EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CRA Managed Care, Inc.
AND
United Healthcare Services, Inc.
March 19, 1996
TABLE OF CONTENTS
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PAGE
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Article I -- List of Defined Terms.................................... 1
Article II -- Sale of Shares and Closing.............................. 2
2.1 -- Purchase and Sale.......................................... 2
2.2 -- Purchase Price............................................. 2
2.3 -- The Closing................................................ 2
Article III -- Representations and Warranties of Buyer................ 3
3.1 -- Organization............................................... 3
3.2 -- Authority Relative to this Agreement....................... 3
3.3 -- Brokers and Finders........................................ 4
3.4 -- Accuracy of Representations and Warranties................. 4
3.5 -- Funding of the Transaction................................. 4
Article IV -- Representations and Warranties of Seller................ 4
4.1 -- Organization............................................... 4
4.2 -- Subsidiaries............................................... 5
4.3 -- Capitalization of the Company.............................. 5
4.4 -- Governmental Authorization and Regulations................. 5
4.5 -- Authority Relative to this Agreement....................... 5
4.6 -- Financial Statements....................................... 6
4.7 -- Employment Understandings and Labor Relations.............. 7
4.8 -- Absence of Certain Changes or Events....................... 7
4.9 -- Employee Benefit Plans..................................... 9
4.10 -- Litigation and Liabilities................................ 10
4.11 -- Compliance with Laws and Orders........................... 10
4.12 -- Tax Returns and Reports................................... 11
4.13 -- Insurance................................................. 12
4.14 -- No Defaults............................................... 13
4.15 -- Brokers and Finders....................................... 13
4.16 -- Real Estate............................................... 13
4.17 -- Contracts................................................. 14
4.18 -- Bank Accounts, Guarantees and Powers...................... 15
4.19 -- Intellectual Property Rights.............................. 15
4.20 -- Insider Interests......................................... 16
4.21 -- Absence of Certain Business Practices..................... 16
4.22 -- No Interest in Competitors................................ 16
4.23 -- Disclosure................................................ 16
4.24 -- Genesys................................................... 17
4.25 -- Accuracy of Representations and Warranties................ 17
PAGE
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Article V -- Covenants................................................ 18
5.1 -- Affirmative Covenants of the Seller........................ 18
5.2 -- Negative Covenants of the Seller........................... 18
5.3 -- Access and Information..................................... 21
5.4 -- Additional Arrangements.................................... 21
5.5 -- Continuing Nature of Representations and Warranties........ 22
5.6 -- Tax Matters................................................ 22
5.7 -- Appropriate Action; Consents; Filings...................... 24
5.8 -- Company Employees.......................................... 24
5.9 -- Employee Benefits.......................................... 25
5.10 -- Employment Agreements..................................... 26
5.11 -- Indemnification........................................... 26
5.12 -- Survival of Indemnifications, Representations and
Warranties....................................................... 28
5.13 -- Funding of the Transaction................................ 28
5.14 -- Insurance................................................. 29
5.15 -- Network Access............................................ 29
5.16 -- Audited Financials........................................ 29
5.17 -- Trademarks................................................ 29
5.18 -- Cost Reimbursement Agreement.............................. 29
Article VI -- Closing Conditions...................................... 30
6.1 -- Conditions to Each Party's Obligation...................... 30
6.2 -- Conditions to Obligation of the Seller..................... 31
6.3 -- Conditions to Obligations of Buyer......................... 31
Article VII -- Termination, Amendment and Waiver...................... 32
7.1 -- Termination................................................ 32
7.2 -- Effect of Termination...................................... 33
7.3 -- Fees and Expenses.......................................... 33
7.4 -- Amendment.................................................. 33
7.5 -- Waiver..................................................... 34
Article VIII -- General Provisions.................................... 34
8.1 -- Notice of Breach........................................... 34
8.2 -- Publicity.................................................. 34
8.3 -- Assignment................................................. 34
8.4 -- Interpretation............................................. 34
8.5 -- Notices.................................................... 34
8.6 -- Separability............................................... 35
8.7 -- Specific Performance....................................... 36
8.8 -- Entire Agreement........................................... 36
8.9 -- Governing Law.............................................. 36
8.10 -- Dispute Resolution and Remedies........................... 36
8.11 -- Counterparts.............................................. 36
8.12 -- No Third Party Benefit.................................... 36
Exhibit A............................................................. 38
Exhibit B............................................................. 39
(Copies of attachments to this agreement will be furnished by the Company
upon request.)
STOCK PURCHASE AGREEMENT
------------------------------
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March 19, 1996
is made and entered into by and between CRA Managed Care, Inc., a Massachusetts
corporation ("Buyer"), and United Healthcare Services, Inc. (formerly known as
UHC Management Company, Inc.), a Minnesota corporation ("Seller").
WHEREAS, Seller owns 100 shares of common stock, par value $.0005 per share,
of FOCUS Healthcare Management, Inc. a Tennessee corporation (the "Company"),
constituting all of the issued and outstanding shares of capital stock of the
Company (such shares being referred to as the "Common Stock").
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the Common
Stock on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
LIST OF DEFINED TERMS
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For purposes of this Agreement, the following terms shall be defined as
follows:
A. "AFFILIATE" shall mean with respect to any person (as hereinafter
defined), any person that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with, such person.
B. "COMMON STOCK" shall mean the Company's common shares, $.0005 par value
per share.
C. "DISCLOSURE SCHEDULE" shall mean the documents prepared and delivered by
the Company upon the execution of this Agreement with respect to its
representations and warranties under this Agreement.
D. "PERSON" shall mean an individual, a group, a corporation, a
partnership, an association, a trust or any other entity or organization.
E. "SUBSIDIARY" shall mean any corporation or partnership of which at least
50% of the outstanding voting securities or ownership interests are
directly or indirectly owned by the Company. Unless the context otherwise
requires, the terms "the Company" shall include
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such entities and their respective Subsidiaries. For purposes of this
Agreement, unless otherwise provided for, Genesys Cost Management
Systems, Inc. ("Genesys") shall not be deemed to be a Subsidiary of the
Company.
F. "TO THE KNOWLEDGE OF" shall mean, to the extent related to the
representations and warranties made in Articles III and IV, information
which is known or should have been known by the officers of the Seller or
the Buyer, as the case may be, listed on Exhibit A to this Agreement, as
such knowledge has been obtained in the normal conduct of the business
and following, unless otherwise stated, a reasonable investigation or
inquiry by Buyer or Seller, as the case may be, for the express purpose
of making such representations and warranties.
ARTICLE II
SALE OF SHARES AND CLOSING
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Section 2.1 Purchase and Sale. Seller agrees to sell to Buyer, and Buyer
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agrees to purchase from Seller, all of the right, title and interest in and to
all of the outstanding Common Stock of the Company (the "Common Stock") on the
terms and subject to the conditions set forth in this Agreement.
Section 2.2 Purchase Price. The purchase price for the Common Stock is
---------------------------
$21,000,000 (Twenty-one million dollars) (the "Purchase Price").
Section 2.3 The Closing.
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(a) The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Hutchins, Wheeler & Dittmar, at
10:00 a.m. on April 1, 1996 (the "Closing Date"), or at such other place and at
such other date as is mutually agreeable to Buyer and Seller. The purchase and
sale of the Common Stock will be effective as of 5:00 p.m. EST on the Closing
Date or such other date designated by the parties.
(b) Subject to the conditions set forth in this Agreement, the parties agree
that at the Closing:
(i) Buyer shall deliver to Seller the Purchase Price by Federal Funds
wire transfer of immediately available funds to the account designated by
Seller;
(ii) Seller shall deliver to Buyer a stock certificate, free and clear
of all liens and encumbrances and restrictions, evidencing the Common Stock
and registered in Buyer's name;
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(iii) Each of the parties shall deliver to the other the documents
required to be delivered pursuant to Agreement; and
(iv) Buyer shall pay to Seller $12,000 (Twelve thousand dollars) in
consideration of certain agreements of Seller made pursuant to Section
5.8 herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
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Buyer represents and warrants to the Seller as follows that, except as set
forth in a Disclosure Schedule:
Section 3.1 Organization. Buyer is a corporation duly incorporated, validly
-------------------------
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power to carry on its respective
business as it is now being conducted.
Section 3.2 Authority Relative to this Agreement.
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(a) Buyer has the requisite corporate power to enter into this Agreement and
to carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized, to the extent required, by the Board of Directors of Buyer, and
no other corporate proceedings on the part of Buyer are necessary to authorize
the execution, delivery and performance of this Agreement, and the transactions
contemplated by hereby and thereby. This Agreement has been duly and validly
executed and delivered by Buyer and is a valid and binding obligation of Buyer
enforceable against it in accordance with its terms.
(b) Buyer is not subject to or obligated under:
(i) any charter or by-law;
(ii) to the knowledge of Buyer, any provision of any material contract,
mortgage, indenture, lease or other instrument or agreement or any material
license, franchise or permit; or
(iii) any material order or decree,
which would be breached or violated or in respect of which a right of
acceleration would be created adversely affecting its ability to comply with its
obligations and commitments hereunder, by its executing, delivering and carrying
out this Agreement.
