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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 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On July 1, 1996, the Registrant acquired all of the issued and
outstanding shares of capital stock of Harrington Services Corporation
("Harrington") for a purchase price consisting of (i) approximately
$32.5 million in cash, subject to a post-closing adjustment based on
the balance sheet of Harrington as of June 30, 1996, and (ii)
1,347,133 shares of common stock with a total market value at time of
issuance of approximately $28.8 million. The acquisition was
consummated pursuant to the terms of a certain Plan and Agreement of
Merger dated May 28, 1996 (the "Agreement") between the Registrant,
HealthPlan Services Alpha Corporation, Harrington, and Robert Chefitz
as representative of the Harrington shareholders. The purchase price
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 Harrington
and the Registrant or any of the Registrant's affiliates, directors,
officers or any associate thereof.
Concurrently with the closing of the merger transaction, the
shareholders of Harrington and the Registrant entered into a
Registration Rights Agreement, dated July 1, 1996, pursuant to which
the Registrant agreed, among other things, to prepare and file with
the Securities and Exchange Commission a registration statement (the
"Continuous Offering Registration Statement") sufficient to permit the
public offering and sale of the Registrant's common stock delivered to
the Harrington shareholders as the stock consideration in the merger
transaction (the "Registrable Securities"), and to register and
qualify such Registrable Securities for sale under the securities or
blue sky laws of the jurisdictions which the shareholders may
reasonably request. Such Continuous Offering Registration Statement
is to become effective no later than October 31, 1996, unless a
registration statement with respect to an underwritten offering of the
Registrant's common stock (the "Underwritten Offering Registration
Statement") becomes effective prior to such date and the ninety (90)
lockup period related thereto has not then expired, in which case the
Continuous Offering Registration Statement shall become effective
within fifty-five (55) days of the expiration of such lockup period.
In addition, if the Registrant proposes to file an Underwritten
Offering Registration Statement at any time during which the holders
of Registrable Securities hold in the aggregate more than 200,000
shares of such securities, and such Registrable Securities have not
become saleable under Rule 144, the Registrant shall give advance
notice to the holders of such Registrable Securities of its intent to
file an Underwritten Offering Registration Statement and the holders
of Registrable Securities may request to include such Registrable
Securities in the Underwritten Offering, subject to certain
limitations.
A substantial part of the funds used to pay the cash portion of the
purchase price were provided to the Registrant under its line of
credit with a group of lenders 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) Harrington's principal business is the administration of medical
benefits for self-funded health care plans of primarily large groups,
and its assets are comprised of contracts for the provision of such
administration services. With the exception of office equipment, none
of the assets of Harrington as of the consummation of the merger
constituted plant, equipment or tangible property.
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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
Harrington 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 5.
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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.
- ------ ----------- --------
<S> <C> <C>
2 Plan and Agreement of Merger dated May 28, 1996 between HealthPlan 6
Services Corporation, HealthPlan Services Alpha Corporation,
Harrington Services Corporation, and Robert Chefitz as Shareholders'
Representative
23 Consent of Richard A. Eisner & Co. LLP *
27 Financial Data Schedules *
</TABLE>
* to be filed by amendment
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EXHIBIT 2
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (the "Agreement"), made this
28th day of May, 1996, is entered into by and among HEALTHPLAN SERVICES
CORPORATION, a Delaware corporation (hereinafter referred to as the
"Purchaser"), HEALTHPLAN SERVICES ALPHA CORPORATION, a Delaware corporation
(the "Merger Subsidiary"), and HARRINGTON SERVICES CORPORATION, a Delaware
corporation (the "Company") and ROBERT CHEFITZ as Shareholders' Representative.
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Purchaser and
the Company have approved the merger (the "Merger") of the Company with and
into the Merger Subsidiary in accordance with the Delaware General Corporation
Law (the "Act"), with the effect that the Company will become a wholly-owned
subsidiary of Purchaser.
NOW, THEREFORE, in consideration of the premises and the
mutual promises, representations, warranties and covenants hereinafter set
forth, the parties hereto agree as follows:
I. DEFINITIONS. The capitalized terms used herein will have the
meanings ascribed to them in Exhibit 1.1 hereto. Unless the context otherwise
requires, such capitalized terms will include the singular and plural and the
term "including" shall mean "including but not limited to." Wherever in this
Agreement reference is made to the knowledge of the Company it means the
individual knowledge of the Company's officers, directors and employees.
II. COVENANTS AND UNDERTAKINGS.
2.1 The Merger. At the Effective Time and in accordance with the
provisions of this Agreement and the Act, the Company will be merged with and
into the Merger Subsidiary in the Merger, the separate corporate existence of
the Company shall thereupon cease, and the Merger Subsidiary shall be the
surviving corporation (the "Surviving Corporation") which, effective with the
Effective Time, shall change its name to Harrington Services Corporation.
2.2 Effective Time of Merger. The Merger shall become effective
at the time on the Closing Date (the "Effective Time") of filing of the
Certificate of Merger with the Department of State of the State of Delaware in
accordance with the provisions of the Act.
2.3 Effects of Merger. Subject to the Act, at the Effective Time,
the Merger shall have the following effects:
2.3.1 Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder
of any shares of capital stock of Purchaser or the Company:
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2.3.1.1 each share of Merger Subsidiary Common Stock
that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding;
2.3.1.2 each share of Company Common Stock that is
issued and outstanding immediately prior to the Effective
Time, except for Dissenting Shares, shall be converted into
the right to receive:
(i) the Per Share Stock Consideration, PLUS
(ii) the Per Share Initial Cash Payment, PLUS
(iii) the Per Share Escrow Proceeds, if any;
provided that (x) no fractional shares of Purchaser's Common
Stock shall be issued and any holder who would otherwise have
received a fractional share of Purchaser's Common Stock shall
have a right to receive cash in an amount equal to such
fraction multiplied by the Market Price, and (y) no
Shareholder shall be entitled to receive any part of the
foregoing consideration until he has delivered to the
Purchaser (i) certificates representing all of his capital
stock of the Company duly endorsed in blank with signatures
guaranteed by a national or state bank located in the United
States or by an NASD registered brokerage firm, and (ii)
either a duly executed Shareholders Agreement or Private
Placement Representation Letter;
2.3.1.3 except for Dissenting Shares, each share of
Preferred Stock, shall be converted into the Per Share
Preferred Stock Consideration, provided that no Shareholder
shall be entitled to receive any part of the foregoing
consideration until he has delivered to the Purchaser
certificates representing all of his capital stock of the
Company duly endorsed in blank with signatures guaranteed by a
national or state bank located in the United States or by an
NASD registered brokerage firm;
2.3.1.4 each outstanding certificate representing
shares of Company Common Stock and Preferred Stock, except for
Dissenting Shares, shall be deemed, for all purposes, to
evidence only the right to receive upon surrender of such
certificate the consideration into which such shares of
Company Common Stock or Preferred Stock are convertible; and
2.3.1.5 each share of Company Common Stock that is
owned by the Company immediately prior to the Effective Time
as treasury stock will be canceled and retired and will cease
to exist, without any conversion thereof.
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2.3.1.6 Notwithstanding anything in this Section 2.3
to the contrary, shares of Company Common Stock which are
issued and outstanding immediately prior to the Effective Time
and which are held by stockholders who have not voted such
shares in favor of the merger and who shall have properly
exercised their rights of appraisal for such shares in the
manner provided by the Delaware General Corporation Law (the
"DGCL") (the "Dissenting Shares") shall not be converted or
exchangeable for the right to receive the Merger consideration
set forth herein, unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost
his right to appraisal and payment, as the case may be. If
such stockholder shall have failed to so perfect or shall have
effectively withdrawn or lost such right, his shares shall
thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to
receive the Merger consideration set forth herein without any
interest thereupon. The Company shall give the Purchaser
prompt notice of any Dissenting Shares (and shall also give
the Purchaser prompt notice of any withdrawals of such demands
for appraisal rights) and the Purchaser shall have the right
to direct all negotiations and proceedings with respect to any
such demands. The Company shall not, except with the prior
written consent of the Purchaser, voluntarily make any payment
with respect to, or settle or offer to settle, any such demand
for appraisal rights.
2.3.2 Certificate of Incorporation. At the Effective Time,
the Certificate of Incorporation of the Merger Subsidiary in effect immediately
prior to the Effective Time shall remain in effect as the Certificate of
Incorporation of the Surviving Corporation, until thereafter amended as
provided by law.
2.3.3 Bylaws. The Bylaws of the Merger Subsidiary as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, until thereafter amended as provided by law.
2.3.4 Directors. The directors of the Merger Subsidiary
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
2.3.5 Officers. The officers of the Merger Subsidiary
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
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2.4 Purchase Price Adjustment. Within 45 days of the Closing
Date, the Purchaser will deliver to the Shareholders' Representative and the
Escrow Agent the Closing Balance Sheet together with the Statement of Net Worth
derived therefrom, which shall contain a calculation of the Negative or
Positive Purchase Price Adjustment Amount, as the case may be. 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, including but not limited to bonuses due executives under the
Company's executive bonus plan, to the extent such accrual is required by GAAP
consistently applied with prior practice. Additionally, the Closing Balance
Sheet shall include all liabilities of the Company includable thereon under GAAP
consistently applied with prior periods, including but not limited to any such
liabilities discovered after Closing but prior to the delivery of the Closing
Balance Sheet which if known on the Closing Date would have been so included.
