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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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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) July 1, 1996
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HEALTHPLAN SERVICES CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-13772 13-3787901
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3501 FRONTAGE ROAD, TAMPA, FLORIDA 33607
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (813) 289-1000
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index on Page 4
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EXHIBIT INDEX
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Effective as of July 1, 1996 the Registrant acquired all of the issued
and outstanding shares of capital stock of Consolidated Group, Inc.,
Consolidated Group Claims, Inc., Consolidated Health Coalition, Inc.,
and Group Benefit Administrators Insurance Agency, Inc. (collectively,
the "Consolidated Group"), for a purchase price of approximately $61.5
million, subject to a post-closing adjustment based on the balance
sheet of the Consolidated Group as of June 30, 1996. The acquisition
was consummated pursuant to the terms of a certain Acquisition
Agreement dated May 17, 1996 (the "Agreement") between the Registrant,
the Consolidated Group, the shareholders of the Consolidated Group and
Holyoke L. Whitney as representative of the shareholders of the
Consolidated Group. The purchase price, which was paid in cash at the
closing of the acquisition, was determined through arms' length
negotiation between the parties. As of the date of the closing of
this acquisition, there was no material relationship between any of
the shareholders of the Consolidated Group and the Registrant or any
of the Registrant's affiliates, directors, officers or any associate
thereof.
Approximately $30 million of the funds used to pay the purchase
price of this acquisition were provided from the Company's working
capital, with the balance of the purchase price being provided to the
Registrant under its line of credit with a group of banks for which
First Union National Bank of North Carolina acts as agent, pursuant to
a renegotiation of such line of credit under the terms of that certain
Credit Agreement dated May 17, 1996, as amended by the First Amendment
thereto dated July 1, 1996, by and among the Registrant, HealthPlan
Services, Inc., Third Party Management Claims Inc., Healthcare
Informatics Corporation, the lenders who are or may become a party
thereto, and First Union National Bank of North Carolina, as agent for
the lenders. Under this line of credit, the Registrant is permitted
to borrow up to $85 million. Interest on funds drawn on this line is
calculated on a rolling for quarter pro forma basis. As of July 15,
1996, the amount drawn on this line is $60 million.
(b) The principal business of the Consolidated Group is the provision of
administrative services for health benefits to small groups, and the
bulk of its assets are comprised of contracts for the provision of
such administrative services. The only tangible assets of the
Consolidated Group as of the date of the acquisition consisted of
office equipment and certain real estate, which the Registrant intends
to continue using as office and storage facilities.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
It is impracticable to provide the required financial statements of
the Consolidated Group at this time. Accordingly, such financial
statements shall be filed by amendment as soon as they are available.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma financial
information at this time. Such pro forma financial information shall
be filed by amendment as soon as it is available.
(c) Exhibits.
See Exhibit Index on page 4.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be duly signed on its behalf by
the undersigned hereunto duly authorized, on July 15, 1996.
HEALTHPLAN SERVICES CORPORATION
(Registrant)
By: /s/ JAMES K. MURRAY, JR.
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James K. Murray, Jr.
President and Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
2 Acquisition Agreement dated May 17, 1996 between HealthPlan Services 5
Corporation, Consolidated Group, Inc., Consolidated Group Claims, Inc.,
Consolidated Health Coalition, Inc., and Group Benefit Administrators
Insurance Agency, Inc., the named Shareholders, and Holyoke L. Whitney
as Shareholders' Representative.
23 Consent of Bonanno, Savino & Davies, P.C. *
26 Financial Data Schedules *
</TABLE>
* to be filed by amendment
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EXHIBIT 2
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, made this 17th day of May, 1996,
by and among HEALTHPLAN SERVICES CORPORATION, a Delaware corporation
(hereinafter referred to as "Purchaser"), CONSOLIDATED GROUP, INC. ("CGI"),
GROUP BENEFIT ADMINISTRATORS INSURANCE AGENCY, INC. ("GBA"), CONSOLIDATED GROUP
CLAIMS, INC. ("CGC"), and CONSOLIDATED HEALTH COALITION, INC. ("CHC")
(hereinafter collectively referred to as the "Acquired Companies"), and the
shareholders listed on the attached signature pages (the "Shareholders") and
HOLYOKE L. WHITNEY, as Shareholders' Representative.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into this
Acquisition Agreement pursuant to which Purchaser will purchase from the
Shareholders all of the issued and outstanding shares of capital stock of the
Acquired Companies, upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the
mutual promises, representations, warranties and covenants hereinafter set
forth, the parties hereto agree as follows:
I. DEFINITIONS. The capitalized terms used herein will have the
meanings ascribed to them in Exhibit 1.1 hereto. Unless the context otherwise
requires, such capitalized terms will include the singular and plural and the
conjunctive and disjunctive forms of the terms defined.
II. COVENANTS AND UNDERTAKINGS.
2.1 Purchase and Sale of Stock. Subject to the terms and
conditions hereinafter set forth, at the Closing the Shareholders shall sell,
assign, transfer, convey and deliver to Purchaser, free and clear of all liens,
claims, charges, security interests and other encumbrances of any nature
whatsoever, all of the issued and outstanding shares of capital stock of the
Acquired Companies (the "Shares"). Such sale, transfer, conveyance and delivery
shall be evidenced by the delivery to Purchaser of duly endorsed in blank share
certificates or share certificates accompanied by duly executed stock powers
(in either case, with signatures guaranteed and with all necessary transfer
taxes, if any, paid or other revenue stamps affixed thereto).
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2.2 Purchase Price.
2.2.1 Purchaser, in full payment for the Shares, shall pay the
Purchase Price as follows:
2.2.1.1 The Cash Purchase Price Amount shall be paid in cash
or by other immediately available funds to the Shareholders'
Representative for the account of the Shareholders at Closing; and
2.2.1.2 The Escrow Amount shall be paid in cash or other
immediately available funds at Closing to the Escrow Agent to be held
in escrow pursuant to the terms of the Escrow Agreement.
2.2.1.3 A Negative Purchase Price Adjustment Amount, if any,
shall be paid in cash, or by other immediately available funds, by the
Shareholders to the Purchaser as specified in Section 2.2.2.2 below.
2.2.1.4 A Positive Purchase Price Adjustment Amount, if any,
shall be paid in cash, or by other immediately available funds, by the
Purchaser to the Shareholders' Representative for the account of the
Shareholders.
2.2.2 Within 50 calendar days of the Closing Date,
the Purchaser will engage Price Waterhouse under an agreed-upon procedures
letter to deliver to the Shareholders' Representative and the Escrow Agent the
Closing Balance Sheet together with their proposed Purchase Price Adjustment
Amount Calculation, if any. The Closing Balance Sheet shall be prepared in
accordance with GAAP consistently applied with prior periods and shall include
as accrued payables all bonuses and unpaid compensation and/or benefits due to
any employee of the Acquired Companies as of the Closing Date under any Benefit
Plan, including but not limited to bonuses due executives under the Acquired
Company's executive bonus plan (or any severance plan as a result of the
transactions contemplated hereby) and any amounts due or the value of any time
earned for accrued or accruable vacation, sick leave and personal days up to
and including the Closing Date. The foregoing notwithstanding, no account and
no part of such account receivable shall be included on the Closing Balance
Sheet which is more than sixty (60) calendar days past due or which is being
disputed by the debtor. In addition, only assets which are supported by proper
substantiation and reconciliation as of the Closing Balance Sheet Date will be
included in the Closing Balance Sheet. Additionally, the Closing Balance Sheet
shall include all Liabilities of the Acquired Companies includable thereon
under GAAP, including but not limited to Liabilities discovered after Closing
but prior to the delivery of the Final Closing Balance
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Sheet which if known on the Closing Date would have been so included. Upon
delivery of the Closing Balance Sheet, the Purchaser shall give the
Shareholders' Representative and any independent auditors and authorized
representatives of the Shareholders' Representative full access at all
reasonable times to the properties, books, records and personnel of the
Acquired Companies relating to periods prior to the Closing Date for purposes
of reviewing and resolving any disputes concerning the Closing Balance Sheet
and the calculation of the Purchase Price Adjustment Amount Calculation, if
any. The Shareholders' Representative shall have 50 calendar days following
the delivery by Purchaser of the Closing Balance Sheet during which to notify
the Purchaser and the Escrow Agent of any dispute of any item contained
therein, which notice shall set forth in reasonable detail the specific items
being disputed and the basis for such dispute. If the Shareholders'
Representative fails to notify the Purchaser and the Escrow Agent of any such
dispute within such 50-day period, the Closing Balance Sheet and the Purchase
Price Adjustment Amount Calculation provided by the Purchaser shall be final,
conclusive and binding as of the date of expiration of the above-referenced
50-day period and shall be deemed to be the "Final Closing Balance Sheet" and
the "Final Purchase Price Adjustment Amount Calculation". In the event that the
Shareholders' Representative shall so notify the Purchaser and the Escrow Agent
of any dispute, the Purchaser and the Shareholders' Representative shall
cooperate in good faith to resolve such dispute as promptly as practicable. If
the Purchaser and the Shareholders' Representative are unable to resolve any
such dispute within 15 days of the Shareholders' Representative's delivery of
such notice, such dispute shall be resolved by the Settlement Auditor. The
Settlement Auditor shall make such revisions to the Closing Balance Sheet and
the Purchase Price Adjustment Amount Calculation as it deems appropriate under
GAAP in order to make a determination of the appropriate Positive or Negative
Purchase Price Adjustment Amount in accordance with GAAP as promptly as
practicable. Such determination shall be final, conclusive and binding on the
parties and shall be deemed a final arbitration award that is enforceable
pursuant to all terms of the Federal Arbitration Act, 9 U.S.C. Section Section
1 et seq. (the "Federal Arbitration Act"). The expenses relating to the
engagement of the Settlement Auditor shall be shared one-half by the Purchaser
and one half by the Shareholders. In the event of a dispute, the Closing
Balance Sheet prepared by the Settlement Auditor shall be the "Final Closing
Balance Sheet" and the Purchase Price Adjustment Amount Calculation prepared by
the Settlement Auditor shall be the "Final Purchase Price Adjustment Amount
Calculation". Upon determination of the Final Closing Balance Sheet and the
Final Purchase Price Adjustment Amount Calculation, the Settlement Auditor
shall submit a certificate (the "Settlement Auditor's Certificate") to the
Purchaser, Shareholder's Representative and Escrow Agent which in the event of
a Negative
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Purchase Price Adjustment Amount shall instruct the Escrow Agent to pay to the
Purchaser the amount of the Negative Purchase Price Adjustment Amount and in
the event of a Positive Purchase Price Adjustment shall instruct the Purchaser
to pay to the Shareholder's Representative the amount of the Positive Purchase
Price Adjustment Amount. The Settlement Auditor's Certificate shall also
contain a statement of the Settlement Auditor's fees and expenses for its
services as Settlement Auditor.
2.2.2.1 For purposes of the foregoing, the Purchase Price
Adjustment Amount Calculation shall be a calculation subtracting the
Target Net Assets Amount from the Closing Net Assets Amount. If the
result thereof is a negative amount such amount shall be designated as
the Negative Purchase Price Adjustment Amount, provided that the
Negative Purchase Price Adjustment Amount shall never be less than the
amount by which the combined shareholders' equity of the Acquired
Companies shown on the Final Closing Balance Sheet is less than
$7,281,773.00, which is the represented combined shareholders' equity
of the Acquired Companies at December 31, 1995. If the result of the
foregoing calculation is a positive amount such amount shall be
designated as the "Positive Purchase Price Adjustment Amount." In
making the foregoing calculation:
(i) the term "Target Net Assets Amount" shall mean the sum of
$2,340,000.00.
(ii) the term "Closing Net Assets Amount" shall mean the
amount determined by subtracting the Liabilities of the
Acquired Companies on a consolidated basis as shown on the
Final Closing Balance Sheet from the Current Tangible Assets
shown on the Final Closing Balance Sheet.
(iii) the term "Current Tangible Assets" shall mean the current
tangible assets of the Acquired Companies on a consolidated
basis determined in accordance with GAAP and the provisions of
Section 2.2.2 above and shown on the Final Closing Balance
Sheet after the conversion to cash of the current and long term
portions of the Notes Receivable-Associated Partnerships and
Notes Receivable-Officers in accordance with the provisions of
this Agreement and shall not include any intangible asset or
any fixed asset of the Acquired Companies. Without limiting the
foregoing, current tangible assets shall include but not be
limited to all cash and cash equivalents, accrued interest
receivable, administrative income receivable and prepaid
expenses and deposits.
(iv) the term "Liabilities" of the Acquired Companies shall
mean the current and long term liabilities of the
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Acquired Companies on a consolidated basis determined in
accordance with GAAP as shown on the Final Closing Balance
Sheet. The foregoing notwithstanding, Liabilities as used
herein shall not include any capitalized leases or the real
estate mortgage on the Diebold property in an amount not to
exceed $1,500,000.00, provided that the underlying assets
related thereto are characterized as fixed assets and are not
included in Current Assets.
2.2.2.2 To the extent that there is a Negative Purchase Price
Adjustment Amount, if any, and it can be paid from the Escrow Fund,
Purchaser and the Shareholders Representative shall instruct the
Escrow Agent to make such payment from the Escrow in accordance with
the provisions of the Escrow Agreement. In the event that the Purchase
Price Adjustment Amount exceeds the funds contained in the Escrow,
each Shareholder shall promptly pay his or her pro rata portion of the
Negative Purchase Price Adjustment Amount (less any amount of the
Negative Purchase Price Adjustment Amount previously paid from the
Escrow) to the Purchaser upon receipt of notice of demand therefor
from Purchaser.
2.3 HSR Act Filings. As promptly as practicable after the
execution of this Agreement, and in any event not later than the fourteenth
(14th) calendar day following the date of this Agreement, Purchaser and
Shareholders shall, in cooperation with each other, make the required filings
in connection with the transactions contemplated by this Agreement under the
HSR Act with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice, and, as promptly as practicable from time
to time thereafter, each party shall make all such further filings and
submissions, and take such further action, as may be required in connection
therewith. Purchaser and Shareholders shall each request early termination of
the waiting period with respect to such filings. The filing fees for making
such filings shall be borne one-half by Purchaser and one-half by the
Shareholders in the event that the transactions contemplated hereby close. In
such event, the Shareholders' portion of such fees shall be deducted from the
Cash Purchase Price at Closing. In the event that the transactions contemplated
hereby do not close for any reason, the fees for making such filings shall be
paid by the Purchaser. Each party shall furnish the other all information in
its possession necessary for compliance by the other with the provisions of
this Section 2.3. Purchaser, the Shareholders and the Acquired Companies shall
each notify the others immediately upon receiving any request for additional
information with respect to such filings from either the Antitrust Division of
the Department of Justice or the Federal Trade Commission and the party
receiving the request shall use its best efforts to comply with
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such request as soon as possible. Neither party shall withdraw any such filing
or submission without the written consent of the other party.
2.4 Compliance with Securities Laws and Cooperation with
Post-Closing Audit.
2.4.1 In connection with the transactions
contemplated by this Agreement, the parties hereto agree to cooperate with one
another in complying with the provisions of the 1933 Act and the General Rules
and Regulations thereunder, and all other applicable federal and state
securities laws, and each of them agrees to furnish the other, or its counsel,
with such information and to take such actions, as may be reasonably requested
in respect of such compliance.
2.4.2 The Shareholders shall cooperate with and
make available any records required by Purchaser's accountants so as to
facilitate any post-closing audit of the Acquired Companies' books and records
which may be required by the securities laws and the rules and regulations of
the Securities and Exchange Commission or any exchange upon which the
Purchaser's securities are listed.
2.4.3 Prior to the Closing, the Shareholders shall
obtain the consent of Bonanno, Savino & Davies, P.C. to the incorporation of
the financial statements prepared by Bonanno, Savino & Davies, P.C. in
Purchaser's public filings.
2.5 Conduct of the Business of the Acquired Companies
Prior to Closing.
