<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 18, 1997
CRA MANAGED CARE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 02-25856 004-2658593
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
organization)
312 Union Wharf, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 367-2163
N/A
(Former name or former address, if changed since last report)
Exhibit Index located at Page 4
<PAGE>
Item 2. Acquisition or Disposition of Assets.
CRA Managed Care, Inc. (the "Registrant"), a Massachusetts corporation, and
FNS Acquisition Corp. ("Acquisition Sub"), a Delaware corporation and a wholly
owned subsidiary of the Registrant, acquired substantially all of the assets of
First Notice Systems Company, a Massachusetts business trust ("FNS"), pursuant
to an Asset Purchase Agreement (the "FNS Agreement"), dated as of June 4, 1997,
by and among the Registrant, Acquisition Sub, FNS, and the shareholders of FNS
(the "FNS Shareholders") a copy of which is attached hereto and incorporated by
reference. The effective date of the acquisition is May 31, 1997. In
consideration for the assets of FNS, the Registrant paid a purchase price of $40
million cash and assumed certain liabilities of FNS. This acquisition was
accounted for as a purchase and was funded with amounts borrowed under the
Registrant's senior revolving credit facility with First Union National Bank of
North Carolina.
Description of the Business
FNS is currently a leading provider of outsourced call center reporting for
first notice of loss/injury to the insurance industry. Today, FNS provides its
services primarily to the auto insurance industry for first notice of loss
reporting; however, the company has recently begun to do more business with
workers' compensation carriers for first report of injury reporting with P&C
carriers who write both auto and workers' compensation insurance. Significant
investment in technology and personnel over the past four years has positioned
FNS to offer its call center services to some of the largest insurance carriers
in the country 24 hours per day, 365 days per year at a cost effective price.
FNS has over 300 employees handling 70,000 calls per month from two call centers
in Massachusetts and has capacity to substantially increase its call volume
without adding an additional call center.
FNS provides a flexible service that can range from simple acceptance and
transmission of a report of loss to a full turn-key service that could include
one or more of the following: notice of loss reporting; direction into an FNS
preferred towing company, glass company or auto body shop with a discounted
price; arrangement for car rental or alternative mode of transportation; or, in
the event of an injury, direction into a PPO network of providers and hospitals.
Approximately 25% of all calls are not related to a report of loss, but instead
are information requests for which FNS charges a separate fee.
Description of the Transaction
FNS Agreement
General. The FNS Agreement provides, among other things, for the
acquisition of substantially all of the assets subject to substantially all
of the liabilities of FNS by Acquisition Sub. Acquisition Sub acquired from
FNS the business of FNS as a going concern (the "Business") including all of
FNS' assets of every kind and description other than certain enumerated
Retained Assets and acquired such assets subject only to the Assumed
Liabilities of FNS. The Assumed Liabilities include all liabilities of FNS
other than the Retained Liabilities which are (i) all liabilities and
obligations of FNS owing to any one or more of Cross Country Motor Club,
Inc., Cross Country Motor Club of California, Inc., Cross Country Service
Corp., Cross Country House Assistance Services, Inc. and Homeowners Assurance
Company, Inc. or their respective
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<PAGE>
affiliates, (ii) all liabilities of FNS relating to indebtedness for borrowed
money, to the extent such liabilities are not reflected on FNS' last
regularly prepared balance sheet, (iii) all liabilities of FNS or the FNS
Shareholders resulting from, constituting or relating to a breach of any of
the representations, warranties, covenants or agreements of FNS or the FNS
Shareholders in the FNS Agreement, (iv) all liabilities of FNS for federal,
state, local or foreign taxes; (v) any liability incurred by FNS in
connection with the FNS Agreement or related agreements; (vi) any liability
with respect to a loan from Government Land Bank to East Coast Springfield
Development, L.L.C. and (vii) liabilities incurred by FNS after the Closing
Date other than those incurred pursuant to an ancillary agreeement to the
transaction.
Consideration. The consideration paid to FNS for the purchased assets was
$40 million, payable in cash. Additionally, Acquisition Sub assumed the
Assumed Liabilities.
Indemnification. FNS and the FNS Shareholders ("FNS") agreed to
indemnify and hold harmless the Registrant and Acquisition Sub and the
Registrant and Acquisition Sub agreed to indemnify and hold harmless FNS and
the FNS Shareholders against all expense, loss or liability resulting from
any breach of their respective representations or warranties contained in the
FNS Agreement and any demands, claims, actions, suits or proceedings,
assessments, judgments, costs and legal and other expenses incident to the
foregoing in an amount up to $4 million. Each of the parties is liable to
the other party only if the injured party's losses subject to the
indemnification provision exceed $250,000, and the injured party will not be
indemnified for the first $150,000 of such losses. Claims under these
indemnification provisions must be asserted on or before the first to occur
of (i) the 30th day after the date audited financial statements of the
Registrant for the year ended December 31, 1997 are released to the
Registrant and (ii) May 31, 1998.
FNS and the FNS Shareholders indemnify the Registrant and Acquisition Sub
against any claims arising out of any of the Retained Liabilities, except for
those claims arising out of the breach of representations and warranties as
described above. This indemnification is not subject to the limitations
described above and survives the Closing.
The Registrant and Acquisition Sub indemnify FNS and the FNS Shareholders
against any claims arising out of any of the Assumed Liabilities, except for
those claims arising out of the breach of representations and warranties as
described above This indemnification is not subject to the limitations
described above and survives the Closing.
Non-Competition and Marketing Agreement and Other Agreements
A Non-Competition and Marketing Agreement was entered into by the
Registrant, Acquisition Sub, FNS, the FNS Shareholders and certain entities
controlled by the FNS Shareholders. The Agreement establishes a relationship
between Acquisition Sub and companies owned by the FNS Shareholders
(hereinafter "Cross Country"). This Agreement contains non-competition
provisions to protect the goodwill and business interests of Acquisition Sub
and Cross Country whereby each agrees not to compete with the other for a
period of up to 5 years in their respective businesses as defined in the
Agreement. Additionally, Cross Country and the Registrant agree to cooperate
in continuing to provide integrated services to common customers of Acquisition
Sub and Cross
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<PAGE>
Country; to market to each of their respective customers services and
programs provided by each other; and to endorse the use of the services of
each other as part of a cooperative marketing effort. This Agreement sets
forth the provisions establishing this relationship.
Agreements regarding the provision of transitional services, sublease
arrangements and other similar agreements were also entered into by and among
Cross Country, FNS and the Registrant in connection with this transaction.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
First Notice Systems, Inc. Report of Independent Public
Accountants.
Balance Sheets as of September 30, 1995 and 1996 (audited) and
March 31, 1997 (unaudited).
Statement of Income and Accumulated Deficit for the years ended
September 30, 1995 and 1996 (audited) and the six months
ended March 31, 1997 (unaudited).
Statement of Cash Flows for the years ended September 30, 1995
and 1996 (audited) and the six months ended
March 31, 1997 (unaudited).
Notes to Financial Statements.
(b) Pro Forma Financial Information.
Pro Forma Consolidated Balance Sheet for the period ended
March 31, 1997.
Pro Forma Consolidated Statement of Operations for the three
months ended March 31, 1997.
Pro Forma Consolidated Statement of Operations for the year
ended December 30, 1996.
Notes to Pro Forma Consolidated Financial Statements.
(c) Exhibits - The following conformed copies of Exhibits to this
Form 8-K are hereby filed:
Exhibit 2.1 Asset Purchase Agreement among Registrant, Acquisition Sub, FNS
and the FNS Shareholders.
Exhibit 10.1 Non-Competition and Marketing Agreement among the FNS
Shareholders, FNS, Acquisition Sub and the Registrant.
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<PAGE>
In accordance with Item 601(b) (2) of Regulation S-K, the Schedules, Exhibits
and other documents referred to in the Asset Purchase Agreement and the
Non-Competition and Marketing Agreement have not been filed as part of the
Exhibits to this Current Report on Form 8-K. The registrant agrees to furnish
supplementally a copy of such documents to the Commission upon request.
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.
CRA MANAGED CARE, INC.
June 18, 1997 /s/ Donald J. Larson
-------------------------
By: Donald J. Larson
President and Chief Executive Officer
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<PAGE>
FIRST NOTICE SYSTEMS, INC.
FINANCIAL STATEMENTS
AS OF MARCH 31, 1997 (UNAUDITED), SEPTEMBER 30, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
First Notice Systems, Inc.:
We have audited the accompanying balance sheets of First Notice Systems,
Inc. (a Massachusetts S corporation) as of September 30, 1996 and 1995, and the
related statements of income and accumulated deficit and cash flows for the
years then ended. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of First Notice Systems, Inc.
as of September 30, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 30, 1997
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<PAGE>
FIRST NOTICE SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
ASSETS 1997 1996 1995
- ---------------------------------------------------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............................... $ 269 $ 100,269 $ 100,014
Accounts receivable..................................... 2,124,156 2,349,552 1,253,968
Prepaid expenses........................................ 17,315 5,236 8,555
------------- ------------ ------------
Total current assets................................. 2,141,740 2,455,057 1,362,537
------------- ------------ ------------
Property and Equipment:
Furniture, computer and office equipment................ 3,215,781 2,040,385 398,387
Motor vehicles.......................................... 18,459 18,459 18,459
Leasehold improvements.................................. 68,899 4,961 --
Less--Accumulated depreciation and amortization......... 508,978 306,664 105,817
------------- ------------ ------------
Total property and equipment, net.................... 2,795,161 1,757,141 311,029
------------- ------------ ------------
Software Development Costs, net of accumulated
amortization of $380,120, $204,375 and $41,641 at March
31, 1997, September 30, 1996 and 1995, respectively..... 1,554,584 1,126,055 215,627
------------- ------------ ------------
Total assets......................................... $ 6,491,485 $ 5,338,253 $ 1,889,193
------------- ------------ ------------
------------- ------------ ------------
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' DEFICIT 1997 1996 1995
- ---------------------------------------------------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current Liabilities:
Due to affiliates....................................... $ 6,930,533 $ 5,246,804 $ 2,759,889
Notes payable........................................... 86,902 -- --
Accounts payable........................................ 262,026 465,685 70,000
Accrued expenses........................................ 660,317 331,998 256,421
------------- ------------ ------------
Total current liabilities............................ 7,939,778 6,044,487 3,086,310
------------- ------------ ------------
Stockholders' Deficit:
Common stock, $.10 par value--
Authorized--10,000 shares issued and outstanding--
10,000 shares......................................... 1,000 1,000 1,000
Paid-in capital......................................... 4,000 4,000 4,000
Accumulated deficit..................................... (1,453,293) (711,234) (1,202,117)
------------- ------------ ------------
Total stockholders' deficit.......................... (1,448,293) (706,234) (1,197,117)
------------- ------------ ------------
Total liabilities and stockholders' deficit.......... $ 6,491,485 $ 5,338,253 $ 1,889,193
------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
FIRST NOTICE SYSTEMS, INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ---------------------------
1997 1996 1995
------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue............................................................... $ 5,278,868 $ 9,422,419 $ 5,341,332
------------- ------------ -------------
Operating Expenses:
Labor and related benefits.......................................... 3,264,944 4,855,802 2,704,602
Depreciation and amortization....................................... 377,182 361,651 147,458
General and administrative.......................................... 2,131,501 3,384,083 2,193,086
------------- ------------ -------------
Total operating expenses......................................... 5,773,627 8,601,536 5,045,146
------------- ------------ -------------
Income (Loss) from Operations......................................... (494,759) 820,883 296,186
Interest Expense...................................................... 247,300 330,000 193,083
------------- ------------ -------------
Net income (loss)................................................ (742,059) 490,883 103,103
Accumulated Deficit, beginning of year................................ (711,234) (1,202,117) (1,305,220)
------------- ------------ -------------
Accumulated Deficit, end of year...................................... $ (1,453,293) $ (711,234) $ (1,202,117)
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-9-
<PAGE>
FIRST NOTICE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ------------------------
1997 1996 1995
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)...................................................... $ (742,059) $ 490,883 $ 103,103
Adjustments to reconcile net income to net cash provided by (used in)
operating activities--
Depreciation and amortization.......................................... 378,059 361,651 147,458
Changes in current assets and liabilities--
Accounts receivable.................................................. 225,396 (1,095,584) (1,186,124)
Prepaid expenses..................................................... (12,079) 3,319 (8,555)
Accounts payable and accrued expenses................................ 124,660 471,261 326,336
----------- ----------- -----------
Net cash provided by (used in) operating activities.................. (26,023) 231,530 (617,782)
----------- ----------- -----------
Cash Flows from Investing Activities:
Capital expenditures................................................... (1,844,608) (2,718,190) (674,114)
----------- ----------- -----------
Net cash used in investing activities................................ (1,844,608) (2,718,190) (674,114)
----------- ----------- -----------
Cash Flows from Financing Activities:
Net borrowings--other.................................................. 86,902 -- --
Net borrowings from affiliates......................................... 1,683,729 2,486,915 1,386,896
----------- ----------- -----------
Net cash provided by financing activities............................ 1,770,631 2,486,915 1,386,896
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents..................... (100,000) 255 95,000
Cash and Cash Equivalents, beginning of year............................. 100,269 100,014 5,014
----------- ----------- -----------
Cash and Cash Equivalents, end of year................................... $ 269 $ 100,269 $ 100,014
----------- ----------- -----------
----------- ----------- -----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest................................. $ -- $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-10-
<PAGE>
FIRST NOTICE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) NATURE OF BUSINESS
First Notice Systems, Inc., a Massachusetts S corporation ("FNS"), was
organized to provide a variety of services to the insurance industry. These
services include accepting and processing insurance claims and providing
personal and commercial insurance policyholders with emergency assistance of all
types around-the-clock. FNS operates in North America.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF 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.