The foregoing notwithstanding, the Closing Balance Sheet shall not show under
any circumstances Intangible Assets in an amount in excess of twenty-three
million six hundred thousand dollars ($23,600,000.00) and to the extent that
Intangible Assets of the Company on the Closing Date exceed $23,600,000, they
shall be disallowed and not taken into account on the Final Closing Balance
Sheet. For purposes of the foregoing the term "Intangible Assets" shall mean
those assets historically categorized as intangible assets by the Company in
accordance with GAAP applied on a consistent basis, as shown on the Company's
audited annual financial statements under the headings "Other Intangibles Net"
and "Software Net." Upon delivery of the Closing Balance Sheet and the
Statement of Net Worth, 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 Company relating to periods
prior to the Closing Date for purposes of reviewing and resolving any disputes
concerning the Closing Balance Sheet and the Statement of Net Worth. The
Shareholders' Representative shall have 30 days following the delivery by
Purchaser of the Closing Balance Sheet and the Statement of Net Worth during
which to notify the Purchaser of any dispute of any item contained therein,
which notice shall set forth in reasonable detail the basis for such dispute.
If the Shareholders' Representative fails to notify the Purchaser of any such
dispute within such 30-day period, the Closing Balance Sheet and the Statement
of Net Worth provided by the Purchaser shall be final, conclusive and binding
and shall be deemed to be the "Final Closing Balance Sheet" and the "Final
Statement of Net Worth." In the event that the Shareholders' Representative
shall so notify the Purchaser 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 at the option of either the Purchaser or the
Shareholders' Representative. The Settlement Auditor shall make such revisions
to the Closing Balance Sheet and Statement of Net Worth as it deems appropriate
in order to make a determination of the Net Worth
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Amount in accordance with the foregoing provisions 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 paid in equal parts by the Purchaser and from the
Escrow. In the event of a dispute, the Closing Balance Sheet and Statement of
Net Worth, as modified by the Settlement Auditor shall be the "Final Closing
Balance Sheet" and the "Final Statement of Net Worth."
2.4.1 Upon determination of the Final Closing Balance
Sheet, if the Net Worth Amount is less than the Target Net Worth
Amount, the Purchaser shall be paid from the Escrow cash in the amount
of one dollar for each dollar that the Net Worth Amount as of the
Closing Date shown on the Statement of Net Worth is less than such
Target Net Worth Amount (the "Negative Purchase Price Adjustment
Amount").
2.4.2 Upon determination of the Final Closing Balance Sheet
and the Final Statement of Net Worth, if the Net Worth Amount of the
Company as shown on the Final Statement of Net Worth is more than the
Target Net Worth Amount (a "Positive Purchase Price Adjustment
Amount"), the Purchaser shall issue to each Shareholder an additional
number of shares of the Purchaser's Common Stock determined by first
dividing the Positive Purchase Price Adjustment Amount plus interest
earned thereon since the Closing at the interest rate earned on the
Escrow Amount, by the Market Price, then dividing the result thereof
by the Company's Outstanding Shares, and then multiplying the result
thereof by the number of Company Shares owned by each such Shareholder
immediately prior to the Effective Time; provided that any fractional
shares resulting therefrom shall be paid in cash in the same manner
set forth in Section 2.3.1.2 hereof and the aggregate number of shares
issued to all of the Shareholders pursuant to this Section 2.4.2 shall
never be more than 75,000 shares of the Purchaser's Common Stock.
2.5 HSR Act Filings. As promptly as practicable after the
execution of this Agreement, and in any event not later than the fourteenth
(14) business day following the date of this Agreement, Purchaser and the
Company shall, in cooperation with each other, make the required filings in
connection with the transactions contemplated by this Agreement under the HSR
Act with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice, and, as promptly as practicable from time to time
thereafter, each party shall make all such further filings and submissions, and
take such further action, as may be required in connection therewith.
Purchaser and the Company shall each request early termination of the waiting
period with respect to such filings. Each party shall furnish the other all
information in its possession necessary for compliance by the other with the
provisions of this Section 2.5. Purchaser and the Company shall
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each notify the other immediately upon receiving any request for additional
information with respect to such filings from either the Antitrust Division of
the Department of Justice or the Federal Trade Commission and the party
receiving the request shall use its best efforts to comply with such request as
soon as possible. Neither party shall withdraw any such filing or submission
without the written consent of the other party.
2.6 Compliance with Securities Laws, Registration Rights and
Cooperation with Post-Closing Audit.
2.6.1 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. At the Closing the Purchaser will enter into Registration
Rights Agreements in substantially the form of Exhibit 2.6.1 hereto with any
Shareholder who wishes to avail himself of the registration rights contained
therein subject to the obligations and conditions contained therein and the
condition set forth in Section 5.15 hereof.
2.6.2 Before the Closing, the Company shall obtain the
consent of Richard Eisner & Company to the incorporation of the financial
statements prepared by Richard Eisner & Company in Purchaser's public filings
as may be required after Closing.
2.7 Conduct of the Business of the Company Prior to Closing.
2.7.1 Except (i) with the prior consent in writing
of Purchaser, (ii) as may be required to effect the transactions contemplated
by this Agreement, (iii) as provided otherwise in this Agreement or (iv) as set
forth on Exhibit 2.7.1, the Company covenants that, between the date of this
Agreement and the Effective Time, the Company will conduct its business only in
the ordinary course, and that it will: (a) use its best efforts to preserve
the organization of the Company intact and to preserve the goodwill of clients,
customers and others having business relations with the Company; (b) maintain
the properties of the Company in the same working order and condition as such
properties are in as of the date of this Agreement, reasonable wear and tear
excepted; (c) keep in force at no less than their present limits all existing
bonds, letters of credit and policies of insurance insuring the Company, its
performance and its respective properties; (d) not enter into any contract,
commitment, arrangement or transaction of the type required to be listed on
Exhibits 3.4, 3.12, 3.13.1, 3.13.2, 3.15 or 3.18 hereof or 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
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within the control of the Company; (e) not enter into any contracts,
commitments, arrangements or transactions of the type required to be listed on
Exhibit 3.7 which individually exceed $100,000 or in the aggregate exceeds
$250,000.00; (f) not make or permit any change in the Company's Certificate of
Incorporation or Bylaws, or in its authorized, issued or outstanding
securities; (g) not issue any security or grant any stock option or right to
purchase any security of the Company, issue any security convertible into such
securities, purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing or declare, set aside or pay
any dividend or other distribution in respect of such securities; (h) not make
any contribution to or distribution on behalf of or to any employee of the
Company (except for the payment of any health, disability and life insurance
premiums which may become due and except for contributions or distributions
required to be made (and not discretionary) pursuant to the terms of any
Benefit Plans); (i) not make any capital expenditure which when aggregated with
all other capital expenditures for the period exceeds the sum of $100,000.00;
and (j) 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.
2.7.2 Except after prior notification to, and with
the prior written consent of, Purchaser, the Company will not make, between the
date of this Agreement and the Closing Date, any material change in its
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 Company and of all persons authorized to
act with respect thereto is attached hereto as Exhibit 2.7.2.
2.7.3 Except with the prior consent in writing of
Purchaser or as otherwise required by GAAP, the Company will not make, between
the date of this Agreement and the Closing Date, any changes in its accounting
methods or practices.
2.8 Intercompany Accounts and Services. Prior to or at the
Closing, the Company will cause its Shareholders to take all actions necessary
to settle as of the Closing all cash overdrafts, loans, advances, intercompany
payables or receivables, indebtedness and other accounts between the Company,
on the one hand, and the Shareholders or any Affiliate of any of the
Shareholders which is not the Company on the other hand.
2.9 Examination of Property and Records. Between the date of this
Agreement and the Closing Date, the Company will allow Purchaser, its counsel
and other representatives full access to all the books, records, files,
documents, assets, properties, contracts and agreements of the Company which
may be reasonably requested, and shall furnish Purchaser, its officers and
representatives during such period with all information concerning the affairs
of the Company which may be reasonably requested. Purchaser will
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conduct any investigation in a manner which will not unreasonably interfere
with the business of the Company.
2.10 Consents and Approvals. The Company agrees to use its 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 the
Company or any Shareholder or any Affiliate of any Shareholder is a party or
subject to on the Closing Date and (a) which would prohibit, or require the
waiver, consent or approval of any person to such transactions or (b) under
which, without such waiver, consent or approval, such transactions would
constitute an occurrence of default under the provisions thereof, result in the
acceleration of any obligation thereunder or give rise to a right of any party
thereto to terminate its obligations thereunder. All required written waivers,
consents and approvals shall be listed on Exhibit 3.8 hereto and except as
waived by the Purchaser in writing, at or prior to Closing, shall be produced
at Closing in form and content reasonably satisfactory to Purchaser.
2.11 Employment Agreements and Nondisclosure and Noninterference
Agreements.
2.11.1 The Company covenants to use its best efforts
to cause those employees identified on Exhibit 2.11.1(a) to enter into, at the
Closing, Employment Agreements substantially in the form set forth in Exhibit
2.11.1(b).
2.11.2 The Company shall cause the Shareholders
listed on Exhibit 2.11.2(a) to enter into, at the Closing, a Nondisclosure and
Noninterference Agreement substantially in the form attached hereto as Exhibit
2.11.2(b).
2.12 Supplying of Financial Statements. The Company
covenants to deliver to Purchaser all regularly prepared monthly, and other,
unaudited financial statements of the Company prepared after the date of this
Agreement, in format historically utilized internally, as soon as available but
not later than the 15th of each month following each statement's date.
2.13 Access to Business Records. Prior to Closing,
the Company shall cause any Shareholder or any Affiliates thereof, who possess
documents required or incident to the performance of the Company's businesses
to transfer such documents to the Company. Such Shareholders may make copies
or extracts from such books and records prior to transfer at their sole
expense.
