with
the termination of the Company's status as an S Corporation. Within ten days
after receiving written notice from a Shareholder, together with
documentation supporting the calculation referred to in this sentence, Buyer
shall cause the Company to distribute to such Shareholder the amount, if any,
of any federal and state income taxes which any Shareholder's accountant has
determined will be owed by the Shareholder as a result of his share of
distributive income of the Company with respect to the period from January 1,
1998 through July 24, 1998, except that the Shareholders will be responsible
for their own taxes resulting from the sale of the Company Shares and the
Section 338(h)(10) election. To the extent that the Section 338(h)(10)
election results in the acceleration of taxes owed by a Shareholder on the
Company Shares to be sold at the Subsequent Closing, Buyer will loan such
Shareholder the amount of such accelerated tax on an interest free basis,
until such tax would otherwise be owed. No other distributions shall be made
to any Shareholder as a result of the financial performance of the Company
prior to the Closing Date.
5.4 EXPENSES. The parties shall each pay their own legal,
accounting and financial advisory fees and other out-of-pocket expenses
related to the negotiation, preparation and carrying out of this Agreement
and the transactions herein contemplated; provided, however, that the Company
may pay the legal fees of counsel advising the Shareholders with respect to
this Agreement (and the other shareholder pursuant to the Concurrent
Agreement) and the out of pocket costs of Clareity as long as the aggregate
fees and expenses paid by the Company in connection with this Agreement and
the Concurrent Agreement do not exceed $25,000.
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<PAGE>
ARTICLE VI
CONDITIONS TO THE CLOSING
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each Party to this Agreement shall be subject to the
satisfaction on or prior to the Initial Closing Date of the following
conditions:
(a) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity the failure of which to obtain or comply with would
be reasonably likely to have a Material Adverse Effect on Buyer or the
Company or a Material Adverse Effect on the consummation of the transactions
contemplated hereby shall have been filed, occurred or been obtained.
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or prohibition preventing the
consummation of the transactions contemplated hereby or limiting or
restricting Buyer's conduct or operation of the business of Buyer or the
Company after the transactions contemplated hereby shall have been
consummated, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic governmental entity seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the transactions contemplated hereby which makes the consummation of the
transactions contemplated hereby illegal.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The
obligations of Buyer to effect the transactions contemplated hereby are
subject to the satisfaction of each of the following conditions, any of which
may be waived in writing exclusively by Buyer:
(a) The representations and warranties of the Company and the
Shareholders set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date
as though made on and as of the Closing Date, except (i) for changes
contemplated by this Agreement or the Concurrent Agreement, (ii) that
representations and warranties which specifically relate to a particular date
or period shall be true and correct as of such date and for such period and
(iii) where the failure of any such representation or warranty to be true and
correct on and as of the Closing Date, individually and in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on the
Company, or a material adverse effect upon the consummation of the
transactions contemplated hereby; and Buyer shall have received a certificate
to such effect signed on behalf of the Company by the chief executive officer
of the Company and by Shareholders in their capacities as individuals with
respect to the representations and warranties of Shareholders;
(b) The Company and Shareholders shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and Buyer shall have received a
certificate to such effect signed on
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<PAGE>
behalf of the Company by the chief executive officer of the Company and by
the Shareholders in their capacities as individuals;
(c) Buyer shall have received from the Company written
evidence that the execution, delivery and performance of the Company's
obligations under this Agreement have been duly and validly approved and
authorized by the Board of Directors;
(d) Mr. Calder and Mr. Solomon shall have executed and
delivered Employment Agreements in the form of EXHIBIT B-1 attached hereto;
Mr. Mathews shall have executed an Amendment to Employment Agreement in the
form of EXHIBIT B-2 attached hereto; and each Shareholder shall have executed
and delivered the Non-Competition and Non-Solicitation Agreement in the form
attached hereto as EXHIBIT C;
(e) The Company, Buyer, the Shareholders and the Escrow Agent
shall have executed and delivered the Escrow Agreement;
(f) Buyer shall have received from the Shareholders such
other documents as Buyer's counsel shall have reasonably requested, in form
and substance reasonably satisfactory to Buyer's counsel;
(g) The Company, Buyer and the other party to the Concurrent
Agreement shall have executed and delivered the Concurrent Agreement, and all
of the conditions to Buyer's obligations under the Concurrent Agreement shall
have been satisfied or duly waived by Buyer;
(h) The shareholders of the Company who are listed as
applicants for the E/Risk trademark registration shall have assigned their
interests in such mark to the Company; and
(i) The Shareholders of the Company shall have taken action,
effective as of the Initial Closing, to (A) expand the size of the Board of
Directors of the Company to seven, and (B) elect Thomas R. Gay, E. Stevens
Hamilton, Jerome T. Marani, and Brian Conn as directors; and the Board of
Directors shall have appointed Thomas R. Gay as Chairman of the Company, E.