CASH EQUIVALENTS
FNS considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Assets are being depreciated on
either a straight-line or an accelerated basis over the following estimated
useful lives:
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
Furniture, computer and office equipment 5-10 years
Motor vehicles 5 years
Leasehold improvements Lesser of term of lease or useful
life of asset
Maintenance and repairs are charged to expense when incurred; renewals and
improvements are capitalized.
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<PAGE>
FIRST NOTICE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
SOFTWARE DEVELOPMENT COSTS
FNS capitalizes computer software costs for internal use. These
costs include direct internal and external costs associated with system design,
documentation, programming, testing and other installation work, in addition to
the actual software costs. Amortization of capitalized software costs is
provided over the estimated economic useful life of the software product on a
straight-line basis, generally three to seven years.
REVENUE RECOGNITION
Revenue is recognized from services when services are performed. Accounts
receivable at September 30, 1996 and 1995 include approximately $399,000 and
$648,000, respectively, of unbilled accounts receivable relating to services
rendered during the period but not invoiced until after the period-end.
INCOME TAXES
FNS has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Under these provisions, the entity does not pay
federal or state corporate income taxes on its taxable income. Instead, the
stockholders are liable for income taxes. Therefore, no provision for income
taxes has been made.
(3) RELATED-PARTY TRANSACTIONS
Certain shareholders of FNS are also shareholders of SWW Realty
Trust, East Coast Springfield Development, LLC, and The Cross Country Group,
Inc. and its wholly owned subsidiaries (the "Group"). FNS receives
management, human resources, accounting and computer services from the Group.
FNS is also charged telephone, rent, office, building and other
expenses related to activities shared with the Group based on percentages of
services utilized by FNS. For the years ended September 30, 1996 and
1995, FNS was charged and allocated $3,689,862 and $2,543,505,
respectively, by the Group.
FNS occupies space at facilities leased from SWW Realty Trust and
East Coast Springfield Development, LLC to the Group and is allocated a share of
these costs as discussed above. Certain property and equipment of FNS
are pledged as collateral on certain of East Coast Springfield Development,
LLC's debt. In addition, FNS and the Group have guaranteed certain of
East Coast Springfield Development, LLC's debt.
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<PAGE>
FIRST NOTICE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
(3) RELATED-PARTY TRANSACTIONS (CONTINUED)
FNS's activities are funded as needed by borrowings from the Group. As of
September 30, 1996 and 1995, FNS owed the Group $5,246,804 and
$2,759,889, respectively. FNS is charged interest at 8% on outstanding
borrowings. For the years ended September 30, 1996 and 1995, FNS was charged
$330,000 and $193,083, respectively, in interest expense by the Group. The
Group has agreed to continue to provide financial support to FNS.
(4) BENEFIT PLANS
FNS participates in the Group's profit sharing plan covering all of its
employees that meet certain age and service requirements. The plan is a
defined contribution plan, with all contribution amounts determined by
management of the Group. Contributions to the plan for the benefit of FNS's
employees were approximately $45,000 and $21,500 for the years ended
September 30, 1996 and 1995, respectively.
FNS also participates in the Group's salary reduction/profit sharing plan
under the provisions of Section 401(k) of the Internal Revenue Code. The plan
covers all employees who have completed one full year of service with FNS.
The Group, at its option, may contribute additional amounts to the
plan based on each employee's contribution. Matching contributions for the
benefit of FNS's employees were approximately $8,000 and $2,500 for the years
ended September 30, 1996 and 1995, respectively.
(5) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
On November 27, 1996, FNS agreed to lease certain facilities from an
unrelated party. The lease is a long-term, noncancelable real estate lease
agreement expiring in 2001. The agreement provides for fixed minimum rental
payments and the payment of utilities, real estate taxes, insurance and
repairs. The lease also contains a renewal option of five years and various
fixed increases in rent.
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<PAGE>
FIRST NOTICE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
(5) COMMITMENTS AND CONTINGENCIES (Continued)
LEASE COMMITMENTS (CONTINUED)
The future minimum annual rental commitments under this long-term,
noncancelable lease are as follows:
FISCAL YEARS AMOUNT
------------- ------------
1997 $ 448,000
1998 448,000
1999 448,000
2000 470,000
2001 470,000
------------
$ 2,284,000
------------
------------
LEGAL PROCEEDINGS
FNS is subject to various legal proceedings that arise in the
ordinary course of business. Based on the opinion of FNS's legal
counsel, management believes that the amount of ultimate liability with respect
to these actions will not be material to the financial position or results of
operations of FNS.
(6) SIGNIFICANT CUSTOMERS
Revenues from two customers for the year ended September 30, 1996 were $3.2
million and $2.1 million, which accounted for 34% and 22%, respectively, of
total revenue for the year. Revenues from three customers for the year ended
September 30, 1995 were $2.9 million, $0.6 million and $0.5 million, which
accounted for 55%, 11% and 10%, respectively, of total revenue for the year.
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<PAGE>
CRA Managed Care, Inc.
CONSOLIDATED PRO FORMA BALANCE SHEET (UNAUDITED)
The following sets forth the Company's Consolidated Pro Forma Balance
Sheet as of March 31, 1997 giving effect to the acquisition of First Notice
Systems, Inc. ("FNS"). The Company's Consolidated Pro Forma Balance Sheet
presents the acquisition of FNS as if it had been consummated on March 31,
1997. The Consolidated Pro Forma Financial Statements of the Company do not
purport to present the financial position or results of operations of the
Company had the transaction assumed therein occurred on the dates indicated,
nor are they necessarily indicative of the results of operations which may be
expected to occur in the future.
The acquisition of FNS has been accounted for by the Company as a
purchase whereby the basis of accounting for FNS's assets and liabilities is
based upon their fair values at the date of acquisition. Pro forma
adjustments represent the Company's preliminary determination of these
adjustments and are based upon available information and certain assumptions
which the Company considers reasonable under the circumstances. Final amounts
could differ from those set forth below.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------------------------------
PRO FORMA PRO FORMA
ASSETS CRA FNS ADJUSTMENTS COMBINED
-------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 1,692,000 $ -- $ -- $ 1,692,000
Accounts receivable, net........................ 41,478,000 2,124,000 -- 43,602,000
Prepaid expenses and tax assets................. 939,000 17,000 -- 956,000
-------------- ------------ ---------------- --------------
Total current assets.......................... 44,109,000 2,141,000 -- 46,250,000
Property and equipment, net..................... 9,566,000 2,795,000 -- 12,361,000
Goodwill, net................................... 48,376,000 -- 37,000,000 (1) 85,376,000
Other assets.................................... 327,000 1,555,000 -- 1,882,000
-------------- ------------ ---------------- --------------
$ 102,378,000 $ 6,491,000 $ 37,000,000 $ 145,869,000
-------------- ------------ ---------------- --------------
-------------- ------------ ---------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facilities..................... $ 6,012,000 $ -- $ 40,000,000 (2) $ 46,012,000
Current portion of long-term debt............... 40,000 86,000 -- 126,000
Due to affiliates............................... -- 6,931,000 (6,931,000)(3) --
Accounts payable and accrued expenses........... 14,698,000 922,000 2,483,000 (4) 18,103,000
-------------- ------------ ---------------- --------------
Total current liabilities..................... 20,750,000 7,939,000 35,552,000 64,241,000
Long-term deferred tax liabilities.............. 841,000 -- -- 841,000
Stockholders' equity (deficit).................. 80,787,000 (1,448,000) 1,448,000 (5) 80,787,000
-------------- ------------ ---------------- --------------
$ 102,378,000 $ 6,491,000 $ 37,000,000 $ 145,869,000
-------------- ------------ ---------------- --------------
-------------- ------------ ---------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
15
<PAGE>
CRA Managed Care, Inc.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
The following sets forth the Company's Consolidated Pro Forma Statement
of Operations for the three months ended March 31, 1997 and year ended
December 31, 1996 giving effect to the acquisition of FNS. The Statement of
Operations for FNS presented in the Pro Forma Results of Operation for year
ended December 31, 1996 represents FNS's fiscal year ended September 30,
1996. The Consolidated Pro Forma Financial Statements of the Company do not
purport to present the financial position or results of operations of the
Company had the transaction assumed therein occurred on the dates indicated,
nor are they necessarily indicative of the results of operations which may be
expected to occur in the future. Certain reclassifications have been made to
the historical financial statements of FNS to conform to the presentation
expected to be used by the Company.
The acquisition of FNS has been accounted for by the Company as a
purchase whereby the basis for of accounting for FNS's assets and liabilities
is based upon their fair values at the date of acquisition. Pro forma
adjustments represent the Company's preliminary determination of theses
adjustments and are based upon available information and certain assumptions
which the Company considers reasonable under the circumstances. Final amounts
could differ from those set forth below.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------
PRO FORMA PRO FORMA
CRA FNS ADJUSTMENTS COMBINED
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Net revenues........................................... $ 54,489,000 $ 2,610,000 $ -- $ 57,099,000
Cost of services....................................... 44,571,000 2,003,000 308,000(6) 46,882,000
------------- ------------ ----------- -------------
Gross profit...................................... 9,918,000 607,000 (308,000) 10,217,000
General and administrative expenses.................... 4,251,000 806,000 -- 5,057,000
------------- ------------ ----------- -------------
Operating income.................................. 5,667,000 (199,000) (308,000) 5,160,000
Interest expense, net.................................. 140,000 137,000 700,000(7) 977,000
------------- ------------ ----------- -------------
Income before taxes............................... 5,527,000 (336,000) (1,008,000) 4,183,000
Provision for income taxes............................. 2,432,000 0 (591,000) 1,841,000
------------- ------------ ----------- -------------
Net income (loss)................................. $ 3,095,000 ($ 336,000) ($ 417,000)(8) $ 2,342,000
------------- ------------ ----------- -------------
------------- ------------ ----------- -------------
Earnings per share..................................... $ 0.34 $ 0.26
------------- -------------
------------- -------------
Weighted average shares outstanding.................... 9,102,000 9,102,000
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
PRO FORMA PRO FORMA
CRA FNS ADJUSTMENTS COMBINED
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Net revenues........................................ $ 179,652,000 $ 9,423,000 $ -- $ 189,075,000
Cost of services.................................... 147,747,000 6,545,000 1,233,000(6) 155,525,000
-------------- ------------ ------------- --------------
Gross profit...................................... 31,905,000 2,878,000 (1,233,000) 33,550,000
General and administrative expenses................. 14,439,000 2,057,000 -- 16,496,000
-------------- ------------ ------------- --------------
Operating income.................................. 17,466,000 821,000 (1,233,000) 17,054,000
Interest expense, net............................... 199,000 330,000 2,800,000(7) 3,329,000
-------------- ------------ ------------- --------------
Income before taxes............................... 17,267,000 491,000 (4,033,000) 13,725,000
Provision for income taxes.......................... 7,166,000 -- (1,470,000)(8) 5,696,000
-------------- ------------ ------------- --------------
Net income (loss)................................. $ 10,101,000 $ 491,000 ($ 2,563,000) $ 8,029,000
-------------- ------------ ------------- --------------
-------------- ------------ ------------- --------------
Earnings per share.................................. $ 1.19 $ 0.95
-------------- --------------
-------------- --------------
Weighted average shares outstanding................. 8,475,000 8,475,000
-------------- --------------
-------------- --------------
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
16
<PAGE>
CRA MANAGED CARE, INC.