2.14 Employee Matters.
2.14.1 After the Closing until the later of December
31, 1996 and such date as the Company's employees commence participation in
Purchaser's employee benefit plans, as described in the next sentence (the
"Plan Transfer Date"), Purchaser shall
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cause the Surviving Corporation to take whatever action is necessary or
appropriate to cause the Surviving Corporation to maintain the participation,
sponsorship and/or maintenance of all of the Company's employee benefit plans
except those identified on Exhibit 2.14.1. From and after the Plan Transfer
Date, (except with respect to employees of the Company's APBA subsidiary who
receive benefits pursuant to a collective bargaining contract which shall be
assumed by the Surviving Corporation) all employees of the Surviving
Corporation shall become participants in the employee benefit plans and
programs maintained by the Purchaser for similarly situated employees of the
Purchaser. Such employee benefit plans that are health benefit plans shall (i)
recognize expenses and claims that were incurred by such employees in the year
in which the Effective Time occurs and recognized for similar purposes under
the Company's plans as of the Effective Time and (ii) provide coverage (without
any required waiting period) for pre-existing health conditions to the extent
covered under the applicable plans or benefit programs of the Company as of the
Effective Time. In addition, such employee benefit plans and programs shall
credit such employees with years of service with the Company for all plan
purposes, provided that no such crediting shall be required to the extent that
it would result in a duplication of benefits or require contributions for years
prior to the Effective Time.
2.14.2 The Company shall provide Purchaser with any
information which Purchaser shall reasonably request concerning the employees
of the Company (the "Employees"), and shall cooperate with, and assist,
Purchaser with respect to the commencement of participation of any Employee in
the Surviving Corporation's benefit plans or arrangements.
2.14.3 Prior to the Closing, the Company shall cause
the Deferred Compensation Plan of R. E. Harrington, Inc. for Robert J. Covert,
the Deferred Compensation Plan of R. E. Harrington, Inc. for Robert R. Parker
and the Deferred Compensation Plan of R. E. Harrington, Inc. for Warren G. Blue
(the "Deferred Compensation Agreements") to be amended to provide that
effective January 1, 1996, employer contributions may no longer be made under
each such Deferred Compensation Plan. Further, the Company will not make any
amendments prior to Closing respecting employer or employee contributions to
the Rabbi Trust Agreement which is used to receive the funds that will be paid
under each Deferred Compensation Agreement.
2.15 Affiliated Contracts. At or prior to Closing, the
Company shall cause the Shareholders and their Affiliates to transfer to the
Company any contracts the revenues from which are included in the revenues of
the Company but which are in the name of the Shareholders or their Affiliates
and any assets which have been paid for by the Company but which are owned by
the Shareholders or their Affiliates, as opposed to the Company. All such
assets and contracts are listed on Exhibit 2.15.
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2.16 Shareholders' Tax Free Reorganization Treatment. The
Company understands that the Purchaser is making no representation as to the
tax-free status of the Merger or the gain or loss, if any, which the
Shareholders will experience upon consummation of the Merger. The Company
represents and warrants that it has consulted with its own tax advisers
concerning the tax consequences of the proposed transactions and is not relying
on any representation of the Purchaser as to such consequences.
Notwithstanding the foregoing, Purchaser covenants and agrees that it will
treat the Merger, for federal income tax purposes, as a tax-free reorganization
under Section 368(a)(1)(A) and (a)(2)(D) of the Code. Following the Merger,
neither the Purchaser, the Surviving Corporation nor any Affiliate of Purchaser
or the Surviving Corporation shall take, or cause to be taken, any action
which, after consultation with counsel, it reasonably believes would jeopardize
the status of the merger as a tax-free reorganization within the meaning of
Section 368 (a) of the Code.
2.17 Shareholder Vote. As promptly as practical after the
execution of this Agreement, the Company shall call a shareholders meeting to
vote upon the Merger, which shareholders meeting shall be held as soon as
permitted by the Company's Bylaws and applicable law after mailing of such
notice. The Board of Directors of the Company shall recommend to the
Shareholders the approval of the Merger and the Company shall use its best
efforts to obtain the affirmative vote of all Shareholders for approval of the
Merger.
2.18 Conduct of the Business of the Purchaser Prior to the
Closing. Except with the prior written consent of the Shareholders'
Representative, the Purchaser covenants that, between the date of this
Agreement and the Effective Time, (a) the Purchaser will not adopt or propose
any change in its Certificate of Incorporation or Bylaws; (b) the Purchaser
will not and will not allow any of its subsidiaries to merge or consolidate
with any other Person or acquire a material amount of assets of any other
Person; (c) the Purchaser will not and will not allow any of its subsidiaries
to lease, license or dispose of any assets or property, which assets or
property are material to the Purchaser and its subsidiaries taken as a whole;
(d) the Purchaser will not declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise with respect
to any of its capital stock; and (f) the Purchaser will not agree or commit to
do any of the foregoing.
2.19 Execution of Shareholder Agreements. Simultaneous with
the execution of this Agreement, the Company will cause the Shareholders listed
on Exhibit 5.14(a) to execute Shareholder Agreements with the Purchaser and the
Merger Subsidiary in substantially the form of Exhibit 5.14(b).
2.20 Continuation of Indemnification. On or prior to
Closing, the Company will purchase tail coverage under its existing directors
and officers liability insurance policy affording coverage for a period of
twelve (12) months to the Company's
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directors and officers for periods prior to the Closing. From and after
Closing for a period of one year, the Purchaser will cause the Surviving
Corporation to keep in place officer and director indemnification in
substantially the same form as currently contained in the Company's Articles of
Incorporation and Bylaws which will indemnify the Company's officers and
directors immediately prior to Closing in accordance with the terms thereof for
occurrences prior to the Effective Time; provided, however, that such
indemnification will not cover any claims made or action filed against such
directors and officers by the Company's Shareholders.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Purchaser as follows:
3.1 Organization, Standing and Foreign Qualification.
3.1.1 The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation as set forth in Exhibit 3.1 and
has full corporate power and authority to carry on its business as it is now
being conducted and to own and lease the properties and assets which it now
owns or leases.
3.1.2 The Company and each of its Subsidiaries is
now, and will be at Closing, duly qualified and/or licensed to transact
business and in good standing as a foreign corporation in the jurisdictions
listed in Exhibit 3.1 hereto, and the character of the property owned or leased
by the Company and each of its Subsidiaries and the nature of the business
conducted by them do not require such qualification and/or licensing in any
other jurisdiction, except where the failure to be so qualified or licensed
would not have a material adverse effect on the business, results of operations
or condition (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole (a "Material Adverse Effect").
3.1.3 Except as Listed on Exhibit 3.1.3 attached
hereto, the Company has no Subsidiaries.
3.2 Authority and Status. The Company 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 the Company of this Agreement and each and every agreement,
document and instrument provided for herein have been duly authorized and
approved by the Board of Directors of the Company. Subject to Shareholder
approval as contemplated by Section 2.17, this Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
the Company in connection herewith constitute or will, when executed and
delivered,
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constitute the valid and legally binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time
to time in effect affecting the enforcement of creditors' rights generally.
Attached hereto as Exhibit 3.2 are true, correct and complete copies of the
Certificate or Articles of Incorporation and Bylaws of the Company and each
Subsidiary of the Company.
3.3 Capitalization. All outstanding securities of the
Company and each Subsidiary of the Company, the entire authorized capital
stock, the amount of shares issued and outstanding and the amount of shares
held in treasury for the Company and each such Subsidiary are as set forth on
Exhibit 3.3. All of the issued and outstanding shares of the Company are owned
by the Shareholders as indicated on Exhibit 3.3 and all of the outstanding
shares of each Subsidiary are owned by the Company, in each case free and
clear of all liens, claims, charges and encumbrances of any nature whatsoever,
and, subject to shareholder approval as contemplated by Section 2.17, the
authorization or consent of no other person or entity is required in order to
consummate the transactions contemplated herein by virtue of any such person or
entity having an equitable or beneficial interest in the Company or the capital
stock of the Company. Except as set forth on Exhibit 3.3 or as contemplated
herein, there are no outstanding options, warrants, calls, commitments or plans
by the Company or any Subsidiary to issue any additional shares of its capital
stock, to pay any dividends on such shares or to purchase, redeem, or retire
any outstanding shares of its capital stock, nor are there outstanding any
securities or obligations which are convertible into or exchangeable for any
shares of capital stock of the Company or any such Subsidiary.
3.4 Absence of Equity Investments. Except as described
in Exhibit 3.4 hereto or Exhibit 3.1.3 hereto, the Company does not, either
directly or indirectly, own of record or beneficially any shares or other
equity interests in any corporation, partnership, limited partnership, joint
venture, trust or other business entity. Except as 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 Company.
3.5 Liabilities and Obligations of the Company.
3.5.1 Attached hereto as Exhibit 3.5.1 are true,
correct and complete copies of the Company's consolidated audited balance
sheets as of December 31, 1993, 1994 and 1995 and the related consolidated
statements of operations and operating cash
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flow for the year then ended (the "1993, 1994 and 1995 Financial Statements").
The 1993, 1994 and 1995 Financial Statements are complete, have been prepared
in accordance with GAAP consistently applied, fairly present in all material
respects the financial condition of the Company as of the respective dates
thereof and disclose all liabilities of the Company, 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 GAAP consistently applied.
3.5.2 The Company has no 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
is reasonably likely to result from an audit of its Tax Returns by any
appropriate authority, except for (a) the liabilities and obligations of the
Company 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 which do not, either
individually or in the aggregate, have a Material Adverse Effect.