(c) To the knowledge of Buyer:
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(i) there is no legal impediment to the execution and delivery of this
Agreement by Buyer and
(ii) except as referred to herein, and except for compliance with the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"H-S-R Act"), (x) there is no legal impediment to the consummation of the
transactions contemplated hereby by Buyer, (y) no filing, notice to, or
registration with, or authorization, consent or approval of, any public
body or authority and (2) no notice to, consent or approval of any third
party or entity, is necessary for the consummation by Buyer of the
transactions contemplated hereby.
Section 3.3 Brokers and Finders. No broker, finder or financial advisor is
--------------------------------
acting or has acted on behalf of Buyer or is entitled to receive any brokerage
fees, commissions, finders' fees or financial advisory fees in connection with
the transactions contemplated herein.
Section 3.4 Accuracy of Representations and Warranties. No representation
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or warranty made by Buyer to the Seller in this Agreement is false or misleading
with respect to any material fact, or omits or fails to state a material fact
necessary to make the statements contained therein not misleading.
Section 3.5 Funding of the Transaction. Buyer will have sufficient cash on
---------------------------------------
hand and available through bank facilities in effect and approved for the
purchase of the Common Stock to pay the Purchase Price as required by this
Agreement without any contingency or approval by a third party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
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Except as set forth and described in the Disclosure Schedule (which shall
specifically reference the applicable Section of this Agreement), the Seller
represents and warrants to Buyer as follows:
Section 4.1 Organization. The Company is a corporation duly incorporated,
-------------------------
validly existing and in good standing under the laws of the State of Tennessee
and has the requisite corporate power to carry on its business as it is now
being conducted. The Company is duly qualified and licensed to conduct business
as a foreign corporation, and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary other than where failure to be so
qualified would not materially adversely effect the Company's ability to carry
on its business as currently conducted. All jurisdictions where the Company or
any Subsidiary is required to be or is qualified to do business as a foreign
corporation due to the nature of its operations are listed in Section 4.1 of the
Disclosure
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Schedule. The Company has previously furnished to Buyer true and complete copies
of the articles of incorporation and by-laws, each as amended to date, of the
Company.
Section 4.2 Subsidiaries. The Company has no Subsidiaries.
-------------------------
Section 4.3 Capitalization of the Company.
- ------------------------------------------
(a) As of the date of this Agreement, the authorized capital stock of the
Company consists of the following:
(i) 20,000,000 shares of Common Stock, of which:
(1) 100 shares are issued and outstanding and owned by the Seller;
(2) 19,999,900 shares are reserved for future issuance.
(ii) 102,000 shares of Preferred Stock, par value .01, none of which is
issued or outstanding
All of the issued and outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights. At
Closing there will be, no options, warrants, rights, agreements, commitments or
outstanding securities obligating the Company to issue, transfer or sell, or to
redeem, purchase or otherwise acquire, directly or indirectly, any shares of
Common Stock and no obligations to issue, transfer or sell any Shares of Common
Stock. All of the Common Stock is held by the Seller and the Seller will
transfer the Common Stock to the Buyer free and clear of all liens, encumbrances
and restrictions.
Section 4.4 Governmental Authorization and Regulations. Section 4.4 of the
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Disclosure Schedule lists all material governmental licenses, permits,
certificates, consents, certificates of authority, bonds, orders or other
approvals currently held by the Company. The Company holds all governmental
licenses, permits, certificates, consents, certificates of authority, bonds,
orders, approvals and other authorizations, whether foreign, federal, state or
local, necessary for the operation of its business, as currently conducted and
as contemplated by this Agreement to be conducted and to own, hold under lease
or operate its properties where the absence of such items would have a material
adverse effect on the business or financial condition of Company.
Section 4.5 Authority Relative to this Agreement.
- -------------------------------------------------
(a) Seller has the requisite corporate power to enter into this Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and have
been duly authorized, to the extent required, by the Board of Directors of the
Seller and, no other corporate proceedings on the part of the Seller
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will be necessary to authorize this Agreement, and the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Seller and is a valid and binding obligation of the Seller enforceable against
the Seller in accordance with its terms.
(b) The Seller is not subject to or obligated under:
(i) its charter or bylaws;
(ii) any provision of any material obligation or right, whether a
contract, mortgage, indenture, lease or other instrument or agreement or any
license, franchise or permit; or
(iii) any order or decree, which, to the knowledge of Seller, would be
breached or violated in any material respect or in respect of which a right
of acceleration or termination would be created, adversely affecting its
ability to comply with its obligations and commitments hereunder, by the
execution, delivery and carrying out of this Agreement.
(c) To the knowledge of the Seller:
(i) there is no legal impediment to the Company's execution and delivery
of this Agreement; and
(ii) except as referred to herein or in the Disclosure Schedules, and
except for compliance with the provisions of the H-S-R Act, (x) there is no
legal impediment to the Company's consummation of the transactions
contemplated hereby, and (y) no filing or registration with, or
authorization, consent or approval of, any public body or authority and no
consent or approval of any third party or entity, is necessary for the
consummation by the Company of the transactions contemplated hereby.
Section 4.6 Financial Statements.
- ---------------------------------
(a) Section 4.6(a) of the Disclosure Schedule sets forth the unaudited
balance sheet of the Company as of December 31, 1994 and the unaudited income
statement for the year then ended (the "1994 Financials") and unaudited balance
sheet as of December 31, 1995 and the unaudited income statement for the year
then ended (the "1995 Financials"). The 1994 Financials and the 1995 Financials
are sometimes collectively referred to as the "Financial Statements".
(b) The Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis (except as
may be indicated in any audited financial statements or in the notes thereto)
and fairly present the financial position of the Company as at the dates thereof
and the results of their operations and changes in financial position for the
periods then ended.
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(c) The accounts receivable balance and related reserve for doubtful
accounts shown on the Financial Statements are reported in accordance with GAAP
and as of the date of this Agreement, the Company has no knowledge that any such
receivables are currently not collectible in the normal course of business
consistent with past practice, except to the extent reserved against as being
uncollectible.
Section 4.7 Employment Understandings and Labor Relations.
- ----------------------------------------------------------
(a) There are no written or oral employment agreements or contracts relating
to employment to which the Company is a party or for which the Company has any
liability. Each of the written contracts or agreements is, to the knowledge of
the Company, valid, binding and enforceable in accordance with its terms, and
none of the parties thereto is, to the knowledge of the Company, in default of
any of its obligations thereunder.
(b) Section 4.7(b) of the Disclosure Schedule contains a complete listing of
all unfair labor practice complaints, labor disturbances or other controversies
respecting employment, whether pending or, to the knowledge of the Company,
threatened, or proposed against the Company, or to the best of Seller's
knowledge, any current employee, officer, or director. The Company is in
material compliance with all laws materially affecting employment and employment
practices, terms and conditions of employment and wages and hours and is not
engaged in any unfair labor practice. The Company is not a party to or bound by
any collective bargaining agreement with any labor union or organization nor, to
the knowledge of the Company, are any of its employees represented by any labor
union or organization. To the knowledge of the Company there are no union
organization attempts underway with respect to the employees of the Company. To
the knowledge of the Company, no employee of the Company is subject to any
secrecy or noncompetition agreement or any agreement or restriction of any kind
with any third party that would impede in any material way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of the Company.
(c) Section 4.7(c) of the Disclosure Schedule contains a complete listing of
all written or oral agreements or understandings relating to individuals or
entities providing services to the Company as independent contractors and which
provide for annual payments in excess of $100,000.00.
Section 4.8 Absence of Certain Changes or Events. Except as described in
-------------------------------------------------
the Financial Statements (or in the notes thereto), or as otherwise agreed to in
this Agreement or in writing by Buyer, since the date of the 1995 Financials:
(a) the Company has conducted its business only in ordinary and usual
course;
(b) there has not been any material adverse change in the condition
(financial or otherwise), results of operations, businesses, properties, assets,
liabilities or earnings of the
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Company taken as a whole and the Company is not aware of any information
(excluding public information regarding economic conditions and similar matters
of general application) which reasonably could be expected to result therein;
(c) neither the Seller nor the Company has entered into any employment or
severance agreements, or granted any increase in compensation, bonuses,
severance pay, or other employee benefits, payable to or with respect to any
Company Employee (as defined in Section 5.8 of this Agreement), except for any
increase in compensation granted in the ordinary course of business consistent
with past practices for the Company Employees or as required under Sections 5.8
or 5.9 of this Agreement.
(d) the Company has not made any loans or advances to any officer, director,
shareholder or Affiliate of the Company (except for ordinary travel and business
expense payments);
(e) the Company has not declared or paid, or accrued any liability for the
payment of, any dividends or made any other distributions to its shareholders
with respect to shares of Common Stock;
(f) the Company has not entered into any material commitment or transaction
(including without limitation any borrowing or capital expenditure) other than
in the ordinary course of business;
(g) there has not been any material change in the accounting methods or
practices followed by the Company except as required by GAAP and disclosed to
Buyer;
(h) the Company has not incurred any debt, liability or obligation, whether
accrued, absolute, contingent or otherwise, which is material to the business or
financial condition of the Company other than in the ordinary course of
business;
(i) the Company has not sold, assigned, transferred or granted any exclusive
license with respect to any trademark, trade name, service mark, copyright,
trade secret or other intangible asset;
(j) the Company has not issued, redeemed or repurchased any stock, bond or
other corporate security;
(k) the Company has not experienced any material damage, theft or loss;
(l) the Company has not relinquished any material contract or contract
right;
(m) the Company has not entered into any commitment (contingent or
otherwise) to do any of the foregoing.