Stevens Hamilton as Chief Financial Officer and Brian Conn as Assistant
Secretary.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS. The obligations of the Company and the Shareholders to close
the transactions contemplated hereby is subject to the satisfaction of each
of the following conditions, any of which may be waived, in writing,
exclusively by the Company and the Shareholders:
(a) The representations and warranties of Buyer set forth in
this Agreement shall be true and correct in all material respects as of the
date of this Agreement and (except to the extent such representations speak
as of an earlier date) as of the Closing Date as though made on and as of the
Closing Date, except for (i) changes contemplated by this Agreement and (ii)
where the failure to be true and correct would not be reasonably likely to
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<PAGE>
have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a
whole, or a material adverse effect upon the consummation of the transactions
contemplated hereby; and the Company and the Shareholders shall have received
a certificate to such effect signed on behalf of Buyer by the chief financial
officer of Buyer;
(b) Buyer shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company and the Shareholders shall have received
a certificate to such effect signed on behalf of Buyer by the chief financial
officer of Buyer;
(c) The Company, Buyer, the Shareholders and the Escrow Agent
shall have executed and delivered the Escrow Agreement; and
(d) The Company and the Shareholders shall have received from
Buyer written evidence that the execution, delivery and performance of
Buyer's obligations under this Agreement have been duly and validly approved
and authorized by the Board of Directors of Buyer;
ARTICLE VII
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. If the Initial
Closing occurs, all of the representations and warranties contained in
Section 2 and 4 of this Agreement shall survive for a period of six months
from the Initial Closing Date (except that representations and warranties
that specifically relate to a particular date or period shall be true and
correct as of such date and for such period). If the Initial Closing occurs,
all of the representations, warranties and covenants contained in Section 3
and 5 of this Agreement shall survive from the Initial Closing Date until the
expiration of two years from the Subsequent Closing Date.
7.2 INDEMNIFICATION.
(a) Subject to the terms and conditions contained herein,
each Shareholder shall indemnify, defend and hold harmless Buyer, its
officers, directors, employees and attorneys, all Subsidiaries and Affiliates
of Buyer, and the respective officers, directors, employees and attorneys of
such entities (all such persons and entities being collectively referred to
as the "Vista Group") from, against, for and in respect of any and all
losses, damages, costs and expenses (including reasonable legal fees and
expenses) ("Indemnified Loss") which any member of the Vista Group may
sustain or incur which are caused by or arise out of (i) any inaccuracy in or
breach of any of the representations, warranties or covenants made by the
Company or the Shareholders in this Agreement, or (ii) as a result of willful
fraud or intentional misrepresentation by the Company or the Shareholders or
any of their representatives. Resort against the Escrow Shares in accordance
with the terms of the Escrow Agreement shall be Buyer's sole and exclusive
remedy for breaches of the representations and warranties of the Shareholders
and the Company set forth in Article II; PROVIDED, HOWEVER, that such
limitation shall not apply to Indemnified Losses which are the result of
willful fraud or intentional
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<PAGE>
misrepresentation; PROVIDED, further, that Vista shall not be entitled to any
indemnification hereunder until the total Indemnified Losses exceed $25,000.
For purposes of determining the amount of Indemnified Losses, no effect will
be given to the resulting tax benefit to any Indemnitee. Each Shareholder
acknowledges and agrees that he shall not have and shall not exercise or
assert (or attempt to exercise or assert) any right of contribution, right of
indemnity or other right or remedy against the Company in connection with any
indemnification obligation or any other liability to which he may become
subject under or in connection with this Agreement or any certificate
delivered to Buyer in connection with this Agreement.
(b) Subject to the terms and conditions contained herein,
Buyer shall indemnify, defend and hold harmless the Shareholders from,
against, for and in respect of any and all Indemnified Losses which the
Shareholders may sustain or incur which are caused by or arise out of (i) any
inaccuracy in or breach of any other representations, warranties or covenants
made by Buyer in this Agreement, including the Vista Disclosure Schedule, or
(ii) as a result of willful fraud or intentional misrepresentation by Buyer.
For purposes of determining the amount of Indemnified Losses, no effect will
be given to the resulting tax benefit to any Indemnitee.
7.3 PROCEDURES FOR INDEMNIFICATION.
(a) As used in this Article VII, the term "Indemnitee" means
the member or members of the Vista Group or, as the case may be, the
Shareholders seeking indemnification hereunder; and the term "Indemnifying
Party" shall mean Vista in the case where the Shareholders are the
Indemnitees, and the Shareholders in the case where a member of the Vista
Group is the Indemnitee.
(b) A claim for indemnification hereunder (an
"Indemnification Claim") shall be made in accordance with the provisions of
the Escrow Agreement.