3.5.3 Except as disclosed in the 1995 Financial
Statements or Exhibit 3.5.2, the Company is not in default with respect to any
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. (a) Except as otherwise
disclosed on Exhibit 3.6: (i) the Company has never filed, nor 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; (ii) all Returns in
respect of Taxes required to be filed with respect to the Company 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; (iii)
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 the Company under section 6655 of the Code or any comparable
provision of state, local or foreign Law have been made; (iv) all such Returns
are true, correct and complete in all material respects; (v) no adjustment
relating to such Returns has been proposed to the Company formally or
informally by any tax authority and, to the knowledge of the Company, no basis
exists for such an adjustment; (vi) there are no pending or threatened actions
or proceedings for the assessment or collection of Taxes against the Company;
(vii)
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there are no Tax liens on any assets of the Company other than ad valorem or
income taxes which are not yet due; (viii) there are no outstanding subpoenas
or requests for information currently outstanding that could affect the Taxes
of the Company; (ix) there are no proposed reassessments of any property owned
or leased by the Company or other proposals that could increase the amount of
any Tax to which the Company would be subject; (x) the Company is not 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; (xi) the Company has not 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; (xii) there are no outstanding waivers or agreements extending the
statute of limitations for any period with respect to any Tax to which the
Company may be subject; (xiii) there are no requests for rulings or information
currently outstanding that could affect the Taxes of the Company or any similar
matters pending with respect to any tax authority; (xiv) no power of attorney
that is currently in force has been granted with respect to any matter relating
to Taxes that could affect the Company; (xv) no consent under section 341(f) of
the Code has been filed with respect to the Company; (xv) 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; (xvi) the
Company has not 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; (xvii) the Company does not owe 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; (xviii) all Taxes required to
be withheld, collected or deposited by the Company have been timely withheld,
collected or deposited and, to the extent required, have been paid to the
relevant Tax authority; (xix) any adjustment of Taxes of the Company made by
the Internal Revenue Service ("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; (xx) the Company was not
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 the Company; (xxi) the Company
has not issued or assumed any corporate acquisition indebtedness, as defined in
section 279(b) of the Code or any obligations described in section 279(a) of
the Code; (xxii) as of the Closing, the Company will not have any
non-recaptured net section 1231 loss as defined in section 1231(c) of the Code;
(xxiii) the books and records of the Company reflect reserves that are adequate
for the payment of all Taxes not yet due and payable that are properly
accruable thereon as of the
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<PAGE> 16
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; (xxiv) the Company has not 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; (xxv) the Company is not 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 (xxvi) the Company is not 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 the
Company 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 Company has 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 Company, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since January 1,
1990; (iii) Exhibit 3.6 sets forth the following information with respect to
the Company as of the most recent practicable date (and, in each case,
specifying such date): (A) the tax basis of the Company in its 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 the Company; (iv) the
Company has delivered to the Purchaser a complete and accurate description of
all Tax accounting methods for all significant items affecting federal and
state income or franchise Taxes; (v) the Company has delivered to the Purchaser
a full description of any and all related party transactions between the
Company and its respective Affiliates; (vi) the Company has provided to the
Purchaser a complete and accurate list of locations by city and state in which
the Company leases any real or personal property; and (vii) the Company 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.
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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 $100,000 net of the reserve
for depreciation, and all real property and all material items of personal
property which are leased or licensed by the Company. The Company has good and
marketable title to all of its property and assets, other than leased or
licensed property, including those listed and described in 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 Company and the other respective
parties thereto and is enforceable in accordance with its terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time
to time in effect affecting the enforcement of creditors' rights generally, and
there is not under any of such leases, licenses or agreements existing any
default of the Company or any other parties thereto (or event or condition
which, with notice or lapse of time, or both, would constitute a default).
Neither the 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 Company are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. The
Company has not received any notice of a violation of any applicable zoning
regulation, ordinance or other law, regulation or requirement relating to its
operations and properties, whether owned or leased, and there is no such
violation or grounds therefor which could have a Material Adverse Effect.
Except pursuant to this Agreement, neither the 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 the Company or which
are used in connection with the business of the Company.
3.7.2 Accounts Receivable. All of the accounts
receivable of the Company as of the Closing Date 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
Company does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of the Certificate of Incorporation, as
amended, Articles of
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<PAGE> 18
Incorporation, as amended, or Bylaws, as amended, of the Company or violate or
constitute an occurrence of default under any provision of, or conflict with,
or result in acceleration of any obligation under, or give rise to a right by
any party to terminate its obligations under, any material mortgage, deed of
trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument, or any order, judgment, decree or other material arrangement to
which the Company is a party or is bound or by which the Company's assets are
affected. Except for Shareholder approval as noted in Section 2.17 hereof, 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 is required
to be obtained or made by or with respect to the Company, any Shareholder or
any assets, properties or operations of the Company or any Shareholder, in
connection with the execution and delivery by the Company of this Agreement or
the consummation of the transactions contemplated hereby.
3.9 Absence of Changes. Since December 31, 1995, the
Company has not, nor has anyone on its behalf, except as disclosed on Exhibit
3.9 attached hereto or as permitted by Section 5.13 hereof:
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 material 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 material 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 material claim or right which it
has against others or accelerated its
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collections or its efforts to collect accounts receivable or otherwise deviated
from its normal collection activities consistent with historic practice in any
material respect;
3.9.8 Declared, promised or made any distribution
or other payment to its shareholders (other than reasonable compensation for
services actually rendered) or issued any additional shares or rights, options
or calls with respect to the Company's shares, or redeemed, purchased or
otherwise acquired the Company's shares, or made any change whatsoever in the
Company's 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 or agreed to pay any bonus to, or
granted or agreed to grant any increase in the compensation of, the Company's
directors, officers, agents or employees, or made any increase in the pension,
retirement or other benefits of its directors, officers, agents or other
employees (except for regularly scheduled periodic increases in employees'
compensation at times and in amounts consistent with historic practice);
3.9.10 Committed, suffered, permitted or
incurred any transaction or event which would materially increase its Tax
liability for any prior taxable year;
3.9.11 Incurred any other material 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 customer has taken or contemplates any steps which could
materially disrupt the business relationship of the Company with said person or
could result in the material diminution in the value of the Company as a going
concern;
3.9.13 Paid, agreed to pay or incurred any
material obligation for any payment of any indebtedness except current
liabilities incurred in the ordinary course of business and except for payments
as they become due pursuant to governing agreements 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 material 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 Company's third party administrator business involving
denied coverage or claims
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administration), there is no suit, action, proceeding, claim or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the Company and, to the knowledge the Company, there exists no basis or grounds
for any such material suit, action, proceeding, claim or investigation. None
of the items described in Exhibit 3.10, individually or in the aggregate, if
pursued and/or resulting in a judgment, would have a Material Adverse Effect or
adversely affect the right of the Company or the Shareholders to consummate the
transactions contemplated hereby.
3.11 Licenses and Permits; Compliance With Law. The
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. All such licenses,
certificates, permits, franchises and rights are listed in Exhibit 3.11.
Except as noted in Exhibit 3.11, the Company is presently conducting its
business so as to comply with all applicable statutes, ordinances, rules,
regulations and orders of any governmental authority. All necessary records
demonstrating such compliance will become the property of the Surviving
Corporation subsequent to the Closing. Further, the Company is not presently
charged with, or, to the knowledge of the Company, under governmental
investigation with respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation, nor presently the subject of any pending or, to
the knowledge of the Company, threatened material adverse proceeding by any
regulatory authority having jurisdiction over its business, properties or
operations. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in the
termination of any material license, certificate, permit, franchise or right
held by the Company.
3.12 Contracts, Etc. Exhibit 3.12 hereto consists of a
true and complete list of all contracts, agreements and other instruments to
which the Company is a party which are not listed on Exhibits 3.7, 3.13.2(ii),
3.15 or 3.18 and which involve the payment by or to the Company of more than
$100,000.00 over the term of the agreement, and contemporaneously with the
delivery of the Exhibits to this Agreement, the Company has delivered a true
and complete copy of each contract, agreement or instrument listed in Exhibits
3.7, 3.12, 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 the Company, except that, with respect to the contracts
listed on Exhibit 3.12, the Company has provided access to the Purchaser to
such contracts but has not made copies thereof. The foregoing notwithstanding
Exhibit 3.12 includes all of the following:
3.12.1 Any contract or commitment which requires
services in excess of $100,000 to be provided or performed by the Company or
which authorizes others to perform services for a third party for, through or
on behalf of the Company, other than those services performed for customers and
clients set forth on Exhibit 3.16;
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3.12.2 Any contract or commitment involving an
obligation in excess of $100,000 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 the 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
the 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 an employee or independent contractors which is not terminable by the
Company within thirty (30) days without payment of any amount for any reason
whatsoever, or without any continuing payment of any type or nature, including,
without limitation, any bonuses and vested commissions;
3.12.8 Any contract, agreement, understanding or
arrangement materially restricting the Company from carrying on its business
anywhere in the world;
3.12.9 Any material instrument or arrangement
evidencing or related to indebtedness for money borrowed or to be borrowed,
whether directly or indirectly, by way of purchase money obligation, guaranty,
subordination, conditional sale, lease-purchase or otherwise;
3.12.10 Any contract with any labor organization; and
3.12.11 Any material bond, suretyship arrangement,
guarantee, letter of credit or other performance guarantee document pursuant to
which any obligation of the Company is guaranteed or secured or pursuant to
which the Company has guaranteed or secured the performance or obligation of
another person.