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
(1) To record the excess of cost over fair value of net assets acquired
resulting from the preliminary purchase price allocation as follows:
Pro forma purchase price including fees and expenses:.......... $41,000,000
Purchase price allocated to:
Current assets............................................ 2,141,000
Property and equipment.................................... 2,795,000
Other long term assets.................................... 1,555,000
Current liabilities....................................... (2,491,000)
----------
Net assets acquired.................................. 4,000,000
----------
Excess of cost over fair value of net assets acquired.......... $37,000,000
----------
The foregoing purchase price allocation is based upon preliminary
information. The final purchase price allocation is contingent upon the final
determination of the fair value of the net assets acquired on June 4, 1997,
the date of acquisition. Based upon presently available information, the
Company does not believe that the final purchase price allocation will
materially differ from the preliminary allocation.
(2) To record the borrowing of $40,000,000 under the Company's recently
expanded $60,000,000 Credit Facility to finance the FNS acquisition.
(3) To eliminate the loans and advances from affiliates which will be
forgiven immediately prior to the closing of the transaction.
(4) To record fees and expenses associated with the purchase of FNS.
(5) To eliminate the historical stockholders' deficit of FNS.
(6) To record the amortization of FNS goodwill under a thirty year life.
(7) To record interest expense on the $40,000,000 of borrowings used to
finance the acquisition at an interest rate of 7%.
(8) To record the tax benefits associated with the pro forma adjustments and
record a tax provision for FNS's results of operation to an effective tax
rate of 41.5% and 44% for the three months ended March 31, 1997 and the year
ended December 31, 1996, respectively. Prior to its acquisition, FNS had
elected "S" corporation status under Section 1362 of the Internal Revenue
Code. Accordingly, FNS was not liable for federal and state income taxes as
income was taxed directly to its stockholders.
17
<PAGE>
Conformed Copy
ASSET PURCHASE AGREEMENT
among
CRA MANAGED CARE, INC.
FNS ACQUISITION CORP.
FIRST NOTICE SYSTEMS
and
THE SHAREHOLDERS OF FIRST NOTICE SYSTEMS
June 4, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of June 4, 1997,
among CRA Managed Care, Inc., a Massachusetts corporation ("CRA"), FNS
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of CRA
("Acquisition Sub"), First Notice Systems Company, a Massachusetts business
trust ("FNS"), and the shareholders of FNS, each of whom is listed on the
signature page hereof (collectively, the "FNS Shareholders").
RECITALS
WHEREAS, the respective Boards of Directors of CRA and Acquisition Sub
and the FNS Shareholders have determined that it is in the best interests of
their respective shareholders for Acquisition Sub to acquire substantially all
of the assets, subject to substantially all of the liabilities, of FNS upon the
terms and subject to the conditions of this Agreement;
WHEREAS, each of the FNS Shareholders has approved and is a party to
this Agreement;
WHEREAS, CRA, Acquisition Sub, FNS and the FNS Shareholders desire to
make certain representations, warranties, covenants and agreements in connection
herewith.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, CRA, Acquisition Sub, FNS
and the FNS Shareholders hereby agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, at the Closing (as hereinafter defined), FNS shall sell, assign,
transfer and convey to Acquisition Sub, and Acquisition Sub shall (and CRA shall
cause Acquisition Sub to) purchase, acquire and accept from FNS, the business of
FNS as a going concern (the "Business"), including all of FNS' assets of every
kind and description (such assets being acquired referred to herein as the
"Purchased Assets"), other than those assets included in the Retained Assets as
defined in Section 1.2 below, and subject to all of FNS' liabilities and
obligations of every kind and description, other than those liabilities and
obligations included in the Retained Liabilities as defined in Section 1.4 below
(such liabilities and obligations being assumed referred to herein as the
"Assumed Liabilities"). No transfer of assets or liabilities herein shall be
construed as giving to either party any rights or obligations inconsistent with
the rights and obligations set forth in that certain Marketing and
Non-Competition Agreement of even date herewith. The Purchased Assets include,
without limitation, the following assets and properties (other than those assets
<PAGE>
included in the Retained Assets as defined in Section 1.2):
(a) all assets owned by FNS on the Balance Sheet Date (as defined
herein), and reflected on the balance sheet included as part of the Interim
Financial Statements (the "Last Balance Sheet") of FNS, with only such changes
therein as have occurred in the ordinary course of the Business since the date
of such Last Balance Sheet. Such assets include, without limitation, (i) all
trade and other accounts receivable and other indebtedness owing to FNS and
including the benefit of all collateral, security, guaranties, and similar
undertakings received or held in connection therewith; (ii) all inventories
wherever located, including raw materials, goods consigned to vendors or
subcontractors, work in process, finished goods and goods in transit; (iii) all
prepaid expenses, deposits and rights to refunds (including refunds from
customers and suppliers but excluding prepaid premiums under insurance policies
for periods after the Closing Date); (iv) all machinery, equipment, fixtures and
furniture; (v) all motor vehicles; and (vi) all rights to real estate, including
the buildings and improvements thereon;
(b) all rights and interests of FNS in and to any contracts,
including contracts for the purchase of materials, supplies and services and the
sale of products and services, equipment leases, or other obligations relating
to the borrowing of money by FNS, and any other contract of FNS, including
without limitation, those listed on Schedule 1.1(b) attached hereto;
(c) copies of all of FNS' books, records and other data pertaining to
contracts with FNS customers and performance and billing by FNS under such
contracts;
(d) all of FNS' goodwill, and all of FNS' dealer and customer lists
and sales and marketing information, know-how, technology, drawings, engineering
specifications, bills of materials, software and other intangible assets of FNS,
which shall include without limitation those items listed in Schedule 1.1(d)-1
and shall not include those items listed on Schedule 1.1(d)-2 except to the
extent use is permitted as set forth on such Schedule or in the Ancillary
Agreements;
(e) all of FNS' interest in any patents, patent applications,
proprietary designs, copyrights, tradenames, servicemarks, trademarks and
trademark applications (including, without limitation, the exclusive right to
use the name First Notice Systems and all variants thereof in connection with
products sold or services rendered by FNS on or prior to the date of this
Agreement), and all patents, trademarks, servicemarks, proprietary designs,
trade names, assumed names and copyrights of FNS, in each case together with the
goodwill appurtenant thereto, all federal, state, local and foreign
registrations thereof, if applicable, all common law rights thereto, and all
claims or causes of action for infringement thereof;
(f) all permits, licenses, orders, ratings and approvals of all
federal, state, local or foreign governmental or regulatory authorities or
industrial bodies which are held by FNS, to the extent the same are
transferable;
2
<PAGE>
(g) all rights of FNS to causes of action, lawsuits, judgments,
claims and demands of any nature, excluding claims in respect of loans not in
excess of $12,000 made to employees of FNS and any causes of action that may
exist against Cross Country Motor Club and its affiliates, their officers or
directors, or the Sellers;
(h) all rights and interest of FNS in and to the employee benefit
plans of FNS or of its affiliates to the extent related to the FNS Employees and
the assets included therein or held thereunder;
(i) all present and future insurance proceeds which may be payable
under insurance policies in respect of the Business in place on or before
Closing to the extent such proceeds are received in respect of Purchased Assets;
(j) except for the Retained Assets described in Section 2.2 below,
all other items of property, real or personal, tangible or intangible including
without limitation those listed on Schedule 5.1(t)(i) owned by FNS; and
(k) all cash and cash equivalents of FNS received by FNS from and
after June 1, 1997 and on or prior to the Closing (other than cash received
pursuant to this Agreement).
1.2 Retained Assets. FNS will retain ownership only of the following
assets (collectively, the "Retained Assets"):
(a) FNS' minute and stock record books, journals, tax records,
ledgers and books of original entry;
(b) FNS' cash and cash equivalents as of May 31, 1997 and FNS' rights
under this Agreement, including its right and interest in and to the Purchase
Price and FNS' rights under the Transaction Agreement, the Transitional Services
Agreement, the Marketing and Non-Competition Agreement and the Lease relating to
the FNS Springfield facility, in each case dated as of the date hereof and by
and among CRA and/or Acquisition Sub, and FNS, the FNS Shareholders and/or Cross
Country (collectively, the "Ancillary Agreements");
(c) claims in respect of loans not in excess of $12,000 made to
employees of FNS and any causes of action that may exist against Cross Country
Motor Club and its affiliates, their officers or directors, or the Sellers;
(d) any tax refund payable to FNS or its predecessors with respect to
any federal, state, local or foreign taxes of whatever nature paid by FNS or its
predecessors prior to the Closing; and
(e) any and all assets or rights set forth on Schedule 5.1(t)(2)
and 5.1(t)(3) except to the extent use is permitted as set forth on such
Schedules or in the Ancillary
3
<PAGE>
Agreement.
1.3 Assumed Liabilities. Acquisition Sub shall assume and agree to pay,
perform and discharge the Assumed Liabilities, and CRA will cause Acquisition
Sub to pay, perform and discharge the Assumed Liabilities as they become due.
The Assumed Liabilities shall consist of all liabilities of FNS, other than
Retained Liabilities.
1.4 Retained Liabilities. The liabilities and obligations which shall be
retained by FNS (the "Retained Liabilities") shall consist only of the
following:
(a) all liabilities and obligations of each and every kind owed by
FNS to or for the account of any one or more of Cross Country Motor Club, Inc.,
Cross County Motor Club of California, Inc., Cross Country Service Corp., Cross
Country Home Assistance Services, Inc. and HAC, Inc. or their respective
affiliates (collectively "Cross Country"), such liabilities and obligations
referred to herein collectively as the "Intercompany Obligations"; provided,
however, that payments made on or after the Closing by the Sellers or their
affiliates to a third party on behalf of Acquisition Sub relating to any expense
or cost incurred prior to May 31, 1997 shall be an Assumed Liability of New FNS.
(b) all liabilities of FNS relating to indebtedness for borrowed
money (other than operating leases), to the extent such liabilities are not
reflected on the Last Balance Sheet;
(c) all liabilities of FNS or the FNS Shareholders resulting from,
constituting or relating to a breach of any of the representations, warranties,
covenants or agreements of FNS or the FNS Shareholders under this Agreement;
(d) all liabilities of FNS for federal, state, local or foreign taxes
of whatever nature, including transfer taxes and taxes incurred in respect of or
measured by the income of FNS earned or realized on or prior to the Closing Date
(including any gain and income from the sale of the Purchased Assets and other
transactions contemplated herein);
(e) any liability or obligation incurred by FNS in connection with
the negotiation, execution or performance of this Agreement or the Ancillary
Agreements, including, without limitation, all legal, accounting, brokers',
finders' and other professional fees and expenses;
(f) any liability or obligations relating to or with respect to East
Coast Springfield Development, L.L.C.'s loan from the Government Land Bank; and
(g) all liabilities incurred by FNS after the Closing Date other than
those incurred pursuant to the Transitional Services Agreement of even date
herewith among the parties hereto or as otherwise mutually agreed by FNS and
Acquisition Sub.
4
<PAGE>
ARTICLE II
The Closing
2.1 Closing. The closing (the "Closing") of the acquisition of the
Purchased Assets contemplated by Section 1.1 (the "Acquisition") shall take
place (i) at the offices of Hutchins, Wheeler & Dittmar, A Professional
Corporation, 101 Federal Street, Boston, Massachusetts, as of the close of
business on May 31, 1997. The date as of which the closing occurs is referred
to herein as the "Closing Date."
ARTICLE III
Payment for the Purchased Assets
3.1 Purchase Price. The consideration to be paid to FNS for the Purchased
Assets and the covenants of FNS and the FNS Shareholders contained herein or
contemplated hereby shall be Forty Million ($40,000,000) Dollars, payable in
cash (the "Purchase Price").