2.5.1 Except (i) as listed on Exhibit 2.5.1 or with
the prior consent in writing of Purchaser, (ii) as may be required to effect
the transactions contemplated by this Agreement or (iii) as provided otherwise
in this Agreement, the Acquired Companies and the Shareholders covenant that,
between the date of this Agreement and the Closing Date, the Acquired Companies
will conduct their business in the ordinary course, and that they will: (a) use
their best efforts to preserve the organization of the Acquired Companies
intact and to preserve the goodwill of clients, customers and others having
business relations with the Acquired Companies; (b) maintain the properties of
the Acquired Companies in the same working order and condition as such
properties are in as of the date of this Agreement, reasonable wear and tear
excepted; (c) keep in force at no less than their present limits all existing
bonds, letters of credit and policies of insurance insuring the Acquired
Companies, their performance, and/or their respective properties; (d) not enter
into any contract, commitment, arrangement or transaction of the type required
to be listed on Exhibits 3.4, 3.12, 3.13.1, 3.13.2, 3.15, 3.18 or 3.19 hereof
or
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suffer, permit or incur any of the transactions or events described in Section
3.9 hereof (except for the payment of any health, disability and life insurance
premiums which may become due and except for contributions or distributions
required to be made (and not discretionary) pursuant to the terms of any
Benefit Plans) to the extent such events or transactions are within the control
of the Acquired Companies or the Shareholders; (e) not enter into any
contracts, commitments, arrangements or transactions of the type required to be
listed on Exhibits 3.7 which in the aggregate exceed $100,000.00; (f) not make
or permit any change in the Acquired Companies' Certificates or Articles of
Incorporation or Bylaws, or in their authorized, issued or outstanding
securities; (g) not issue any security or grant any stock option or right to
purchase any security of the Acquired Companies, issue any security convertible
into such securities, purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing or declare, set aside or pay
any dividend or other distribution in respect of such securities (provided that
the Acquired Companies may make distributions or pay dividends or pay expenses
related to the transactions contemplated hereby if and only if after making
such distributions or paying such expenses or dividends no Negative Purchase
Price Adjustment Amount will be payable or is paid under the provisions of
Section 2.2.2 hereof); (h) not make any contribution to or distribution on
behalf of or to any employee of any of the Acquired Companies from any Benefit
Plan (except for the payment of any health, disability and life insurance
premiums which may become due and except for contributions or distributions
required to be made (and not discretionary) pursuant to the terms of any
Benefit Plans); (i) not make any capital expenditure which when aggregated with
all other capital expenditures for the period exceeds the sum of $100,000.00;
and (k) promptly advise Purchaser in writing of any matters arising or
discovered after the date of this Agreement which, if existing or known at the
date hereof, would be required to be set forth or described in this Agreement
or the Exhibits hereto.
2.5.2 Except after prior notification to, and with
the prior written consent of, Purchaser, the Acquired Companies will not make,
and the Shareholders will not permit the Acquired Companies to make, between
the date of this Agreement and the Closing Date, any change in their respective
banking or safe deposit arrangements or grant any powers of attorney. A list of
all bank accounts, safe deposit boxes (and the contents thereof) and powers of
attorney of the Acquired Companies and of all persons authorized to act with
respect thereto is attached hereto as Exhibit 2.5.2.
2.5.3 Except with the prior consent in writing of
Purchaser, the Acquired Companies will not make, and the Shareholders will not
permit the Acquired Companies to make,
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between the date of this Agreement and the Closing Date, any changes in their
respective accounting methods or practices.
2.6 Intercompany Accounts and Services. Prior to or at
the Closing, the Shareholders shall take all actions necessary to settle as of
the Closing all cash overdrafts, loans, advances, intercompany payables or
receivables, indebtedness and other accounts between the Acquired Companies, on
the one hand, and the Shareholders or any Affiliate of any of the Shareholders
which is not an Acquired Company on the other hand; provided, however, that the
loan of Consolidated Group, Inc. from Shawmut Bank, N.A. in the original
principal amount of $1,000,000 taken in October 1995 in connection with the
purchase by certain Shareholders of stock from James F. Carlin will not be
considered a loan which must be paid at Closing but will continue to be an
obligation of Consolidated Group, Inc. and will be included among the
Liabilities shown on the Final Closing Balance Sheet, provided that the total
Notes Payable of the Acquired Companies on the Final Closing Balance Sheet does
not exceed $3,626,388.00. Advances made for acquisition costs of the Diebold
Building, so-called, in Southborough, Massachusetts shall not be settled,
whether or not such advances are characterized on the Acquired Companies' books
as intercompany advances.
2.7 Resignations. The Acquired Companies and the
Shareholders covenant to cause to be delivered at the Closing the resignation
of each of the directors of each of the Acquired Companies, such resignations
to be effective immediately following the Closing. Immediately after the
Closing, the Board of each Acquired Company shall be as set forth on Exhibit
2.7 hereof.
2.8 Examination of Property and Records. Between the date
of this Agreement and the Closing Date, the Acquired Companies will allow, and
the Shareholders will cause the Acquired Companies to allow, Purchaser, its
counsel and other representatives full access to all the books, records, files,
documents, assets, properties, contracts and agreements of the Acquired
Companies which may be reasonably requested, and shall furnish Purchaser, its
officers and representatives during such period with all information concerning
the affairs of the Acquired Companies which may be reasonably requested.
Purchaser will conduct any investigation in a manner which will not unreasonably
interfere with the business of the Acquired Companies and agrees that the
parties will contact the Acquired Companies' carriers jointly after execution of
this Agreement to inform them of the benefits of the transactions contemplated
hereby and ascertain their views thereon. All such information and documents
shall be received and held in accordance with and subject to the terms of this
Agreement and that certain Confidentiality Agreement, dated March 1, 1996,
between
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Purchaser and Tucker Anthony Incorporated, as agent for the Acquired Companies.
2.9 Consents and Approvals. The Acquired Companies and
the Shareholders agree to use their best efforts to obtain the waiver, consent
and approval of all persons whose waiver, consent or approval (i) is required
in order to consummate the transactions contemplated by this Agreement or (ii)
is required by any material agreement, lease, instrument, arrangement,
judgment, decree, order or license to which any of the Acquired Companies or
any Shareholder or any Affiliate of any Shareholder is a party or subject to on
the Closing Date and (a) which would prohibit, or require the waiver, consent
or approval of any person to, such transactions or (b) under which, without
such waiver, consent or approval, such transactions would constitute an
occurrence of default under the provisions thereof, result in the acceleration
of any obligation thereunder or give rise to a right of any party thereto to
terminate its obligations thereunder. All such written waivers, consents and
approvals shall be listed on Exhibit 3.8 hereto and shall be produced at
Closing in form and content reasonably satisfactory to Purchaser.
2.10 Employment Agreements and Nondisclosure and
Noninterference Agreements.
2.10.1 The Acquired Companies and the Shareholders
covenant to use their best efforts to cause those employees identified on
Exhibit 2.10.1(a) to enter into Employment Agreements at the Closing
substantially in the form set forth in Exhibit 2.10.1(b).
2.10.2 The Shareholders listed on Exhibit 2.10.2(a)
covenant to enter into, at the Closing, a Nondisclosure and Noninterference
Agreement substantially in the form attached hereto as Exhibit 2.10.2(b).
2.11 Supplying of Financial Statements. The Acquired
Companies and the Shareholders covenant to deliver to Purchaser all regularly
prepared monthly, and other, unaudited financial statements of the Acquired
Companies prepared after the date of this Agreement, in format historically
utilized internally, as soon as available but not later than the 15th day of
each month following each statement's date.
2.12 Section 338(h)(10) Election. Purchaser and the
Shareholders shall join in making the Election in a timely manner with respect
to the sale of the Shares of the Acquired Companies and each party shall
provide the other all necessary information to permit the Election to be made.
As promptly as practicable after the Closing, the parties shall take all action
and file all
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documents to effect and preserve a timely Election. In connection with the
Election, prior to the Closing, the parties shall, acting together in good
faith, (a) determine and agree upon the amount of the "adjusted grossed-up
basis" of the Shares of the Acquired Companies (within the meaning of Treas.
Reg. Section 1.338(h)(10)-1(e) and (f)) and (b) agree upon the proper
Allocations in accordance with Section 338(b)(5) of the Code and the regulations
promulgated thereunder (it being understood, however, that such determination
and/or agreement by the parties is not a condition to the obligation of either
party to consummate the purchase under this Agreement). The calculations of the
"adjusted grossed-up basis" and Allocations shall not include the respective
Transaction Costs. The Shareholders shall calculate the gain or loss, if any,
resulting from the Election in a manner consistent with the Allocations and
shall not take any position inconsistent with the Election or the Allocations in
connection with any Tax Return; however, the Shareholders may take into account
their Transaction Costs when calculating such gain or loss. Purchaser shall
allocate the "adjusted grossed-up basis" of the Shares of the Acquired
Companies among the assets of the Acquired Companies in a manner consistent with
the Allocations and shall not take any position inconsistent with the Election
or the Allocations in any Tax Return; however, Purchaser may add its Transaction
Costs to the "adjusted grossed-up basis" of such Shares for purposes of
allocating among the assets of the Acquired Companies. Any liability for Taxes
resulting from the Election shall be borne by the Shareholders and shall not be
treated as a liability of, or be payable by, any of the Acquired Companies or
Purchaser under any tax allocation agreement or otherwise.
2.13 Tax Returns.
2.13.1 The Shareholders shall prepare and file all
Tax Returns of or that include the Acquired Companies (including any amendments
thereto) with respect to any taxable period of the Acquired Companies ending on
or prior to the date of the Closing (a "Pre-Closing Period") and shall pay all
Taxes with respect to the Acquired Companies for the Pre-Closing Period.
Purchaser shall cause the Acquired Companies to file all Tax Returns relating
to the Acquired Companies, and to pay all Taxes with respect thereto (except as
otherwise provided in the second sentence of Section 2.13.2), for all taxable
periods ending after the date of the Closing.
2.13.2 For purposes of this Agreement, if, for any
Taxes, whether federal, state or local, a taxable period of an Acquired Company
does not terminate on the date of the Closing (such non-terminating period, a
"Straddle Period"), the parties shall, to the extent permitted by applicable
law, elect with the relevant taxing authority to treat the Pre-Closing Period
portion
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of such Straddle Period for all purposes as a short taxable period ending as of
the close of the date of the Closing and such short taxable period shall be
treated as a Pre-Closing Period for purposes of this Agreement. In any case
where applicable law does not permit such an election to be made, then, for
purposes of this Agreement, Taxes for the entire Straddle Period shall be
allocated to the Pre-Closing Period using an "interim closing of the books"
method, assuming that such Straddle Period ended at the close of the date of
the Closing and treating such Straddle Period as a Pre-Closing Period for
purposes of this Agreement, except that exemptions, allowances and deductions
calculated on an annual basis (such as the deduction for depreciation) shall be
apportioned on a per-diem basis. In the case of any Straddle Period, Purchaser
shall provide Shareholders with copies of the completed Tax Returns for the
relevant Acquired Companies for such period and a statement indicating the
amount of Taxes shown on such Tax Returns that are chargeable to the
Shareholders pursuant to this Section 2.13.2 (the "Tax Statement") at least
thirty five (35) days prior to the due date for the filing of any such Tax
Return (including any extension thereof), and the Shareholders shall have the
right to review such Tax Returns and Tax Statements and contest any issues for
a period of ten (10) days after receipt. Shareholders and Purchaser agree to
consult and to use their best efforts to resolve in good faith any issues
arising as a result of the review of such Tax Returns and Tax Statements by
Shareholders. If the parties are unable to resolve any dispute within the
following fifteen (15) day period, Settlement Auditor will resolve any issue in
dispute as promptly as possible. If Settlement Auditor is unable to make a
determination with respect to any disputed issue prior to the due date
(including extensions) for the filing of the Tax Return in question, Purchaser
or the relevant Acquired Company may file such Tax Return without such
determination having been made and without the consent of the Shareholders
subject, however to Purchaser's obligation thereafter to file an amended Tax
Return reflecting the final decision of Settlement Auditor (which decision
shall be rendered prior to the expiration of the period during which an amended
Tax Return may validly be filed with respect to the applicable taxable period).
Not later than two (2) days before the due date (including any extensions
thereof) for payment of Taxes with respect to such Tax Return, Shareholders
shall cause to be paid to the relevant Acquired Company or Purchaser an amount
equal to the Taxes shown on the Tax Statement as being chargeable to the
Shareholders or their Affiliates pursuant to this Section 2.13.2 unless the
Acquired Companies had established an adequate reserve prior to Closing. If the
Shareholders have disputed such amount, then the Shareholders shall cause to be
paid to the relevant Acquired Company or Purchaser in immediately available
funds, not later than two (2) days before the due date (including any extension
thereof) for the payment of Taxes with respect to such Tax Return, the amount
determined by Purchaser in the Tax Statement as the proper amount
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chargeable to the Shareholders or their Affiliates pursuant to this Section
2.13.2, which payment shall be treated as a payment of Taxes for which
Shareholders are responsible pursuant to the second sentence of this Section
2.13.2. Appropriate adjustments shall be made to the amount paid by the
Shareholders or their Affiliates in order to reflect the decision of Settlement
Auditor.
2.13.3 If the parties disagree as to any matter
governed by this Section 2.13 (other than as to the Allocations), the parties
shall promptly consult with each other in an effort to resolve the
disagreement. If any such disagreement is not resolved within fifteen (15)
calendar days after either party gives the other written notice that it cannot
be resolved, the Settlement Auditor shall act as an arbitrator to resolve the
disagreement. The Settlement Auditor's determination shall be final, binding
and conclusive on the parties, and any expenses relating to the engagement of
the Settlement Auditor shall be shared equally by the parties.
2.14 Access to Business Records. From and after Closing,
the Shareholders shall, and shall cause their Affiliates to, provide Purchaser
and the Acquired Companies reasonable access to all documents owned or held by
the Shareholders or their Affiliates, required or incident to the performance of
the Acquired Companies' businesses. From and after Closing, Purchaser and the
Acquired Companies shall provide the Shareholders with reasonable access to all
documents of the Acquired Companies, required or incident to the filing of any
tax return or defense of any indemnity claim of Purchaser hereunder. Either
party having access to documents owned or held by the other may make copies or
extracts from such books and records at the copying party's sole expense. Each
party shall maintain such records consistent with its historical practice and
shall destroy such records only in accordance with that party's historical
practice.
2.15 Employee Matters.
2.15.1 Continuation of Acquired Companies' Benefit
Plans. After the Closing, Purchaser shall cause the Acquired Companies to
continue, until December 31, 1996, the participation, sponsorship and/or
maintenance of the Acquired Companies in all of the Benefit Plans except those
identified on Exhibit 2.15.1.
2.15.2 Obligation to Assist in Transition.
Shareholders shall, both before and after the Closing Date, provide Purchaser
with any information which Purchaser shall reasonably request concerning the
employees of the Acquired Companies (the "Employees"), and shall cooperate and
assist Purchaser with respect to the commencement of participation after
December 31, 1996, of
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any Employee in any of Purchaser's Benefit Plans or arrangements then in
existence.
2.15.3 Benefit Plan Obligations. Shareholders shall
be responsible for any claims incurred or benefits accrued on or prior to the
Closing Date under any of the Benefit Plans of the Acquired Companies to the
extent such claims or benefits have not been accrued and reflected as
liabilities on the Closing Balance Sheet, and Shareholders shall be responsible
for providing any necessary "continuation coverage" required under Part 6 of
Title I of ERISA for "qualifying events" (as defined in ERISA Section 603) which
have occurred on or prior to the Closing Date under any of the Benefit Plans of
the Acquired Companies to the extent such claims or benefits have not been
accrued and reflected as liabilities on the Closing Balance Sheet. No liability
to the PBGC has been or will be incurred as of the Closing Date by any of the
Acquired Companies, except for PBGC insurance premiums, and all such insurance
premiums incurred or accrued up to and including the Closing Date have been or
will be timely paid by the Acquired Companies prior to Closing, or will be
timely paid by the Shareholders after Closing. Shareholders agree to indemnify
and hold Purchaser and the Acquired Companies harmless from and against all
liability, loss, damage or injury and all reasonable costs and expenses
(including reasonable counsel fees and costs of any suit related thereto)
suffered or incurred by Purchaser or the Acquired Companies which was not
accrued and reserved for in the Final Closing Balance Sheet and arises (i) from
any claims incurred or benefits accrued on or prior to the Closing Date under
any of the Benefit Plans of the Acquired Companies, (ii) from any necessary
"continuation coverage" required under Part 6 of Title I of ERISA for
"qualifying events" (as defined in ERISA Section 603) which have occurred on or
prior to the Closing Date under any of the Benefit Plans of the Acquired
Companies, or (iii) from any liability to the PBGC by the Acquired Companies
which arises from periods on or prior to the Closing Date.
2.15.4 Stock Option Grants to Employees of the
Acquired Companies. The Purchaser shall reserve shares of its common stock for
granting non-qualified stock options to key employees of the Acquired Companies
in accordance with Exhibit 2.15.4. Such options shall be granted on the first
business day following the Closing Date and the exercise price for such options
shall be the closing price of the Purchaser's common stock on the New York
Stock Exchange on the date of the execution of this Agreement or the Closing
Date, whichever is lower, provided that those employees desiring that such
options be treated as Incentive Stock Options under the Code will receive
options at an exercise price determined on the Closing Date. Such options shall
vest in accordance with the Purchaser's Stock Option Plan.