All of the contracts, agreements, policies of insurance or instruments
described in 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 Company and, to the knowledge of the Company, the
other parties thereto and are in full force and effect and enforceable in
accordance with their terms. Neither the Company nor, to the knowledge of the
Company, any other party to any such contract, commitment or arrangement has
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breached any material provision of, or is in 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 material trademarks, trade
names, service marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefor, applicable to or used in the
business of the Company, together with a complete list of all licenses granted
by or to the Company with respect to any of the above. All such trademarks,
trade names, service marks, service names, brand names, copyrights and patents
are owned by the Company, free and clear of all liens, claims, security
interests and encumbrances of any nature whatsoever. The Company is not
currently in receipt of any notice of any violation of, and, to the knowledge
of the Company, it is not violating, the rights of others in any trademark,
trade name, service mark, copyright, patent, trade secret, know-how or other
intangible asset.
3.13.2 (i) Exhibit 3.13.2(i) contains a complete and
accurate list of all material computer software owned by the Company (the
"Owned Software"). Except as set forth on Exhibit 3.13.2(i), the Company has
exclusive title to the Owned Software, free and clear of all claims, including
claims or rights of employees, agents, consultants, customers, licensees or
other parties involved in the development, creation, marketing, maintenance,
enhancement or licensing of such computer software. Except as set forth on
Exhibit 3.13.2(i), 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. To the knowledge of the Company, 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 the Company is a licensee, lessee
or otherwise has obtained the right to use software (the "Licensed Software").
Exhibit 3.13.2(ii) also sets forth a list of all license fees, rents, royalties
or other charges that the Company is required or obligated to pay with respect
to Licensed Software. The Company has the right and license to use,
sublicense, modify and copy Licensed Software, free and clear of any
limitations or encumbrances except as may be set forth in any license
agreements listed in Exhibit 3.13.2(ii). The Company is in full compliance
with all material provisions of any license, lease or other similar agreement
pursuant to which it has rights to use the Licensed Software. Except as
disclosed on 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. The
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Company has not published or disclosed any Licensed Software to any other
party.
(iii) The Owned Software and Licensed
Software constitute all software necessary for use in the businesses of the
Company (the "Company 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 material computer
programming services for the Company and identifies all material contracts and
agreements pursuant to which such services were performed. The transactions
contemplated herein will not cause a material breach or default under any
licenses, leases or similar agreements relating to the Company Software or
materially impair the Purchaser's or the Surviving Corporation's ability to use
the Company Software in the same manner as such computer software is currently
used by the Company. The Company is not infringing any intellectual property
rights of any other person or entity with respect to the Company Software, and
to the knowledge of the Company, no other person or entity is infringing any
intellectual property rights of the Company with respect to the Company
Software.
3.14 Labor Matters. Exhibit 3.14 sets forth a list of all
employees, consultants and independent contractors of the Company 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, the Company has not
been the subject of any union activity or labor dispute, nor has there been any
strike of any kind called or threatened to be called, against the Company.
Except as set forth on Exhibit 3.14, the Company has not violated any
applicable federal or state law or regulation relating to labor, labor
practices or immigration matters. The Company has no knowledge that there will
be any adverse change in relations with employees and independent contractors
of the Company 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 the Company or any Affiliate of the Company for the benefit
of employees, retirees, dependents, spouses, directors,
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officers, independent contractors or other beneficiaries of the Company or an
Affiliate of the Company and under which employees, retirees, dependents,
spouses, directors, officers, independent contractors or other beneficiaries of
the Company or an Affiliate of the Company are eligible to participate or under
or in connection with which the 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.
Except as set forth on Exhibit 3.15, neither the Company nor any Subsidiary has
ever contributed to or had an obligation to contribute to any multiemployer
plan.
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 Company has delivered a true and complete
copy of each such Benefit Plan or summary description if such Benefit Plan is
not in writing, agreements, 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 the Company.
3.15.3 All the Benefit Plans and the related trusts
subject to ERISA comply with and have been administered 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 neither the Company nor any 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 full force and effect.
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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, adversely affect the
qualified status of the Plan of any such plan under Sections 401(a) or 501(a)
of the Code or to a tax under Section 511 of the Code. All contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been paid to each Benefit Plan and have been
paid on a timely basis.
3.15.4 Neither the Company, any Affiliate 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 the 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 the Company prior to the Closing Date which is not in
accordance with the written or otherwise preexisting terms and provisions of
such Benefit Plans in effect immediately prior to the Closing Date. There are
no unresolved 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 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 the Company or an Affiliate of the
Company maintains or contributes to or has maintained or contributed to or was
required to maintain or contribute to or for the benefit of employees of the
Company or any Affiliate of the Company now or formerly in existence.
3.15.7 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 date of the most recent actuarial report by
all present or former participants in such Benefit Plan. For this purpose the
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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 Except as set forth on Exhibit 3.15.8, as of
December 31, 1995 the Company did not have any current or future liability
under any Benefit Plan that was not reflected in the 1995 Financial Statements,
and the liability of the Company 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 Except as set forth on Exhibit 3.15.9, the
Company does not maintain any Benefit Plan providing deferred or stock based
compensation which is not reflected in the 1995 Financial Statements.
3.15.10 The Company has not maintained a Benefit Plan
providing welfare benefits (as defined in ERISA Section 3(1)) to employees
after retirement or other separation of service except to the extent required
under Part 6 of Title I of ERISA and Code Section 4980B, or except as set forth
on Exhibit 3.15.10.
3.15.11 The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of the Company to severance pay, unemployment compensation or any
payment contingent upon a change in control or ownership of the Company, or
(ii) accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such employee or former employee.
3.15.12 All Benefit Plans subject to section 4980B of
the Code as amended from time to time or Part 6 of Title I of ERISA or both
have been maintained in 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
Company within the preceding twenty-four months who generated revenues of more
than $100,000.00 within the preceding twelve months, setting forth as to each
customer or client its name and address. Except as set forth on Exhibit 3.16,
neither the Company nor any Shareholder has received any notice, or has reason
to believe, that any such customer or client has taken or contemplates taking
any steps which could materially disrupt the business relationship of the
Company with such customer or client, or could result in the material
diminution in the value of the business of the 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 the Company or now or
previously owned or leased by the Company (the "Real Property") has been used
by the Company or any other party
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for the handling, treatment, storage or disposal of any Hazardous Substance (as
hereinafter defined). Except as set forth in Exhibit 3.17, 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. Except as set forth in
Exhibit 3.17, the Company has complied with all reporting requirements under
any applicable federal, state or local environmental laws and permits, and, to
the knowledge of the Company there are no existing violations by the Company of
any such environmental laws or permits. 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,
to the knowledge of the Company, threatened with respect to the Real Property
or otherwise against the Company in any court or before any state, federal or
other governmental agency or private arbitration tribunal and, to the knowledge
of the Company, there is no basis for any such claim, action, suit, proceeding
or investigation. To the knowledge of the Company, there are no underground
storage tanks on any Real Property which is or was owned by the Company or is
currently leased by the Company. To the knowledge of the Company, no building
or other improvement included in any Real Property which is or was owned by the
Company or is presently leased by the Company contains any asbestos, and such
buildings and improvements are free from radon contamination. For the purposes
of this Agreement, "Hazardous Substance" shall mean any hazardous or toxic
substance or waste as those terms are defined by any applicable federal, state
or local law, ordinance, regulation, policy, judgment, decision, order or
decree, including, without limitation, the Comprehensive Environmental Recovery
Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et. seq. and the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., and petroleum, petroleum
products and oil.
3.18 Insurance. Set forth in Exhibit 3.18 is a complete
list of all insurance policies which the Company maintained, or was an insured
party under, with respect to its businesses, properties or employees which are
currently in force and effect together with a list of all such policies which
have been in effect during the last 36 months but have expired. 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 material adverse change in the 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, to the Company's knowledge, no Shareholder, or Affiliate of any
Shareholder nor any officer or director of the Company possesses, directly or
indirectly, any beneficial interest in, or is a director, officer or employee
of, any corporation,
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partnership, firm, association or business organization which is a client,
supplier, customer, lessor, lessee, lender, creditor, borrower, debtor or
contracting party with or of the Company (except as a stockholder holding less
than a one percent interest in a corporation whose shares are traded on a
national or regional securities exchange or in the over-the-counter market).
3.20 Exhibits. All Exhibits attached hereto are true,
correct and complete in all material respects as of the date of this Agreement
and will be true, correct and complete in all material respects 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 Company 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 to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading.
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND THE
MERGER SUBSIDIARY.
Purchaser and the Merger Subsidiary represent and warrant to
the Company for the benefit of the Shareholders as follows:
4.1 Organization and Standing. The Purchaser and the
Merger Subsidiary are duly organized and validly existing corporations in good
standing under the laws of the State of Delaware.
4.2 Corporate Power and Authority. The Purchaser and the
Merger Subsidiary have the capacity and authority to execute and deliver this
Agreement, to perform hereunder and to consummate the transactions contemplated
hereby without the necessity of any act or consent of any other Person
whomsoever. The execution, delivery and performance by Purchaser and the
Merger Subsidiary of this Agreement and each and every agreement, document and
instrument provided for herein have been duly authorized and approved by the
respective Board of Directors (or Executive Committee thereof) of the Purchaser
and Merger Subsidiary. This Agreement and each and every other agreement,
document and instrument to be executed, delivered and performed by Purchaser or
the Merger Subsidiary in connection herewith, constitute or will, when executed
and delivered, constitute the valid and legally binding obligation of Purchaser
or Merger Subsidiary (whichever is applicable) enforceable against it in
accordance with their
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respective terms, except as enforceability may be limited by applicable
equitable principles, or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally.
4.3 Agreement Does Not Violate Other Instruments. The
execution and delivery of this Agreement by the Purchaser and Merger Subsidiary
do not, and the consummation of the transactions contemplated hereby will not,
violate any provisions of the Certificate of Incorporation, as amended, or
Bylaws, as amended, of Purchaser or Merger Subsidiary, or violate or constitute
an occurrence of default under any provision of, or conflict with, result in
acceleration of any obligation under, or give rise to a 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 or the Merger
Subsidiary is a party or is bound or by which it or its assets are affected.