(c) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 7.4 hereof shall be observed by
Indemnitee and the Shareholders.
7.4 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made or
suit or proceeding be instituted against an Indemnitee which, if prosecuted
successfully, would be a matter for which such Indemnitee is entitled to
indemnification under this Article VII (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect to such
Third Party Claim shall be subject to the following terms and conditions:
(a) Indemnitee shall give the Indemnifying Party written
notice of any such Third Party Claim promptly after receipt by Indemnitee of
notice thereof, and the Indemnifying Party may, subject to the prior written
consent of the Indemnitee, undertake control of the defense thereof by
counsel of his or its own choosing reasonably acceptable to Indemnitee. If
Indemnifying Party has undertaken control of the defense of the matter,
Indemnitee may participate in the defense through his or its own counsel at
his or its own expense. In the event the Shareholder as an Indemnitee
desires to assume the defense of the matter, the Shareholders shall provide
Buyer with reasonable assurances of the Shareholders' ability to bear the
costs of such defense and any likely outcome. If, however, the Indemnifying
Party fails or refuses to
29
<PAGE>
undertake the defense of such Third Party Claim within fifteen (15) days
after written notice of such claim has been delivered to the Shareholders by
Indemnitee, Indemnitee shall have the right to undertake the defense,
compromise and settlement of such Third Party Claim in any manner which the
Indemnitee deems is reasonable with counsel of its own choosing; provided,
however that the Shareholders may not settle a claim in a manner that would
materially affect Buyer's business or that would exceed the value of the
Escrow Shares. In the circumstances described in the preceding sentence,
Indemnitee shall, promptly upon its assumption of the defense of such Third
Party Claim, make an Indemnification Claim as specified in Section 7.3(b),
which shall be deemed an Indemnification Claim that is not a Third Party
Claim for the purposes of the procedures set forth herein. Failure of
Indemnitee to furnish written notice to the Indemnifying Party of a Third
Party Claim shall not release the Indemnifying Party from his or its
obligations hereunder, except to the extent he or it is prejudiced by such
failure.
(b) Indemnitee and the Indemnifying Party shall cooperate
with each other in all reasonable respects in connection with the defense of
any Third Party Claim, including making available records relating to such
claim and furnishing employees of Vista as may be reasonably necessary for
the preparation of the defense of any such Third Party Claim or for testimony
as witness in any proceeding relating to such claim.
(c) Unless the Indemnifying Party has failed to fulfill his
or its obligations under this Article VII, no settlement by Indemnitee of a
Third Party Claim shall be made without the prior written consent by or on
behalf of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. If the Indemnifying Party has assumed the defense of a
Third Party Claim as contemplated by this Section 7.4, no settlement of such
Third Party Claim may be made by the Indemnifying Party without the prior
written consent by or on behalf of Indemnitee, which consent shall not be
unreasonably withheld or delayed.
ARTICLE VIII
GENERAL PROVISIONS
(a) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or within seventy-two (72) hours after being
mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with confirmation of receipt) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(b) if to Buyer, to:
Vista Information Solutions, Inc.
5060 Shoreham Place
San Diego, CA 92122
Attention: Chief Financial Officer
Fax: (619) 450-6185
Tel: (619) 450-6100
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<PAGE>
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Ste. 1600
San Diego, CA 92121
Attention: Douglas J. Rein
Fax: (619) 677-1477
Tel: (619) 677-1443
(c) if to the Company, to
E/Risk Information Systems
100 N. Winchester Blvd., Suite 230
Santa Clara, CA 95050
Attention: President
Fax: (408) 261-6454
Tel: (408) 261-6450
with a copy to:
Christopher J. Walt, Esq.
2223 Avenida de la Playa, Suite 100
La Jolla, CA 92037
Fax: (619) 459-7210
Tel: (619) 459-5940
(d) if to the Shareholders, to
[Name of Shareholder]
c/o 100 N. Winchester Blvd., Suite 230
Santa Clara, CA 95050
Fax: (408) 261-6454
Tel: (408) 261-6450
8.2 INTERPRETATION. When a reference is made in this Agreement to
an Article or Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The words "include," "includes"
and "including" when used herein shall be deemed in each case to be followed
by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
The phrases "the date of this
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<PAGE>
Agreement," "the date hereof," and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to July 24, 1998. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement. Each Party and its counsel has reviewed this Agreement and
provided revisions thereto; the rule of construction to the effect that
ambiguities are construed against the drafter shall not be used in the
interpretation of this Agreement.
8.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original as against any party
whose signature appears on such counterpart and all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the Parties and delivered to
the other Parties, it being understood that all Parties need not sign the
same counterpart.
8.4 SEVERABILITY. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The Parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
8.5 ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits hereto and the other documents delivered pursuant hereto)
constitutes the entire agreement among the Parties concerning the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof, other than the Confidentiality Agreement dated as of June 1, 1998.