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2.16 Affiliated Contracts. At or prior to Closing, the
Shareholders shall, and shall cause their Affiliates to, transfer to the
Acquired Companies any contracts the revenues from which are included in the
revenues of the Acquired Companies but which are in the name of the
Shareholders or their Affiliates, and any assets which have been paid for by
any Acquired Company but which are owned by or in the possession of the
Shareholders or their Affiliates, as opposed to the relevant Acquired Company.
The Shareholders and the Acquired Companies represent and warrant that as of
this date, there are no such assets and contracts. Purchaser agrees that that
certain Amended, Consolidated and Restated Lease dated January 1, 1987, as
amended by instrument dated March 27, 1996, covering the premises located on
Pleasant Street Connector in Framingham, Massachusetts, between Consolidated
Group Services Company, Limited Partnership and Consolidated Group, Inc., will
remain in place and the Purchaser will cause the Acquired Companies to honor
the terms of such lease until the expiration of its current term.
2.17 Disallowed Accounts Receivable Collections
Reimbursement. To the extent that any account receivable on the books of the
Acquired Companies as of the Closing Date are disallowed and not included in
the Final Closing Balance Sheet and the Acquired Companies collect such
disallowed accounts after Closing, the Acquired Companies will pay the amount
of such collected accounts ("Written Off A/R Collection Payments") to the
Shareholders as an additional Purchase Price Amount, provided that to the
extent that there has been a Negative Purchase Price Adjustment Amount paid
from the Escrow Fund and the Escrow has not terminated, the Written Off A/R
Collections Payments shall be made to the Escrow Agent for the Escrow Account
and shall be subject to claims under the terms of the Escrow Agreement.
III. REPRESENTATIONS AND WARRANTIES OF THE
ACQUIRED COMPANIES AND THE SHAREHOLDERS.
The Acquired Companies prior to Closing and the Shareholders
prior to and after Closing, Severally (but not jointly or jointly and
severally) represent and warrant to Purchaser as follows:
3.1 Organization, Standing and Foreign Qualification.
3.1.1 Each Acquired Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts as set forth in Exhibit 3.1 and has the full
power and authority (corporate and otherwise) to carry on its business in
Massachusetts and in every jurisdiction where it holds a certificate of
authority to do business as it is
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now being conducted and to own and lease the properties and assets which it now
owns or leases.
3.1.2 Each Acquired Company is now, and will be as
of Closing, duly qualified and/or licensed to transact business and in good
standing as a foreign corporation in the jurisdictions listed in Exhibit 3.1
hereto, and the character of the property owned or leased by each Acquired
Company and the nature of the business conducted by it do not require such
qualification and/or licensing in any other jurisdiction.
3.2 Authority and Status. Each Shareholder and the
Acquired Companies have the capacity and authority to execute and deliver this
Agreement, to perform hereunder and to consummate the transactions contemplated
hereby without the necessity of any act or consent of any other person
whomsoever. The execution, delivery and performance by the Shareholders and the
Acquired Companies of this Agreement and each and every agreement, document and
instrument provided for herein have been duly authorized and approved by the
Boards of Directors of the Acquired Companies. This Agreement and each and
every agreement, document and instrument to be executed, delivered and
performed by any of the Acquired Companies or any Shareholder in connection
herewith constitute or will, when executed and delivered, constitute the valid
and legally binding obligations of the Acquired Companies and the Shareholders,
as the case may be, enforceable against each of them in accordance with their
respective terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally. Attached hereto as Exhibit 3.2 are true, correct
and complete copies of the Certificates or Articles of Incorporation and Bylaws
of the Acquired Companies.
3.3 Capitalization. All outstanding securities of the
Acquired Companies, the entire authorized capital stock, the amount of shares
issued and outstanding, and the amount of shares held in treasury for each
Acquired Company are as set forth on Exhibit 3.3. All of the issued and
outstanding shares of the Acquired Companies are owned by the Shareholders as
indicated on Exhibit 3.3. As of the Closing Date, Shareholders will own all of
the issued and outstanding shares of the Acquired Companies free and clear of
all liens, claims, charges and encumbrances of any nature whatsoever, and the
authorization or consent of no other person or entity is required in order to
consummate the transactions contemplated herein by virtue of any such person or
entity having an equitable or beneficial interest in the Acquired Companies or
the capital stock of the Acquired Companies. There are no outstanding options,
warrants, calls, commitments or plans by any Acquired Company to issue any
additional shares of its capital stock, to pay any
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<PAGE> 17
dividends on such shares or to purchase, redeem, or retire any outstanding
shares of its capital stock, nor are there outstanding any securities or
obligations which are convertible into or exchangeable for any shares of
capital stock of any Acquired Company.
3.4 Absence of Equity Investments. Except as described in
Exhibit 3.4 hereto, no Acquired Company, either directly or indirectly, owns of
record or beneficially any shares or other equity interests in any corporation,
partnership, limited partnership, joint venture, trust or other business
entity. Except as described in Exhibit 3.4 hereto, no Shareholder or any other
Affiliate of a Shareholder, directly or indirectly, owns of record or
beneficially any shares or other equity interests in any corporation (except as
a stockholder holding less than one percent (1%) interest in a corporation
whose shares are traded on a national or regional securities exchange or in the
over-the-counter-market), partnership, limited partnership, joint venture,
trust or other business entity, all or any portion of the business of which is
competitive with that of the Acquired Companies.
3.5 Liabilities and Obligations of the Acquired Companies.
3.5.1 Attached hereto as Exhibit 3.5.1 are true,
correct and complete copies of the consolidated audited balance sheets of CGI,
GBA and CGC (the "Consolidated Companies") and the unconsolidated balance sheet
of CHC as of December 31, 1993, 1994 and 1995 and the related statements of
operations and operating cash flow for the years then ended, and the
Consolidated Companies consolidated and CHC's unconsolidated unaudited balance
sheets as of March 31, 1996 and the related statements of operations and
operating cash flow for the three months then ended (the "1993, 1994, 1995 and
Q1/1996 Financial Statements"). The 1993, 1994, 1995 and Q1/1996 Financial
Statements are complete, have been prepared in accordance with generally
accepted accounting principles consistently applied, fairly present the
financial condition of the Acquired Companies as of the respective dates thereof
and disclose all liabilities of the Acquired Companies, whether absolute,
contingent, accrued or otherwise, existing as of the date thereof which are of a
nature required to be reflected in financial statements prepared in accordance
with generally accepted accounting principles.
3.5.2 No Acquired Company has any liability or
obligation (whether accrued, absolute, contingent or otherwise) which is of a
nature required to be reflected in financial statements prepared in accordance
with GAAP, consistently applied, including, without limitation, any liability
which might result
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from an audit of its Tax Returns by any appropriate authority, except for (a)
the liabilities and obligations of the Acquired Companies which are disclosed
or reserved against in the 1995 Financial Statements or Exhibit 3.5.2 hereto,
to the extent and in the amounts so disclosed or reserved against, and (b)
liabilities incurred or accrued in the ordinary course of business since
December 31, 1995 and which do not, either individually or in the aggregate,
have a material adverse effect on the business, assets or operations of any
Acquired Company.
3.5.3 Except as disclosed in the 1995 Financial
Statements or Exhibit 3.5.2, no Acquired Company is in default with respect to
any material liabilities or obligations, and all such liabilities or
obligations shown or reflected in the 1995 Financial Statements or Exhibit
3.5.2 and such liabilities incurred or accrued subsequent to December 31, 1995
have been, or are being, paid and discharged as they become due, and all such
liabilities and obligations were incurred in the ordinary course of business
except as indicated in Exhibit 3.5.2.
3.6 Tax Returns and Agreements. Except as otherwise
disclosed on Exhibit 3.6, (a) (i) the Acquired Companies are, and have been
since their respective incorporations, "S Corporations" within the meaning of
Section 1361(a)(1) of the Code; (ii) the elections by the Acquired Companies to
be "S Corporations" were valid at the time such elections were made and such
elections have not been revoked or terminated; (iii) none of the Acquired
Companies has ever filed, or has ever been required to file, any Returns in
respect of Taxes with any corporation or other entity on a consolidated,
combined or unitary basis; (iv) all Returns in respect of Taxes required to be
filed with respect to each of the Acquired Companies have been timely filed,
none of such Returns contains, or is required to contain, a disclosure
statement under section 6662 of the Code or any similar provision of state,
local, or foreign law, and no extension of time within which to file any such
Return has been requested, which Return has not since been filed; (v) all Taxes
required to be shown on such Returns or otherwise due or payable have been
timely paid and all payments of estimated Taxes required to be made with
respect to each Acquired Company under section 6655 of the Code or any
comparable provision of state, local or foreign law have been made; (vi) all
such Returns are true, correct and complete in all material respects; (vii) no
adjustment relating to such Returns has been proposed formally or informally by
any Tax authority and, to the knowledge of the Shareholders, no basis exists
for such an adjustment; (viii) there are no pending or threatened actions or
proceedings for the assessment or collection of Taxes against any of the
Acquired Companies; (ix) there are no Tax liens on any assets of any of the
Acquired Companies other than ad valorem taxes which are not yet due; (x) there
are no outstanding subpoenas or requests for
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information currently outstanding that could affect the Taxes of any of the
Acquired Companies; (xi) there are no proposed reassessments of any property
owned or leased by any of the Acquired Companies or other proposals that could
increase the amount of any Tax to which any of the Acquired Companies would be
subject; (xii) none of the Acquired Companies is a party to any agreement or
arrangement that would result, separately or in the aggregate, in the payment
of any "excess parachute payment" within the meaning of section 280G of the
Code; (xiii) none of the Acquired Companies has been a United States real
property holding corporation within the meaning of section 897(c)(2) of the
Code during the applicable period specified in section 897(c)(1)(A)(ii) of the
Code; (xiv) there are no outstanding waivers or agreements extending the
statute of limitations for any period with respect to any Tax to which any of
the Acquired Companies may be subject; (xv) there are no requests for rulings
or information currently outstanding that could affect the Taxes of any of the
Acquired Companies or any similar matters pending with respect to any Tax
authority; (xvi) no power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes that could affect any of
the Acquired Companies; (xvii) no consent under section 341(f) of the Code has
been filed with respect to any of the Acquired Companies; (xviii) no
acceleration of the vesting schedule for any property that is substantially
nonvested within the meaning of the regulations under section 83 of the Code
will occur in connection with the transactions contemplated by this Agreement;
(xix) none of the Acquired Companies has at any time been a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax
potentially applicable as a result of such membership or holding has not
expired; (xx) none of the Acquired Companies owes any amount pursuant to any
Tax sharing agreement or arrangement and does not have any liability after the
date hereof in respect of any Tax sharing agreement or arrangement executed or
agreed to prior to the date hereof, whether any such agreement or arrangement
is written or unwritten; (xxi) all Taxes required to be withheld, collected or
deposited by each of the Acquired Companies have been timely withheld,
collected or deposited and, to the extent required, have been paid to the
relevant Tax authority; (xxii) any adjustment of Taxes of any of the Acquired
Companies made by the IRS that is required to be reported to any state, local
or foreign Tax authority has been so reported and any additional Tax due as a
result thereof has been paid in full; (xxiii) none of the Acquired Companies
was acquired in a qualified stock purchase under section 338(d)(3) of the Code
and no elections under section 338(g) of the Code, protective carryover basis
elections, offset prohibition elections or other deemed or actual elections
under section 338 of the Code are applicable to any of the Acquired Companies;
(xxiv) none of the Acquired Companies has issued or assumed any corporate
acquisition
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indebtedness, as defined in section 279(b) of the Code or any obligations
described in section 279(a) of the Code; (xxv) as of the Closing, none of the
Acquired Companies will have any non-recaptured net section 1231 loss as
defined in section 1231(c) of the Code; (xxvi) the books and records of each of
the Acquired Companies reflect reserves that are adequate for the payment of
all Taxes not yet due and payable that are properly accruable thereon as of the
date thereof (including Taxes being contested), and there is no difference
between the amounts of the book basis and the tax basis of assets (net of
liabilities) that is not accounted for by an accrual on the books for federal
income tax purposes; (xxvii) none of the Acquired Companies has had any income
attributable to a transaction (e.g., an installment sale) occurring in or a
change in accounting method made for a period ending at or prior to the Closing
which resulted in a deferred reporting of income from such transaction or from
such change in accounting method; (xxviii) none of the Acquired Companies is
obligated under any agreement with respect to industrial development bonds or
similar obligations, with respect to which the excludability from gross income
of the holder for federal income tax purposes could be affected by the
transactions contemplated hereunder; and (xxix) none of the Acquired Companies
is subject to liability for any Taxes as a transferee or successor, or by
reason of section 1.1502-6 of the Treasury Regulations (or similar provision of
state, local or foreign law).
(b) (i) Exhibit 3.6 (1) lists all income, franchise and
similar Returns (federal, state, local and foreign) filed with respect to each
of the Acquired Companies for taxable periods ended on or after December 31,
1990; (2) indicates for which jurisdictions Returns have been filed; (3)
indicates the most recent income, franchise or similar Return for each relevant
jurisdiction for which an audit has been completed and indicates all Returns
that currently are the subject of audit; (ii) the Shareholders have delivered
to the Purchaser correct and complete copies of all federal, state and foreign
income, franchise, sales and use, real and personal property Tax Returns and
all other Returns, elections relating to Taxes of the Acquired Companies,
examination reports, and statements of deficiencies assessed against or agreed
to by any of the Acquired Companies since January 1, 1990; (iii) Exhibit 3.6
sets forth the following information with respect to each of the Acquired
Companies as of the most recent practicable date (and, in each case, specifying
such date): (A) the tax basis of the Acquired Companies in their respective
assets and (B) for state Tax purposes, the amount of any net operating loss,
net capital loss, unused credit, unused foreign tax credit, earnings and
profits or excess charitable contribution allocable to each of the Acquired
Companies; (iv) the Shareholders have delivered to the Purchaser a complete and
accurate description of all Tax accounting methods for all material items
affecting
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federal and state income or franchise Taxes; (v) the Shareholders have
delivered to the Purchaser a full description of any and all related party
transactions between any of the Acquired Companies and their respective
Affiliates; (vi) the Shareholders have provided to the Purchaser a complete and
accurate list of locations by city and state in which each of the Acquired
Companies leases any real or personal property; and (vii) each of the Acquired
Companies has provided to the Purchaser a complete and accurate description of
all prior acquisitions, reorganizations and dispositions, and a description of
all changes in corporate control or capital structure.
3.7 Ownership of Assets and Leases.
3.7.1 Real Estate and Personal Property. Exhibit
3.7 attached hereto is a complete and correct list and brief description as of
the date of this Agreement of all real property and items of personal property,
which are owned and have a book value in excess of $25,000.00 (net of the
reserve for depreciation), and all real property and all material items of
personal property which are leased or licensed by each Acquired Company (such
list identifying which of such properties are owned by each Acquired Company
and all of the leases, licenses or agreements under which each Acquired Company
is lessee or licensee or holds or operates such property, real or personal).
Each Acquired Company has good and marketable title to all of its property and
assets, other than leased or licensed property, including those listed and
described in Exhibit 3.7 as owned property and assets, in each case free and
clear of any liens, security interests, claims, charges, options, rights of
tenants or other encumbrances, except as disclosed or reserved against in
Exhibit 3.7 (to the extent and in the amounts so disclosed or reserved against)
and except for liens arising from current Taxes not yet due and payable. Each
of the leases, licenses and agreements described in Exhibit 3.7 is in full
force and effect and constitutes a legal, valid and binding obligation of the
relevant Acquired Company and to the knowledge of the Shareholders and the
Acquired Companies, the other respective parties thereto and is enforceable in
accordance with its terms, except as enforceability may be limited by
applicable equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally, and there is not under any of such
leases, licenses or agreements existing any material default of the relevant
Acquired Company or to the knowledge of the Shareholders or the Acquired
Companies, of any other parties thereto (or event or condition which, with
notice or lapse of time, or both, would constitute a default). Except with
respect to the premises leased by the Acquired Companies as their headquarters
in Framingham, Massachusetts, the "Diebold Building," so called, located in
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<PAGE> 22
Southborough, Massachusetts (which will be transferred to the Acquired
Companies at or prior to Closing in accordance with the transfer provisions
attached hereto as Exhibit 5.10 and the vacant lot located in Framingham,
Massachusetts leased from Gateway Ventures, Inc. (which lease is to be
terminated on or before the Closing Date), no Acquired Company nor any
Shareholder has received any payment from a lessor or licensee in connection
with or as inducement for entering into a lease or license under which it is a
lessee or a licensee. All buildings, machinery and equipment owned or leased by
the Acquired Companies are in good operating condition and reasonable state of
repair, subject only to ordinary wear and tear. No Acquired Company has
received any notice of a material violation of any applicable zoning
regulation, ordinance or other law, regulation or requirement relating to its
operations and properties, whether owned or leased, and there is no such
violation or grounds therefor which could have a material adverse affect on the
operation of any business conducted by any of the Acquired Companies. Except
pursuant to this Agreement, no Acquired Company nor any Shareholder is a party
to any contract or obligation whereby there has been granted to anyone an
absolute or contingent right to purchase, obtain or acquire any rights in any
of the assets, properties or operations which are owned by any Acquired Company
or which are used in connection with the business of any Acquired Company.