4.4 Capitalization. As of the Effective Time, the
authorized capital stock of Purchaser will consist of 100,000,000 shares of
common stock, par value $0.01 per share, 13,396,757 shares of which are issued
and outstanding and 25,000,000 shares of preferred stock, par value $0.01 per
share, none of which is issued and outstanding as of the date hereof. All of
the issued and outstanding shares of common stock of the Purchaser have been
duly authorized and validly issued, and all such shares are fully paid and
nonassessable.
4.5 HPS Shares. The HPS Shares when issued in connection
with the Merger will be duly and validly issued, fully paid and nonassessable
and will be issued to the Shareholders in accordance with the terms of this
Agreement free and clear of any preemptive rights or any lien charge or
encumbrance arising through the Purchaser or the Merger Subsidiary.
4.6 Disclosure. The Purchaser has filed all forms,
reports and documents required to be filed by it with the SEC since May 19,
1995, and has heretofore made available to the Company and its Shareholders, in
the form filed with the SEC (excluding any exhibits thereto, unless otherwise
specifically requested by the Company), the Purchaser Disclosure Documents.
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 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:
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5.1 Representations True at Closing. The representations
and warranties made by the Company to Purchaser in this Agreement, the Exhibits
hereto or any document or instrument delivered to Purchaser hereunder shall be
true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of such time, except for changes contemplated by this Agreement.
5.2 Covenants of the Company . The Company shall have
duly performed in all material respects all of the covenants, acts and
undertakings to be performed by it on or prior to the Closing Date, and the
President of the Company shall deliver to Purchaser 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 in substantially the form attached
hereto as Exhibit 5.2.
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. An opinion of Vorys, Sater,
Seymour and Pease, counsel for the Company, 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 2.10 hereof, 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.
5.7 Absence of Adverse Changes. Since December 31, 1995,
(a) the Company shall not have suffered any material and adverse change in its
financial condition, results of operations, business, prospects, property or
assets, and (b) the Company shall not 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 Employment Agreements. Each individual listed in
Exhibit 2.11.1(a) shall have executed or agreed to execute an Employment
Agreement, substantially in forms set forth in Exhibit 2.11.1(b).
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5.9 Escrow Agreement. The Shareholders' Representative and
the Escrow Agent shall have executed and delivered the Escrow Agreement to the
Purchaser.
5.10 Nondisclosure and Noninterference Agreements. The
Shareholders listed on Exhibit 2.11.2(a) shall have executed and delivered to
Purchaser Nondisclosure and Noninterference Agreements substantially in the
form of Exhibit 2.11.2(b).
5.11 Shareholder Approval/Dissenter's or Statutory Rights.
Such shareholders of the Company as are required by applicable law to have
approved the Merger shall have in fact approved the Merger and Shareholders
holding not more than 5% of the outstanding stock of the Company shall not have
notified the Company that such Shareholders intend to elect nor shall have
taken any other action to perfect any dissenter's or similar statutory rights
under the provisions of any state statute affording such Shareholder such
rights as a result of the Merger.
5.12 Certificate of Merger. The Certificate of Merger
shall have been duly executed and accepted for filing by the Secretary of State
of the State of Delaware and the Merger shall have become effective.
5.13 Warrants. The Warrants shown on the Company's
balance sheet at February 28, 1996 will be repurchased and canceled prior to or
on the Closing Date.
5.14 Shareholders Agreement. The Shareholders listed on
Exhibit 5.14(a) shall each have executed a Shareholders Agreement in
substantially the form of Exhibit 5.14(b) and shall have performed all
covenants and agreements to be performed by them under such agreements as of
the Effective Time.
5.15 Registration Rights Agreement. Shareholders holding at
least 80% of the Company's Outstanding Shares shall have executed and delivered
Registration Rights Agreements to the Purchaser.
5.16 Private Placement Representation Letters. The Purchaser
shall have received Private Placement Representation Letters in substantially
the form of Exhibit 5.16 from each Shareholder other than Dissenting
Shareholders who did not execute a Shareholders Agreement.
VI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY TO
CLOSE.
All of the obligations of the Company to consummate the
transactions contemplated by this Agreement shall be contingent upon and
subject to the satisfaction, on or before the Closing Date, of each and every
one of the following conditions, all or any of which may be waived, in whole or
in part, by the Company for
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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 and the Merger Subsidiary to the Company in
this Agreement or any document or instrument delivered to the Company hereunder
shall be true and correct in all material respects on the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of such date, except for changes contemplated by this Agreement.
6.2 Covenants of Purchaser. Purchaser and the Merger
Subsidiary shall have duly performed in all material respects all of the
covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, and a duly authorized officer of 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 above.
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. An opinion of Fowler, White,
Gillen, Boggs, Villareal & Banker, P.A. counsel for the Purchaser and Merger
Subsidiary, shall have been delivered to the Shareholders' Representative for
the benefit of the 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 Registration Rights Agreement. The Purchaser shall have
executed and delivered the Registration Rights Agreement to the Shareholders'
Representative for the benefit of those Shareholders executing it.
6.7 Certificate of Merger. The Certificate of Merger
shall have been duly executed and accepted for filing by the Secretary of State
of the State of Delaware and the Merger shall have become effective.
6.8 Receipt by Shareholders of Tax Opinion. (a) The
Shareholders' Representative shall have received for the benefit of the
Shareholders the opinion of Vorys, Sater, Seymour and Pease, in form and
substance acceptable to the Shareholders' Representative,
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to the effect that the Merger should be treated as a tax free reorganization
pursuant to the provisions of Section 368(a)(1)(A) and (a)(2)(D), and the
Shareholders should recognize no gain on the exchange of their shares, except
to the extent that they receive Consideration other than the Per Share Stock
Consideration.
(b) The Purchaser and the Merger Subsidiary shall have
delivered an executed officers certificate substantially in the form attached
as Exhibit 6.8(b), and the representations and warranties of the Purchaser and
the Merger Subsidiary set forth in such officer's certificate shall be true and
correct in all material respects as of the date hereof and as of immediately
prior to the Effective Time.
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 tenth business day after the waiting period under the HSR Act has
expired or has been terminated, and all the consents listed on Exhibit 3.8 have
been obtained but in no event earlier than May 31, 1996, and in no event later
than August 31, 1996.
7.2 Transactions at Closing. At the Closing, each of the
following transactions shall occur:
7.2.1 The Company's Performance. At the Closing,
the Company shall deliver to Purchaser, the following, except to the extent
waived:
(a) all certificates representing shares
of the outstanding capital stock of the Company
(other than Dissenting Shares), 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 certificate of the President of
the Company described in Section 5.2;
(c) copies of the consents and waivers
described in Section 2.10 and Section 5.5;
(d) the assignment of assets and
contracts described in Section 2.15.
(e) satisfactory evidences of the
approvals described in Section 5.6;
(f) certificates of compliance or
certificates of good standing of the Company, as of
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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 Board of Directors of the Company approving the
transactions set forth in this Agreement;
(h) certificates of incumbency for the
officers of the Company who are executing the
Agreement and the other documents contemplated
hereunder;
(i) Employment Agreements executed by
those individuals listed in Exhibit 2.11.1(a)
substantially in the forms set forth in Exhibit
2.11.1(b);
(j) Nondisclosure and Noninterference
Agreements executed by the Shareholders listed on
Exhibit 2.11.2(a), substantially in the form of
Exhibit 2.11.2(b);
(k) opinion of counsel described in
Section 5.4;
(l) the Escrow Agreement executed by the
Shareholders' Representative;
(m) executed Registration Rights
Agreement substantially in the form of Exhibit 2.6.1
executed by the holders of at least 80% of the
Company's Outstanding Shares;
(n) the Certificate of Merger duly
executed for delivery to the Secretary of State of
the State of Delaware in form acceptable for filing;
and
(o) Private Placement Representation Letters
executed by all Shareholders other than the
Dissenting Shareholders who did not execute
Shareholder Agreements.
(p) such other evidence of the
performance of all covenants and satisfaction of all
conditions required of the Company 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 and Merger Subsidiary shall deliver to the Shareholders'
Representative for the benefit of the Shareholders the following:
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<PAGE> 35
(a) the Per Share Initial Cash Payment
for each Shareholder who is not a Dissenting
Shareholder;
(b) the Per Share Stock Consideration
for each Shareholder who is not a Dissenting
Shareholder;
(c) executed Registration Rights
Agreements, substantially in the form of Exhibit
2.6.1 with all Shareholders who are willing to
execute and deliver the same to Purchaser at Closing.
(d) the certificate of the authorized
officer described in Section 6.2;
(e) satisfactory evidence of the HSR
waiting period termination;
(f) certificate of incumbency of the
officers of Purchaser who are executing this
Agreement and the other documents contemplated
hereunder;
(g) executed Employment Agreements,
substantially in the form of Exhibit 2.11.1(b) with
each of the persons listed on Exhibit 2.11.1(a);
(h) executed Nondisclosure and
Noninterference Agreements substantially in the form
of Exhibit 2.11.2(b) with each Shareholder listed on
Exhibit 2.11.2(a);
(i) certified copy of resolutions of the
Board of Directors (or Executive Committee thereof)
of Purchaser approving the transactions set forth in
this Agreement;
(j) the Escrow Agreement executed by the
Purchaser;
(k) the Certificate of Merger duly
executed for delivery to the Secretary of State of
the State of Delaware in form acceptable for filing;
and
(l) 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 Company, or
its counsel may reasonably require.
7.2.3. Payment of Escrow Amount. At the Closing, the
Purchaser shall pay the Escrow Amount to the Escrow Agent pursuant to the
Escrow Agreement.