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Section 4.9 Employee Benefit Plans.
- ------------------------------------
(a) Section 4.9(a) of the Disclosure Schedule sets forth any pension,
retirement, savings, disability, medical, dental, health, life, severance pay,
Internal Revenue Code Section 125 "cafeteria" or "flexible benefit", vacation
pay, sick pay, stock purchase, stock option, deferred compensation, incentive
compensation, fringe benefit, stay-with-bonus, change of control agreement or
other employee benefit plan, program or arrangement (including without
limitation, any employee pension benefit plan as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
employee welfare benefit plan as defined in Section 3(1) of ERISA), under which
Company Employees (as defined in Section 5.8 of this Agreement) are entitled to
participate or benefit, whether or not any of the foregoing is funded and
whether insured or self-funded (the "Employee Benefit Plans").
(b) Each Employee Benefit Plan maintained by the Seller in connection with
the Company is in substantial compliance with applicable law and has been
administered and operated in all material respects in accordance with its terms.
Each Plan which is intended to be "qualified" within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended, has received a
favorable determination letter from the Internal Revenue Service and no event
has occurred and no condition exists which could reasonably be expected to
result in the revocation of any such determination.
(c) A true and complete copy of each Employee Benefit Plan, and where
applicable, a copy of the most recent IRS Form 5500 annual report, IRS
determination letter, trust agreement or other funding arrangement, and summary
plan description with respect to each such Employee Benefit Plan has been
furnished to Buyer.
(d) None of the Employee Benefit Plans provide benefits with respect to
current or former Company Employees (or their beneficiaries) beyond their
retirement or other termination of employment, other than (i) coverage for
benefits mandated by applicable law, (ii) death benefits or retirement benefits
under an employee pension benefit plan (as defined by section 3(2) of ERISA),
(iii) benefits, the full cost of which is borne by the current or former Company
Employee, or beneficiary; or (iv) severance or disability plans identified on
Section 4.9(a) of the Disclosure Schedule.
(e) None of the Employee Benefit Plans is or has been subject to Title IV of
ERISA. None of the Seller, the Company, or any entity required to be aggregated
with the Seller or the Company for purposes of section 414 of the Code or
section 4001 of ERISA has (while so aggregated) terminated an employee pension
benefit plan (as defined in section 3(2) of ERISA) that is or has been subject
to Title IV of ERISA, nor has any such employee pension benefit plan ever been
the subject of termination proceedings by the Pension Benefit Guaranty
Corporation. No Person has engaged in any transaction in connection with any
Employee Benefit Plan that
9
could reasonably be expected to result in the imposition of a penalty pursuant
to section 502(i) of ERISA, damages pursuant to section 409 of ERISA, or a tax
pursuant to section 4975(a) of the Code. No liability, claim, action, or
litigation has been incurred, made, commenced, or threatened in connection with
any Employee Benefit Plan against the Company, its officers, or directors, or
any Employee Benefit Plan, or any fiduciary or administrator thereof (other than
for routine claims for benefits and administrative expenses payable in the
ordinary course).
(f) All required contributions to, and all payments with respect to, the
Employee Benefit Plans have been timely made.
(g) The consummation of the transactions contemplated by this Agreement will
not (i) entitle any current or former Company Employee to any severance or
termination pay, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such Company Employee, except as specifically
provided in Sections 5.8 and 5.9 of this Agreement with respect to Seller's
401(k) Plan (as defined in Section 5.8).
Section 4.10 Litigation and Liabilities.
- -----------------------------------------
(a) Section 4.10 of the Disclosure Schedule lists and briefly describes all
claims, actions, suits, disputes, proceedings or governmental or regulatory
investigations involving, pending or, to the knowledge of the Company threatened
against the Company. Except as noted in Section 4.10 of the Disclosure Schedule,
none of the matters listed therein may reasonably be expected to have a
materially adverse effect upon the Company's operations as currently conducted.
(b) To the knowledge of the Seller, there are no judgments, consents,
decrees, injunctions or any other judicial or administrative mandates
outstanding against the Company.
Section 4.11 Compliance with Laws and Orders.
- ----------------------------------------------
(a) The Company is in compliance in all material respects with all laws,
regulations and orders and governing instruments applicable to it and to the
conduct of its business and the Company has not received any notice of any
material noncompliance with any laws, regulations and orders and governing
instruments applicable to it and the conduct of its business, and
(b) The Company is not in default under, and no event has occurred which,
with the lapse of time or action by a third party, could result in the default
under, the terms of any judgment, order, writ, decree, permit or license of any
agency of any government or court, whether federal, state, municipal or local
and whether at law or in equity except where such default would not materially
adversely effect the Company's ability to carry on its business as it is now
being conducted.
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Section 4.12 Tax Returns and Reports.
- --------------------------------------
(a) All federal, state, local and foreign tax returns, declarations, report
estimates, statements and information return required to be filed in respect of
Taxes, as defined in Section (m) below ("Tax Returns") required to be filed for
the periods through the Closing Date by the Company have been or will be filed
with the appropriate governmental authorities in all jurisdictions in which such
Tax Returns are required to be filed, and all such Tax Returns and reports
properly reflect in all material respects the taxes, reporting requirements and
responsibilities of the Company for the periods shown thereon. All Taxes shown
to be due by the Tax Returns, or which are otherwise claimed to be due, to any
taxing authority from the Company have been paid or provided for. 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. The liabilities for Taxes, other than deferred Tax
liabilities, provided for in the Financial Statements are in all material
respects sufficient for payment of all unpaid Taxes accrued for or applicable to
the Company through the periods reflected in such Financial Statements. The
Company has not received any notice of audit, assessment or investigation by the
Internal Revenue Service or any other taxing authority in connection with any
Tax Returns and there are no pending tax examinations of or Tax claims asserted
against the Company, or any of its properties. There are no Tax liens on any of
the properties or assets of the Company or its Subsidiaries except for liens of
current Taxes not yet due and payable. The Company has not waived any law or
regulation fixing, or consented to the extension of, any period of time for
assessment of any Taxes which waiver or consent is currently in effect.
(b) The Company is not a party to any agreement, contract, arrangement or
plan that has resulted or would result in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(c) The Company has not received any outstanding subpoenas or requests for
information with respect to any federal income tax returns of the Company or the
Taxes reflected on such returns.
(d) No consent under Section 341(f) of the Code has been filed with respect
to the Company.
(e) The Company has not been at any time 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.
(f) 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
11
elections, offset prohibition elections or other deemed or actual elections
under Section 338 of the Code are applicable to the Company or any Subsidiaries.
(g) The Company is not nor has been subject to the provisions of Section
1503(d) of the Code.
(h) There are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax, other than real or personal
property Taxes; to which the Company may be subject.
(i) The Company has provided to Buyer a complete and accurate list of
locations by city and state or country in which the Company presently does
business, is qualified to do business or files any state, local or foreign
income, payroll or franchise tax returns.
(j) The Company's net operating losses have been limited under Section 382
of the Code, as described in the Disclosure Schedule, as a result of changes in
ownership of the Common Stock or Preferred Stock occurring prior to Closing.
(k) The Company has no liability for the Taxes of any person other than the
Seller and its affiliates (i) under Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise.
(l) Seller is a wholly-owned subsidiary of the "common parent" of an
"affiliated group" of corporations (as those terms are used in section 1504(a)
of the Code and the Treasury regulations promulgated under section 1502 of the
Code) that includes the Company (the "Seller Group"). The Seller and the Company
will be included in the consolidated federal income Tax Return filed by Seller's
owner for the Taxable Period including the Closing Date.
(m) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees assessments or charges of any kind whatsoever,
including, without limitation, all interest and penalties thereon and additions
to tax or additional amounts imposed by any taxing authority, domestic or
foreign, upon the Company or any subsidiary.
Section 4.13 Insurance. Section 4.13 of the Disclosure Schedule contains a
------------------------
list of all the insurance policies maintained by or on behalf of the Company, on
its respective properties, assets, business, operations or personnel. To the
knowledge of the Company, its business operations and all insurable properties
and assets are insured in all material respects for their benefit against all
risks that are customarily insured against in the industry and that are usually
insured against by
12
businesses operating similar businesses or properties in the localities where
such businesses or properties are located, in each case:
(a) under policies issued by insurers of recognized responsibility, in such
amounts with such deductibles and against such risks and losses as are, in the
reasonable opinion of the Seller, adequate for the business engaged in by the
Company, or
(b) by self-insurance or self-retention by the Company as described in the
Disclosure Schedule.
All such policies are in full force and effect and neither the Company is in
default (A) thereunder in any manner which could result in the denial of
coverage or cancellation of a policy, or (B) in the payment of any premium.