3.7.2 Accounts Receivable. All of the accounts
receivable of the Acquired Companies included in the Final Closing Balance
Sheet will reflect actual transactions, will have arisen in the ordinary course
of business and will not be subject to offset or deduction.
3.8 Agreement Does Not Violate Other Instruments. Except
as listed in Exhibit 3.8, the execution and delivery of this Agreement by the
Acquired Companies and the Shareholders do not, and the consummation of the
transactions contemplated hereby will not, violate any provision of the
Certificates of Incorporation, as amended, Articles of Incorporation, as
amended, or Bylaws, as amended, of any Acquired Company or Shareholder or
violate or constitute an occurrence of default under any provision of, or
conflict with, or result in acceleration of any obligation under, or give rise
to a right by any party to terminate its obligations under, any mortgage, deed
of trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument, or any order, judgment, decree or other arrangement to which any
Acquired Company or any Shareholder is a party or is bound or by which any
Acquired Company's or Shareholder's assets are affected. Except for the
requisite filing under the HSR Act and except as listed or described on Exhibit
3.8 attached hereto, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity or any other
person is required, or
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is required to be obtained or made by or with respect to any Acquired Company,
any Shareholder or any assets, properties or operations of any Acquired Company
or any Shareholder, in connection with the execution and delivery by the
Acquired Companies and the Shareholders of this Agreement or the consummation
of the transactions contemplated hereby.
3.9 Absence of Changes. Since December 31, 1995, no
Acquired Company has, or has had on its behalf, except as disclosed on Exhibit
3.9 attached hereto:
3.9.1 Transferred, assigned, conveyed or liquidated
into current assets any of its assets or business or entered into any
transaction or incurred any liability or obligation, other than in the ordinary
course of its business;
3.9.2 Suffered any adverse change in its business,
operations, or financial condition or become aware of any event or state of
facts which may result in any such adverse change;
3.9.3 Suffered any destruction, damage or loss to a
material asset or a group of assets that are in the aggregate material to the
business, whether or not covered by insurance;
3.9.4 Suffered, permitted or incurred the imposition
of any lien, charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure debt or security
interest) or claim upon any of its assets, except for any current year lien with
respect to Taxes not yet due and payable;
3.9.5 Committed, suffered, permitted or incurred any
default in any liability or obligation;
3.9.6 Made or agreed to any adverse change in the
terms of any material contract or instrument to which it is a party;
3.9.7 Waived, canceled, sold or otherwise disposed
of, for less than the face amount thereof, any claim or right which it has
against others or accelerated its collections or its efforts to collect
accounts receivable or otherwise deviated from its normal collection activities
consistent with historic practice;
3.9.8 Issued any additional shares or rights,
options or calls with respect to any Acquired Company's shares, or redeemed,
purchased or otherwise acquired any of the Acquired
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Companies' shares, or made any change whatsoever in the Acquired Companies'
capital structure;
3.9.9 Paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other amount to, or with
respect to, any employee benefit plan (except for the payment of health,
disability and life insurance premiums which had become due and except for
contributions or distributions required to be made (and not discretionary)
pursuant to any Benefit Plans), or paid any bonus to (except for the payment of
or accrual for all bonuses listed on Exhibit 3.9 which are earned pursuant to
the Executive Bonus Plan, all of which such bonuses shall be paid or accrued
for prior to the Closing and shall be reflected in the Final Closing Balance
Sheet), or granted any increase in the compensation of, any Acquired Company's
directors, officers, agents or employees, or made any increase in the pension,
retirement or other benefits of its directors, officers, agents or other
employees (except for regularly scheduled periodic increases in employees'
compensation at times and in amounts consistent with historic practice);
3.9.10 Committed, suffered, permitted or
incurred any transaction or event which would increase its Tax liability for any
prior taxable year;
3.9.11 Incurred any other liability or
obligation or entered into any transaction other than in the ordinary course of
business;
3.9.12 Received any notices, or had reason to
believe, that any supplier, insurance company, HMO or other benefit payor or
provider has taken or contemplates any steps which could materially disrupt the
business relationship of any Acquired Company with said person or could result
in the diminution in the value of any Acquired Company as a going concern;
3.9.13 Paid, agreed to pay or incurred any
obligation for any payment of any indebtedness except current liabilities
incurred in the ordinary course of business and except for payments as they
become due pursuant to governing agreements as such agreements existed on
December 31, 1995; or
3.9.14 Delayed or postponed the payment of any
liabilities, whether current or long term, or failed to pay in the ordinary
course of business any liability on a timely basis consistent with prior
practice.
3.10 Litigation. Except as otherwise set forth in Exhibit 3.10
hereto (with Exhibit 3.10 separately identifying litigation arising in the
ordinary course in the Acquired
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Companies' third party administrator business involving denied coverage or
claims administration), there is no suit, action, proceeding, claim or
investigation pending, threatened against or affecting any Acquired Company
and, to the knowledge of the Shareholders and the Acquired Companies, there
exists no basis or grounds for any such suit, action, proceeding, claim or
investigation. None of the items described in Exhibit 3.10, singularly or in
the aggregate, if pursued and/or resulting in a judgment, would have a material
adverse effect on the assets, business, goodwill or financial condition of the
Acquired Companies taken as a whole or the right of the Acquired Companies or
the Shareholders to consummate the transactions contemplated hereby.
3.11 Licenses and Permits; Compliance With Law. Each Acquired
Company holds all licenses, certificates, permits, franchises and rights from
all appropriate federal, state or other public authorities necessary for the
conduct of its business and the use of its assets except where the failure to
hold such license will not have a material adverse effect upon the business or
financial condition of the Acquired Companies taken as a whole. All such
licenses, certificates, permits, franchises and rights are listed in Exhibit
3.11. Except as noted in Exhibit 3.11, each Acquired Company is presently
conducting its business so as to comply in all material respects with all
applicable statutes, ordinances, rules, regulations and orders of any
governmental authority. All necessary records demonstrating compliance with
applicable statutes, ordinances, rules, regulations and orders of governmental
authorities will remain the property of the Acquired Companies subsequent to
the Closing. Further, except for the audit pending by the Boston district
office of the U.S. Department of Labor and the issues, potential orders and
consequences therefrom (the "DOL Audit") and those matters described on Exhibit
3.11, no Acquired Company is presently charged with, or under governmental
investigation with respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation, nor presently the subject of any pending or
threatened adverse proceeding by any regulatory authority having jurisdiction
over its business, properties or operations. The parties acknowledge that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby may in certain jurisdictions result in the
termination of any license, certificate, permit, franchise or right held by any
Acquired Company unless additional procedures or amendments are undertaken with
respect to such licenses, certificates, permits, franchises or rights to
reflect the change of stock ownership and changes in officers and directors in
the Acquired Companies.
3.12 Contracts, Etc. Exhibit 3.12 hereto consists of a true and
complete list of all contracts, agreements, and other instruments to which any
Acquired Company is a party, which are not
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listed on Exhibits 2.16, 3.7, 3.13.2(i), 3.13.2(ii), 3.15 or 3.18 and involves
the payment by or to the Acquired Companies of more than $50,000.00 over the
term of the agreement, and contemporaneously with the delivery of the Exhibits
to this Agreement, the Acquired Companies and the Shareholders have made
available or delivered to Purchaser a true and complete copy of each contract,
agreement or instrument listed in Exhibits 2.16, 3.7, 3.12, 3.13.2(i),
3.13.2(ii), 3.15 or 3.18 which is written, and a summary of the terms of each
such contract or agreement which is oral, certified as such by a duly
authorized officer of each Acquired Company and by the Shareholders. The
foregoing notwithstanding, Exhibit 3.12 includes all of the following:
3.12.1 Any contract or commitment which requires
services to be provided or performed by any Acquired Company or which
authorizes others to perform services for a third party for, through, or on
behalf of the Acquired Companies;
3.12.2 Any contract or commitment involving an
obligation which cannot, or in reasonable probability will not, be performed or
terminated within [one year] from the dates as of which these representations
are made;
3.12.3 Any note receivable;
3.12.4 Any contract or commitment providing for
payments based in any manner upon the sales, purchases, receipts, income or
profits of any Acquired Company including, without limitation, any agreements
with general agents or with agents;
3.12.5 Any franchise agreement, marketing agreement
or royalty agreement (and with respect to each such agreement Exhibit 3.12 sets
forth the aggregate royalties or similar payment paid or payable hereunder by
any Acquired Company as of the date hereof);
3.12.6 Any contract or agreement with a creditor not
made in the ordinary course of business;
3.12.7 Any employment contract or arrangement
regarding any employee or independent contractor which is not terminable by the
Acquired Company within thirty (30) days without payment of any amount for any
reason whatsoever, or without any continuing payment of any type or nature,
including, without limitation, any bonuses and vested commissions;
3.12.8 Any contract, agreement, understanding or
arrangement restricting any Acquired Company from carrying on its
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business anywhere in the world except as disclosed on Exhibit 3.12.8;
3.12.9 Any instrument or arrangement evidencing or
related to indebtedness for money borrowed or to be borrowed, whether directly
or indirectly, by way of purchase money obligation, guaranty, subordination,
conditional sale, lease-purchase or otherwise;
3.12.10 Any contract with any labor organization; and
3.12.11 Any bond, suretyship arrangement, guarantee,
letter of credit or other performance guarantee document pursuant to which any
obligation of an Acquired Company is guaranteed or secured or pursuant to which
any Acquired Company has guaranteed or secured the performance or obligation of
another Person.
All of the contracts, agreements, policies of
insurance or instruments described in Exhibits 3.7, 3.12, 3.13.2(i), 3.13.2(ii),
3.15 or 3.18 hereto are valid and binding upon the Acquired Companies and, to
the knowledge of the Shareholders and the Acquired Companies, the other parties
thereto, and are in full force and effect and enforceable in accordance with
their terms except where the failure to be so enforceable will not have a
material adverse effect on any Acquired Company. No Acquired Company nor, to the
knowledge of the Shareholders or the Acquired Companies, any other party to any
such contract, commitment or arrangement has breached any material provision of,
or is in material default under, the terms thereof.
3.13 Intellectual Property; Computer Software.
3.13.1 Exhibit 3.13.1 hereto sets forth a complete
and correct list and summary description of all trademarks, trade names,
service marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefor, applicable to or used in the
business of each Acquired Company, together with a complete list of all
licenses granted by or to each Acquired Company with respect to any of the
above. All such trademarks, trade names, service marks, service names, brand
names, copyrights and patents are owned by the Acquired Companies, free and
clear of all liens, claims, security interests and encumbrances of any nature
whatsoever. Neither the Acquired Companies nor any Shareholder is currently in
receipt of any notice of any violation of, and no Acquired Company is
violating, the rights of others in any trademark, trade name, service mark,
copyright, patent, trade secret, know-how or other intangible asset
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except for potential conflicts with entities using the names "Consolidated
Group, Inc." and "Consolidated Group Trust" in Colorado and North Carolina.
3.13.2 (i) Exhibit 3.13.2(i) contains a complete and
accurate list of all computer software owned by each Acquired Company which is
significant to the business and operations of the Acquired Companies (the
"Owned Software"). Except as set forth on Exhibit 3.13.2(i), each respective
Acquired Company has exclusive title to the Owned Software, free and clear of
all claims, including claims or rights of employees, agents, consultants,
customers, licensees or other parties involved in the development, creation,
marketing, maintenance, enhancement or licensing of such computer software. The
Owned Software is not dependent on any Licensed Software (as defined in
subsection (ii) below) in order to fully operate in the manner in which it is
intended. No Owned Software has been published or disclosed to any other
parties, except as set forth on Exhibit 3.13.2(i), and except pursuant to
contracts requiring such other parties to keep the Owned Software confidential.
No such other party has breached any such obligation of confidentiality.
(ii) Exhibit 3.13.2(ii) contains a complete
and accurate list of all software under which any Acquired Company is a
licensee, lessee or otherwise has obtained the right to use such software (the
"Licensed Software"). Exhibit 3.13.2(ii) also sets forth a list of all license
fees, rents, royalties or other charges that such Acquired Company is required
or obligated to pay with respect to the Licensed Software. The applicable
Acquired Company or Companies have the right and license to use, sublicense,
modify and copy the Licensed Software, free and clear of any limitations or
encumbrances except as may be set forth in any license agreements listed in
Exhibit 3.13.2(ii). Each Acquired Company is in full compliance with all
provisions of any license, lease or other similar agreement pursuant to which
it has rights to use the Licensed Software. Except as disclosed on Exhibit
3.13.2(ii), none of the Licensed Software has been incorporated into or made a
part of any Owned Software or any other Licensed Software. No Acquired Company
has published or disclosed any Licensed Software to any other party.
(iii) The Owned Software and Licensed
Software constitute all software used in the businesses of the Acquired
Companies (the "Acquired Companies' Software"). Exhibit 3.13.2(iii) sets forth
a list of all contract programmers, independent contractors, nonemployee agents
and Persons or other entities (other than employees) who have performed
computer programming services for any Acquired Company and identifies all
contracts and agreements pursuant to which such services were performed. The
transactions contemplated herein will not cause a
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breach or default under any licenses, leases or similar agreements relating to
the Acquired Companies' Software or impair the Purchaser's or the Acquired
Companies' ability to use the Acquired Companies' Software in the same manner
as such computer software is currently used by the Acquired Companies. No
Acquired Company is infringing any intellectual property rights of any other
Person or entity with respect to the Acquired Companies' Software, and to the
knowledge of the Acquired Companies and the Shareholders, no other Person or
entity is infringing any intellectual property rights of any Acquired Company
with respect to the Acquired Companies' Software.
3.14 Labor Matters. Exhibit 3.14 sets forth a list of all
employees, consultants and independent contractors of the Acquired Companies
whose compensation for 1995 or expected compensation for 1996 exceeds $75,000.00
per annum and lists the compensation per annum for such persons. Except as set
forth on Exhibit 3.14, within the last three (3) years, no Acquired Company has
been the subject of any union activity or labor dispute, nor has there been any
strike of any kind called or threatened to be called, against any Acquired
Company. Except as set forth on Exhibit 3.14, no Acquired Company has violated
any applicable federal or state law or regulation relating to labor, labor
practices or immigration matters. Neither the Acquired Companies nor the
Shareholders have any knowledge that there will be any adverse change in
relations with employees and independent contractors (excluding brokers, agents,
insurance carriers and bank trustees) of the Acquired Companies as a result of
the transactions contemplated by this Agreement.
3.15 Benefit Plans.
3.15.1 Exhibit 3.15 lists every pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, any other written or
unwritten employee program, arrangement, agreement or understanding (whether
arrived at through collective bargaining or otherwise), any medical, vision,
dental or other health plan, any life insurance plan or any other employee
benefit plan or fringe benefit plan, including, without limitation, any
"employee benefit plan," as that term is defined in Section 3(3) of ERISA, or
any other plan, program, agreement, arrangement, commitment and/or method of
compensation, whether funded or unfunded, whether legally binding or not,
currently or previously adopted, maintained, sponsored in whole or in part or
contributed to by any Acquired Company or any Affiliate of any Acquired Company
for the benefit of employees, retirees, dependents, spouses, directors,
officers, independent contractors or other beneficiaries of any Acquired
Company or an Affiliate of any Acquired Company and under which employees,
retirees, dependents, spouses, directors,
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officers, independent contractors or other beneficiaries of any Acquired
Company or an Affiliate of any Acquired Company are eligible to participate or
under or in connection with which any Acquired Company may have any contingent
or noncontingent liability of any kind whether or not probable of assertion
(collectively, the "Benefit Plans"). Any of the Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, or an "employee welfare benefit plan" as that term is defined in Section
3(1) of ERISA, is referred to herein as an "ERISA Plan." No Benefit Plan is or
has been a multiemployer plan within the meaning of Section 3(37) of ERISA.