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<PAGE> 36
7.3 Closing of Transfer Books. After the execution of this
Agreement, there shall be no transfers on the stock transfer books of the
Company of any of the shares of the Company Common or Preferred Stock
VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, AGREEMENTS AND
COVENANTS AFTER CLOSING.
8.1 Survival of Representations and Warranties . All
representations and warranties of the parties in this Agreement or in any
document or instrument executed and delivered pursuant hereto, are only
conditions to the Closing of the transactions contemplated hereby and shall not
survive the Closing hereunder except that Purchaser's representations and
warranties in Sections 4.2 and 4.5 shall survive the Closing without limitation
and Purchaser's representation in Section 4.4 shall survive the Closing for a
period of two years.
8.2 Survival of Agreements and Covenants. All
agreements, covenants and obligations made or undertaken by the parties in this
Agreement shall be deemed to have been performed or waived upon Closing, if
Closing occurs, and shall not survive the Closing except that the agreements
and covenants contained in Sections 2.1, 2.2, 2.3, 2.4, 2.14.1, 2.16, 8.1, 8.2,
10.5, 10.6, 10.12, 10.13 and the Definitions contained therein shall survive
the Closing. The foregoing notwithstanding, the provisions of the Certificate
of Merger, the Shareholders Agreement, the Escrow Agreement, the Non-Disclosure
and Noninterference Agreements, the Employment Agreements, the Registration
Rights Agreements, the Private Placement Representation Letters and the Legal
Opinions delivered at Closing shall survive the Closing for the term set forth
therein.
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 Company,
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 the Company and
Purchaser;
9.1.2 By Company after July 31, 1996, if any of the
conditions set forth in Article VI hereof, to which the Company's 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;
and
35
<PAGE> 37
9.1.3 By Purchaser after July 31, 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.
9.2 Effect of Termination. In the event of a termination
of this Agreement pursuant to Section 9.1 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. In the event of any other
termination, the parties shall retain any and all rights attendant to a breach
of any covenant, representation or warranty made hereunder.
9.3 Risk of Loss. The Company assumes 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 Company is
materially interrupted or curtailed or the assets of the Company 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 the
Company is neither materially interrupted nor curtailed nor its assets
materially affected, or if the business is materially 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 Company, on the other
hand, are unable to agree upon the amount of such adjustment, the dispute shall
be resolved by arbitration in Tampa, Florida, in accordance with the rules and
regulations of the American Arbitration Association. The decision of such
arbitration 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:
36
<PAGE> 38
10.1.1 If to the Company:
Harrington Services Corporation
3401 Loop Road
Columbus, Ohio 43219
Attn: Robert R. Parker
and to:
Vorys, Sater, Seymour and Pease
52 E. Gay Street
Columbus, Ohio 43215
Attn: Russell M. Gertmenian, Esq.
10.1.2 If to the Shareholders' Representative:
Robert Chefitz
c/o Patricof & Co. Ventures
445 Park Avenue
New York, New York 10022
Attn: Robert Chefitz
and to:
Shareff, Friedman,
Hoffman & Goodman LLP
919 Third Avenue
New York, New York 10022
Attn: Morris Orens, Esq.
and to:
Vorys, Sater, Seymour and Pease
52 E. Gay Street
Columbus, Ohio 43215
Attn: Russell M. Gertmenian
10.1.3 If to Purchaser or Merger Subsidiary:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida, 33607
Attn: 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.
10.1.4 If delivered personally, the date on which a
notice, request, instruction or document is delivered shall be
37
<PAGE> 39
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.
10.1.5 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
Company, and the Company represents and warrants to Purchaser that no broker or
finder has acted for it or them or any entity controlling, controlled by or
under common control with it or them in connection with this Agreement other
than Smith Barney Inc. who has acted as Purchaser's broker. Purchaser agrees
to indemnify and hold harmless the Company against any fee, loss or expense
arising out of any claim by any broker or finder employed or alleged to have
been employed by it, including the fees of Smith Barney Inc. and the Company
agrees 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 it.
10.3 Waiver. Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions hereunder may
be waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
10.4 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 Company shall be borne by the Company if
incurred or accrued prior to the Effective Time and reflected in the Final
Closing Balance Sheet or by the Shareholders if incurred thereafter. To the
extent an amount is accrued and not used within nine (9) months, then the
amount of such unused accrual shall be paid by the Surviving Corporation to the
Shareholders' Representative for the account of the Shareholders. The
Surviving Corporation shall not be liable for or responsible for any expenses
of the Company or the Shareholders which is not accrued on or is in
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<PAGE> 40
excess of the accrual therefore on the Final Closing Balance Sheet.
10.5 Shareholders' Representative to Act on Behalf of
Shareholders and the Company. 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 the Shareholders, the Purchaser 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 of which such action or
performance was required. Payment or delivery of the Consideration to the
Shareholders' Representative for the account of the Shareholders shall be
deemed to be payment to or delivery of such Consideration to the Shareholders.
10.6 Public Announcements. At all times at or before the
Closing, the Company, on the one hand, and the Purchaser, on the other hand,
will consult with one another before issuing or making any reports, statements,
or releases to the public with respect to this Agreement or the transactions
contemplated hereby and will use good faith efforts to agree on the text of a
joint public report, statement, or release or will use good faith efforts to
obtain the other parties' approval of the text of any public report, statement,
or release to be made solely on behalf of a party. If such parties are unable
to agree on or approve any such public report, statement, or release and such
report, statement, or release is, based on the advice of legal counsel to a
party, required by Law or appropriate to discharge such party's disclosure
obligations, then such party may make or issue the legally required or
appropriate report, statement, or release upon prior notice to the other
parties hereto.
10.7 Confidentiality. The Company, its respective
officers, directors, employees, agents, and other representatives, will, and
will use reasonable efforts to cause its Shareholders 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 Company, unless (A) such disclosure is compelled by judicial or
administrative process or by other requirements of law and notice of such
disclosure is furnished to Purchaser; or (B) such confidential documents or
information can be shown to have been (x) previously known by the Person
receiving such documents or information, or (y) in the public domain through no
fault of such Persons. If for any reason the contemplated Merger is not
consummated, Purchaser and the Company agree that they will return any and all
such confidential information provided by any of them to the other party so
providing such information.
10.8 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.
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<PAGE> 41
10.9 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.
10.10 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
agreement in writing signed by the party against whom or which the enforcement
of such change, waiver, discharge or termination is sought.
10.11 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might be applicable under principles of conflicts of law) as to
all matters including, but not limited to, matters of validity, construction,
effect and performance.
10.12 Litigation Venue. This Agreement shall be deemed for
all purposes to have been entered into in Delaware, and any litigation brought
by any party hereto shall be brought on in the Delaware Chancery Court or in
the United States District Court in Delaware (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.
10.13 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.
10.14 Pronouns. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires.
10.15 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.
10.16 Time of Essence. Time is of the essence in this
Agreement.
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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:
---------------------------------
James K. Murray, Jr.
Title: President
"COMPANY":
Harrington Services Corporation
By:
---------------------------------
Robert R. Parker
Title: Chief Executive Officer
"MERGER SUBSIDIARY"
HealthPlan Services
Alpha Corporation
By:
---------------------------------
James K. Murray, Jr.
Title: President
SHAREHOLDERS'S REPRESENTATIVE:
------------------------------------
Robert Chefitz
<PAGE> 43
LIST OF EXHIBITS
EXHIBITS
1.1 Definitions.
2.6.1 Form of Registration Rights Agreement
2.7.1 Exceptions to Conduct of Business Prior to Closing
2.7.2 List of Bank Accounts, Safe Deposit Boxes and Powers of
Attorney.
2.11.1(a) List of Employees to Enter into Employment Agreements.
2.11.1(b) Forms of Employment Agreements for Employees.
2.11.2(a) Shareholders to Enter into Nondisclosure and
Noninterference Agreements.
2.11.2(b) Form of Nondisclosure and Noninterference Agreements.
2.14.1 Benefit Plans Being Terminated.
2.15 List of Assets and Contracts to be Transferred to the
Company.
3.1 List of Jurisdiction of Incorporation and Jurisdictions
where there is Good Standing Status.
3.1.3 List of Subsidiaries
3.2 Certificates (or Articles) of Incorporation, Articles of
Incorporation and Bylaws.
3.3 List of Authorized, Issued and Outstanding and Treasury
Shares of the Company.
3.4 List of Equity Investments.
3.5.1 1993, 1994 and 1995 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
3.7 List of Assets and Leases; List of Encumbrances.
3.8 List of Required Consents.
3.9 List of Changes.
(i)
<PAGE> 44
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.
3.13.1 List of Trademarks, Trade Names, Service Marks, Service
Names, Etc.
3.13.2(i) Lists 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.
3.14 List of Highly Compensated Employees and their Compensation,
Union Activities and Labor Disputes.
3.15 List of Benefit Plans.
3.15.8 Current or Future Liabilities under Benefit Plans not
reflected in 1995 Financial Statements.
3.15.9 Benefit Plans providing deferred or stock based
compensation not reflected in 1995 financial statement.
3.15.10 List of Benefit Plans Providing Post Separation Benefits
3.16 List of Customers, Addresses 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.
5.2 Form of Certificate of the President of the Company.
5.4 Form of Opinion of Counsel for the Company.
5.9 Form of Escrow Agreement.
5.14(a) List of Shareholders Executing Shareholders Agreements.
5.14(b) Form of Shareholders Agreement.
5.16 Form of Private Placement Representation Letter.
(ii)
<PAGE> 45
6.2 Officer's Certificate of Purchaser and Merger Subsidiary.
6.4 Form of Opinion of Counsel for Purchaser and Merger
Subsidiary.