Except for the Texas Association of School Boards litigation, there currently is
no outstanding material claim with respect to such insurance coverage. Neither
the Company nor any Subsidiary has received notification of, and, to the
knowledge of the Company, no grounds exist for, the cancellation or proposed
cancellation of any such policies. To the knowledge of the Company there is no
reason why any such policies would not be valid, binding and enforceable in all
material respects, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding thereof may be brought. The Company has not failed to give any notice
or present any claim thereunder in accordance with such policies, such as would
permit the insurer to deny coverage under such policies.
Section 4.14 No Defaults. The Company is not nor, to the Company's
--------------------------
knowledge is any other party thereto, in material violation or breach of, and,
to the knowledge of the Seller, no event exists which constitutes or would
(after notice or lapse of time or both) constitute a material default (or give
rise to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any Company Contract, (as defined in
Section 4.17).
Section 4.15 Brokers and Finders. No broker, finder or financial advisor
----------------------------------
is acting or has acted on behalf of Seller or is entitled to receive any
brokerage fees, commissions, finders' fees or financial advisory fee in
connection with the transactions contemplated herein.
Section 4.16 Real Estate.
- --------------------------
(a) The Company does not own any real property. The leased property listed
in Section 4.16 of the Disclosure Schedule constitutes all of the real property,
in excess of 5,000 square feet, occupied by the Company (the "Real Property").
The Real Property has access sufficient for the conduct of the Company's
business as now conducted or as presently proposed to be conducted to public
roads and to all utilities, including electricity, sanitary and storm sewer,
potable water,
13
natural gas and other utilities, used in the operation of the business of
the Company at that location.
(b) To the knowledge of the Seller, the leases described in Section 4.16 the
Disclosure Schedule are in full force and effect, and the Company holds a valid
and existing leasehold interest under each of the leases for the term set forth
in Section 4.16(b) of the Disclosure Schedule. The Company has delivered to
Buyer complete and accurate copies of each of the leases described in Section
4.16 of the Disclosure Schedule, and none of such leases has been modified in
any material respect, except to the extent that such modifications are disclosed
by the copies delivered to Buyer. The Company is not in material default, and to
the knowledge of the Company no circumstances exist which, if unremedied, would,
either with or without notice or the passage of time or both, result in the
Company's material default under any of such leases; nor, to the knowledge of
the Seller, is any other party to any of such leases in material default.
(c) The buildings, machinery, equipment and other tangible assets used in
the conduct of the Company's business are in good condition and repair, ordinary
wear and tear excepted, and are usable in the ordinary course of business. There
are no material defects in such assets or other conditions relating thereto
which, in the aggregate, materially adversely affect the operation value of such
assets. The Company owns, or leases under valid leases, all buildings,
machinery, equipment and other tangible assets reasonably necessary for the
conduct of its business.
(d) The Company is not in violation in any material respect of any
applicable zoning ordinance or other law, regulation or requirement including
laws relating to hazardous waste disposal, relating to the operation of any
properties used in the operation of its business, and the Company has not
received any notice of any such violation, or the existence of any condemnation
proceeding with respect to any of the Real Property, except, in each case, with
respect to violations or proceedings the potential consequences of which do not
or will not materially impair the use of any of the Company's Real Property.
Section 4.17 Contracts.
- ------------------------
(a) Section 4.17(a) of the Disclosure Schedule sets forth as of the date of
this Agreement a list of each contract or agreement of the Company including,
without limitation, contracts or agreements between the Company, on the one
hand, and any person or entity, on the other hand (together with the contracts
and agreements listed in Section 4.17(b) of the Disclosure Schedule, the
"Company Contracts"):
(i) involving an aggregate payment or commitment per contract or
agreement on the part of either of the parties thereto of more than $100,000
during the 12-month period ended December 31, 1995;
(ii) concerning a material partnership or joint venture with another
person;
14
(iii) pursuant to which assets or services are provided to or from an
affiliate in excess of $10,000 in any 12-month period; or
(iv) which is otherwise material to the Company.
To the Company's knowledge, all the Company Contracts are valid and in full
force and effect on the date hereof. Correct and complete copies of all written
Company Contracts have been made available to Buyer and the terms of all oral
Company Contracts have been disclosed to Buyer.
(b) Section 4.17(b) of the Disclosure Schedule lists each Company Contract
to which the Company or any Subsidiary is a party and which limits the right of
the Company prior to the Closing Date or any of its subsidiaries at or after the
Closing Date, to engage in, or to compete with any person in, any business,
including each contract or agreement containing exclusivity provisions
restricting the geographical area in which, or the method by which, any business
may be conducted by the Company prior to the Closing Date, or Buyer or any of
its subsidiaries after the Closing Date.
(c) As of the date of this Agreement, to the knowledge of the Company, the
relationships of the Company with their customers are good commercial working
relationships. During 1995, no material customer of the Company or its
Subsidiaries has canceled or otherwise terminated its relationship with the
Company or such Subsidiaries and to the Company's knowledge no material customer
of the Company or any Subsidiary currently intends to cancel or otherwise
terminate its relationship with the Company or its Subsidiaries.
Section 4.18 Bank Accounts, Guarantees and Powers. Section 4.18 of the
---------------------------------------------------
Disclosure Schedule sets forth:
(a) a list of all accounts maintained by the Company at any bank or other
financial institution;
(b) all agreements or commitments of the Company guaranteeing the payment of
money or the performance of other obligations or contracts by any third persons
(other than endorsements of negotiable instruments in the ordinary course of the
Company's or any Subsidiary's business); and
(c) the names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from the Company or
any Subsidiary together with a summary of the terms thereof.
Section 4.19 Intellectual Property Rights. Section 4.19 of the Disclosure
-------------------------------------------
Schedule sets forth (a) all material patents, trademarks, service marks,
tradenames, slogans, registered copyrights, and
15
commercially significant unregistered copyrights owned, used, or licensed by the
Company (the "Marks and Rights"), including all titles, registration numbers,
application numbers, dates of registration and application, inventors, licensor,
and licensees, as applicable; and (b) all litigation and claims currently
outstanding or brought or made by the Company or by a third party against the
Company since January 1, 1994, involving the Marks and Rights or trade secrets,
including all conflicting claims of ownership and claims of infringement of the
Marks and Rights or the trade secrets. The Company or Seller's parent company
owns or possesses the right to use all Marks and Rights Company currently uses,
and to the knowledge of the Company, there are no conflicts with the rights of
others with respect to such use.
Section 4.20 Insider Interests. No present officer or director or employee
--------------------------------
of the Company (a) owns, directly or indirectly, in whole or in part, any of the
material properties used in the business of the Company, (b) has received a loan
or advance from the Company (other than with respect to business and travel
expenses) which is currently outstanding, (c) has the right to borrow from the
Company (other than with respect to business travel), (d) has any obligation to
make any loan to the Company, or (e) has any other material business
relationship with the Company other than in his or her capacity as an officer,
director, shareholder, employee, health care provider, provider of legal
services or subscriber.
Section 4.21 Absence of Certain Business Practices. Neither the Company
----------------------------------------------------
nor, to the knowledge of the Company, any officer, employee or agent of the
Company, nor any other person or entity acting on its behalf, has, directly or
indirectly, given or agreed to give any gift or similar benefit to any customer,
supplier or governmental employee or other person who is or may be in a position
to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (a) might subject the
Company, to any material damage or penalty or to any material civil, criminal or
governmental litigation or proceeding, (b) if not given in the past, might have
materially adversely affected the assets, business or operations of the Company
as reflected in the Financial Statements, or (c) if not continued in the future,
might materially adversely affect the Company's assets, business or operations
or which might subject the Company to suit or penalty in any private or
governmental litigation or proceeding.
Section 4.22 No Interest in Competitors. No officer, director or, to the
-----------------------------------------
knowledge of the Seller, employee of the Company directly or indirectly owns any
interest in, or controls or is a participant in or consultant to, any
corporation, partnership, limited partnership, joint venture, association or
other entity which is a competitor, landlord, or tenant of the Company, other
than an ownership interest involving less than five percent (5%) of the equity
securities of any entity which is traded on a recognized stock exchange or
quoted on a consolidated reporting system.
Section 4.23 Disclosure. To the knowledge of the Seller, it has not
-------------------------
withheld any material facts relating to the ongoing business or financial
condition of the Company from Buyer, and copies of all documents which have been
delivered or made available to Buyer are true, correct and
16
complete copies thereof, and include all material amendments, supplements or
modifications thereto or material waivers thereunder.
Section 4.24 Genesys.
- ----------------------
(a) Section 4.24(a) of the Disclosure Schedule sets forth with respect to
Genesys as of January 28, 1994:
(i) the authorized capital stock;
(ii) the number of shares issued and outstanding;
(iii) the identity of the holders of all such shares of issued and
outstanding shares of stock; and
(iv) the number of shares held in treasury of Genesys.
As of the date hereof, all of the shares of capital stock of Genesys held by the
Company are duly authorized, validly issued, fully paid and non-assessable.
(b) Genesys ceased all active business operations on July 31, 1993, and
since that time has had no ongoing business operations and is currently
inactive.
(c) The Amended and Restated Stockholder Agreement, dated as of December 31,
1992, by and between the Company and Corporate Systems, Ltd. (the "Stockholder
Agreement"), a copy of which has been delivered to Buyer and which is listed in
the Disclosure Schedule, is valid, in full force and effect and has not been
superseded or amended in any way.