3.15.2 Exhibit 3.15 also lists: (a) where applicable,
with respect to any such plans or plan amendments, the most recent determination
letters issued by the United States Internal Revenue Service, (b) all rulings,
opinion letters, information letters or advisory opinions issued by the United
States Department of Labor, the United States Internal Revenue Service or the
Pension Benefit Guaranty Corporation after December 31, 1974, with respect to
such Benefit Plan, (c) annual reports or Returns and audited or unaudited
financial statements for the most recent three plan years and any amendments
thereto, and (d) the most recent summary plan descriptions and any material
modifications thereto, and any other material written communications to
employees or to any governmental agency with respect to such Benefit Plans
during the three most recent plan years. Contemporaneous with the delivery of
the Exhibits to this Agreement, the Acquired Companies and the Shareholders have
delivered a true and complete copy of each of such Benefit Plans, agreements,
letters, rulings, opinions, letters, reports, Returns, financial statements and
summary plan descriptions described in Sections 3.15.1 or 3.15.2 hereof,
certified as such by a duly authorized officer of each Acquired Company.
3.15.3 All the Benefit Plans and the related trusts
subject to ERISA comply with and have been administered in all material respects
in compliance with the provisions of ERISA, all provisions of the Code relating
to qualification and tax exemption under Code Sections 401(a) and 501(a) or
otherwise applicable to secure intended Tax consequences, all applicable state
or federal securities laws and all other applicable laws, rules and regulations
and collective bargaining agreements, and no Acquired Company or Affiliate has
received any notice from any governmental agency or instrumentality questioning
or challenging such compliance. All available governmental approvals for the
Benefit Plans have been obtained, including, but not limited to, timely
determination letters on the qualification of the ERISA Plans and tax exemption
of related trusts, as applicable, under the Code and timely registration and
disclosure under applicable securities laws, and all such governmental approvals
continue in
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full force and effect. No event has occurred which will or could give rise to
disqualification of any such plan under sections 401(a) or 501(a) of the Code or
to a tax under Section 511 of the Code.
3.15.4 Neither the Acquired Companies nor any
administrator or fiduciary of any such Benefit Plan (or agent or delegate of any
of the foregoing) has engaged in any transaction or acted or failed to act in
any manner which could subject any Acquired Company to any direct or indirect
liability (by indemnity or otherwise) for a breach of any fiduciary,
co-fiduciary or other duty under ERISA. No oral or written representation or
communication with respect to any aspect of the Benefit Plans has been or will
be made to employees of any Acquired Company prior to the Closing Date which is
not in accordance with the written or otherwise preexisting terms and provisions
of such Benefit Plans in effect immediately prior to the Closing Date. There are
no unresolved claims or disputes under the terms of, or in connection with, the
Benefit Plans, and no action, legal or otherwise, has been commenced with
respect to any claim.
3.15.5 All annual reports or Returns, audited or
unaudited financial statements, actuarial valuations, summary annual reports and
summary plan descriptions issued with respect to the Benefit Plans are correct
and accurate in all material respects as of the dates thereof, and have been
timely filed or disseminated, as appropriate or required by applicable law, and
there have been no amendments filed to any of such reports, Returns, statements,
valuations or descriptions or required to make the information therein true and
accurate.
3.15.6 No "party in interest" (as defined in Section
3(14) of ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of
the Code) of any Benefit Plan has engaged in any "prohibited transaction"
(within the meaning of Section 4975(c) of the Code or Section 406 of ERISA).
There has been no (a) "reportable event" (as defined in Section 4043 of ERISA),
or event described in Section 4062(f) or Section 4063(a) of ERISA or (b)
termination or partial termination, withdrawal or partial withdrawal with
respect to any of the ERISA Plans which any Acquired Company or an Affiliate of
any Acquired Company maintains or contributes to or has maintained or
contributed to or was required to maintain or contribute to for the benefit of
employees of any Acquired Company or any Affiliate of an Acquired Company now or
formerly in existence.
3.15.7 For any ERISA Plan which is an employee
pension benefit plan as defined in ERISA Section 3(2), the fair market value of
such Benefit Plan's assets equals or exceeds the present value of all benefits
(whether vested or not) accrued to
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date of the most recent actuarial report by all present or former participants
in such Benefit Plan. For this purpose the assumptions prescribed by the PBGC
for valuing plan assets or liabilities upon plan termination shall be applied
and the term "benefits" shall include the value of any early retirement or
ancillary benefits (including shutdown benefits) provided under any Benefit
Plan.
3.15.8 As of December 31, 1995 no Acquired Company
had any current or future liability under any Benefit Plan that was not
reflected in the 1995 Financial Statements, and the liability of the Acquired
Companies in connection with any Benefit Plan as of Closing will not exceed the
amount recorded therefor on the Final Closing Balance Sheet.
3.15.9 No Acquired Company maintains any Benefit Plan
providing deferred or stock based compensation which is not reflected in the
1995 Financial Statements.
3.15.10 No Acquired Company has maintained a Benefit
Plan providing welfare benefits (as defined in ERISA Section 3(1)) to employees
after retirement or other separation of service except to the extent required
under Part 6 of Title I of ERISA and Code Section 4980B, or except as set forth
on Exhibit 3.15.10.
3.15.11 Except as described on Exhibit 3.15.11, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee of any Acquired Company to severance pay,
unemployment compensation or any payment contingent upon a change in control or
ownership of any Acquired Company, or (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any such employee or
former employee.
3.15.12 All Benefit Plans subject to section 4980B of
the Code or Part 6 of Title I of ERISA or both have been maintained in good
faith compliance with the requirements of such laws and any regulations
(proposed or otherwise) issued thereunder.
3.16 Customers and Clients. Exhibit 3.16 attached hereto
consists of a true and correct list of all of the customers and clients of the
Acquired Companies within the preceding twenty-four months who generated
revenues of more than $50,000.00 within the preceding twenty-four months,
setting forth as to each customer or client its name, address, telephone number
and principal person of contact. No Acquired Company and no Shareholder has
received any notice, or has reason to believe, that either MetraHealth, Ameritas
Life Insurance Corp., United HealthCare Corp. or Arbella Life and Health
Insurance Company has
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taken or contemplates taking any steps which could disrupt the business
relationship of any Acquired Company with such customer or client, or could
result in the diminution in the value of the business of any Acquired Company as
a going concern.
3.17 Environmental Matters. Except as set forth in Exhibit
3.17, no real property now or previously used by any Acquired Company or now or
previously owned or leased by an Acquired Company (the "Real Property") has been
used by any Acquired Company for the handling, treatment, storage or disposal of
any Hazardous Substance (as hereinafter defined). Except as set forth in
Exhibit 3.17, to the knowledge of the Shareholders and the Acquired Companies,
no release, discharge, spillage or disposal into the environment of any
Hazardous Substance and no soil, water or air contamination by any Hazardous
Substance has occurred or is occurring in, from or on the Real Property during
the period the Acquired Companies have occupied the Real Property. Except as set
forth in Exhibit 3.17, each Acquired Company has complied with all reporting
requirements under any applicable federal, state or local environmental laws and
permits, and, to the knowledge of Shareholders and the Acquired Companies, there
are no existing violations by any Acquired Company of any such environmental
laws or permits [[except as may be reported on environmental reports provided by
the Acquired Companies and Shareholders to Purchaser prior to the date hereof.
Except as set forth in Exhibit 3.17, there are no claims, actions, suits,
proceedings or investigations related to the presence, release, production,
handling, discharge, spillage, transportation or disposal of any Hazardous
Substance or ambient air conditions or contamination of soil, water or air by
any Hazardous Substance pending or threatened with respect to the Real Property
or otherwise against any of the Acquired Companies in any court or before any
state, federal or other governmental agency or private arbitration tribunal and
to the knowledge of the Shareholders and the Acquired Companies, there is no
basis for any such claim, action, suit, proceeding or investigation except as
may be reported on environmental reports provided by the Acquired Companies and
Shareholders to Purchaser prior to the date hereof. For the purposes of this
Agreement, "Hazardous Substance" shall mean any hazardous or toxic substance or
waste as those terms are defined by any applicable federal, state or local law,
ordinance, regulation, policy, judgment, decision, order or decree, including,
without limitation, the Comprehensive Environmental Recovery Compensation and
Liability Act, 42 U.S.C. 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et. seq. and the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et seq., and petroleum, petroleum products and oil. Nothing
in this Section 3.17 or elsewhere in this Agreement shall be deemed a release by
the Purchaser or the Acquired Companies of any term, condition, representation,
warranty, covenant, right or remedy which the Acquired Companies have under any
lease of the Real
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Property, whether or not the lessor thereunder is an entity in which the
Shareholders or any one or more of them have an ownership interest.
3.18 Insurance. Set forth in Exhibit 3.18 is a complete
list of all insurance policies which each Acquired Company maintains, or is an
insured party under, with respect to its businesses, properties or employees
which are currently in force and effect together with a list of all such
policies which have been in effect during the last 36 months but have expired.
Exhibit 3.18 lists the annual premium and renewal date of all such insurance
policies. Except as set forth in Exhibit 3.18, since January 1, 1996, there has
not been any change in any Acquired Company's relationship with its insurers or
in the premiums payable pursuant to such policies.
3.19 Related Party Relationships. Except as set forth in
Exhibit 3.19, no Shareholder, or Affiliate of any Shareholder, nor any officer
or director of the Acquired Companies possesses, directly or indirectly, any
beneficial interest in, or is a director, officer or employee of, any
corporation, partnership, firm, association or business organization which is a
client, supplier, customer, lessor, lessee, lender, creditor, borrower, debtor
or contracting party with or of any Acquired Company (except as a stockholder
holding less than a one percent interest in a company or corporation whose
shares are traded on a national or regional securities exchange or in the
over-the-counter market).
3.20 Exhibits. All Exhibits attached hereto are true,
correct and complete as of the date of this Agreement and will be true, correct
and complete as of the Closing, except to the extent that such Exhibits may be
untrue, incorrect or incomplete due to changes occurring due to the operation
of the Acquired Companies in the ordinary course. Matters disclosed on each
Exhibit shall be deemed disclosed only for purposes of the matters to be
disclosed on such Exhibit and shall not be deemed to be disclosed for any other
purpose unless expressly provided therein.
3.21 Disclosure and Absence of Undisclosed Liabilities. No
statement contained herein or in any certificate, schedule, list, Exhibit or
other instrument furnished to Purchaser pursuant to the provisions hereof
contains or will contain any untrue statement of any material fact or omits or
will omit a material fact necessary in order to make the statements contained
herein or therein not misleading.
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IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Acquired Companies
and the Shareholders as follows:
4.1 Organization and Standing. Purchaser is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware.
4.2 Corporate Power and Authority. Purchaser has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other Person whomsoever. The execution,
delivery and performance by Purchaser of this Agreement and each and every
agreement, document and instrument provided for herein have been duly
authorized and approved by its Board of Directors (or Executive Committee
thereof). This Agreement and each and every other agreement, document and
instrument to be executed, delivered and performed by Purchaser in connection
herewith, constitute or will, when executed and delivered, constitute the valid
and legally binding obligation of Purchaser enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
4.3 Agreement Does Not Violate Other Instruments. The
execution and delivery of this Agreement by Purchaser do not, and the
consummation of the transactions contemplated hereby will not, violate any
provisions of the Certificate of Incorporation, as amended, or Bylaws, as
amended, of Purchaser, or violate or constitute an occurrence of default under
any provision of, or conflict with, result in acceleration of any obligation
under, or give rise to a right by any party to terminate its obligations under,
any mortgage, deed of trust, conveyance to secure debt, note, loan, lien,
lease, agreement, instrument or any order, judgment, decree or other
arrangement to which Purchaser is a party or is bound or by which it or its
assets are affected.
4.4 Investment. Purchaser will be purchasing the shares
of the Acquired Companies for investment purposes and not with a view to the
sale or distribution of such shares.
V. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
All of the obligations of Purchaser to consummate the
transactions contemplated by this Agreement are contingent upon and subject to
the satisfaction, on or before the Closing Date, of each
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and every one of the following conditions, all or any of which may be waived, in
whole or in part, by Purchaser for purposes of consummating such transactions,
but without prejudice to any other right or remedy which Purchaser may have
hereunder:
5.1 Representations True at Closing. The representations
and warranties made by the Acquired Companies and the Shareholders to Purchaser
in this Agreement, the Exhibits hereto or any document or instrument delivered
to Purchaser or its representatives hereunder shall be true and correct in all
material respects on the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of such time, except
for changes contemplated by this Agreement.
5.2 Covenants of the Acquired Companies and the
Shareholders. The Acquired Companies and the Shareholders shall have duly
performed, in all material respects, all of the covenants, acts and undertakings
to be performed by them on or prior to the Closing Date, and the President of
each Acquired Company and each Shareholder shall deliver, in substantially the
forms attached hereto as Exhibit 5.2, a certificate dated as of the Closing Date
certifying to the fulfillment of this condition and the condition set forth in
Section 5.1 hereof.
5.3 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted or
threatened before any court, governmental agency or legislative body to enjoin,
restrain, prohibit or obtain damages in respect of this Agreement or the
consummation of the transactions contemplated hereby.
5.4 Opinion of Counsel. A favorable opinion of Rubin and
Rudman LLP, counsel for the Acquired Companies and the Shareholders, shall have
been delivered to Purchaser dated as of the Closing Date, substantially in form
and substance of the opinion attached hereto as Exhibit 5.4.
5.5 Consents, Approvals, and Waivers. Purchaser shall
have received a true and correct copy of each and every consent, approval and
waiver (a) referred to in Section 2.9 hereof and listed on Exhibit 3.8 hereto,
or (b) otherwise required for the execution of this Agreement and the
consummation of the transactions contemplated hereby.
5.6 Legal Approvals. The execution and the delivery of
this Agreement and the consummation of the transactions contemplated hereby
shall have been approved by all regulatory authorities whose approvals are
required by law, and the waiting period under the HSR Act shall have expired or
been terminated.
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5.7 Absence of Adverse Changes. Since December 31, 1995,
(a) no Acquired Company shall have suffered any change in its financial
condition, results of operations, business, prospects, property or assets which
materially and adversely affects its business, and (b) none of the Acquired
Companies nor the Shareholders shall have permitted to occur or suffered any
transaction or event described in Section 3.9 hereof which is not described in
Exhibit 3.9 hereto.
5.8 Escrow Agreement. The Shareholders and the Escrow
Agent shall have executed and delivered the Escrow Agreement to the Purchaser.
5.9 Acquired Companies and Shareholder Deliveries. The
Acquired Companies and the Shareholders shall have delivered to Purchaser all
items to be delivered by them at the Closing as required by Section 7.2.1
hereof in the form required by this Agreement.
5.10 Real Estate Transfer-Southborough Property. The
Acquired Company shall have closed the purchase of that certain real estate
located in Southborough, Massachusetts, in accordance with the terms of that
certain Real Estate Transfer Agreement attached hereto as Exhibit 5.10.
VI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRED
COMPANIES AND THE SHAREHOLDERS TO CLOSE.
All of the obligations of each of the Acquired Companies and
each of the Shareholders to consummate the transactions contemplated by this
Agreement are contingent upon and subject to the satisfaction, on or before the
Closing Date, of each and every one of the following conditions, all or any of
which may be waived, in whole or in part, by the Acquired Companies and the
Shareholders for purposes of consummating such transactions, but without
prejudice to any other right or remedy which they may have hereunder:
6.1 Representations True at Closing. The representations
and warranties made by Purchaser to the Acquired Companies and the Shareholders
in this Agreement or any document or instrument delivered to the Acquired
Companies, the Shareholders or their representatives hereunder shall be true
and correct in all material respects on the Closing Date with the same force
and effect as though such representations and warranties had been made on and
as of such date, except for changes contemplated by this Agreement.
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6.2 Covenants of Purchaser. Purchaser shall have duly
performed in all material respects all of the covenants, acts and undertakings
to be performed by it on or prior to the Closing Date, and a duly authorized
officer of Purchaser shall deliver, in substantially the form attached hereto
as Exhibit 6.2, a certificate dated as of the Closing Date certifying to the
fulfillment of this condition and the condition set forth under Section 6.1
hereof.
6.3 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted or
threatened before any court, governmental agency or legislative body to enjoin,
restrain, prohibit or obtain substantial damages in respect of this Agreement or
the consummation of the transactions contemplated hereby.
6.4 Opinion of Counsel. A favorable opinion of Fowler,
White, Gillen, Boggs, Villareal & Banker, P.A., counsel for the Purchaser, shall
have been delivered to Shareholders dated as of the Closing Date, substantially
in form and substance of the opinion attached hereto as Exhibit 6.4.
6.5 Legal Approvals. The execution and the delivery of
this Agreement and the consummation of the transactions contemplated hereby
shall have been approved by all regulatory authorities whose approvals are
required by law, and the waiting period under the HSR Act shall have expired or
been terminated.
6.6 Escrow Agreement. The Purchaser and the Escrow Agent
shall have executed and delivered the Escrow Agreement to the Shareholders.
6.7 Purchaser Deliveries. The Purchaser shall have
delivered to the Acquired Companies and the Shareholders all items to be
delivered by them at the Closing as required by Section 7.2.2 hereof in the form
required by this Agreement.