3.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Purchased Assets in proportion to their respective fair market values
as determined in good faith by CRA; it being agreed that the fair market value
of the fixed assets included in the Purchased Assets shall not exceed FNS' book
value thereof as of the date hereof. A copy of such allocation shall be
delivered by CRA to FNS promptly after such allocation is determined. FNS, the
FNS Shareholders, CRA and Acquisition Sub shall be bound by such allocation for
all purposes and agree to account for and report the purchase and sale
contemplated hereby for all financial, accounting and tax purposes in accordance
with such allocation. The parties hereto agree to report such allocation on
Form 8594 as required by Section 1060 of the Internal Revenue Code of 1986, as
amended.
ARTICLE IV
Closing Deliveries
4.1 Payment of Cash Portion of Purchase Price. At the Closing,
Acquisition Sub shall deliver to FNS the Purchase Price contemplated by Section
3.1.
4.2 Execution and Delivery of Documents by Buyer. At the Closing,
Acquisition Sub and CRA shall execute and deliver to FNS an Instrument of
Assumption in form reasonably satisfactory to CRA and FNS, and such other
documents as FNS may reasonably request in order to evidence Acquisition Sub's
assumption of the Assumed Liabilities. Acquisition Sub and CRA will, from time
to time after the Closing Date, take such additional action and deliver such
further documents as FNS or the FNS Shareholders may reasonably request in order
effectively to assume the Assumed Liabilities.
5
<PAGE>
4.3 Execution and Delivery of Documents of Title by the Company. At the
Closing, FNS shall execute and deliver to Acquisition Sub a Bill of Sale in form
reasonably satisfactory to CRA and FNS and such deeds, conveyances, bills of
sale, certificates of title, assignments, assurances and other instruments and
documents as Acquisition Sub may reasonably request in order to effect the sale,
conveyance, and transfer of the Purchased Assets from FNS to Acquisition Sub.
Such instruments and documents shall be sufficient to convey to Acquisition Sub
good and merchantable title in all of the Purchased Assets. FNS will, from
time to time after the Closing Date, take such additional actions and execute
and deliver such further documents as Acquisition Sub may reasonably request in
order more effectively to sell, transfer and convey the Purchased Assets to
Acquisition Sub and to place Acquisition Sub in position to operate and control
all of the Purchased Assets.
4.4 Other Deliveries. At the Closing, the parties hereto shall deliver
such other documents, instruments and agreements as are contemplated by this
Agreement.
ARTICLE V
Representations, Warranties and Certain Covenants
5.1 Representations, Warranties and Certain Covenants of FNS. FNS hereby
represents, warrants and covenants to CRA and Acquisition Sub that, as of the
date of this Agreement:
(a) Corporate Organization. FNS is a Massachusetts business trust
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. True and correct copies of the Declaration of
Trust and Bylaws of FNS in effect as of the date of this Agreement have been
provided to CRA. FNS does not have any direct or indirect equity interest in
any other firm, corporation, partnership, joint venture association or other
business organization. FNS is the ultimate successor by merger to First Notice
Systems, Inc., a Massachusetts corporation ("FN Corp."), and holds all of the
contractual and other rights and licenses formerly held by FN Corp. For
purposes of this Agreement, the term, "FNS" shall be deemed to include FNS and
its predecessors, including without limitation FN Corp., except as otherwise
expressly stated.
(b) Qualification to do Business. Except as set forth in Section
5.1(b) of the FNS Disclosure Schedule attached hereto and made a part hereof
(the "FNS Disclosure Schedule"), FNS is duly qualified or licensed to do
business as a foreign corporation or association in each jurisdiction wherein
the nature of its activities or of its properties owned or leased makes such
qualification necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on the financial condition, assets,
liabilities, business or operations of FNS or the Business (a "Material Adverse
Effect").
(c) Power. FNS has all requisite power and authority to own and
operate its
6
<PAGE>
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
(d) Authority. The execution and delivery of this Agreement by FNS,
and the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of FNS, including
without limitation the unanimous approval of the FNS Shareholders. This
Agreement and all other instruments required hereby to be executed and delivered
by FNS have been, or will be, duly executed and delivered by authorized officers
of FNS, and are, or when delivered will be, legal, valid and binding obligations
of FNS, enforceable against FNS, in accordance with their terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(e) Capitalization. Section 5.1(e) of the FNS Disclosure Schedule
attached hereto contains the name and address of each shareholder of FNS and the
number of Shares owned of record by each shareholder. The authorized capital
stock or other equity ownership of FNS is set forth on Schedule 5.1(e). All of
the outstanding FNS Shares have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights. No FNS Shares are
held in the treasury of FNS or reserved for issuance. There are no outstanding
or authorized options, warrants, calls, rights, commitments or any other
agreements of any character to which FNS is a party, or by which it is bound,
requiring it to issue, transfer, sell, purchase, redeem or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock or other
securities of FNS. No agreement exists among the FNS Shareholders relating to
the voting of their interests in FNS.
(f) Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by FNS and the FNS Shareholders
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Declaration of Trust or the Bylaws of FNS;
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental authority with respect to FNS,
(iii) except with respect to the customer agreements and other contracts, rights
and obligations as set forth in Section 5.1(f) of the FNS Disclosure Schedule,
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under any
of the terms, conditions or provisions of any note, license agreement, Material
Contract (as hereinafter defined) or other material instrument or obligation to
which FNS or, to the Knowledge of FNS, any of the FNS Shareholders or any of
their assets may be bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which waivers or consents will have been obtained prior to
the Closing; or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to FNS or any of the FNS Shareholders or to any of
their respective assets.
7
<PAGE>
(g) Actions, Suits, Proceedings. Except as set forth in Section
5.1(g) of the Disclosure Schedule, there are no actions, suits or proceedings
pending or, to the Knowledge of FNS, threatened against FNS or any of its
properties or business in any court or before any governmental authority. FNS
is not subject to any order, writ, injunction or decree of any court or
governmental authority. There are no actions, suits or proceedings pending or,
to the Knowledge of FNS, threatened against any of the FNS Shareholders in any
court or before any governmental authority in regard to their FNS Shares or
relating to FNS or its properties or business. To the Knowledge of FNS, none of
the FNS Shareholders is subject to any order, writ, injunction or decree of any
court or governmental authority in regard to his or her FNS Shares or relating
to FNS or its properties or the Business.
(h) Compliance with Applicable Laws and Other Instruments. The
Business and operations of FNS have been conducted through the date hereof in
all material respects in accordance with all applicable laws, rules or
regulations of all governmental and regulatory authorities, including without
limitation all laws, rules and regulations relating to the environment or
occupational health and safety (hereinafter collectively referred to as
"Environmental Laws"). To the best of FNS' knowledge, FNS is not in material
violation of any building code, special use permit, zoning ordinance or any
other applicable law, rule or regulation, and there are no administrative or
other governmental claims pending or as to FNS' knowledge threatened against FNS
alleging or inquiring as to the existence of any such violation.
(i) Employees. Section 5.1(i) of the FNS Disclosure Schedule is a
true and correct list of all hourly employees and salaried employees of FNS or
Cross Country engaged in the Business (the "FNS Employees") as of May 31, 1997,
which list in the case of each such employee sets forth the position, level of
compensation, accrued vacation and date of employment. There have been no
material increases in the compensation payable to employees of FNS since such
date, nor has there been any material modification to the levels of compensation
set forth on such list. The Year-End Financial Statements and in the Interim
Financial Statements reflect the compensation of all FNS Employees then employed
by FNS (or such portion of their compensation as then related to their services
provided to FNS), whether paid directly by FNS or by Cross Country, during the
periods covered thereby.
(j) Employee Plans. Section 5.1(j) of the FNS Disclosure Schedule
lists and describes all employee benefit plans covering employees of FNS or the
FNS Employees, or under which FNS or any trade or business (whether or not
incorporated) which is a member of a "controlled group" of which FNS is a member
or under "common control" with FNS within the meaning of Section 414(b) and (c)
of the Internal Revenue Code of 1986, as amended ("Code") ("ERISA Affiliate")
is otherwise obligated (individually, "Plan" and collectively, the "Plans").
True and correct copies of each of the Plans described in such Section 5.1(j)
and of the related agreements have been furnished by FNS to CRA. FNS has never
maintained any defined benefit pension plan subject to Title IV of the Employee
Retirement Income Security Act of 1974 as amended ("ERISA") and has never,
except as disclosed in Schedule 5.1(j), maintained any Plan governed by Code
Section 401(a). Additionally, neither FNS nor any ERISA Affiliate has ever
8
<PAGE>
maintained a written or unwritten severance plan or policy providing employees
who terminate employment with FNS with any post-employment benefit, except for a
policy allowing terminated employees to continue to participate in the Plans to
the extent required by applicable law. There are no pending, or to the
Knowledge of FNS, threatened, claims, lawsuits or arbitrations which have been
asserted or instituted against the Plans or any fiduciaries thereof respecting
their duties to the Plans or the assets or any of the trusts under any of the
Plans. No such Plan is a Multiemployer Plan, as defined in Section 4001(a)(3)
of ERISA. Each of the Plans described in such Section 5.1(j) that is subject to
ERISA is in compliance with ERISA in all material respects. Neither FNS, nor
its directors, officers and employees nor any fiduciary of any such Plan is in
breach of any obligations imposed on fiduciaries under Title I of ERISA. No
prohibited transactions within the meaning of Section 406 of ERISA has occurred
with respect to any Plan. FNS is in substantial compliance with all applicable
requirements of Section 4980B of the Code.
(k) Labor Matters. Except as otherwise set forth on Section 5.1(k)
of the FNS Disclosure Schedule, there are no existing employment, consulting,
non-competition, severance, indemnification or non-disclosure agreements or
collective bargaining agreements between FNS and any of its past or present
employees, officers and directors. There is no collective bargaining unit
representing any of the FNS Employees. No petition has been filed and is
pending with the National Labor Relations Board by any labor organization or any
group of employees for an election or certification regarding the representation
of any group of the FNS Employees by a labor organization, nor to the Knowledge
of FNS, is there at present any solicitation or campaign by any labor
organization or employee for the representation of the FNS Employees by a labor
organization.
(l) Financial Information. FNS has previously delivered to CRA (i)
the audited balance sheets of FN Corp. as of September 30, 1996 and 1995 and the
related audited statements of earnings and changes in cash-flows for the years
then ended (collectively, the "Year-End Financial Statements"), and (ii) the
unaudited balance sheet of FN Corp., at March 31, 1997 (the "Balance Sheet
Date"), the detail of Accounts Payable as of March 31, 1997, and the related
statements of earnings and cash flows for the six (6) months then ended attached
as Schedule 5.1(l) of the FNS Disclosure Schedule (the "Interim Financial
Statements"). The Year-End Financial Statements and the Interim Financial
Statements are complete and correct in all material respects, are in accordance
with the books and records of FNS and present fairly in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods the financial condition and results of operations of FNS as of the
dates and for the periods shown, except that the Interim Financial Statements
are subject to year end adjustments which will not be material and do not
contain any footnote disclosure. FNS does not have any liability, contingent
or otherwise, which is not adequately reflected in or reserved against in the
Year-End Financial Statements or the Interim Financial Statements in accordance
with generally accepted accounting principles (GAAP), consistently applied,
other than liabilities arising in the ordinary course of business since the date
of the Year-End Financial Statements. The aggregate amount of accounts payable
and accrued expenses of FNS for goods purchased by and delivered,
9
<PAGE>
or services rendered to, FNS at any point prior to March 31, 1997 (as
determined by GAAP, consistently applied) not reflected on the detail of the
accounts payable and accrued liabilities as of such date included within the
Interim Financial Statements, and which remain unpaid at the Closing Date
shall not exceed $75,000.
(m) Tax Returns and Audits. All required federal, state, local and
foreign tax returns or appropriate extension requests of FNS have been filed,
and all federal, state, local and foreign taxes required to be paid have been
paid or due provision for the payment thereof has been made. FNS is not
delinquent in the payment of any such tax or of any assessment or governmental
charge. FNS has not received notice of any tax deficiency proposed or assessed
against it, and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax. None of FNS' tax returns has been audited
by governmental authorities. FNS has no tax liabilities except those reflected
on Section 5.1(m) of the FNS Disclosure Schedule and those incurred in the
ordinary course of business since the Balance Sheet Date.