(d) The cessation of Genesys' operations was performed in material
compliance with
(i) all applicable laws and regulations, including requirements relating
to regulatory approvals or notifications and employee terminations; and
(ii) all applicable client or provider agreements and employee benefit
plans or programs.
(e) Other than compliance with the Stockholder Agreement, the Company has no
current or future obligations, financial or otherwise, whether accrued or not,
known or unknown, with respect to Genesys or its prior business or employees.
Section 4.25 Accuracy of Representations and Warranties. No representation
---------------------------------------------------------
or warranty made by the Seller and Buyer in this Agreement is false or
misleading with respect to any material fact,
17
or omits or fails to state a material fact necessary to make the statements
contained therein not misleading.
ARTICLE V
COVENANTS
-----------
Section 5.1 Affirmative Covenants of the Seller. The Seller hereby
-------------------------------------------------
covenants and agrees that, unless otherwise agreed in writing by Buyer or as
otherwise contemplated by this Agreement, from the date hereof through the
Closing Date, the Company will:
(a) Operate its business in the ordinary and usual course and consistent
with past practices;
(b) Use best efforts to preserve intact its business organization and
assets, maintain its rights and franchises, retain the services of its
respective officers and key employees and maintain the relationships with its
respective customers and suppliers;
(c) Use best efforts to keep in full force and effect its property and
liability insurance and bonds comparable in amount and scope of coverage to that
currently maintained; and
(d) Confer with Buyer at its request to report operational matters and
general status of the ongoing operations of the business of the Company. The
Company shall promptly inform Buyer of any unexpected emergency or other change
in the normal course of business or in the operations of the business, of any
investigation or review pending or threatened by any governmental entity and of
submissions to the Company's Board of Directors involving any material business,
asset or property, and of any material litigation, investigation, review or
audit instituted or threatened by any party, and shall keep Buyer fully informed
of developments with respect to such events and permit Buyer's representatives
access to all materials prepared by, or delivered to, the Company in connection
therewith.
Section 5.2 Negative Covenants of the Seller. Except as expressly
----------------------------------------------
contemplated by this Agreement or as otherwise agreed to in writing by Buyer,
from the date hereof through the Closing Date, the Seller covenants that the
Company shall not do any of the following:
(a) amend its charter or bylaws;
(b) except for the payment of bonuses for 1995 performance (which are funded
by Seller), increase the compensation payable or to become payable to any
director, officer or employee (including any Company Employee), except for
increases in salary or wages payable or to become payable in the ordinary course
of business and consistent with past practice for Company Employees;
18
(c) grant or increase any severance or termination pay (other than pursuant
to the normal severance policy of the Company in effect on the date of this
Agreement as disclosed to Buyer on Disclosure Schedule 4.9(a)) to, or enter into
any severance agreement;
(d) enter into any employment agreement except in accordance with Section
5.8 of this Agreement;
(e) establish, adopt, enter into or amend any employee benefit plan, program
or arrangement, except as may be required to comply with applicable law, or as
required under Section 5.8 of this Agreement with respect to the Company's
adoption of Seller's 401(k) Plan;
(f) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(g) redeem, purchase or otherwise acquire any shares of its capital stock or
any securities or obligations convertible into or exchangeable for any shares of
its capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its capital stock or obligations;
(h) effect any reorganization or recapitalization;
(i) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its or its respective Subsidiaries' capital
stock;
(j) issue, deliver, award, grant, or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security interests,
liens, claims, pledges, limitations in voting rights, charges or other
encumbrances) of, any shares of any class of its capital stock (including shares
held in treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to acquire
any such shares or amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof;
(k) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with past
practice);
(l) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose
of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of any material amount of
19
any of its assets, except for dispositions in the ordinary course of business
and consistent with past practice;
(m) initiate, solicit or encourage (including by way of furnishing
information or assistance) any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as such term is defined below), or authorize any of the officers or directors
of the Company to take any such action, and the Company shall use its reasonable
efforts to cause the directors, officers, employees, agents, and representatives
of the Company (including, without limitation, any investment banker, financial
advisor, attorney or accountant retained by the Seller) not to take any such
action. Seller shall promptly notify Buyer if any such inquiries or proposals
are received by the Company or any of its or their other respective officers,
directors, investment bankers, financial advisors, attorneys, accountants or
other representatives; PROVIDED, HOWEVER, that nothing in this Section 5.2(m)
shall limit the Seller from taking any actions required of it by applicable law.
For purposes of this agreement, "Competing Transaction" shall mean any of
the following involving the Company (other than the transactions contemplated by
this Agreement):
(i) any merger, consolidation, share exchange, business combination or
other similar transaction;
(ii) any sale, lease, mortgage, pledge, transfer or other disposition of
twenty percent or more of the assets of the Company in a single transaction;
(iii) any person shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is defined
under Section 13(d) of the Securities Exchange Act of 1934) shall have been
formed which beneficially owns or has right to acquire beneficial ownership
of twenty percent or more of the then outstanding shares of capital stock of
the Company; or
(iv) any agreement to, or public announcement by the Seller of a
proposal, plan or intention to, do any of the foregoing;
(n) make or rescind any express or deemed election relating to Taxes, settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of the federal income tax returns for the
taxable year ending December 31, 1995, except in either case as may be required
by law, the IRS, or GAAP;
(o) incur any obligation for borrowed money or purchase money indebtedness,
whether or not evidenced by a note, bond, debenture or similar instrument;
20
(p) fail to maintain its books and records in the ordinary and usual course
of business in accordance with past practices, except for such changes as are
necessary to comply with GAAP or regulatory accounting principles, consistently
applied;
(q) make any investment of a capital nature in excess of $50,000 singly or
$250,000 in the aggregate, either by purchasing stock or securities,
contributions to capital, property transfers or otherwise, or by the purchase of
any property or assets of any other individual, firm or corporation, except
transactions in the ordinary course of business;
(r) enter into any new material lease, amend or modify the terms of any
existing material lease, or terminate any existing material lease;
(s) release or relinquish any material contract rights or forgive any
indebtedness without Buyer's consent;
(t) increase the compensation to be paid to any provider or group of
providers, except in the ordinary course of business;
(u) make any loans or advances to any officer, director, shareholder or
Affiliate of the Company (except for ordinary travel and business expense
payments);
(v) engage in any transaction or take any other action which would cause or
result in a breach of any representation or warranty of the Seller set forth in
Article IV hereof; and
(w) agree in writing or otherwise to any of the foregoing.
Section 5.3 Access and Information.
- ------------------------------------
(a) Seller shall afford to Buyer, and their respective affiliates and
accountants, counsel, other representatives, and prospective lenders and
investors and investor representatives access during normal business hours
throughout the period prior to the Closing Date to all of Company's officers,
directors, employees, properties, offices, books, contracts, commitments and
records (including but not limited to Tax Returns and Regulatory filings) and
the Company shall use its best efforts to cause access to accountants' work
papers, during such period, shall furnish promptly to any of them all other
information concerning its business, properties and personnel as may be
reasonably requested in writing. No investigation by Buyer prior to or following
the execution of this Agreement shall affect the representations and warranties
of the Company as contained herein.
Section 5.4 Additional Arrangements. Subject to the terms and conditions
-------------------------------------
of this Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all action and
21
to do, or cause to be done, as promptly as practicable, all things necessary,
proper or advisable under applicable laws and regulations to assure the
satisfaction of each condition to, and to consummate and make effective, the
transactions contemplated by this Agreement, including using its best efforts to
obtain all necessary waivers, consents and approvals.
Section 5.5 Continuing Nature of Representations and Warranties. The
-----------------------------------------------------------------
Seller agrees, until the earlier of the Closing Date or termination of this
Agreement, to provide Buyer with notice of any material information which comes
to the knowledge of the Seller and which affects the truth and accuracy, or
continuing truth and accuracy, of the warranties and representations made by the
Seller herein or which has the effect of rendering any of the covenants
contained in this Article VI incapable of performance. Buyer agrees, until the
earlier of the Closing Date or termination of this Agreement, to provide the
Seller with notice of any material information which comes to the knowledge of
Buyer and which affects the truth and accuracy, or continuing truth and
accuracy, of the warranties and representations made by Buyer herein.
Section 5.6 Tax Matters. Following the date of this Agreement:
-------------------------
(a) Seller shall file any Tax Returns, elections or information statements
with respect to any liabilities for Taxes of the Company or other matters
relating to Taxes of the Company which, pursuant to applicable law must be filed
for taxable years ending on or prior to Closing. Buyer agrees to cooperate with
Seller for the purpose of completing and filing such returns. Seller shall have
the sole right and responsibility to respond to and resolve any Tax audits
related to taxable years ending on or prior to Closing and shall be responsible
for any additional Tax liabilities related to Tax periods ending on or before
Closing and shall receive any Tax refunds or reductions related to Tax periods,
other than refunds attributable to the carry-back of Tax attributes, such as
loss carryovers from a Tax period after the Closing Date. Buyer will provide any
necessary information and other reasonable assistance to Seller for the purpose
of responding to and resolving such audits. Buyer shall be responsible for all
Tax filings and for all Tax liabilities relating to the Company for periods
commencing after the Closing Date.