VII. CLOSING.
7.1 Time and Place of Closing. The Closing shall be held
at the offices of Fowler, White, Gillen, Boggs, Villareal & Banker P.A., 501
East Kennedy Blvd, Tampa, Florida, commencing at 10:00 a.m. Eastern Daylight
Time, on the last business day of the month during which the waiting period
under the HSR Act has expired or has been terminated ("HSR Termination"), and
all the consents listed on Exhibit 3.8 have been received by the Purchaser but
in no event earlier than May 31, 1996, and in no event later than July 31, 1996
(unless the HSR Termination Date has not occurred by that date with the HSR
application having been filed within the time
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provided by Section 2.3, in which event the last day for Closing shall be
September 30, 1996); provided that if the HSR Termination occurs within five
business days of the end of a month, the Closing shall occur at the end of the
next succeeding month.
7.2 Transactions at Closing. At the Closing, each of the
following transactions shall occur:
7.2.1 The Acquired Companies' and the Shareholders'
Performance. At the Closing, the Acquired Companies and the Shareholders shall
deliver to Purchaser, the following, except to the extent waived:
(a) all certificates representing shares
of the outstanding capital stock of the Acquired
Companies, each certificate duly endorsed for
transfer or accompanied by instruments of transfer
reasonably satisfactory in form and substance to
Purchaser and its counsel, with signatures
guaranteed;
(b) the certificates of each of the
Shareholders and of the Presidents of the Acquired
Companies described in Section 5.2;
(c) copies of the consents and waivers
described in Section 2.9 and Section 5.5 and those
listed on Exhibit 3.8 hereof;
(d) the assignment of assets and
contracts described in Section 2.16;
(e) satisfactory evidences of the
approvals described in Section 5.6;
(f) certificates of compliance or
certificates of good standing of the Acquired
Companies, as of the most recent practicable date,
from the appropriate governmental authority of the
jurisdiction of its incorporation and any other
jurisdiction which is set forth in Exhibit 3.1
hereto;
(g) certified copies of resolutions of
the Boards of Directors of the Acquired Companies
approving the transactions set forth in this
Agreement;
(h) certificates of incumbency for the
officers of the Acquired Companies and the
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Shareholders who are executing the Agreement and the
other documents contemplated hereunder;
(i) resignations of each director of
each Acquired Company, effective immediately after
the Closing;
(j) Employment Agreements in
substantially the form of Exhibit 2.10.1(b) executed
by those individuals listed on Exhibit 2.10.1(a);
(k) Nondisclosure and Noninterference
Agreements executed by the Shareholders listed on
Exhibit 2.10.2(a), substantially in the form of
Exhibit 2.10.2(b);
(l) opinion of counsel described in
Section 5.4;
(m) the Escrow Agreement executed by the
Shareholders; and
(n) such other evidence of the
performance of all covenants and satisfaction of all
conditions required of the Acquired Companies and the
Shareholders by this Agreement, at or prior to the
Closing, as Purchaser or its counsel may reasonably
require.
7.2.2 Performance by Purchaser. At the Closing,
Purchaser shall deliver to the Acquired Companies and the Shareholders the
following, except to the extent waived:
(a) cash, by cashier's or certified
check or wire transfer of immediately available
funds, in the aggregate amount of the Cash Purchase
Price Amount to be paid at Closing, as set forth in
Section 2.2.1;
(b) the certificate of the authorized
officer described in Section 6.2;
(c) satisfactory evidence of the
approvals described in Section 6.5;
(d) certificate of incumbency of the
officers of Purchaser who are executing this
Agreement and the other documents contemplated
hereunder;
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(e) Executed Employment Agreements
substantially in the forms set forth in Exhibit
2.10.1(b);
(f) Executed Nondisclosure and
Noninterference Agreements substantially in the form
of Exhibit 2.10.2(b);
(g) certified copy of resolutions of the
Board of Directors (or Executive Committee thereof)
of Purchaser approving the transactions set forth in
this Agreement;
(h) the Escrow Agreement executed by the
Purchaser;
(i) such other evidence of the
performance of all the covenants and satisfaction of
all of the conditions required of Purchaser by this
Agreement at or before the Closing as the Acquired
Companies, the Shareholders' Representative or the
Acquired Companies' counsel may reasonably require;
and
(j) deliver the Escrow Amount to the
Escrow Agent pursuant to the Escrow Agreement by
cash, cashier's check or wire transfer of immediately
available funds.
VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
8.1 Survival of Representations and Warranties of the
Acquired Companies and the Shareholders. All representations, warranties,
agreements, covenants and obligations made or undertaken by any of the Acquired
Companies or any of the Shareholders in this Agreement or in any document or
instrument executed and delivered pursuant hereto are material, have been
relied upon by Purchaser, shall survive the Closing hereunder pursuant to
Section 8.3 and shall not merge in the performance of any obligation by any
party hereto. Subject to the provisions of this Article VIII, the Acquired
Companies prior to Closing and the Shareholders prior to and after Closing,
Severally (but not jointly or jointly and severally), agree to indemnify and
hold Purchaser harmless from and against their pro rata portion of all
liability, loss, damage or injury and all reasonable costs and expenses
(including reasonable counsel fees and costs of any suit related thereto)
suffered or incurred by Purchaser arising from (i) any misrepresentation by, or
breach of any covenant or warranty of, any one of the Acquired Companies or any
Shareholder contained in this Agreement or any certificate or other instrument
furnished or to be
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furnished by the Acquired Companies or any Shareholder hereunder at Closing, or
any claim by a third party (regardless of whether the claimant is ultimately
successful) which if true would be such a misrepresentation or breach, (ii) any
suit, action, proceeding, claim or investigation pending or threatened against
or affecting the Acquired Companies which arose from any matter or state of
facts existing prior to Closing, to the extent that no cash reserve has been
established therefor on the Final Closing Balance Sheet, regardless of whether
such suit, action, proceeding, claim or investigation is disclosed on Exhibit
3.10, (iii) any claim against or liability of the Shareholders or the Acquired
Companies, which relates to events occurring prior to the Closing Date, to the
extent not accrued or reserved against in the Final Closing Balance Sheet
prepared pursuant to Section 2.2.2 of this Agreement, regardless of whether
such claim or liability is disclosed in the notes to the financial statements
prepared pursuant to Section 2.2.2. Since following the Closing the Acquired
Companies will be owned by the Purchaser, the parties to this Agreement agree
that any recovery by Purchaser after Closing will be against the Shareholders
to be paid through the Escrow Account except to the extent otherwise provided
in Section 8.6. The Shareholders shall have no right of reimbursement or
contribution against the Acquired Companies for any such indemnification
payments. Any liability, loss, damage or injury and reasonable costs and
expenses (including reasonable counsel fees and costs of any suit related
thereto) suffered or incurred by the Acquired Companies against which Purchaser
is indemnified and held harmless as provided above shall be deemed suffered by
Purchaser, which shall, either independently or jointly with any Acquired
Company, be entitled to enforce such indemnity. Any examination, inspection or
audit of the properties, financial condition or other matters of the Acquired
Companies by Purchaser pursuant to this Agreement shall in no way limit, affect
or impair the ability of Purchaser to rely upon the representations,
warranties, covenants and obligations of the Acquired Companies and the
Shareholders set forth herein.
8.2 Survival of Representations and Warranties of
Purchaser. All representations, warranties, agreements, covenants and
obligations made or undertaken by Purchaser in this Agreement or in any
document or instrument executed and delivered pursuant hereto are material,
have been relied upon by the Acquired Companies and the Shareholders, shall
survive the Closing hereunder pursuant to Section 8.3 and shall not merge in
the performance of any obligation by any party hereto. Purchaser agrees to
indemnify and hold the Acquired Companies and the Shareholders harmless from
and against all liability, loss, damage or injury and all reasonable costs and
expenses (including reasonable counsel fees and costs of any suit related
thereto) suffered or incurred by the Acquired Companies or the Shareholders
arising from any misrepresentation by, or breach of any agreement, covenant or
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warranty of, Purchaser contained in this Agreement or any certificate or
instrument furnished or to be furnished by Purchaser hereunder, or any claim by
a third party (regardless of whether the claimant is ultimately successful)
which if true would be such a misrepresentation or breach.
8.3 Survival Period For Claims.
8.3.1 For Claims Against Shareholders. A claim for
indemnification based on the covenants, representations and warranties
contained in the provisions of Section 2.1, 2.2.2, 3.2, 3.3, 10.2 or 10.5 or
from a breach of the covenant contained in Section 2.5.1 to the extent it
pertains to the making of a payment described in subparagraph (g) thereof or in
Section 3.9.8 or 3.9.9 shall survive for the longest period available under
applicable laws and may be made at any time. A claim for indemnification based
on the covenants, representations and warranties contained in the provisions of
Section 3.6 shall survive for the applicable statute of limitations, provided
that any claim under Section 3.6 which relates to the DOL Audit shall be made
as a claim subject to the limitations of (b) of the next sentence. Except for
claims referred to in the first sentence of this Section 8.3.1, a claim for
indemnification hereunder against the Shareholders shall be forever barred
unless made by notifying Shareholders thereof in writing in reasonable detail
(a) in the case of a claim based upon a Tax liability of any Acquired Company
(including, without limitation, any claim based upon an assertion that any of
the previously filed Tax Returns of the Acquired Company are inaccurate or
incomplete), within the statutory period of limitations under the applicable
Tax statute, unless and to the extent such claim is raised by the taxing
authority by way of an offset against any claim or suit for refund by or on
behalf of such Acquired Company or is allowed to be assessed after the
expiration of the applicable statute of limitations pursuant to a validly
executed waiver or extension thereof or pursuant to the mitigation provisions
contained in the Internal Revenue Code of 1986, as amended, in which case a
claim may be made within one year after such offset or assessment, and (b) in
all other cases, within eighteen months from the Closing Date. It is understood
and agreed that any Acquired Company or Purchaser may file a consent with the
Internal Revenue Service or any other taxing authority extending the period
during which an assessment may be made and any such waiver or extension of the
statutory period of limitations under the applicable Tax statute shall defer
the termination of the obligations of the Shareholders provided in this Article
VIII.
8.3.2 For Claims Against Purchaser. A claim for
indemnification hereunder against Purchaser shall be forever barred unless made
by notifying Purchaser thereof in writing in reasonable detail within eighteen
months from the Closing Date.
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8.4 Notification and Defense of Claims.
8.4.1 Third Party Claims.
8.4.1.1 Notification and Defense Rights.
(i) If any party to this Agreement (an
"Indemnitee") receives written notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement (a "Third Party Claim") against or affecting such Indemnitee,
and, if such assertion were presumed to be true (regardless of the actual
outcome) then the other party or parties could be obligated to provide
indemnification under this Agreement (an "Indemnifying Party"), then such
Indemnitee will give such Indemnifying Party reasonably prompt written notice
thereof, but in any event no later than forty-five (45) calendar days after
receipt of such written notice of such Third Party Claim. At Closing, the
Purchaser as Indemnitee shall be deemed to have given the notice required by (i)
above to the Shareholders' Representative as Indemnifying Party with regard to
all Third Party Claims listed on Exhibit 3.10 hereto and such notice shall be
deemed to be Indemnity Claims Notices under the provisions of the Escrow
Agreement.
(ii) Failure of the Indemnitee to give the
notice described in subsection (i) above shall not relieve the Indemnifying
Party from any liability which it may have on account of indemnification or
otherwise, except to the extent that the Indemnifying Party is prejudiced
thereby.
(iii) If (a) the Indemnifying Party admits in the
Notice to Defend (defined below) its obligation to indemnify the Indemnitee for
the Third Party Claim, and (b) in the case of the Shareholders, the asserted
claim is one which will involve only monetary damages, is greater than the
Minimum Aggregate Liability Amount described in Section 8.5, and the Indemnitee
will not have to pay any part of such monetary damages, the Indemnifying Party
will have the sole right to defend such Third Party Claim at such Indemnifying
Party's sole expense by Indemnifying Party's own counsel (which counsel must be
reasonably satisfactory to the Indemnitee), by giving written notice to the
Indemnitee (the "Notice to Defend") no later than twenty (20) calendar days
after receipt of the above-described notice of such Third Party Claim.
(iv) In all circumstances other than that
described in subsection (iii) above, the Indemnifying Party may participate in
the defense and the Indemnitee also will have the right to participate in the
defense of any Third Party Claim assisted by counsel mutually acceptable to
Indemnitee and
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Indemnified Party, provided that if the Indemnitee and the Indemnifying Party
cannot mutually agree to such counsel each may select their own counsel and the
counsel selected by the Indemnitee shall be the lead counsel. In such case the
fees and costs of both such counsel shall be paid by the Indemnifying Party to
the extent such party is ultimately determined to be liable for indemnification
under this Article VIII. The foregoing notwithstanding, the Indemnitee shall
have the right to make any significant decisions with respect to the defense of
such Third Party Claim concerning which the Indemnifying Party and Indemnitee
cannot agree after reasonable discussion, except when such disagreement relates
to the settlement or compromise of such Third Party Claim which shall be
subject to the provisions of Section 8.4.1.3.
(v) During the period prior to receiving the
Notice to Defend, the Indemnitee can proceed to defend the claim, action or
proceeding and the Indemnitee shall be entitled to recover from the Indemnifying
Party to the extent the Indemnifying Party is liable for indemnification
hereunder.
(vi) Notwithstanding anything in this Section
8.4.1.1 to the contrary, the Indemnifying Party shall not be entitled to
participate in, and the Indemnitee shall be entitled to sole and absolute
control over the defense, compromise or settlement of, any claim to the extent
that (i) the claim seeks an injunction or other similar equitable relief against
the Indemnitee, (ii) the claim is asserted by a party with which Purchaser has a
continuous business relationship, or (iii) involves the DOL Audit.
8.4.1.2 Defense Costs.
(i) If, within the twenty day period set forth
in subsection 8.4.1.1(iii) above, an Indemnitee receives a Notice to Defend from
an Indemnifying Party with respect to any Third Party Claim and the other
conditions set forth in 8.4.1.1(iii) are met, the Indemnifying Party will not be
liable for any legal expenses incurred by the Indemnitee after receipt of the
Notice to Defend in connection with the defense thereof.
(ii) Notwithstanding subsection (i) above, if
after giving a Notice to Defend, the Indemnifying Party fails to take reasonable
steps necessary to defend diligently such Third Party Claim within the earlier
of (a) twenty (20) calendar days after receiving written notice from the
Indemnitee that the Indemnitee believes, after due inquiry, that the
Indemnifying Party has failed to take such steps or (b) within such period
necessary to not prejudice the defense of such Third Party Claim, then the
Indemnitee may, at its option, solely assume the defense of the
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<PAGE> 46
Third Party Claim, assisted by counsel of its own choosing, and the
Indemnifying Party will be liable for all reasonable costs and expenses, and
all settlement amounts (subject to and in accordance with Section 8.4.1.3) and
other liabilities, losses, damages and injuries paid or incurred in connection
therewith to the extent that the Indemnifying Party is liable for such other
liabilities, losses, damages and injuries pursuant to this Article VIII.
(iii) Notwithstanding subsection (i) above if (a)
the Indemnitee has available defenses, counterclaims or third party claims that
are not available to the Indemnifying Party, (b) a claim seeks an injunction or
other similar equitable relief against the Indemnitee, or (c) a claim seeks any
remedy or relief other than a monetary claim, then the Indemnitee shall be
entitled to recover from the Indemnifying Party its reasonable costs and
expenses incurred in defending such Third Party Claim, and all settlement
amounts (subject to and in accordance with Section 8.4.1.3) and other
liabilities, losses, damages and injuries paid or incurred in connection
therewith to the extent that the Indemnifying Party is liable for
indemnification hereunder.
8.4.1.3 Settlement.
(i) In the circumstances described in Section
8.4.1.1(iii) where the Indemnifying Party has the sole right to defend the Third
Party Claim, the Indemnifying Party shall have the sole right to settle such
claim.
(ii) In all other circumstances, if there is a
dispute between the Indemnifying Party and Indemnitee concerning whether a Third
Party Claim should be contested, settled or compromised, it shall be settled,
compromised or contested, in accordance with the next succeeding subsections of
this Section 8.4.1.3; provided, however, that the Indemnitee, or its respective
successors or assigns, shall neither be required to refrain from paying or
satisfying any claim in which the Indemnifying Party has not acknowledged in
writing its obligations to indemnify the Indemnitee, or which has matured by
court judgment or decree, unless appeal is taken thereafter and proper appeal
bond posted by the Indemnifying Party, nor shall the Indemnitee be required to
refrain from paying or satisfying any Third Party Claim after and to the extent
that such Third Party Claim has resulted in an unstayed injunction or other
similar equitable relief against the Indemnitee or in an imposition of a lien
upon any of the properties or assets then held by the Indemnitee or its
respective successors and assigns (unless such claim shall have been discharged
or enforcement thereof stayed by the filing of a legally permitted bond by the
Indemnifying Party or otherwise, at its sole expense), or result in a breach or
default in a material license, lease or
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other contract by which any of them is bound, or would materially and adversely
affect their respective assets, businesses or financial condition.