8.6 GOVERNING LAW; VENUE AND JURISDICTION. This Agreement shall
be governed and construed in accordance with the laws of the State of
Delaware without regard to any applicable conflicts of law principles. Any
legal action arising under this Agreement shall be resolved in the courts
located in California.
8.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other Parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.8 THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement is intended to confer upon any person other than the parties hereto
and their respective successors and permitted assigns, any rights, remedies
or obligations under, or by reason of this Agreement.
8.9 ATTORNEY'S FEES. If any Party shall commence any action or
proceeding against another party in order to enforce the provision hereof, or
to recover damages as the result
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of the alleged breach of any of the provisions hereof, the prevailing party
therein shall be entitled to recover all reasonable costs incurred in
connection therewith, including, but not limited to, reasonable attorneys'
fees.
IN WITNESS WHEREOF, Buyer and the Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, and the Shareholders have executed this Agreement in the space
provided below.
"BUYER"
VISTA INFORMATION SOLUTIONS, INC.
By:
-----------------------------
Its:
----------------------------
THE "SHAREHOLDERS" THE "COMPANY"
E/RISK INFORMATION SERVICES
By:
- --------------------------- -----------------------------
Stuart Solomon
Its:
----------------------------
- ---------------------------
Eben Calder
- ---------------------------
Bradley G. Mathews
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<PAGE>
SCHEDULES AND EXHIBITS TO STOCK PURCHASE AGREEMENT
OF JULY 24, 1998 BY AND AMONG
VISTA INFORMATION SOLUTIONS, E/RISK INFORMATION SERVICES,
STUART SOLOMON, EBEN CALDER AND BRADLEY MATHEWS
SCHEDULES/EXHIBITS TITLE
Schedule 1 Allocation of Consideration
Exhibit A E/Risk Disclosure Schedule
Exhibit B-1 Form of Employment Agreement
Exhibit B-2 Form of Amendment to Employment Agreement
Exhibit C Non-Competition and Non-Solicitation Agreement
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT AND
ESCROW AGREEMENT
This Amendment to Stock Purchase Agreement and Escrow Agreement is entered
into as of October 6, 1998 by and between Vista Information Solutions, Inc. a
Delaware corporation ("Buyer"), Stuart Solomon and Eben Calder (each of Solomon
and Calder, a "Seller") and Norwest Bank Minnesota, National Association, a
national banking association principally located in Minneapolis, Minnesota
("Escrow Agent").
RECITALS
A. Buyer and Sellers are parties to a Stock Purchase Agreement entered into as
of July 24, 1998 (the "Purchase Agreement") pursuant to which, among other
things, Buyer purchased an aggregate of 136.8 shares of Common Stock of
E/Risk Information Systems, a California corporation, from Sellers in
return for issuance to each Seller of certain shares of Common Stock of
Buyer .
B. Pursuant to the terms of Purchase Agreement, Sellers contributed an
aggregate of 133,904 shares (66,952 shares from each Seller) of Common
Stock of Buyer to an escrow maintained by Escrow Agent pursuant to terms of
an Escrow Agreement for Acquisition of Assets/Business dated July 24, 1998
(the "Escrow Agreement").
C. Buyer and the Sellers desire to amend the terms of the Purchase Agreement
and the Escrow Agreement to provide for contribution of an additional
133,904 shares of Common Stock of Buyer into the escrow already being
maintained by Escrow Agent and Escrow Agent is willing to act as Escrow
Agent for such additional shares.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. AMENDMENT OF PURCHASE AGREEMENT. The Purchase Agreement is hereby amended
to provide that an aggregate of 267,808 shares (133,904 shares from each
Seller) of Common Stock of Buyer shall be deposited with Escrow Agent
pursuant to the Escrow Agreement, as amended. Upon execution of this
Agreement, each Seller will forward a certificate to Escrow Agent
representing an additional 66,952 shares of Common Stock of Buyer (for a
total additional contribution of 133,904 shares).
2. AMENDMENT OF ESCROW AGREEMENT. The Escrow Agreement is hereby amended to
provide that 267,808 shares of Common Stock shall be deposited into the
Escrow and shall constituted the "Escrow Funds" (as provided for in the
Escrow Agreement).
<PAGE>
3. NO OTHER CHANGES. Except as set forth herein, the terms of the Purchase
Agreement and the Escrow Agreement shall remain in effect without
modification or amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed
as of the date and year first written above.
BUYER
VISTA INFORMATION SOLUTIONS, INC.
By:
--------------------------------
E. Stevens Hamilton
Vice President and Chief Financial Officer
SELLERS
- --------------------------------------
Stuart Solomon
- --------------------------------------
Eben Calder
ESCROW AGENT
NORWEST BANK MINNESOTA, National Association
By:
--------------------------------
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