(b) Any Tax sharing agreement between or among the Seller Group and the
Company is terminated as of the Closing Date and will have no further effect for
any taxable year (whether the current year, a future year, or a past year).
(c) Seller will immediately pay to the Buyer any Tax refund (or reduction in
Tax liability) resulting from a carryback of a postacquisition Tax attribute of
the Company into a Seller consolidated federal or state Tax Return, when such
refund or reduction is realized by the Seller group. Seller will cooperate with
the Company in obtaining such refunds (or reduction in Tax liability), including
through the filing of amended Tax returns or refund claims.
22
(d) Seller will not elect to retain any net operating loss carryovers or
capital loss carryovers of the Company under Regulation Section 1.1502-20(g)
without Buyer's written approval.
(e) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any New York State Gains Tax, New York
City Transfer Tax and any similar tax imposed in other states or subdivisions),
shall be paid by Seller when due, and Seller will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and if
required by applicable law, Buyer will, and will cause its affiliates to, join
in the execution of any such Tax Returns and other documentation.
(f) For purposes of Section 5.6 and 5.11, where applicable law permits, the
Closing Date shall be treated by Buyer and Seller as the end of a taxable year,
and in any case where applicable law does not permit the Company to treat the
Closing Date as the end of a taxable year of the Company, then whenever it is
necessary to calculate the liability for income or franchise taxes of the
Company for a portion of a taxable year, such determination will (unless
otherwise agreed to in writing by Seller and Buyer) be determined by a closing
of the Company's books at the end of the Closing Date. In order appropriately to
apportion any Taxes, other than income or Closing Date, (i) AD VALOREM Taxes
(including, without limitation, real and personal property Taxes) will be
accrued on a monthly basis over the period for which the Taxes are levied, or if
it cannot be determined over what period the Taxes are being levied, over the
fiscal period of the relevant taxing authority, in each case irrespective of the
lien or assessment date of such Taxes, and (ii) franchise and other privilege
Taxes not measured by income will be accrued on a monthly basis over the period
in which the privilege relates.
(g) Buyer will make no election under Section 338(h)(10) of the Internal
Revenue Code without the written approval of Seller. If, notwithstanding this
provision, Buyer makes such an election, Buyer shall fully reimburse Seller any
additional tax liability or costs incurred by Seller as a result of such
election by Buyer. Seller shall provide necessary information and other
reasonable assistance to Buyer for purposes of making a permitted election under
this Section.
(h) Buyer will make no election without Seller's written approval to ratably
allocate income and expenses pursuant to Regulation Section 1.1502-76(b)(2)(ii).
Both Buyer and Seller agree to work together to determine if said election is
advantageous for both parties.
(i) Any intercompany balances due to Seller from the Company which are not
paid prior to the Closing Date shall be canceled and treated by Seller as an
additional capital contribution to Company by Seller.
23
Section 5.7 Appropriate Action; Consents; Filings.
- --------------------------------------------------
(a) Buyer and Seller shall use all reasonable efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable under applicable law
or otherwise to consummate and make effective the transactions contemplated
by this Agreement as promptly as practicable;
(ii) obtain from any governmental entities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be
obtained or made by Seller, Buyer, or the Company or any of their respective
Subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated herein,
including; and
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement required under (A) the H-S-R
Act, and (B) any other applicable law; PROVIDED that, Buyer, and Seller
shall cooperate with each other in connection with the making of all such
filings, including providing copies of all non-confidential portions of such
documents to the non-filing party and its advisors prior to filing and to
discuss additions, deletions or changes suggested in connection therewith.
The Seller and Buyer shall furnish to each other all information required
for any application or other filings to be made pursuant to the rules and
regulations of any applicable law in connection with the transactions
contemplated by this Agreement.
(b) The Disclosure Schedule identifies each of the Company Contracts which
would require notice of or consent of a third party in order to maintain the
Company's relationship with such party or to avoid the Company's being in breach
or default under such Contract, including any policies of insurance. Any such
notices and consents or approvals shall be obtained prior to Closing unless (x)
the failure to deliver such notice and obtain all such consents would not
materially affect the Company's business or its ability to consummate the
transactions contemplated in this Agreement, or (y) Buyer is advised of and
consents in writing to the foregoing failure to deliver such notices or receive
such consents.
(c) From the date of this Agreement until the Closing Date, the Company
shall promptly notify Buyer in writing of any pending or, to the knowledge of
the Company, threatened action, proceeding or investigation by a governmental
entity or any other person (i) challenging or seeking damages in connection with
this transaction, or (ii) seeking to restrain or prohibit the consummation of
the transaction contemplated by this Agreement or otherwise limit the right of
Buyer to own or operate all or any portion of the businesses or assets of the
Company.
Section 5.8 Company Employees. As of the date hereof, the Company has no
------------------------------
employees. Seller shall cause the Company to hire on an at-will basis effective
as of the business day immediately
24
preceding the Closing Date those employees of Seller assigned to the Company,
which employees have been selected by Buyer, and listed in Section 5.8 of the
Disclosure Schedule and such other individuals as may be designated as Company
employees by mutual written agreement between the Seller and the Buyer prior to
the Closing Date ("Company Employees"). Section 5.8 also sets forth those active
employees of Seller who previously rendered services related to the Company
which Buyer has selected to not be hired by the Company. Those employees marked
on Section 5.8 of the Disclosure Schedule with an asterisk are temporary
employees and are not entitled to participate in Seller's Severance Plan. Seller
shall also cause the Company to become a participating employer under the United
HealthCare Corporation 401(k) Savings Plan ("Seller's 401(k) Plan") as of the
business day immediately preceding the Closing Date with respect to the Company
Employees. On and after the Closing Date, Buyer shall cause the Company to
continue to employ the Company Employees (subject to the Company's right to
terminate any such Company Employee or any subsequently hired individual at
will), subject to the following terms and conditions: (i) effective as of the
Closing Date, Buyer or the Company shall cause the Company Employees to be
covered by a medical (and dental) plan without limitations based upon
pre-existing conditions; (ii) for purposes of any employee benefit plan,
program, or arrangement maintained by Buyer or the Company for the Company
Employees ("Buyer's Plan") on and after the Closing Date (including any 401(k)
Plan ("Buyer's 401(k) Plan")) any years of eligibility service or vesting
service credited to such Company Employees under the Employee Benefit Plans as
of the Closing Date shall be treated as eligibility or vesting service under
Buyer's Plan; and (iii) if Buyer or Company does terminate the employment of any
Company Employee prior to the date which is sixty (60) days after Closing Date,
Buyer shall provide to any such terminated Company Employee severance benefits
which are substantially similar to the benefits such individual would have
received under Seller's severance program. Seller agrees to provide Buyer within
sixty (60) days of the Closing Date such information as Buyer shall reasonably
request in order to implement the provisions of this Section 5.8, including the
years of eligibility and vesting service credited to the Company Employees under
the Employee Benefit Plans.
Section 5.9 Employee Benefits. Effective as of the Closing Date, the
------------------------------
Company shall not be a participating employer in any Employee Benefit Plan. No
portion of the assets of any Employee Benefit Plan, heretofore sponsored or
maintained by the Seller for the Company Employees (and no amount attributable
to any such Employee Benefit Plan), shall be transferred to the Company, and the
Company shall not be required to sponsor or contribute to any such Employee
Benefit Plan after the Closing Date. With respect to Seller's 401(k) Plan,
Seller shall authorize lump sum distributions of vested benefits to Company
Employees in connection with the transaction contemplated under this Agreement
pursuant to Section 401(k)(10) of the Internal Revenue Code. Effective as of
Closing Date, Seller shall treat the Company Employees who are participants in
Seller's 401(k) Plan as of Closing Date as being 100% vested in all
contributions and earnings under such plan. The amounts payable to the Company
Employees on account of all benefit arrangements (including, but not limited to,
all accrued, but unpaid sick leave) shall be either maintained in such Employee
Benefit Plans or paid to the Company Employees, in each
25
case, in accordance with the applicable Employee Benefit Plan documents. The
Seller shall not be liable for any claim for insurance, reimbursement or other
benefits incurred after the Closing Date.
Section 5.10 Employment Agreements. Prior to the Closing Date, Buyer may
-----------------------------------
negotiate to enter into an employment agreement with the individual listed on
Exhibit B.
Section 5.11 Indemnification.
- -----------------------------
(a) Seller agrees to indemnify Buyer and the Company from all costs and
expenses, including reasonable attorneys' and auditors' fees, relating to or
resulting from suits, claims, liability, judgments, investigations, loss,
penalties, fines or damage, of any type and whether asserted by or incurred as a
result of action by a governmental body or a private party, asserted against or
incurred by the Buyer or Company as a result of the matters described below (the
"Claims"), provided that Buyer gives written notice of the facts giving rise to
and the alleged basis for such Claim and, if known or reasonably ascertainable,
the amount of the liability asserted or which may be asserted by reason thereof,
during the period following the Closing specified below:
(i) Any inaccurate or erroneous representation or warranty,
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement to be performed by the Seller or Company under this Agreement at
or prior to the Closing Date or from any misrepresentation by the Company in
or omission by the Seller or Company from the Disclosure Schedule pursuant
to this Agreement;
(ii) (1) Any and all Taxes of the Company for all tax periods ending on
or before the Closing Date;
(2) Taxes attributable to other members of an affiliated group (as
defined in Section 1504(a) of the Code or any analogous provision under
foreign, state or local law) to which the Company has belonged on or
prior to the Closing Date attributable to any Tax period.