(n) Changes, Dividends, etc. Except for the transactions
contemplated by this Agreement or as disclosed in Section 5.1(n) of the FNS
Disclosure Schedule, and except for the use of all available cash of FNS as of
May 31, 1997 to repay the Intercompany Obligations since the Balance Sheet Date,
FNS has not: (a) incurred or guaranteed any debts, obligations or liabilities,
absolute, accrued or contingent, and whether due or to become due, or suffered
any bad debt, or other reserve increase, except obligations incurred under
contracts and current liabilities, each as incurred in the ordinary course of
business and consistent with past practice; (b) paid any obligation or liability
other than, or discharged or satisfied any liens or encumbrances other than
those securing, current liabilities, in each case in the ordinary course of
business and consistent with past practice, and except for a trade of assets of
equal or greater value; (c) declared or made any direct or indirect payment, set
aside, or distribution to shareholders, or directly or indirectly purchased,
acquired or redeemed any of its shares of its capital stock or other securities,
or obligated itself to do so; (d) mortgaged, pledged or subjected to lien,
charge, security interest or other encumbrance any of its property or assets
(tangible or intangible, real, personal or mixed); (e) sold, leased,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except in transactions in the
ordinary course of business and consistent with past practice and which in any
event do not exceed $50,000 in the aggregate; (f) canceled or compromised any
debt or claim, or waived or released any right of material value other than
transactions in the ordinary course of business consistent with past practice;
(g) accelerated payments of its receivables or delayed its payables, except in
the ordinary course of business and consistent with past practice; (h) suffered
any physical damage, destruction or loss (whether or not covered by insurance)
which has had or may have a material adverse effect; (i) entered into any
transaction other than in the ordinary course of business; (j) made aggregate
capital expenditures and commitments in excess of $500,000 for additions to
property or equipment; (k) made any change in any "employee benefit plan" of the
type required to be disclosed on Section 5.1(j) of the FNS Disclosure Schedule;
(l) increased the compensation payable, or to become payable, to any of its
employees or directors, or made any bonus payment or similar arrangement with
any employees or directors or increased the scope or
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nature of any fringe benefits provided for its employees or directors, in
each case other than in the ordinary course of business consistent with past
practice; (m) entered into or amended any agreement or arrangement with any
of the FNS Shareholders or any of their affiliates; or (n) agreed, whether in
writing or otherwise, to do any of the foregoing other than pursuant hereto.
Since the Balance Sheet Date, (i) FNS has not compromised, accelerated
payment of or factored its accounts receivable or delayed payment of its
accounts payable, in either case except in the ordinary course of business
and consistent with past practice or (ii) there has been no material adverse
change in the financial condition, operations, or results of operations of
FNS.
(o) Title to Assets. FNS has good and marketable title to all of the
Purchased Assets (real, personal or mixed, tangible and intangible), free and
clear of all liens, pledges, security interests, conditional sale agreements,
license agreements, charges and encumbrances that will continue after the
Closing except encumbrances listed in Section 5.1(o) of the FNS Disclosure
Schedule (the "Permitted Encumbrances"). FNS has requested from the
Massachusetts Department of Revenue a letter of compliance relating to the taxes
owed by FNS.
(p) Payment Obligations. The accounts receivable of FNS (i) have
arisen in the normal course of the operation of the business of FNS, and (ii)
constitute accounts duly and validly created in the amount recorded therefor in
the books and records of FNS and, to the Knowledge of FNS, the account debtors
and obligors have no offsets or counterclaims to reduce the amount of such
accounts, and to the Knowledge of FNS all such accounts are fully collectible
(giving effect only to any allowance for doubtful accounts set forth on the
Interim Financial Statements), subject to year end adjustments that will not be
material and are not subject to any discounts, whether for prompt payment or
otherwise, except as set forth in Section 5.1(p) of the FNS Disclosure Schedule.
(q) Condition of Assets. The plant, offices and equipment owned or
leased by FNS are in good condition and repair, ordinary wear and tear excepted,
consistent with past practice.
(r) Intellectual Property Rights. Section 5.1(r) of the FNS
Disclosure Schedule lists (i) all patents, trademarks, trade names, service
marks and copyrights (and all applications therefor) and (ii) all computer
programs owned by FNS or used in the conduct of the Business (in each case
other than software programs which are generally available to the public for
purchase or license at a price of less than $250) and such schedule specifies
whether such assets are owned or leased by FNS. Except as set forth on
Section 5.1(r) of the FNS Disclosure Schedule, FNS (i) owns or has the
right, in the United States of America, to use all such patents, trademarks,
trade names, service marks and copyrights listed on Schedule 5.1(r) and (ii)
to FNS' Knowledge are not unlawfully using without authorization any
confidential information or trade secrets of others. Except as set forth on
Section 5.1(r) of the FNS Disclosure Schedule, FNS is not obligated by
contract or license to pay royalties, fees or other payments to any owner of,
licensor of, or other claimant to, any patent, trademark, service mark, trade
name, copyright, or other intellectual property. FNS has not transferred or
conveyed any rights to others in the
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intellectual property of FNS. Except as set forth on Section 5.1(r) of the
FNS Disclosure Schedule, FNS is not, nor has it received notice with respect
to, infringing upon or otherwise acting adversely to any known right of, or
right known to be claimed by, any person under or with respect to any
patents, trademarks, service marks, trade names, copyrights, licenses or
other intellectual property rights.
(s) Contracts, Leases, Commitments and Agreements. Section 5.1(s)
of the FNS Disclosure Schedule lists any contract, lease, or agreement to
which FNS is a party or by which it is bound that (i) provides for aggregate
payments by FNS of at least $100,000 during any one year, unless the
aggregate payments are reducible to a lesser amount by exercise by FNS of a
contractual right of termination without cause, (ii) contains an escalation,
renegotiation or redetermination clause, (iii) provides for the assignment,
license or other transfer of any intellectual property by or to FNS or (iv)
is with one of FNS' ten largest customers (by revenue billed or accrued)
during the three month period ended March 31, 1997 (collectively, the
"Material Contracts"). A full and complete copy of each Material Contract as
in effect on the date hereof has been provided to CRA. To the Knowledge of
FNS, FNS and each other party to the Material Contracts has, in all respects
substantially performed all material obligations required to be performed by
them to date, and are not in default under any of the Material Contracts. To
the Knowledge of FNS, except as set forth on Section 5.1(s)-2 of the FNS
Disclosure Schedule, each of the Material Contracts is in full force and
effect. Except as set forth on Section 5.1(s) of the FNS Disclosure
Schedule, none of the Material Contracts by its terms requires the approval
of any other party thereto to permit the assignment thereof to Acquisition
Sub, and FNS has no Knowledge of any other requirement that such consent be
obtained. FNS has not waived or assigned to any other person any of its
rights thereunder, and to its Knowledge has not breached in any material
respect its obligations under any Material Contract. To the Knowledge of
FNS, FNS has complied with all performance standards set forth in the
Material Contracts described in clause (iv) above and to the Knowledge of
FNS, no third party thereto has the right to terminate any such contract or
to adjust the compensation due FNS thereunder as a result of the failure of
FNS to meet performance standards contained in any such contract.
(t) Composition of Assets. The Purchased Assets and the assets and
services described in Section 5.1(t)(1) -2 and certain items specified in
Schedule 5.1(t) -3 of the Disclosure Schedule and in the Transition Services
Agreement of even date herewith comprise all material property and assets
employed by FNS in the Business and necessary to conduct FNS' business as
conducted on the date hereof.
(u) Insurance. FNS has in force through the date hereof the
property, casualty, errors and omissions and other insurance set forth on
Section 5.1(v) of the FNS Disclosure Schedule attached hereto. All policies
providing such insurance are in full force and effect.
(v) Licenses and Permits. Section 5.1(u) of the FNS Disclosure
Schedule accurately lists and describes all governmental licenses and permits
granted to FNS. FNS
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possesses from the appropriate agency, commission, board and governmental
body and authority all licenses, certifications, permits and regulatory
approvals required by law or otherwise necessary for the operation of the
Business, the failure of which to possess could have a Material Adverse
Effect. All such licenses, certifications, permits and approvals granted to
FNS are in full force and effect, and no action to terminate any such
license, certification, permit or approval is pending or, to the Knowledge of
FNS, has been threatened by any governmental agency or other party.
5.2 Representations and Warranties of the FNS Shareholders. Each of the
FNS Shareholders severally represents and warrants to CRA and Acquisition Sub as
to himself or herself that:
(a) Such FNS Shareholder has the legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
(b) This Agreement and all other instruments and agreements required
hereby to be executed and delivered by such FNS Shareholder have been, or will
be, duly executed and delivered by or on behalf of such FNS Shareholder and are,
or when delivered will be, legal, valid and binding obligations of such FNS
Shareholder enforceable against such FNS Shareholder in accordance with their
terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or effecting creditors'
rights and to general principles of equity.
(c) Neither the execution and delivery of this Agreement nor the
consummation by such FNS Shareholder of the transactions contemplated hereby
will (i) require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental authority with respect to such FNS
Shareholder; (ii) result in a violation or a breach of or constitute (with or
without notice or lapse of time or both) a default (or would give rise to any
right of termination, cancellation or acceleration of lien or other charge or
encumbrance) under any of the terms, conditions or provisions of any note,
license agreement or other instrument or obligation to which such FNS
Shareholder or any of his or her assets may be bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration of lien or other charge or encumbrance) which will not interfere
with the transactions contemplated hereby; or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to such FNS
Shareholder or any of his or her assets.
5.3 Representations, Warranties and Certain Covenants of CRA and
Acquisition Sub. CRA and Acquisition Sub jointly and severally represent,
warrant and covenant to FNS and the FNS Shareholders that:
(a) Corporate Organization. Each of CRA and Acquisition Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts. True and correct copies of the Charter
and By-Laws of CRA
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and Acquisition Sub in effect as of the date of this Agreement have been
provided to FNS.
(b) Power. Each of CRA and Acquisition Sub has all requisite
corporate power and authority to own and operate its properties, to carry on
its business as now being conducted, to execute and deliver this Agreement and
to consummate the transactions contemplated hereby.
(c) Corporate Authority. The execution and delivery of this
Agreement by CRA and Acquisition Sub, and the consummation of the transactions
contemplated hereby, has been duly authorized by all necessary corporate or
shareholder action on the part of CRA and Acquisition Sub. This Agreement and
all other instruments required hereby to be executed and delivered by CRA or
Acquisition Sub have been, or will be, duly executed and delivered by authorized
officers of CRA or Acquisition Sub, as the case may be, and are, or when
delivered will be, legal, valid and binding obligations of CRA and Acquisition
Sub, enforceable against CRA and Acquisition Sub in accordance with their terms,
subject, as to enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general principles of equity.
(d) Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by CRA and Acquisition Sub of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Charter or By-Laws of CRA and Acquisition Sub;
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental authority or any other party, except
filings by CRA, pursuant to the applicable requirements of the Securities
Exchange Act; (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration of lien or other charge or
encumbrance) under any of the terms, conditions or provisions of any note,
license agreement or other instrument or obligation to which CRA or Acquisition
Sub or any of their assets may be bound, except for such violations, breaches
and defaults (or rights of termination, cancellation or acceleration or lien or
other charge or encumbrance) as to which requisite waivers or consents have been
obtained prior to the date hereof or which will not be material in nature or
effect on the business, financial condition or operations of CRA or Acquisition
Sub; or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to CRA or Acquisition Sub or to any of their respective
assets.
(e) SEC Reports. Since June 4, 1996, CRA has filed all forms,
reports and documents with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and the
SEC rules and regulations thereunder, all of which complied in all material
respects with all applicable requirements of the Securities Exchange Act
(collectively, the "CRA SEC Reports"). CRA has provided to FNS copies of all
CRA SEC Reports. At the time filed, none of the CRA SEC Reports, including
without limitation any financial statements or schedules included therein,
nor CRA's prospectus dated June 4, 1996, contained any untrue statement of a
material fact or omitted to state a material fact required to be
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stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE VI
Certain Covenants
6.1 Confidentiality. The parties acknowledge that during the process of
negotiating the transaction which is the subject of this Agreement and during
the conduct of the respective businesses of FNS and Cross Country, proprietary
and confidential information concerning such businesses (collectively,
"Proprietary Information") has been disclosed to the parties. Each party agrees
that it shall keep confidential the terms and conditions of the transaction
described herein and the Proprietary Information and will not disclose to any
third party such Proprietary Information of the other unless such Proprietary
Information becomes available generally to the public through no fault of the
party who is obligated to maintain such Proprietary Information in confidence.