(iii) Subject to subsection (ii), in the event
that the Indemnifying Party, on the one hand, or the Indemnitee, on the other
hand, has reached a good faith, bona fide settlement agreement or compromise,
subject only to approval hereunder, with any claimant regarding a matter which
may be the subject of indemnification hereunder and desires to settle on the
basis of such agreement or compromise, such party who desires to so settle or
compromise shall notify the other party in writing of its desire setting forth
the terms of such settlement or compromise (the "Notice of Settlement").
(iv) The Third Party Claim may be settled or
compromised on the basis set forth in the Notice of Settlement unless within
twenty (20) days of the receipt of the Notice of Settlement the party who issued
the Notice of Settlement receives a notice from the other party of its desire to
continue to contest the matter (the "Notice to Contest") and, in such case:
(a) Should the Indemnitee deliver a Notice
to Contest, the claim shall be so contested and the liability of the
Indemnifying Party shall be limited as provided in subsection (c) below.
(b) If the settlement or compromise could
result in a claim for indemnification being made against the Indemnifying Party
and if the Indemnifying Party delivers the Notice to Contest, the claim shall be
so contested and the liability of the Indemnitee shall be limited as provided in
subsection (c) below.
(c) If a matter is contested as provided in
subsections (a) or (b) above and is later adjudicated, settled, compromised or
otherwise disposed of and such adjudication, compromise, settlement or
disposition results in a liability, loss, damage or injury in excess of the
amount for which one party desired previously to settle the matter as set forth
in the Notice of Settlement, then the liability of such party shall be limited
to such lesser proposed settlement amount and the party contesting the matter
shall be solely responsible for the amount in excess of such lesser proposed
settlement amount but subject, in the case of the Shareholders, to any maximum
restriction on liability described in the Agreement.
(v) For an Indemnifying Party's Notice to
Contest to be effective, it must also state that the Indemnifying Party
acknowledges and agrees that it shall be
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obligated to indemnify the Indemnitee for any amount in excess of the lesser
proposed settlement amount as described in subsection (iv)(c) above. Except for
such obligation for the excess of the lesser proposed settlement amount
acknowledged in a Notice to Contest, the giving of or failure to give a Notice
to Contest by any party shall not be construed or implied as an acknowledgment
by such party of an obligation for indemnification under this Article VIII.
(vi) The Indemnifying Party hereby
expressly waives and renounces any and all rights to make a claim against the
Indemnitee or its respective directors, officers, agents and employees based
upon a right or claim of any Third Party to which it may become subrogated as a
result of making any payment for indemnification hereunder except to the extent
that such waiver adversely affects any rights of subrogation of an insurer under
an applicable insurance policy; provided however, nothing herein is intended to
constitute a waiver by the Indemnifying Party of any rights of subrogation to
which it may be entitled against Persons other than those described herein.
8.4.2 Direct Claims. Any claim by an Indemnitee for
indemnification other than indemnification against a Third Party Claim (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
twenty (20) calendar days within which to respond in writing to such Direct
Claim. If the Indemnifying Party does not so respond within such twenty (20)
calendar day period or if the Indemnifying Party responds but does not admit
liability for such claim, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnitee will be free to pursue such
remedies as may be available to the Indemnitee.
8.5 Minimum Aggregate Liability Amount. Purchaser agrees
not to seek recourse against, and shall not recover from the Shareholders under
this Article VIII on account of any liability, loss, damage, injury or claim (a
"Claim Amount") which when aggregated with all other Claim Amounts is less than
$250,000.00. When the aggregate amount of all Claim Amounts exceed $250,000.00,
subject to the provisions of Section 8.6 hereof, Purchaser shall be entitled
to, and may seek recourse against and recover from the Shareholders, 50% of the
amount by which such Claim Amounts exceed $250,000.00 until such Claim Amounts
aggregate $750,000.00. Subject to the provisions of Section 8.6 hereof, after
such Claim Amounts in the aggregate exceed $750,000.00, Purchaser shall be
entitled to, and may seek recourse against and recover from the Shareholders,
100% of the excess of such Claim Amounts over $750,000.00. The limitations on
recovery against Shareholders set forth in this Section 8.5 are herein referred
to as the "Minimum
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Aggregate Liability Amount." There shall be no Minimum Aggregate Liability
Amount for, and the Minimum Aggregate Liability Amount shall not be a
limitation on or a reduction to, any liability, loss, damage, injury or claim
which results from a breach of the covenants, representations and warranties
contained in the provisions of Sections 2.1, 2.2.2, 3.2, 3.3, 3.6, 10.2 or 10.5
or from a breach of the covenants contained in Section 2.5.1 to the extent they
pertain to the making of a payment described in subparagraph (g) thereof or in
Section 3.9.8 and 3.9.9 or resulting from fraud or knowledgeable material
misrepresentation or omission on the part of the Shareholders or the Acquired
Companies (the "Unlimited Claims Items"). Notwithstanding anything to the
contrary contained in this Agreement, any claim against the Acquired Companies
resulting from the DOL Audit, whether in the nature of an excise tax or a fine
or other penalty or assessment, shall not be considered an Unlimited Claims
Item. Any liability, loss, damage, injury or claim resulting from an Unlimited
Claims Item may be asserted against the Shareholders on a dollar for dollar
basis beginning with the first dollar of such liability, loss, damage, injury
or claim.
8.6 Recoveries Limited to Escrow Account/Limitations on
Recoveries from Shareholders. Anything in this Article VIII to the contrary
notwithstanding, all claims against the Shareholders for indemnification under
the provisions of this Article VIII shall be payable only from the Escrow
Account and no such claim may be asserted against or collected from the
Shareholders except through the Escrow Account except as follows:
(a) claims against the Shareholders under this Article
VIII for Claims Amounts resulting from Unlimited
Claims Items may be collected from the Shareholders
directly on a Several basis without first making such
claim against the Escrow, provided that the maximum
liability of any Shareholder shall be the aggregate
amount of the Purchase Price paid to such
Shareholder; and
(b) claims for Claims Amounts resulting from any
indemnifiable matter which does not result from an
Unlimited Claims Item may be collected from the
Shareholders directly on a Several basis after no
further Escrow Funds are available for the payment
thereof to the extent and only to the extent that (i)
the payment of the Purchase Price Adjustment Amount
from the Escrow Fund exceeded $500,000.00, or (ii)
claims resulting from Unlimited Claims Items have
been paid from the Escrow Fund and then only to the
extent of such payments.
48
<PAGE> 50
IX. TERMINATION.
9.1 Method of Termination. This Agreement constitutes the
binding and irrevocable agreement of the parties to consummate the transactions
contemplated hereby, the consideration for which is (a) the covenants set forth
in Article II hereof, and (b) expenditures and obligations incurred and to be
incurred by Purchaser, on the one hand, and by the Acquired Companies and the
Shareholders, on the other hand, in respect of this Agreement, and this
Agreement may be terminated or abandoned only as follows:
9.1.1 By the mutual consent of Shareholders and
Purchaser;
9.1.2 By Shareholders after September 30, 1996, if
any of the conditions set forth in Article VI hereof, to which the
Shareholders' or the Acquired Companies' obligations are subject, have not been
fulfilled or waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of any of them;
9.1.3 By Purchaser after September 30, 1996, if any
of the conditions set forth in Article V hereof, to which the obligations of
Purchaser are subject, have not been fulfilled or waived, unless such
fulfillment has been frustrated or made impossible by any act or failure to act
of Purchaser; or
9.2 Effect of Termination.
9.2.1 In the event of a termination of this Agreement
pursuant to Sections 9.1.1 hereof, each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any of its
officers, directors, employees, agents, representatives or shareholders) shall
be liable to any other party for any costs, expenses, damage or loss of
anticipated profits hereunder.
9.2.2 In the event that the Purchaser fails to close
the transactions contemplated hereby in circumstances where no Acceptable
Termination Reason exists, the Purchaser shall pay the Shareholders'
Representative for the account of the Acquired Companies a break-up fee as
liquidated damages and in full settlement for any claim that the Acquired
Companies and/or the Shareholders may have against the Purchaser, its officers,
directors, employees or agents, the sum of the greater of (i) One Million
($1,000,000.00) Dollars or (ii) the amount of Actual Damages incurred by the
Acquired Companies as a result of the Purchaser's failure to close the
transactions contemplated hereby not to exceed Five Million Dollars
($5,000,000.00).
49
<PAGE> 51
9.3 Risk of Loss. The Acquired Companies and the
Shareholders assume all risk of condemnation, destruction, loss or damage due
to fire or other casualty from the date of this Agreement up to the Closing. If
the condemnation, destruction, loss, or damage is such that the business of the
Acquired Companies is interrupted or curtailed or the assets of any of the
Acquired Companies are materially affected, then Purchaser shall have the right
to terminate this Agreement. If the condemnation, destruction, loss, or damage
is such that the business of none of the Acquired Companies is neither
interrupted nor curtailed nor its assets materially affected, or if the
business is interrupted or curtailed or the assets are materially affected and
Purchaser nevertheless forgoes the right to terminate this Agreement, the
Purchase Price shall be adjusted at the Closing to reflect such condemnation,
destruction, loss, or damage to the extent that insurance proceeds are not
sufficient to cover such destruction, loss or damage. If Purchaser, on the one
hand, and the Acquired Companies and the Shareholders, on the other hand, are
unable to agree upon the amount of such adjustment, the dispute shall be
resolved by the Settlement Auditor, whose determination of the dispute shall be
final and binding.
X. GENERAL PROVISIONS.
10.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand or
mailed by certified mail, return receipt requested, first class postage
prepaid, or sent by Federal Express or similarly recognized national overnight
delivery service with receipt acknowledged, addressed as follows:
10.1.1 If to the Acquired Companies or the
Shareholders:
Holyoke L. Whitney
(the "Shareholders' Representative")
28 Forest Street
Sherborn, Massachusetts 01770
and to:
Rubin and Rudman LLP
50 Rowes Wharf
Boston, Massachusetts 02110
Attn: Jason Sokolov, Esq.
50
<PAGE> 52
10.1.2 If to Purchaser:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida, 33607
Attention: James K. Murray III,
Executive Vice President and Chief
Financial Officer
and to:
Fowler, White, Gillen, Boggs, Villareal &
Banker, P.A.
501 East Kennedy Blvd., Suite 1700
Tampa, Florida 33602
Attn: David C. Shobe, Esq.
10.1.3 If delivered personally, the date on which a
notice, request, instruction or document is delivered shall be the date on
which such delivery is made and, if delivered by mail or by overnight delivery
service, the date on which such notice, request, instruction or document is
received shall be the date of delivery. In the event any such notice, request,
instruction or document is mailed or shipped by overnight delivery service to a
party in accordance with this Section 10.1 and is returned to the sender as
nondeliverable, then such notice, request, instruction or document shall be
deemed to have been delivered or received on the fifth day following the
deposit of such notice, request, instruction or document in the United States
mail or the delivery to the overnight delivery service.
10.1.4 Any party hereto may change its address
specified for notices herein by designating a new address by notice in
accordance with this Section 10.1.
10.2 Brokers. Purchaser represents and warrants to the
Acquired Companies and the Shareholders, and the Acquired Companies and the
Shareholders represent and warrant to Purchaser that, other than Tucker Anthony
Incorporated, which has represented the Shareholders and the Acquired
Companies, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, which has
represented the Purchaser, no broker or finder has acted for it or them or any
entity controlling, controlled by or under common control with it or them in
connection with this Agreement. Purchaser agrees to indemnify and hold harmless
the Acquired Companies and the Shareholders against any fee, loss or expense
arising out of any claim by any broker or finder employed or alleged to have
been employed by it, and the Shareholders agree to indemnify and hold harmless
Purchaser against any fee, loss, or expense arising out of any claim by any
broker or finder employed or alleged to have been employed by the
51
<PAGE> 53
Shareholders, the Acquired Companies or any of them. The Shareholders shall be
solely responsible for any commissions, fees, costs, expenses or other charges
of Tucker Anthony Incorporated or its Affiliates in connection with the
transactions contemplated by this Agreement and no assets of the Acquired
Companies shall be used to pay or satisfy such commissions, fees, costs,
expenses or other charges. The Purchaser shall be solely responsible for any
commissions, fees, costs, expenses or other charges of Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its Affiliates in connection with the
transactions contemplated by this Agreement.
10.3 Further Assurances. Each party covenants that at any
time, and from time to time, after the Closing Date, it will execute such
additional instruments and take such actions as may be reasonably requested by
the other parties to confirm or perfect or otherwise to carry out the intent
and purposes of this Agreement.
10.4 Waiver. Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions hereunder may
be waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
10.5 Expenses. Except as otherwise provided herein, all
Transactions Costs incurred by the parties hereto in connection with or related
to the authorization, preparation and execution of this Agreement and the
Closing of the transactions contemplated hereby, including, without limitation
of the generality of the foregoing, all fees and expenses of agents,
representatives, counsel and accountants employed by any such party, shall be
borne solely and entirely by the party which has incurred the same. All
Transaction Costs and expenses of the Acquired Companies shall be borne by the
Shareholders. In no event shall any assets of the Acquired Companies be
utilized for or reduced by the payment of any such fees or expenses. The
Acquired Companies and the Shareholders hereby represent and warrant that no
such fees or expenses have been paid by the Acquired Companies from their
assets prior to the date of this Agreement, and hereby covenant that the
Acquired Companies will not so pay any such fees or expenses prior to the
Closing.
10.6 Public Announcements. At all times at or before the
Closing, the Shareholders and the Acquired Companies, on the one hand, and the
Purchaser, on the other hand, will consult with one another before issuing or
making any reports, statements, or releases to the public with respect to this
Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of a joint public report, statement, or release
52
<PAGE> 54
or will use good faith efforts to obtain the other parties' approval of the
text of any public report, statement, or release to be made solely on behalf of
a party. If such parties are unable to agree on or approve any such public
report, statement, or release and such report, statement, or release is, based
on the advice of legal counsel to a party, required by Law or appropriate to
discharge such party's disclosure obligations, then such party may make or
issue the legally required or appropriate report, statement, or release upon
prior notice to the other parties hereto.
10.7 Confidentiality. The Shareholders will refrain, and
will cause the Acquired Companies and their respective officers, directors,
employees, agents, and other representatives to refrain, from disclosing to any
other Person (i) any documents or information concerning Purchaser or its
Affiliates furnished to it in connection with this Agreement or the
transactions contemplated hereby, and (ii) any documents or information
concerning the Acquired Companies, unless (A) such disclosure is compelled by
judicial or administrative process or by other requirements of law and notice
of such disclosure is furnished to Purchaser; or (B) such confidential
documents or information can be shown to have been (x) previously known by the
Person receiving such documents or information, or (y) in the public domain
through no fault of the Shareholders. If for any reason the contemplated
purchase and sale of the Shares is not consummated, Purchaser, the Shareholders
and the Acquired Companies agree that they will return any and all information
provided by any of them to the other party so providing such information.
10.8 Nondisclosure of Terms. The Acquired Companies and
the Shareholders represent and warrant that prior to the execution hereof they
have not disclosed any of the terms, conditions, obligations or matters
contained in or relating to this Agreement and the transactions contemplated
herein, and the Acquired Companies and the Shareholders covenant and agree that
following the execution of this Agreement they shall not disclose to any
person, individual or entity any of such terms, conditions or matters and to
keep the same confidential, regardless of whether the Closing occurs.
10.9 Shareholders' Representative to Act on Behalf of
Shareholders and the Acquired Companies. With respect to all matters relating
to, and all actions to be taken pursuant to, this Agreement that are to occur
or be performed at or prior to the Closing, the parties hereto agree that, with
respect to either of the Shareholders or any of the Acquired Companies, the
Purchaser may seek, and shall be entitled to rely upon, the actions or
performance by the Shareholders' Representative being on behalf of, and binding
upon the Shareholders of which such action or
53
<PAGE> 55
performance was required and any payments by Purchaser required to be made to
the Shareholders which is made to the Shareholders' Representative for the
account of the Shareholders shall be deemed to have been received by the
Shareholders when paid to the Shareholders' Representative in accordance with
the terms of this agreement. Similarly, following Closing, the Purchaser and
the Acquired Companies may seek, and shall be entitled to rely upon, the
actions or performance by the Shareholders' Representative as being on behalf
of, and binding upon the Shareholders. Any notices or other actions required of
Purchaser hereunder may be given to or performed by the Shareholders'
Representative and such notice or performance shall be deemed given to or
performed for the Shareholders and all of the Acquired Companies.