(3) Any and all Taxes incurred in connection with or arising out of
any inaccuracy; breach, or nonfulfillment by the Seller of any
representation, consent, covenant or agreement of the Seller made in this
Agreement including, without limitation, Section 4.12, 5.6 and Article V
hereof.
(4) Taxes arising out of, resulting from or attributable to a Section
338(h)(10) Election by Seller.
(iii) Claims relating to or resulting from any litigation or disputes
with respect to the operation of the Company prior to the date of this
Agreement.
26
(iv) Claims relating to any employee benefit plan, program or
arrangement maintained or contributed to by the Seller or any entity which
is or has been aggregated with the Seller or the Company for purposes of
section 414 of the Code or section 4001 of ERISA, including any Claims
relating to or arising from the Seller's transfer of the Company Employees
to the Company under Section 5.8 of this Agreement, but excluding Claims
relating to any employee benefit plan, program or arrangement maintained or
contributed to by the Buyer or the Company after the Closing Date.
(v) Claims relating to or resulting from any litigation or dispute with
respect to Genesys, including but not limited to the lawsuit involving the
Texas Association of School Boards ("Genesys Claims").
(b) Buyer agrees to indemnify Seller from all costs and expenses, including
reasonable attorneys' and auditors' fees, relating to or resulting from suits,
claims, liability, judgments, investigations, loss, penalties, fines or damage,
of any type and whether asserted by or incurred as a result of action by a
governmental body or a private party, asserted against or incurred by the Buyer
or the Seller, as the case may be, as a result of the matters described below
(the "Claims"), provided that the Seller gives written notice of the facts
giving rise to and the alleged basis for such Claim and, if known or reasonably
ascertainable, the amount of the liability asserted or which may be asserted by
reason thereof, during the period following the Closing specified below:
(i) Any inaccurate or erroneous representation or warranty,
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement to be performed under this Agreement at or prior to the Closing
Date or from any misrepresentation in or omission from the Disclosure
Schedule pursuant to this Agreement;
(ii) (1) Any and all Taxes of the Buyer for all tax periods beginning
after the Closing Date;
(2) Any and all Taxes incurred in connection with or arising out of
any inaccuracy, breach, or nonfulfillment by the Buyer of any
representation, consent, covenant or agreement of the Buyer made in this
Agreement including, without limitation, Section 3.4.
(3) Taxes arising out of, resulting from or attributable to a Section
338(h)(10) Election by Buyer.
(iii) Claims relating to or resulting from any litigation or disputes
with respect to the operation of the Company or Buyer after the date of this
Agreement.
(c) In the event of the assertion of a Claim which may give rise to a claim
for indemnification hereunder, the indemnified party shall notify the other
party as stated above, and Claims shall not include any such matters as to which
proper notice is not given within the
27
following periods after Closing: (x) fifteen (15) months for Claims
described in subparagraphs (a)(i) and (b)(i) above; (y) three (3) years for
claims described in subparagraphs (a)(ii), (a)(iii), (a)(iv), (b)(ii) and
(b)(iii) above; and (z) no limit on the time in which Genesys Claims may be
asserted. As soon as practical after becoming aware of a Claim subject to
indemnification under this Agreement, the indemnified party shall provide the
other party with written notice stating the nature, basis and (to the extent
known or reasonably estimated) amount thereof. In the event an indemnified party
becomes aware of a Claim it shall promptly notify the other party and seek
instructions as to the defense thereof. The indemnifying party shall control the
defense and settlement of any Claim. The indemnifying party shall keep the
indemnified party apprised of the status of such Claim, shall consult with the
indemnified party as appropriate as to the handling of a Claim and shall not
unreasonably refuse to defend, compromise or settle any Claim. The indemnified
party shall cooperate fully in the defense of any Claim, including but not
limited to the defense of the Texas Association of School Board litigation. The
indemnifying party shall reimburse the indemnified party for the reasonable cost
of such cooperation. The indemnified party shall have the right at its own
expense to employ separate counsel to monitor such Claim.
(d) The first $5,000 (including the reasonable cost of defense thereof) of
any Claim individually, or an aggregate of $25,000 for multiple Claims each of
which is less than $5,000 shall be the responsibility of the indemnified party.
Once the $5,000 limit for an individual Claim or the $25,000 limit for multiple
Claims in the aggregate is reached, the full amount of all Claims (including the
reasonable costs of defense thereof) shall be paid by the indemnifying party. To
the extent that a Claim has been paid for by an insurance payment on behalf of
or insurance recovery on behalf of the Company payment shall not be the
responsibility of the indemnifying party. To the extent that a Claim has been
reserved against in the Company's Financial Statements (by means of a liability
accrual or payable or a valuation allowance or reserve against current assets),
Seller shall have no liability.
(e) Any indemnification paid under this Section 5.11 shall, as to the extent
permitted by law, be an adjustment to the Purchase Price.
Section 5.12 Survival of Indemnifications, Representations and Warranties.
--------------------------------------------------------------------------
All statements made by the Seller and the Company herein or in the
Disclosure Schedule shall be deemed representations and warranties of the
Company, and all representations, warranties and agreements made by any party to
this Agreement shall not be deemed to be waived or otherwise affected by any
investigation made by any other party. The representations and warranties of the
parties contained herein shall survive the Closing for the time periods set
forth in Section 5.11(c).
Section 5.13 Funding of the Transaction. Buyer shall maintain sufficient
----------------------------------------
cash on hand and available through bank facilities in effect and approved for
the purchase of the Common Stock to pay the Purchase Price as required by this
Agreement without any contingency or approval by a third party.
28
Section 5.14 Insurance. Effective as of the Closing Date, the Seller shall
------------------------
terminate all insurance coverage with respect to the Company, at which time it
will be the exclusive responsibility of the Buyer or the Company to provide
insurance coverage with respect to the Company and its operations. Subject to
commercial availability, from and after the Closing Date, the Seller, at
Seller's expense, shall maintain for the benefit of the Company until the
expiration of all applicable periods of limitation under relevant statutes of
limitations the right to file claims against insurance with respect to a
pre-Closing Date acts or omissions of the Company, its officers and directors
and employees, in amounts and in such types as which insure the Company, its
officers and directors and employees, immediately prior to the Closing Date.
Section 5.15 Network Access. Consistent with the letter dated February 23,
-----------------------------
1996 from Gregg Strott to Tom Cox regarding MetraComp, Buyer shall use its best
efforts to cause Company to continue to perform after the Closing Date in
accordance with the provisions of such letter.
Section 5.16 Audited Financials. At its expense, the Buyer shall use its
---------------------------------
best efforts to arrange to have the Company's balance sheet as of December 31,
1993, and related statement of income for the year then ended, the 1994
Financials and the 1995 Financials audited by Arthur Andersen, Boston, prior to
March 31, 1996. These audited financial statements shall be referred to as the
"1993 Audited Financials", "1994 Audited Financials" and "1995 Audited
Financials", respectively. The Seller shall cooperate with this audit of the
Company's financial statements.
Section 5.17 Trademarks. Prior to the Closing, Seller shall have caused
-------------------------
all of the service marks listed on Disclosure Schedule 4.19 to be assigned to
the Company.
Section 5.18 Cost Reimbursement Agreement.
- -------------------------------------------
(a) Prior to the Closing Date, Seller and Company shall, consistent with
past practices, comply with the terms of the Cost Reimbursement Agreement, dated
January 28, 1994 between the Company and Seller ("Cost Reimbursement Agreement")
including the practice whereby the Seller processes expenses incurred in the
operation of the Company and Seller receives all available funds paid to the
Company to be applied to reimburse Seller for all expenses incurred on behalf of
the Company, including any balances due Seller for prior periods. This practice
of processing expenses and applying funds received against amounts due to the
Seller shall be referred to as the "Settlement".
(b) Buyer and Seller agree that if the Closing Date is on or prior to April
5, 1996, the last Settlement prior to Closing will take place on March 29, 1996.
Specifically for the March 29, 1996 settlement, Seller will:
(i) process for payment all invoices received by its Accounts Payable
Department from the Company on March 29, 1996. Responsibility for payment of
these invoices will be
29
retained by the Seller and added to the intercompany payable balance due
Seller from Company as of the Closing Date;
(ii) be responsible for payment of the April 5, 1996 payroll which
covers services provided to Company by the Seller's employees for the two
week period ended March 29, 1996 and added to the intercompany payable
balance due Seller from Company; and
(iii) withdraw via Federal wire transfer all available funds from the
Company's bank accounts on March 29, 1996 and deducted from the intercompany
payable balance due Seller from Company.
All invoices for expenses not processed by Seller on or before March 29,
1996, whether the related expenses were incurred prior to or after March 29,
1996 shall become the financial responsibility of the Buyer. Buyer shall be
responsible for payment of salary and related expenses for Company Employees for
March 30, 1996 and thereafter. Seller will cease daily withdrawal of available
funds from Company bank accounts after March 29, 1996.