Notwithstanding the foregoing, CRA may disclose such information about the
transaction described herein as is required to fulfill its reporting and filing
requirements under applicable law; provided that CRA shall not file with any
governmental authority any of the schedules or exhibits to this Agreement unless
required to do so under applicable law.
6.2 Employee Matters. Following the Closing CRA will cause Acquisition
Sub to continue to employ as at will employees those persons who were FNS
Employees immediately prior to the Closing, subject to FNS' right to terminate
such employment at any time (except for Jonathan McNeill and Paul Nielson, who
shall be employed pursuant to written employment agreements between them and
Acquisition Sub). CRA will offer to include each such FNS employee in its
employee benefit plans, and will give credit for years of service to FNS in
determining eligibility and vesting under such plans. Notwithstanding the
foregoing, during the period from the Closing Date through June 30, 1997 the FNS
Employees shall continue to be employed by FNS, for the benefit and account of
Acquisition Sub in all respects and CRA shall be liable for all costs, expenses,
benefits, claims by and obligations to, such FNS Employees of FNS in respect of
their employment from the Closing Date to July 1, 1997.
6.3 Change of Name; Use of Name. FNS and the FNS Shareholders will take
all action necessary or appropriate to change FNS' corporate name, effective
immediately after the Closing, to a name that does not include the words "First
Notice" and execute all consents necessary to permit Acquisition Sub immediately
after the Closing to use FNS' present corporate name and any other names
substantially similar thereto from and after the effective date of change of FNS
corporate name, FNS shall not use the name "First Notice" or any other name
which includes such words or which is substantially similar to for any purpose
except to refer to the business conducted by FNS prior to the Closing.
6.4 Access to Books and Records. CRA and Acquisition Sub will grant the
FNS Shareholders and their representatives and agents reasonable access to,
and the right to
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photocopy, the books and records of FNS included within the Purchased Assets,
and FNS and the FNS Shareholders will grant CRA and its representatives and
agents reasonable access to, and the right to photocopy, the books and
records of FNS included within the Retained Assets, in each case upon
reasonable notice and during normal business hours, for the purpose of
preparing tax returns and financial statements and other valid business
purposes. All such books and records shall be retained for a period of five
years after the Closing.
6.5 Letter of Compliance. FNS will use all reasonable efforts to obtain
as soon as practicable from the Massachusetts Department of Revenue and furnish
to CRA a certificate of compliance with respect to taxes owed by FNS.
ARTICLE VII
Indemnification
7.1 Indemnification by FNS and FNS Shareholders. Subject to the
limitations set forth in this Article VII, each of FNS and the FNS Shareholders
hereby agrees, jointly and severally, to indemnify and hold harmless CRA from
and after the Closing against and with respect to the following (together
referred to as "CRA Losses") suffered by CRA or Acquisition Sub:
(a) Any and all expense, loss or liability resulting from any breach
of a representation or warranty contained in Section 5.1 or 5.2 of this
Agreement; and
(b) Any and all demands, claims, actions, suits or proceedings,
assessments, judgments, costs and legal and other expenses incident to the
foregoing.
7.2 Indemnification by CRA. Subject to the limitations set forth in this
Article VII, each of CRA and Acquisition Sub hereby agrees to indemnify and hold
harmless each of FNS and the FNS Shareholders at all times from and after the
Closing against and with respect to the following (together referred to as "FNS
Losses") suffered by FNS or the FNS Shareholders:
(a) Any and all expense, loss or liability resulting from any breach
of a representation or warranty contained in Section 5.3 of this Agreement; and
(b) Any and all demands, claims, actions, suits or proceedings,
assessments, judgments, costs and legal and other expenses incident to the
foregoing.
7.3 Procedures for Indemnification. Promptly after receipt by an
indemnified party pursuant to the provisions of Section 7.1 or Section 7.2 of
notice of the commencement of any action by a person not a party to this
Agreement involving the subject matter of the foregoing indemnity provisions,
such indemnified party shall, if a claim thereof is to be made against an
indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2,
promptly notify such
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indemnifying party of the commencement thereof; but the omission to so notify
such indemnifying party will not relieve it from any liability which it may
have to the indemnified party to the extent the indemnifying party was not
prejudiced by such omission. In case such action is brought against an
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, or if there is a
conflict of interest which would prevent counsel for the indemnifying party
from also representing the indemnified party, the indemnified party shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to the
indemnified party pursuant to the provisions of such Section 7.1 or Section
7.2 for any legal or other expense subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation, unless (a) the indemnified party shall have employed counsel
in accordance with the proviso of the preceding sentence, (b) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action, or (c) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the release from all liability in respect to such claim or litigation.
7.4 Limitations on Indemnification by FNS or FNS Shareholders.
Notwithstanding Section 7.1 or any other provision of this Agreement or
applicable law, FNS' and the FNS Shareholders' aggregate liability for CRA
Losses (other than as contemplated by Section 7.10) is subject to the following
limitations:
(a) FNS and the FNS Shareholders shall have no liability for any CRA
Loss unless notice of a claim for such CRA Loss, specifying in reasonable detail
the basis for such claim, is made upon FNS or the FNS Shareholders on or before
the first to occur of (i) the close of business on the thirtieth (30th) day
after the date audited financial statements of CRA for the year ended December
31, 1997 are released to CRA and (ii) May 31, 1998 (such earlier date referred
to as the "Representation Termination Date").
(b) FNS' and the FNS Shareholders' maximum aggregate liability for
CRA Losses shall be $4,000,000.
(c) The FNS Shareholders shall be liable for CRA Losses only if the
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aggregate CRA Losses sustained by CRA and Acquisition Sub exceed $250,000. The
FNS Shareholders shall not be liable for the first $150,000 of CRA Losses
sustained in the aggregate by CRA and Acquisition Sub.
7.5 Limitations on Indemnification by CRA and Acquisition Sub.
Notwithstanding Section 7.2 or any other provision of this Agreement or
applicable law, CRA's and Acquisition Sub's aggregate liability for FNS Losses
(other than as contemplated in Section 7.10) is subject to the following
limitations:
(a) CRA and Acquisition Sub shall have no liability for any FNS Loss
unless notice of a claim for such FNS Loss, specifying in reasonable detail the
basis for such claim, is made upon CRA and Acquisition Sub on or before the
Representation Termination Date.
(b) CRA's and Acquisition Sub's maximum aggregate liability for FNS
Losses shall be $4,000,000.
(c) CRA and Acquisition Sub shall be liable for FNS Losses only if
the aggregate FNS Losses sustained by FNS and the FNS Shareholders exceed
$250,000. CRA and Acquisition Sub shall not be liable for the first $150,000 of
FNS Losses sustained in the aggregate by FNS and the FNS Shareholders.
7.6 Mitigation of Losses. CRA Losses and FNS Losses shall be referred to
herein collectively sometimes as "Losses." Losses for which any party is liable
under this Article VII shall be subject to appropriate mitigation for (i) any
actual recovery from third parties (less attorneys' fees, expenses and other
costs of recovery), (ii) net tax savings realized from deductions taken within
two years from the date of incurrence of the CRA Loss or FNS Loss, as the case
may be, which gave rise to the claim for indemnification and (iii) the actual
collection of insurance proceeds (less attorneys' fees, expenses and other costs
of recovery). The parties hereto agree that payment for Losses under this
Article VIII shall be treated as an adjustment to purchase price.
7.7 Exclusivity. Following the Closing, the remedies (subject to the
limitations) set forth in this Article VII shall be the sole remedy for claims
of the parties to this Agreement for liability for Losses arising under this
Agreement.
7.8 Cooperation in Defense. In case of any claim, arbitration or legal
proceeding, the defense of which is assumed by FNS or any of the FNS
Shareholders in accordance with this Article VII, the Acquisition Sub, upon
request of FNS or such FNS Shareholder(s), shall provide
reasonable cooperation (at the expense of FNS or the FNS Shareholders in
accordance with this Article VII) in the defense thereof, including affording to
FNS or such FNS Shareholder(s) the right of access, during normal business
hours, upon reasonable notice and without disturbing the business of the
Acquisition Sub or CRA, to pertinent books and records for purposes of
inspection and making copies.
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7.9 No Solicitation of Claims.
(a) Notwithstanding anything to the contrary contained in this
Agreement, FNS and the FNS Shareholders shall not be obligated to indemnify CRA
or Acquisition Sub with respect to any CRA Loss to the extent CRA or an officer
of CRA intentionally provides to the third party making the claim which gave
rise to such CRA Loss, on an unsolicited basis, written information which
clearly indicates on the face of such information that such third party has or
may have a claim covered under this Article VII which is the same as the claim
that gave rise to the CRA Loss, or to the extent CRA intentionally solicits such
third party to make such a claim, which solicitation was a proximate cause of
such third party's decision to pursue the claim giving rise to such CRA Loss,
except in either case to the extent required by law or to the extent provided in
the context of a dispute resolution with respect to such a claim.
(b) Notwithstanding anything to the contrary contained in this
Agreement, CRA shall not be obligated to indemnify FNS or the FNS Shareholders
with respect to any FNS Loss to the extent either FNS or any FNS Shareholder
intentionally provides to the third party making the claim which gave rise to
such FNS Loss, on an unsolicited basis, written information which clearly
indicates on the face of such information that such third party has or may have
a claim covered under this Article VII which is the same as the claim that gave
rise to the FNS Loss, or to the extent either of FNS or any of the FNS
Shareholders intentionally solicits such third party to make such a claim, which
solicitation was a proximate cause of such third party's decision to pursue the
claim giving rise to such FNS Loss, except in either case to the extent required
by law or to the extent provided in the context of a dispute resolution with
respect to such a claim.
7.10 Indemnification for Assumed Liabilities and Retained Liabilities.
Notwithstanding anything to the contrary contained in this Article VII, FNS and
the FNS Shareholders hereby agree jointly and severally to indemnify and hold
harmless each of CRA and the Acquisition Sub from and against any and all loss,
injury, damage, demands, claims, actions, suits, proceedings, assessments,
judgments, costs and legal and other expenses incident to any of the Retained
Liabilities; provided this Section 7.10 shall not apply to CRA Losses (as
defined in Section 7.1) included within Section 1.4(c). Notwithstanding
anything to the contrary contained in this Article VII, CRA and the Acquisition
Sub hereby agree jointly and severally to indemnify and hold harmless each of
FNS and the FNS Shareholders from and against any and all loss, injury, damage,
demands, claims, actions, suits, proceedings, assessments, judgments, costs and
legal and other expenses incident to any of the Assumed Liabilities (other than
the Retained Liabilities described in Section 1.4(b) which shall be subject to
the other provisions of this Article VII). The indemnification provided for in
this Section 7.10 shall survive the Closing and shall not be subject to any
limitations on Losses contained elsewhere in this Article VII.
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ARTICLE VIII
Miscellaneous
8.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of CRA,
Acquisition Sub, FNS and the FNS Shareholders in this Agreement shall survive
the Closing.
8.2 Expenses. Whether or not the Acquisition is consummated, all costs
and expenses (including without limitation the fees and expenses of investment
bankers, attorneys and accountants) incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne (i) by CRA, in the case
of costs and expenses incurred by CRA or Acquisition Sub, and (ii) by FNS (as a
Retained Liability) or the FNS Shareholders, in the case of costs and expenses
incurred by FNS and the FNS Shareholders.
8.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given, if given) by hand delivery, transmitted by
telegram, telex or telecopy or mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:
(a) If to CRA or Acquisition Sub to:
CRA Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
Attention: John McCarthy
Telephone: (617) 367-2163
Telecopy: (617) 367-8519
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra
Telephone: (617) 951-6600
Telecopy: (617) 951-1295
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(b) If to FNS or the FNS Shareholders to:
First Notice Systems Company
c/o 4040 Mystic Valley Parkway
Boston, MA 02155
Attention: Jeffrey C. Wolk
Telephone: (617) 393-9300
Telecopy: (617) 395-6706
with a copy to:
Lane Altman & Owens LLP
101 Federal Street
Boston, MA 02110
Attention: Joseph Mazzella, Esq.