6.8(b) Form of Certificate of Purchaser and Merger Subsidiary re
tax matters.
(iii)
<PAGE> 46
EXHIBIT 1.1
DEFINED TERMS
As used herein, the following terms shall have the following meanings unless
the context otherwise requires:
1. "Act" shall mean the Delaware General Corporation Law.
2. "Affiliate" shall mean, with respect to a Person, any other Person which
is required to be aggregated with such Person under Code Section
414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
3. "Aggregate Cash Consideration" shall mean the number derived by
multiplying the Per Share Initial Cash Payment by the Company's
Outstanding Shares.
4. "Aggregate Stock Consideration" shall mean the number derived by
multiplying the Per Share Stock Consideration by the Company's
Outstanding Shares.
5. "Aggregate Escrow Proceeds" shall mean $1,500,000.
6. "Aggregate Consideration" shall mean the sum of the Aggregate Cash
Consideration, the Aggregate Stock Consideration, and the Aggregate
Escrow Proceeds adjusted by the Purchase Price Adjustment.
7. "Agreement" shall mean this Plan and Agreement of Merger.
8. "Benefit Plans" shall have the meaning set forth in Section 3.15.
9. "Cash Payment Amount" shall mean cash equal to $32,500,000 less the
Preferred Stock Payment Amount.
10. "Closing" shall mean the consummation of the transactions provided for
in this Agreement.
11. "Closing Balance Sheet" shall mean the balance sheet of the Company as
of the Closing Date prepared in accordance with GAAP pursuant to the
provisions of Section 2.4 hereof.
12. "Closing Date" shall mean the date on which the Closing occurs pursuant
to Section 7.1 hereof.
13. "Code" shall mean the Internal Revenue Code of 1986, as amended.
14. "Company" shall mean Harrington Services Corporation, a Delaware
corporation, and unless otherwise specified, shall be deemed to include
all of its Subsidiaries.
(i)
<PAGE> 47
15. "Company Common Stock" shall mean the common stock of the Company.
16. "Company Shares" shall mean shares of Company Common Stock.
17. "Company Software" shall have the meaning set forth in Section 3.13.2.
18. "Company's Outstanding Shares" shall mean the total number of shares of
common stock of the Company which are issued and outstanding or are
issuable on a fully-diluted basis immediately prior to the Effective
Time.
19. "Consideration" shall mean the Stock Consideration, the Cash
Consideration, and the Escrow Proceeds, if any.
20. "Deferred Compensation Agreement" shall have the meaning set forth in
Section 2.14.3.
21. "Dissenting Shareholder" is a Shareholder who holds Dissenting Shares.
22. "Dissenting Shares" shall have the meaning set forth in Section 2.3.1.6.
23. "Effective Time" shall have the meaning set forth in Section 2.2 hereof.
24. "Employees" shall have the meaning set forth in Section 2.14.2.
25. "Employment Agreements" shall mean those Employment Agreements among the
entities and those individuals set forth in Exhibit 2.11.1(a),
substantially in the form attached as Exhibit 2.11.1(b), each of which
may be referred to individually as an "Employment Agreement."
26. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
27. "ERISA Plan" shall have the meaning set forth in Section 3.15.
28. "Escrow" shall mean the escrow fund established pursuant to the Escrow
Agreement to be used solely for the purposes of funding the purchase
price adjustment set forth in Section 2.4 of this Agreement.
29. "Escrow Agent" shall mean First Union National Bank of Florida or such
other financial institution as the Purchaser and the Company may agree
upon to hold the Escrow Amount pursuant to the Escrow Agreement.
30. "Escrow Agreement" means the escrow agreement substantially in the form
of Exhibit 2.3.1.2(iii), attached hereto, pursuant to which the Escrow
Amount will be held by the Escrow Agent.
(ii)
<PAGE> 48
31. "Escrow Amount" means the amount of One Million Five Hundred and 00/100
Dollars (U.S. $1,500,000).
32. "Escrow Proceeds" shall mean the proceeds, if any, from the Escrow after
termination of the Escrow and the satisfaction of all claims asserted
against the Escrow in connection with the purchase price adjustment in
accordance with the terms of the Escrow Agreement.
33. "Federal Arbitration Act" shall mean 9 U.S.C. Section Section 1 et seq.
34. "Final Closing Balance Sheet" shall have the meaning set forth in
Section 2.4 hereof.
35. "Final Statement of Net Worth" shall have the meaning set forth in
Section 2.4 hereof.
36. "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.
37. "Hazardous Substance" shall have the meaning set forth in Section 3.17.
38. "HPS Shares" shall have the meaning set forth in the Shareholders
Agreement.
39. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and Improvements
Act of 1978, as amended.
40. "Licensed Software" shall have the meaning set forth in Section
3.13.2(ii).
41. "Market Price" shall mean Twenty four dollars and Twelve and one half
cents ($24.125).
42. "Material Adverse Effect" shall have the meaning set forth in Section
3.1.2.
43. "Merger" shall mean the merger of the Company with and into the Merger
Subsidiary.
44. "Merger Subsidiary" shall mean HealthPlan Services Alpha Corporation, a
Delaware corporation.
45. "Merger Subsidiary Common Stock" shall mean the common stock of the
Merger Subsidiary.
46. "Merger Subsidiary Shares" shall mean shares of Merger Subsidiary Common
Stock.
47. "Negative Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.4.1.
(iii)
<PAGE> 49
48. "Net Worth Amount" shall mean the net worth determined in accordance
with GAAP applied consistently with prior periods as shown on the Final
Closing Balance Sheet computed in accordance with Section 2.4.
49. "1933 Act" shall mean the Securities Act of 1933, as amended.
50. "1993, 1994, and 1995 Financial Statements" shall have the meaning set
forth in Section 3.5.1.
51. "Nondisclosure and Noninterference Agreements" shall mean agreements
substantially in the form of Exhibit 2.11.2(b).
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. "Per Share Escrow Proceeds" means the Escrow Proceeds divided by the
Company's Outstanding Shares.
55. "Per Share Initial Cash Payment" shall mean the Cash Payment Amount less
the Escrow Amount divided by the Company's Outstanding Shares.
56. "Per Share Preferred Stock Consideration" shall mean the Preferred Stock
Payment Amount divided by 33,284.
57. "Per Share Stock Consideration" shall mean the Stock Consideration Share
Number divided by the Company's Outstanding Shares.
58. "Person" shall include, but is not limited to, an individual, a trust,
an estate, a partnership, an association, a company, a corporation, a
limited liability company, a sole proprietorship, a professional
corporation or a professional association.
59. "Plan Transfer Date" shall have the meaning set forth in Section 2.14.1.
60. "Positive Purchase Price Adjustment Amount" shall have the meaning set
forth in Section 2.4.2.
61. "Preferred Stock" shall mean the $100 per share Preferred Stock of the
Company as described on Exhibit 3.3.
62. "Preferred Stock Payment Amount" shall mean the amount of $3,328,400
plus the amount of the accrued but unpaid dividends on the Preferred
Stock as of the Closing.
63. "Private Placement Representation Letters" shall mean the letters in
substantially the form of Exhibit 5.16 hereto.
64. "Purchaser" shall mean HealthPlan Services Corporation, a Delaware
corporation.
(iv)
<PAGE> 50
65. "Purchaser Common Stock" shall mean the common stock of the Purchaser.
66. "Purchaser Disclosure Documents" shall have the meaning ascribed thereto
in Section 1(g) of the Shareholders Agreement.
67. "Purchaser Shares" shall mean shares of Purchaser Common Stock.
68. "Real Property" shall have the meaning set forth in Section 3.17.
69. "Registration Rights Agreement" shall mean that certain agreement, in
substantially the form as Exhibit 2.6.1, attached hereto, which shall be
entered into by the Purchaser and certain of the Shareholders pursuant
to Section 5.15 hereof.
70. "SEC" shall mean the Securities and Exchange Commission.
71. "Settlement Auditor" shall mean a big-six accounting firm to be mutually
agreed upon by the parties. If for any reason such accounting firm
shall not be available to resolve such issues, the Shareholders'
Representative and Purchaser shall promptly contact the national office
of, and shall retain the services of, another big-six accounting firm.
If the Shareholders' Representative and Purchaser cannot agree on such
accounting firm to be retained, the Shareholders' Representative and
Purchaser shall each submit the name of another big-six 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.
72. "Shareholders" shall mean the shareholders of the Company at the
Effective Time, each of which may be referred to individually as a
"Shareholder."
73. "Shareholders Agreement" shall mean the agreement to be executed by the
persons listed on Exhibit 5.14(a) in substantially the form of Exhibit
5.14(b) hereto.
74. "Shareholders' Representative" shall mean Robert Chefitz, or such other
Shareholder who has been chosen in writing, with notice thereof to the
Purchaser, by a majority of the Shareholders based on their then
percentage of beneficial ownership (without duplication) of HPS Shares.
75. "Statement of Net Worth" shall mean the statement of the Company's Net
Worth derived from the Closing Balance Sheet in accordance with the
provisions of Section 2.4 hereof.
76. "Stock Consideration Share Number" shall mean the number of shares
determined by dividing 32,500,000 by the Market Price.
77. "Subsidiary" shall mean any entity the controlling interest in which is
owned either directly or indirectly by the Company.
(v)
<PAGE> 51
78. "Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
79. "Surviving Corporation Common Stock" shall mean common stock of the
Surviving Corporation.
80. "Surviving Corporation Shares" shall mean shares of Surviving
Corporation Common Stock.
81. "Target Net Worth Amount" shall mean $9,881,811.
82. "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.
83. "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).
84. "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.
(vi)