10.10 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, executors, administrators, successors and assigns. The
invalidity or unenforceability of this Agreement as to any Shareholder shall
not affect the validity or enforceability of this Agreement as to any other
Shareholder or Acquired Company.
10.11 Headings. The section and other headings in this
Agreement are inserted solely as a matter of convenience and for reference, and
are not a part of this Agreement.
10.12 Entire Agreement. This Agreement constitutes the
entire agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein except for a certain Confidentiality
Agreement dated March 1, 1996 between Purchaser and Tucker Anthony,
Incorporated, as agent for the Acquired Companies, all rights in respect of the
provisions thereof shall survive the execution of this Agreement and shall
continue in effect in accordance with the terms hereof until Closing. Neither
this Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
10.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida (regardless of
the laws that might be applicable under principles of conflicts of law) as to
all matters including, but not limited to, matters of validity, construction,
effect and performance.
10.14 Litigation Venue. This Agreement shall be deemed for
all purposes to have been entered into in Hillsborough County,
54
<PAGE> 56
Florida, or in the United States District Court for the Middle District of
Florida, Tampa Division (unless the actual location of real estate that is the
subject of any suit requires otherwise). The parties hereto submit to the
personal jurisdiction of such courts and agree that such courts shall be the
sole situs of venue for the resolution of any such dispute through litigation.
10.15 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.16 Pronouns. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires.
10.17 Exhibits Incorporated. All Exhibits attached hereto are
incorporated herein by reference, and all blanks in such Exhibits, if any, will
be filled in as required in order to consummate the transactions contemplated
herein and in accordance with this Agreement.
10.18 Time of Essence. Time is of the essence in this
Agreement.
IN WITNESS WHEREOF, each party hereto has executed or caused
this Agreement to be executed on its behalf, all on the day and year first
above written.
"PURCHASER"
HealthPlan Services Corporation
By:
------------------------------------------
Title:
------------------------------------
"ACQUIRED COMPANIES":
CONSOLIDATED GROUP, INC.
By:
------------------------------------------
Title:
------------------------------------
55
<PAGE> 57
GROUP BENEFIT ADMINISTRATORS
INSURANCE AGENCY, INC.
By:
------------------------------------------
Title:
------------------------------------
CONSOLIDATED GROUP CLAIMS, INC.
By:
------------------------------------------
Title:
------------------------------------
CONSOLIDATED HEALTH COALITION, INC.
By:
------------------------------------------
Title:
------------------------------------
"SHAREHOLDERS":
---------------------------------------------
Holyoke L. Whitney
---------------------------------------------
Woolsey S. Conover
---------------------------------------------
John C. Naramore
---------------------------------------------
Michael V. Clark
---------------------------------------------
David H. Knight
---------------------------------------------
James F. Carlin
---------------------------------------------
Holyoke L. Whitney as
Shareholders' Representative
56
<PAGE> 58
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
1.1 Definitions.
2.2.1.2 Form of Escrow Agreement.
2.5.1 Conduct of Business.
2.5.2 List of Bank Accounts, Safe Deposit Boxes and Powers of Attorney.
2.7 Board of each Acquired Company.
2.10.1(a) Executive officer Shareholders of the Acquired Companies who are to enter into Employment
Agreements.
2.10.1(b) Forms of Employment Agreements.
2.10.2(a) Shareholders who are to enter into a Nondisclosure and Noninterference Agreement.
2.10.2(b) Form of Nondisclosure and Noninterference Agreement.
2.15.1 Benefit Plans Being Terminated.
2.15.4 Grant of Options to Key Employees of Acquired Companies.
3.1 List of Jurisdiction of Incorporation and Foreign Jurisdictions where there is Good Standing Status.
3.2 Certificates of Incorporation, Articles of Incorporation and Bylaws of each Acquired Company.
3.3 List of Authorized, Issued and Outstanding and Treasury Shares of each Acquired Company.
3.4 List of Equity Investments.
3.5.1 1993, 1994, 1995 and Q1/1996 Financial Statements.
3.5.2 List of Liabilities Not Disclosed in the 1995 Financial Statements and List of Defaults.
3.6 List of Tax Matters and Copy of 1995 Federal Income Tax Return.
</TABLE>
(i)
<PAGE> 59
<TABLE>
<S> <C>
3.7 List of Assets and Leases; List of Encumbrances.
3.8 List of Required Consents.
3.9 List of Changes.
3.10 List of Litigation, Separately Identifying Litigation in the Ordinary Course of Third Party
Administrator Business.
3.11 List of Licenses and Permits and List of Noncompliance with Laws.
3.12 List of Contracts.
3.12.8 Contracts Restricting Business Activities.
3.13.1 List of Trademarks, Trade Names, Service Marks, Service Names, Etc.
3.13.2(i) List of Owned Software.
3.13.2(ii) List of Licensed Software, List of Problems with Software Licenses.
3.13.2(iii) List of Computer Programming Services Providers and agreements.
3.14 List of Highly Compensated Employees and their Compensation, Union Activities and Labor Disputes.
3.15 List of Benefit Plans.
3.15.10 List of Benefit Plans Providing Post Separation Benefits.
3.15.11 Acceleration of Severance Benefits or Increases in Compensation Resulting from Transaction
3.16 List of Customers, Addresses, Telephone Numbers and Principal Person of Contact and List of Problems
with Customer.
3.17 List of Environmental Matters.
3.18 List of Insurance Matters.
3.19 List of Related Party Relationships.
</TABLE>
(ii)
<PAGE> 60
<TABLE>
<S> <C>
5.2 Form of Certificates of each Shareholder and of each President of the Acquired Companies.
5.4 Form of Opinion of Counsel for the Shareholders and Acquired Companies.
5.10 Real Estate Transfer Agreement.
6.2 Form of Officer's Certificate of Purchaser.
6.4 Form of Opinion of Counsel for Purchaser.
</TABLE>
(iii)
<PAGE> 61
EXHIBIT 1.1
DEFINED TERMS
As used herein, the following terms shall have the following meanings unless
the context otherwise requires:
1. "Acceptable Termination Reason" shall mean any of the following reasons:
(i) fraud or deceit on the part of any Acquired Company, its officers,
directors or employees or any Shareholder thereof, (ii) material
misrepresentation or omission by the Shareholders or the Acquired
Companies under circumstances where the Acquired Companies' officers,
directors or employees knew or should have known of the facts or
circumstances giving rise to such material misrepresentation or omission,
(iii) the occurrence of a material adverse change in the financial
condition, results of operations, business, prospects, properties or
assets of the Acquired Companies which was not disclosed on Exhibit 3.9
hereto (other than a termination or deterioration in the business
relationship of the Acquired Companies with United HealthCare
Corp./MetraHealth Companies which is solely attributable to the
transactions contemplated hereby), (iv) the failure of any condition
listed in Sections 5.2 through 5.10 hereof to be satisfied on or as of
the Closing Date, or (v) a termination pursuant to the provisions of
Section 9.3 hereof.
2. "Acquired Companies" shall mean Consolidated Group, Inc., Group Benefit
Administrators Insurance Agency, Inc., Consolidated Group Claims, Inc.
and Consolidated Health Coalition, Inc., each of which may be
individually referred to as an "Acquired Company."
3. "Acquired Companies' Software" shall have the meaning set forth in
Section 3.13.2(iii).
4. "Actual Damages" shall mean the monetary damages actually and directly
incurred by the Acquired Companies as a result of Purchaser's failure to
close the transactions contemplated hereby which do not derive from the
loss of expected benefits to the Acquired Companies as a result of being
a wholly owned subsidiary of Purchaser and do not include any form of
consequential, exemplary, punitive, remote, special or speculative
damages including but not limited to damages for lost business
opportunity or damage to reputation or loss of goodwill.
(i)
<PAGE> 62
5. "Affiliate" shall mean, with respect to a Person, any other Person which
is required to be aggregated with such Person under Code Section 414(b),
(c), (m) and/or (o) at any time prior to the Closing Date.
6. "Agreement" shall mean this Acquisition Agreement.
7. "Allocations" shall mean for purposes of the Election the allocations of
the "adjusted grossed-up basis" of the shares of Acquired Companies
among the assets of the Acquired Companies.
8. "Benefit Plans" shall have the meaning set forth in Section 3.15.
9. "Cash Purchase Price Amount" means the amount of Fifty-Six Million Eight
Hundred Fifty Thousand Dollars ($56,850,000.00).
10. "Claim Amount" has the meaning set forth in Section 8.5 hereof.
11. "Closing" shall mean the consummation of the transactions provided for
in this Agreement.
12. "Closing Balance Sheet" shall mean the balance sheet of the Acquired
Companies prepared in accordance with GAAP as of the Closing Date as
provided in Section 2.2.2 hereof.
13. "Closing Date" shall mean the date on which the Closing occurs pursuant
to Section 7.1 hereof.
14. "Closing Net Assets Amount" shall have the meaning set forth in Section
2.2.2.1.
15. "Code" shall mean the Internal Revenue Code of 1986, as amended.
16. "Consolidated Companies" shall have the meaning set forth in Section
3.5.1 hereof.
17. "Covenant Not to Compete" shall mean the Covenant Not to Compete among
Purchaser and the Shareholders, substantially in the form attached as
Exhibit 2.10.
18. "Current Tangible Assets" shall have the meaning ascribed thereto in
Section 2.2.2.1.
19. "Direct Claim" shall have the meaning set forth in Section 8.4.2.
20. "DOL Audit" shall have the meaning set forth in Section 3.11 hereof.
(ii)
<PAGE> 63
21. "Election" shall mean the election provided by Section 338(h)(10) of the
Code and any corresponding elections under state, local, or foreign tax
laws.
22. "Employees" shall have the meaning set forth in Section 2.15.2.
23. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
24. "ERISA Plan" shall have the meaning set forth in Section 3.15
25. "Escrow Account" means the account with the Escrow Agent which is
established pursuant to the Escrow Agreement.
26. "Escrow Agent" means First Union National Bank of Florida or such other
financial institution as the Purchaser and Shareholders may agree upon
to hold the Escrow Amount pursuant to the Escrow Agreement.
27. "Escrow Agreement" means the escrow agreement substantially in the form
of Exhibit 2.2.1.2, attached hereto, pursuant to which the Escrow Amount
will be held by the Escrow Agent.
28. "Escrow Amount" means the amount of Five Million Dollars ($5,000,000.00).
29. "Escrow Fund" shall mean the funds contained in the Escrow Account,
including any interest earned thereon.
30. "Excess Notes and Loans Payable Amount" shall have the meaning set forth
in Section 2.2.2.2 hereof.
31. "Federal Arbitration Act" shall have the meaning set forth in Section
2.2.2.
32. "Final Closing Balance Sheet" shall have the meaning set forth in
Section 2.2.2.
33. "Final Purchase Price Adjustment Amount Calculation" shall have the
meaning set forth in Section 2.2.2.
34. "GAAP" shall mean Generally Accepted Accounting Principles formulated by
the American Institute of Certified Public Accountants as in effect from
time to time during the term of this Agreement.
35. "Hazardous Substance" shall have the meaning set forth in Section 3.17.
(iii)
<PAGE> 64
36. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and Improvements
Act of 1978, as amended.
37. "HSR Termination" shall have the meaning set forth in Section 7.1.
38. "Indemnitee" shall have the meaning set forth in Section 8.4.1.1(i).
39. "Indemnifying Party" shall have the meaning set forth in Section
8.4.1.1(i).
40. "Indemnity Payment" shall mean any payment by an Indemnifying Party to
an Indemnitee.
41. "Liabilities" shall have the meaning set forth in Section 2.2.2.1.
42. "Licensed Software" shall have the meaning set forth in Section
3.13.2(ii).
43. "Negative Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.2.2.1.
44. "Minimum Aggregate Liability Amount" shall have the meaning set forth in
Section 8.5.
45. "Net Working Capital" shall have the meaning set forth in Section
2.2.2.1.
46. "1933 Act" shall mean the Securities Act of 1933, as amended.
47. "1993, 1994, 1995 and Q1/1996 Financial Statements" shall have the
meaning set forth in Section 3.5.1.
48. "Notes and Loans Payable Amount" shall be the amount of all notes and
loans shown on the Final Closing Balance Sheet, including the current
and long-term portions of such notes and loans.
49. "Notice of Settlement" shall have the meaning set forth in Section
8.4.1.3(iii).
50. "Notice to Contest" shall have the meaning set forth in Section
8.4.1.3(iv).
51. "Notice to Defend" shall have the meaning set forth in Section
8.4.1.1(iii).
(iv)
<PAGE> 65
52. "Owned Software" shall have the meaning set forth in Section 3.13.2(i).
53. "PBGC" shall mean the Pension Benefit Guaranty Corporation.
54. "Person" shall include, but is not limited to, an individual, a trust,
an estate, a partnership, an association, a company, a corporation, a
sole proprietorship, a professional corporation or a professional
association.
55. "Positive Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.2.2.1.
56. "Pre-Closing Period" shall have the meaning set forth in Section 2.13.1.
57. "Purchase Price" shall mean the sum of Sixty-One Million Eight Hundred
Fifty Thousand Dollars ($61,850,000.00) adjusted by the Purchase Price
Adjustment Amount Calculation, if any, and any Indemnity Payments.
58. "Purchase Price Adjustment Amount Calculation" shall mean the
calculation set forth in Section 2.2.2.1 hereof.
59. "Purchaser" shall mean HealthPlan Services Corporation, a Delaware
corporation.
60. "Real Property" shall have the meaning set forth in Section 3.17.
61. "SEC" shall mean the Securities and Exchange Commission.
62. "Settlement Auditor" shall mean the Boston office of Arthur Andersen LLP
or, if Arthur Andersen LLP is unwilling to accept such assignment, a
big-six accounting firm as mutually agreed upon by the parties. If for
any reason such accounting firm shall not be available to resolve such
issues, the Shareholders and Purchaser shall promptly contact the
national office of, and shall retain the services of, another big-six
accounting firm. If the Shareholder and Purchaser cannot agree on such
accounting firm to be retained, the Shareholders and Purchaser shall
each submit the name of another big-six independent accounting firm
which does not at the time provide, and has not in the prior two years
provided, significant services to the Shareholders or to Purchaser, and
the firm shall be selected by lot from these two firms.
63. "Settlement Auditor's Certificate" shall have the meaning set forth in
Section 2.2.2.
(v)
<PAGE> 66
64. "Several" or "Severally" as used herein shall mean that each Shareholder
individually but not jointly or jointly and severally, and when used in
relationship to any indemnification obligation shall mean that such
Shareholder is liable for a percentage of any indemnification liability
of the Shareholders and the Acquired Companies hereunder which is equal
to the percentage set forth opposite his name as follows:
<TABLE>
<CAPTION>
Percentage
Shareholder Ownership
----------- ----------
<S> <C>
Holyoke L. Whitney 48.51%
James F. Carlin 10.75%
Woolsey S. Conover 16.30%
John C. Naramore 10.66%
Michael V. Clark 8.15%
David H. Knight 5.43%
</TABLE>
65. "Shareholders" shall mean Holyoke L. Whitney, Woolsey S. Conover, John
C. Naramore, Michael V. Clark, David H. Knight and James F. Carlin, each
of which may be referred to individually as a "Shareholder".
66. "Shareholders' Representative" shall mean Holyoke L. Whitney.
67. "Shares" shall have the meaning set forth in Section 2.1 hereof.
68. "Straddle Period" shall have the meaning set forth in Section 2.13.2.
69. "Target Net Assets Amount" shall have the meaning set forth in Section
2.2.2.1 hereof.
70. "Taxes" shall mean all taxes, charges, fees, levies, or other similar
assessments or liabilities including without limitation income, gross
receipts, inventory, ad valorem, excise, real property, personal
property, sales, use, transfer, withholding, deed, license, employment,
payroll, and franchise taxes imposed by any governmental authority
(including any interest, fines, penalties, or additions attributable to
any such tax or any contest or dispute thereof).
71. "Tax Return" or "Return" shall mean any report, return, statement or
other written information required to be supplied to a taxing authority
in connection with Taxes.
72. "Tax Statement" shall have the meaning set forth in Section 2.13.2.
(vi)
<PAGE> 67
73. "Third Party Claim" shall have the meaning set forth in Section
8.4.1.1(i).
74. "Transaction Costs" shall mean the respective investment banking, legal,
accounting or other fees or costs incurred by the parties as a result
of the transactions contemplated by this Agreement.
75. "Unlimited Claims Items" shall have the meaning set forth in Section 8.5.
76. "Working Capital Adjustment Amount" shall have the meaning set forth in
Section 2.2.2.1 hereof.
(vii)