Telephone: (617) 345-9800
Telecopy: (617) 345-0400
or to such other address as the person to whom notice is given has previously
furnished to the other parties in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt. Notice shall
be deemed to have been received when given by hand delivery or transmitted by
telegram, telex or telecopy and three days after deposited in the mail.
8.4 Amendments. This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto.
8.5 Waiver. At any time prior to the Closing, CRA or FNS may (i) extend
the time for the performance of any of the obligations or other acts of the
other party , (ii) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant hereto
and (iii) waive compliance with any of the obligations of the other party or any
of the conditions to its own obligations contained herein to the extent
permitted by law. Any agreement on the part of CRA and FNS to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of CRA and FNS. For purposes of this Section 10.5, the "other
party" in relation to CRA means FNS and the FNS Shareholders and the "other
party" in relation to FNS means CRA and Acquisition Sub. Any such agreement on
the part of FNS shall also be binding upon the FNS Shareholders.
8.6 Brokers. Each of CRA and Acquisition Sub hereby represents and
warrants to FNS and the FNS Shareholders that no broker, finder or investment
banker engaged by CRA or Acquisition Sub is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated
hereby. Each of FNS and the FNS Shareholders hereby represents and warrants to
CRA and Acquisition Sub that, other than Goldman, Sachs & Co., whose fees and
expenses shall be borne by FNS (as a Retained Liability), or by Cross Country,
21
<PAGE>
no broker, finder or investment banker engaged by FNS or the FNS Shareholders is
entitled to any brokerage finder's or other fee or commission in connection with
the transactions contemplated hereby.
8.7 Publicity. Unless otherwise consented to by CRA in advance, no party
other than CRA shall make any public announcement or issue any press release
concerning the transactions contemplated by this Agreement, and any public
announcement or press release by CRA shall require the prior approval of FNS
both as to the making of such announcement or release and as to the form and
content thereof, except to the extent that CRA is advised by counsel, in good
faith, that such announcement or release is required as a matter of law and full
opportunity for prior consultation is afforded to FNS to the extent practicable.
8.8 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.9 Nonassignability. This Agreement shall not be assigned by any party
without the prior written consent of all other parties. Any purported
assignment in contravention of the preceding sentence shall be void.
8.10 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their successors (in the case of
FNS, CRA and Acquisition Sub), heirs, personal representatives and permitted
assigns, and nothing in this Agreement, expressed or implied, is intended to
confer upon any other person any rights or remedies of any nature under or by
reason of this Agreement.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto.
8.12 Governing Law; Submission to Jurisdiction; Venue.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of The Commonwealth of Massachusetts, without regard to
its conflicts of law rules.
(b) Any legal action or proceeding with respect to this Agreement may
be brought in, and adjudicated by, state or federal courts, as the case may be,
located in the City of Boston in the Commonwealth of Massachusetts and, by
execution and delivery of this Agreement, each of FNS, Acquisition Sub and CRA
hereto hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each
of the parties hereto hereby further irrevocably waives any claim that any such
22
<PAGE>
courts lack jurisdiction over such party, and agrees not to plead or claim, in
any legal action or proceeding with respect to this Agreement brought in any of
the aforesaid courts, that any such court lacks jurisdiction over such party;
provided, however, that notice and service of process on the parties shall not
be waived.
(c) Each of FNS and CRA hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the courts referred to in clause (b) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
8.13 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
8.14 Remedies. Except as otherwise expressly set forth herein, nothing
contained herein is intended to or shall be construed so as to limit the
remedies which any party may have against the others in the event of a breach by
any party of any representation, warranty, covenant or agreement made under or
pursuant to this Agreement, it being intended that any remedies shall be
cumulative and not exclusive.
8.15 Entire Agreement. This Agreement, including the FNS Disclosure
Schedules and all exhibits referred to herein, the terms of which are
incorporated as additional terms of this Agreement, the Ancillary Agreements and
the Confidentiality Agreement dated as of February 14, 1997, between CRA and
FNS, constitutes the entire agreement among the parties hereto and supersedes
all prior agreements and understandings oral or written, among the parties
hereto with respect to the subject matter hereof and thereof, including any
letters of intent.
8.16 Knowledge of FNS. As used herein, the term "Knowledge of FNS" shall
be deemed to mean solely the actual knowledge of Jonathan McNeill, Jeffrey Wolk
and Thomas Graham, in their respective individual capacities and in their
respective capacities as stockholder, director, officer and/or employee of FNS
or its affiliates.
* * * * * * * * * * * * * * * * * *
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement,
or have caused their duly authorized officers to execute this Agreement of CRA,
Acquisition Sub and FNS and by the FNS Shareholders on the date first above
written.
CRA MANAGED CARE, INC.
By: /s/ Donald J. Larson
-------------------------
Donald J. Larson, President
FNS ACQUISITION CORP.
By: /s/ Donald J. Larson
-------------------------
Donald J. Larson, President
FIRST NOTICE SYSTEMS COMPANY
By: /s/ Jeffrey C. Wolk
-------------------------
Name: Jeffrey C. Wolk
Title: President
FNS SHAREHOLDERS:
/s/ Sidney Wolk
-------------------------
Sidney Wolk
/s/ Nathan T. Wolk
-----------------------------
Nathan T. Wolk
/s/ Jeffrey C. Wolk
-----------------------------
Jeffrey C. Wolk
/s/ Howard Wolk
-----------------------------
Howard Wolk
24
<PAGE>
/s/ Michael Wolk
-----------------------------
Michael Wolk
/s/ Robin Wolk
-----------------------------
Robin Wolk
25
<PAGE>
NON-COMPETITION AND MARKETING AGREEMENT
THIS AGREEMENT is made and entered into as of the 31st day of May, 1997, by,
among and between each of Sidney D. Wolk, Nathan T. Wolk, Jeffrey C. Wolk,
Howard L. Wolk, Robin A. Wolk, and Michael D. Wolk (each a Seller and
collectively "Sellers"), Cross Country Motor Club, Inc., a Massachusetts
corporation, Cross Country Motor Club of California, a California corporation
(such two entities being sometimes hereafter collectively referred to as the
"Motor Club"), and First Notice Systems Company, a Massachusetts business
trust (the "Old FNS"), and FNSI Acquisition Corp., a Massachusetts
corporation ("New FNS"), and CRA Managed Care, Inc., of Boston, Massachusetts
(collectively with New FNS, "CRA").
W I T N E S S E T H: _
_ _ _ _ _ _ _ _ _
WHEREAS, CRA, through New FNS, its wholly-owned subsidiary, has purchased
substantially all of the assets and liabilities (the "Purchase") of the
Company from the Sellers on the date hereof;
WHEREAS, Sellers and CRA have benefited from such Purchase;
WHEREAS, CRA shall have the benefit of Sellers' and Cross Country's
representations and agreements herein contained;
WHEREAS, the Sellers, directly or indirectly, in the aggregate are
controlling stockholders of the Motor Club, Cross Country Service Corp., a
Massachusetts corporation, Cross Country Home Assistance Services, Inc., a
Massachusetts corporation, and HAC, Inc., a Florida corporation which is the
acquiring company of Homeowners Group, Inc., a publicly-owned Florida
corporation (all of such entities collectively referred to herein as "Cross
Country");
WHEREAS, Cross Country and CRA desire to cooperate in continuing to
provide integrated services to common customers of CRA and Cross Country and
to market to each of their respective customers, and jointly to new prospects
and potential customers, services and programs provided by the other, in
their respective business areas, as more fully described below; and
WHEREAS, each of Cross Country and CRA desire to endorse the use of
certain services of the other as part of a cooperative marketing effort;
NOW, THEREFORE, in connection with the purchase of the assets of Old FNS
by CRA and in consideration of the mutual promises herein exchanged, and for
One Dollar and other for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
1. Definitions. For purposes of this Agreement:
(a) "Acquired Business" shall mean the business of Old FNS (without
limiting the manner of conducting such business in the future, except as
otherwise specified herein), of providing initial property and casualty
loss claim reports, whether by telephone, computer line, mail or otherwise,
to third party property and casualty insurance providers (including,
without limitation, workers' compensation), and to entities for their
self-insurance purposes in the areas of property and casualty losses (other
than to entities involved in the vehicle industry activities described in
(f)(2) below), which reports include the type of information set forth in a
standard ACORD or similar form, or comparable documented report. Acquired
Business shall also include the insurance sales and policy upgrade, call
center services currently proposed (in writing) to be provided to
Continental Casualty Company. Except for the businesses described above,
in all cases, Acquired Business shall exclude the Cross Country Reserved
Businesses (as defined herein); provided, however that in the conduct of
the Acquired Business, CRA shall be entitled to provide referral services
to auto body repair, and rental, property repair and medical providers
contained on lists supplied to CRA by its clients (or with respect to
medical providers, as also may be contained on lists compiled by CRA) with
respect to loss notice services provided to such client.
(b) "Affiliate" shall mean any person or entity which is the direct or
indirect owner of greater than 20% of the total outstanding voting stock or
similar equity interests (the "Interest") of another entity, or whose
voting stock is so owned by such other person or entity. An entity shall
cease to be an Affiliate when the Interest drops below 20%.
(c) "CRA Business" means the business of providing worker's compensation
field case management and specialized cost containment services, short-term
and long-term disability services (as such terms are customarily understood
in the insurance industry) and related services and products in the
worker's compensation field, and bodily injury managed care services in the
automobile insurance industry.
(d) "CRA Services" shall mean services rendered, or programs offered, by
CRA or its Affiliates from time to time in the areas of the CRA Business
or the Acquired Business.
(e) "Competitive Business" means any company, venture, enterprise,
endeavor, or business organization, engaged in the CRA Business or the
Acquired Business, on the one hand, or in the Cross Country Reserved
Businesses, on the other.
(f) "Cross Country Services" and "Cross Country Reserved Businesses"
shall mean services rendered, or programs offered, by Cross Country, or
Affiliates of Cross Country or the Sellers, in the areas of (x) towing,
lockout, and jump start dispatch, roadside assistance inquiry handling,
auto repair network management and referral service, in-vehicle security
and event monitoring, global positioning system devices sales and/or
monitoring or other similar systems, and other consumer travel
assistance and monitoring activities, including injury, property or
casualty loss reporting coincident to, or related to, the provision of
such service assistance and monitoring with respect to the same incident
of inquiry or dispatch
<PAGE>
("Roadside Assistance Services"), (y) home mechanical systems and
appliance, repair and repair dispatch services, home warranty services,
structural damage and property repair services, loss reports and similar
services arising out of homeowner insurance and/or warranty programs
("Homeowner Repair Services"), and (z) reports, management, sales, and
services regarding, or for companies engaged in the businesses of, the
rental, leasing, sale, transportation, processing, resale or servicing
of motor vehicles of any kind (the "Automotive Industry Services").
(g) "Confidential Information" means and includes, without limitation
by reason of specification, identities of employees or clients of a
party; vendor and customer lists; pricing policies and agreements;
dispatch procedures technology; training materials; sources; and other
similar information which is not generally known or available to the
public, except as the result of unauthorized disclosure by or
information supplied by a third party, or which gives any party or an
Affiliate an opportunity or the possibility of obtaining an advantage
over competitors who may not know or use such information or who are not
lawfully permitted to use the same.
(h) "Restricted Territory" means the United States and Canada.
2. Non-Disclosure of Confidential Information. Each party hereto
recognizes that they have, and will in the future, acquire Confidential
Information concerning the operation of the businesses of the other party
hereto, the use or disclosure of which could cause the other party
substantial loss and damages which could not be readily calculated and for
which no remedy at law would be adequate. Accordingly, each party hereto
covenants and agrees that they will not directly or indirectly, disclose or
in any way use, any Confidential Information of any other party hereto in a
way which could reasonably be foreseen as assisting any other person in
pursuit of the CRA Business or the Acquired Business in competition with CRA,
or in pursuit of Cross Country Reserved Businesses in competition with Cross
Country, the Sellers or their Affiliates.
3. Non-Competition. Subject to the last paragraph of this Section 3,
Sellers agree with respect to the Acquired Business and the CRA Business, and
CRA agrees, with respect to the Cross Country Reserved Businesses, that for
an uninterrupted period of five (5) years from the date hereof, they will
not, individually, or as a group, nor will they permit any of their
Affiliates to, without the prior written consent of the other party, directly
or indirectly:
(a) as joint venturer, employee, partner, officer, consultant or in any
other operating or management capacity whatsoever, participate in, or lend
his or its name, counsel or provide management assistance, or financing,
to the operation of any business activity which is engaged in the
Acquired Business or the CRA Business on the one hand, or the Cross
Country Reserved Businesses, on the other;
(b) recruit, solicit, or induce, or attempt to induce, any employees of
the other party hereto to terminate their employment with, or otherwise
cease their relationship with, such party or hire or attempt to hire any
employees of such other party.
<PAGE>
The parties hereto acknowledge and agree that the failure of any person or
entity restricted pursuant to this Agreement to comply with these
restrictions (regardless of whether that person or entity actually has
executed this Agreement) shall constitute a breach of this Agreement;
provided, however, that with respect to NorCross Inc., the Sellers' sole
responsibility hereunder shall be that, so long as NorCross Inc. is an
Affiliate of Sellers, the Sellers, as Stockholders of NorCross, will not,
directly or indirectly, give permission (or waive any prohibition) under the
Stockholders Agreement among Norell Corporation, The Cross Country Group,
LLC, and NorCross, Inc., dated August 15, 1996 (as in effect on such date),
which would permit NorCross to engage in, and will exercise any rights they
have to prohibit Norcross from engaging in, the Acquired Business.
4. Cooperative Sales and Marketing Efforts. (a) During the Term
hereof, and subject to the provisions of this Agreement, Sellers, and their
Affiliates shall utilize CRA and its Affiliates as their exclusive third
party provider of CRA Services, and CRA and its Affiliates shall utilize
Cross Country and its and Sellers' Affiliates as its exclusive third party
provider of Cross Country Services, in each case whether for existing
customers, prospects or any future customers or prospects.
(b) In furtherance of such marketing efforts, the parties hereto agree
that each shall have the right to use the other's name and logos in any
written materials used in connection with the offering of the other party's
services and shall have the right to use the name and logo of the other in
its endorsements, its marketing efforts and in customer materials. Each
party hereto agrees to submit to the other, for its prior approval, the forms
of such written materials, and all telemarketing scripts to be used by one
party in connection with the marketing of the other party's services. In
each case, such submission shall be made a reasonable time in advance of such
use. Consent to such use shall be deemed to have been given if the other
party shall fail to disapprove, in writing, any request for approval within
five (5) business days after a receipt of a written request reasonably
describing such use.
(c) The parties hereto agree and acknowledge that their intention is to
act for their respective benefit by cross selling the Cross Country Services
and Acquired Business to their customers of the other, and to current or new
joint customers, including, if possible, as an integrated package of claim
reporting, cost containment and service assistance programs. The parties
further acknowledge that the nature of integration of such services, the
extent of such services, and the profitability and cost of rendering such
services, are matters which are in development, and will continue to be in
development, by and between the parties and that nothing herein shall be
deemed to obligate either of the parties to provide their respective services
for any specified cost, formula price or profit rate, to provide such
services in a minimum amount or on a minimum schedule, or to provide them on
any favored or most favored pricing or other basis; provided, however, that
each party hereto shall be required to honor any program service commitments
and pricing set forth in any proposals, bids, agreements or programs accepted
by a customer, so long as such proposal, bid, agreement or program was
properly authorized by the entity whose services are being offered to such
customer.
(d) Nothing herein shall be deemed to create a joint venture,
partnership or formal or informal joint business of any kind including any
arrangement or relationship giving rise to fiduciary
<PAGE>
or other duties from one to the other, and each party hereto remains fully
entitled to make its decision to render the services described herein, to go
into new business areas, to expand other business areas, enter into other
strategic or business arrangements, agreements or alliances not inconsistent
with the provisions hereof, to exit an area of business, terminate an offered
service (including a service provided on the date hereof), or to not render
the services described herein, in whole or in part, based upon its own
financial, strategic or other self interest.
(e) During the term in this Agreement, each party hereto agrees not to
endorse, or make its customer list available to, or utilize the services of
any person or entity competing with the other party hereto in the rendering
of the CRA Services or the Cross Country Services, as the case may be, unless
such customer or business opportunity has been declined by the other party
hereto. From time to time, each party hereto agrees to provide to the other,
at such other person's request and expense, customer, prospect, client and
similar lists based upon criteria selected by the requesting party reasonably
related to the marketing effort of services pursuant to this Agreement, and
the requesting party shall have the right to use such lists during the term
of this Agreement for the sole purpose of marketing hereunder.
(f) The parties hereto shall from time to time, agree upon sales
commission and other related sales compensation and incentive arrangements
applicable to the cross-selling of the services described herein as may be
agreed from time to time.
5. Remedy at Law Inadequate\Specific Enforcement. The parties hereto
specifically acknowledge and agree that the restrictions set forth in
paragraphs 2 and 3 hereof are reasonable and necessary to protect the
legitimate interest of the other, that restricting the ownership and/or
operation of a Competitive Business will not impose undue hardship on the
restricted party, and that the restrictions are reasonable and necessary to
the development of each of their respective businesses. Each party hereto
further acknowledges and agrees that any violation of the provisions hereof
will result in irreparable injury to the other and that therefore:
(a) All parties hereto agree that the remedy which the non-breaching
party may have at law for any breach or threat of breach of the
provisions of this Agreement is inadequate, and in the event of breach or
threat of breach of the provisions thereof by any person intended to be
bound thereby, the non-breaching party shall be entitled to seek and
obtain injunctive relief or other equitable relief from any court of
competent jurisdiction, without the necessity of posting a bond or other
surety or proving actual damages , restraining the party intended to be
bound thereby from such a breach, and that if such a breach has occurred,
then the term of the restrictions contained herein, hereof and of such
injunctive relief shall be for a period of five years commencing on the
date that the last of such breach(es) ceased.
(b) Each party agrees that the provisions contained in this Agreement
shall remain in full force and effect notwithstanding the breach or claimed
breach of any other provision hereof by one party hereto to the other.
6. Term. The term of this Agreement shall end five years from the date
hereof.
<PAGE>
7. Records. Each party hereto shall maintain and preserve its books
and records, as they relate to the subjects of this Agreement, and the other
party hereto shall have the right to inspect that portion of such books and
records from time to time, during regular business hours, in order to verify
the customers and business for which payments are to be made hereunder.
8. Indemnification. Each party shall indemnify and save the other
harmless from all loss, cost and expense, including reasonable attorneys'
fees, arising out of or in connection with any claim that use or display of
the other's trademark in connection with marketing of services hereunder
infringes upon or violates any trade name, trademark or copyright of any
person, firm or entity, provided, however, that each party has first obtained
the prior written approval of the other in accordance herewith with respect
to each specific use of its trademark, logo, or trade name.
9. Enforcement. (a) The failure of either party to enforce at any
time, or for any period, any provision of this Agreement shall not be
construed as a waiver of such provision or of the right of such party
thereafter to enforce each and every such provision. No claim or right
arising out of the breach or default of this Agreement can be discharged in
whole or in part by a waiver or renunciation of the claim or right unless the
waiver or renunciation is in writing and signed by the aggrieved party. If
any action at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which it may be entitled. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
In the event that any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, or to violate any
applicable law, it shall be deemed null and void solely to the extent
thereof, without affecting the balance of this Agreement.
In any case where either party hereto is required to do any act (other
than make a payment of money to the other) the time for performance by such
party shall be extended for delays caused by or resulting from Act of God,
war, civil commotion, fire or other casualty, labor difficulties, general
shortages of labor materials or equipment, government regulations or other
causes beyond such party's reasonable control.
(b) The parties further acknowledge and agree that the restrictive
covenants contained in this Agreement are severable and separate from each
other. If at any time any of the foregoing restrictive covenants in this
Agreement shall be deemed invalid or unenforceable by the laws of the
jurisdiction wherein it is to be enforced, by reason of being vague or
unreasonable as to duration, or geographic scope, or scope of activities
restricted, or for any other reason, such agreements or covenants shall be
considered divisible as to such portion, and such agreements or covenants
shall become and be immediately amended or reformed to include only such
agreements or covenants as are deemed reasonable and enforceable by the court
or other body having jurisdiction of this Agreement, to the full duration,
geographic scope and scope of restricted activities deemed reasonable and
thus enforceable by said court or body; and the parties agree that such
agreements or covenants, as so amended and reformed, shall be valid and
binding as though the invalid or unenforceable portion had not been included
therein.
<PAGE>
10. Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors of entities, if any, and
representatives. This Agreement may not be assigned.
11. Representations. The parties hereto represent and warrant that
neither the execution and delivery of this Agreement nor the performance of
its duties hereunder violates the provisions of any other agreement to which
they are a party or by which they are bound.
12. Notices. Any notice or other communications under this Agreement
shall be in writing, signed by the party making the same, and shall be
delivered personally or sent by certified or registered mail, postage
prepaid, by any nationally recognized overnight courier service or by
facsimile against a printed confirmation, as follows:
If to Buyer, to: CRA Managed Care, Inc.
312 Union Wharf
Boston, MA 02109
Facsimile: (617) 367-8519
With a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: James Westra, Esq.
Facsimile: (617) 951-1295
If to Sellers, to: Sidney D. Wolk
c/o Cross Country Motor Club, Inc.
4040 Mystic Valley Parkway
Medford, MA 02155
Facsimile: (617) 395-6706
With a copy to: Lane Altman & Owens LLP
101 Federal Street
Boston, MA 02110
Attn: Joseph F. Mazzella, Esq.
Facsimile: (617) 345-0400
or to such other address as may hereafter be designated by either party
hereto. All such notices shall be deemed given on the date personally
delivered or mailed.
13. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Massachusetts.
14. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any
one or more of the provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect for any reason,
<PAGE>
the validity, legality and enforceability for any such provisions in every
other respect and of the remaining provisions of this Agreement shall not be
in any way impaired.
15. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto with respect to the subject matter contained herein.
There are no restrictions, promises, covenants, or undertakings, other than
those expressly set forth herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter. This Agreement may not be changed except by a writing
executed by the parties.
16. Attorney Fees and Venue. Any party breaching the terms of this
Agreement agrees to pay the non-breaching party reasonable attorney fees in
enforcing the terms of this Agreement. The parties agree by the execution of
this Agreement to submit themselves to the exclusive jurisdiction and venue
of the courts of the Commonwealth of Massachusetts for the interpretation of
the terms and conditions and performance of this Agreement.
17. Sale of Cross Country. The parties hereto agree that in the event
that the Motor Club is sold to a third party, whether through stock sale,
merger or asset sale (a "Motor Club Sale"), then, as part of such sale, the
purchaser shall be required to agree that the purchaser shall not use the
assets of the Motor Club in the operation of any business activity which is
engaged in the Acquired Business or the CRA Business for a period of at least
one (1) year following such third party's acquisition (or such shorter period
as expires on the fifth anniversary of the date of this Agreement) (the
"Continuation Period"). Nothing in this paragraph 17 shall relieve the
Sellers from their obligations under paragraphs 3 and 4, notwithstanding any
Motor Club sale. Upon expiration of the Continuation Period, CRA shall be
released from its obligations set forth in paragraphs 3 and 4 with respect to
any of the activities included within Cross Country Reserved Businesses as
may be transferred to the acquiror in the Motor Club Sale.
THIS SPACE LEFT INTENTIONALLY BLANK
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
CRA MANAGED CARE, INC. FIRST NOTICE SYSTEMS COMPANY
By: /s/ Jeffrey C. Wolk
-------------------------------
By: /s/ Donald J. Larson
---------------------------------
Title: President
---------------------------
FNSI ACQUISITION CORP. SELLERS:
By: /s/ Donald J. Larson /s/ Sidney D. Wolk
--------------------------------- ----------------------------
Sidney D. Wolk
/s/ Nathan T. Wolk
----------------------------
Nathan T. Wolk
CROSS COUNTRY MOTOR CLUB, INC.
By: /s/ Nathan T. Wolk /s/ Jeffrey C. Wolk
--------------------------------- ----------------------------
Title: Vice President Jeffrey C. Wolk
-----------------------------
CROSS COUNTRY MOTOR CLUB
OF CALIFORNIA, INC.
/s/ Howard L. Wolk
By: /s/ Nathan T. Wolk ----------------------------
--------------------------------- Howard L. Wolk
Title: Vice President
-----------------------------
/s/ Robin A. Wolk
----------------------------
Robin A. Wolk
/s/ Michael D. Wolk
----------------------------
Michael D. Wolk