(c) If the Closing Date is after April 5, 1996, then the last Settlement
prior to Closing shall take place on the last business day of a month, or such
other date as the parties shall mutually agree upon using procedure consistent
with those described above.
ARTICLE VI
CLOSING CONDITIONS
----------------------
Section 6.1 Conditions to Each Party's Obligation. The respective
---------------------------------------------------
obligations of each party pursuant to this Agreement shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) No temporary, preliminary or permanent injunction or other order by any
federal or state court which prevents the consummation of the transaction
contemplated by this Agreement shall have been issued and remain in effect;
(b) No action shall have been taken nor any statute, rule, regulation or
executive order have been enacted, promulgated or enforced by any court or the
government (or any governmental body or agency) that makes the consummation of
the transaction contemplated by this Agreement illegal;
(c) The applicable waiting period, if any, under the H-S-R Act shall have
expired or been terminated;
30
(d) Any third party consents and governmental, regulatory or administrative
consents, approvals or notices necessary for the Company, Seller or Buyer to
consummate the transaction contemplated by this Agreement shall have been
received or given, as appropriate, and filings made;
(e) No suit, action or other proceeding or investigation shall, to the
knowledge of the Company or to the knowledge of Seller or Buyer, be threatened
or pending by any third party questioning the legality of this Agreement, or the
consummation of the transactions contemplated hereby in whole or in part; and
Section 6.2 Conditions to Obligation of the Seller. The obligation of the
-----------
Company pursuant to this Agreement shall be subject to the fulfillment at or
prior to the Closing Date of the following additional conditions (unless waived
by the Company):
(a) The representations and warranties of Buyer contained in this Agreement
shall be true in all material respects on and as of the Closing Date with the
same force and effect as though made on and as of such date and time, except as
affected by the transactions contemplated hereby and except that any such
representation and warranty made as of a specified date shall have been true on
and as of such date;
(b) Buyer shall in all material respects have performed each obligation and
agreement and complied with each covenant to be performed or complied with by it
hereunder on or before the Closing Date;
(c) The Seller shall have received such closing certificates of Buyer and of
governmental authorities as are customary for the type of transaction
contemplated and which are satisfactory to the Company's counsel; and
(d) The Seller shall have received a legal opinion from counsel to the Buyer
in form reasonably satisfactory to the Seller.
Section 6.3 Conditions to Obligations of Buyer. The obligations of Buyer
------------------------------------------------
pursuant to this Agreement shall be subject to the fulfillment at or prior to
the Closing Date of the following additional conditions (unless waived
by Buyer):
(a) The representations and warranties of the Seller contained in this
Agreement and as limited, modified or supplemented by the Disclosure Schedule,
shall be true in all material respects on and as of the Closing Date with the
same force and effect as through made on and as of such date and time, except as
affected by the transactions contemplated hereby and except that any such
representation or warranty made as of a specified date shall have been true on
and as of such date;
31
(b) The Company shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed or
complied with by it hereunder on or before the Closing Date;
(c) Buyer shall have received such closing certificates of the Seller and of
governmental authorities as are customary for the type of transaction
contemplated and which are satisfactory to Buyer's counsel;
(d) Since the date of this Agreement and prior to Closing, there shall have
been no material adverse change in the condition (financial or otherwise),
assets, liabilities, earnings, business or of the Company;
(e) Company shall have received the resignations of each of the members of
Boards of Directors and the officers of the Company, in each case to be
effective as of the date immediately following the Closing Date;
(f) The Buyer shall have received a legal opinion from counsel to the Seller
and the Company in form reasonably satisfactory to the Buyer;
(g) The Seller and Company shall have terminated, as of the Closing Date,
the Cost Reimbursement Agreement such that neither the Seller or Company will
have any further obligation under the Cost Reimbursement Agreement, including
but not limited to payment of any intercompany balance as of the Closing Date;
(h) Buyer shall have received the audited 1993, 1994 and 1995 Audited
Financial Statements, as provided for in Section 5.16, and, with respect to the
1994 and 1995 Audited Financial Statements, Arthur Andersen shall have issued an
unqualified opinion, without material adverse audit adjustments; provided that
any necessary audit adjustments for restatement of restructuring expenses shall
not be considered a material adverse audit adjustment; and
(i) Seller shall have caused the assignment to Company all rights in the
service marks listed on Disclosure Schedule 4.19.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
-----------------------------------------
Section 7.1 Termination. This Agreement may be terminated and the
-------------------------
transaction abandoned at any time prior to the Closing Date:
(a) by mutual written consent of the parties;
32
(b) by any party, by notice to the other parties, if at any time prior to
the Closing Date,
(i) another party shall have materially breached its representations,
warranties or covenants contained herein and, upon receiving notice, is
unwilling or unable to remedy such breach within ten (10) days following
receipt by the breaching party of notice of such breach from the
non-breaching party; provided that, in the case of any such breach that is
susceptible of cure but that cannot with diligence be cured within such ten
(10) day period, if the party in breach shall promptly have commenced to
cure the same and shall thereafter prosecute the curing thereof with
reasonable diligence, the period within which such breach may be cured shall
be extended by the shorter of thirty (30) days or for such further period as
shall be necessary for the curing thereof with reasonable diligence, or
(c) By any party, if the transaction contemplated by this Agreement shall
not have been consummated prior to May 31, 1996, provided that no party who has
caused such transaction not to have been consummated may terminate this
Agreement pursuant to this clause (c).
Section 7.2 Effect of Termination. In the event of the termination of this
-----------------------------------
Agreement under Section 7.1, this Agreement shall have no further force or
effect and there shall be no further obligation hereunder on the part of Buyer
and Seller or their respective officers or directors, except for compliance with
the provisions of any and all confidentiality agreements executed by Buyer or
any of its Affiliates and the Seller prior to the execution of this Agreement,
and claims for breach of this Agreement.
Section 7.3 Fees and Expenses.
- -------------------------------
(a) The Buyer shall pay all H-S-R Act filing fees. All other Expenses
incurred by the Buyer shall be borne solely and entirely by the Buyer and all
Expenses of the Company, the Seller and their affiliates shall be borne by the
Seller. For the purposes of this paragraph, apportionment of salaries for time
spent by Company Employees as part of their duties for the Company shall not be
considered Expenses.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its Affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters related to the closing of
the transactions contemplated herein.
Section 7.4 Amendment. This Agreement may not be amended except by an
-----------------------
instrument in writing signed on behalf of each of the parties.
33
Section 7.5 Waiver. At any time prior to the Closing Date, any term,
-------------------
provision or condition of this Agreement may be waived in writing (or the time
for performance of any of the obligations or other acts of the other parties may
be extended) by the party which is, or the party the shareholders of which are,
entitled to the benefits thereof. Any agreement on the part of a party to any
such extension or waiver, shall be valid if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
ARTICLE VIII
GENERAL PROVISIONS
----------------------
Section 8.1 Notice of Breach. Each party will promptly give written notice
-----------------------------
to the other parties upon becoming aware of the occurrence, or impending or
threatened occurrence, of any event which would cause or constitute a material
breach of any of its representations, warranties or covenants contained or
referred to in this Agreement and will use its best efforts to prevent or
promptly remedy the same.
Section 8.2 Publicity. So long as this Agreement is in effect, neither the
----------------------
Seller, Company nor the Buyer, or any of their respective Affiliates, shall
issue or cause the publication of any press release or other public announcement
with respect to this Agreement without prior consultation with the other party,
except as may be required by law.
Section 8.3 Assignment. Buyer shall have the right to assign to one or more
-----------------------
of its Affiliates all but not less than all of its rights together with all of
its obligations under this Agreement. Buyer may not otherwise assign this
Agreement or any of its rights or obligations hereunder without prior written
consent of the Seller. The Seller may not assign this Agreement or any of its
rights hereunder without the prior written consent of Buyer. Notwithstanding any
assignment by Buyer, Buyer shall continue to be liable under this Agreement to
the same extent as if the assignment were not made to the extent Buyer's
assignee fails to perform or comply with any provision of this Agreement.
Section 8.4 Interpretation. The headings contained in this Agreement are
---------------------------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The Disclosure Schedule shall be deemed to be
a part of this Agreement.
Section 8.5 Notices. All notices and other communications hereunder shall
--------------------
be in writing and shall be deemed to have been duly given when delivered
personally or by cable, telex, telecopier or telegram or by certified mail
(return receipt requested) to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice):
34
(a) To Seller:
United Healthcare Services, Inc.
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
Attention: William W. McGuire, M.D.
Telecopier No.: (612) 936-0044
With copies to:
United HealthCare
8330 Boone Boulevard, Suite 300
Vienna, Virginia 22182
Attention: James M. Michener
Telecopier No.: (703) 918-4057
(b) To Buyer:
CRA Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
Attention: John McCarthy
Telecopier No.: (617) 367-8519
With copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
Telecopier No.: (617) 951-1295
Section 8.6 Separability. Any term or provision of this Agreement which is
-------------------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
35
Section 8.7 Specific Performance. Each of Seller and Buyer acknowledge that
---------------------------------
(a) they will not have any adequate remedy at law if the other fails to
perform any of its obligations hereunder; and
(b) each shall have the right, in addition to any other rights it may have,
to obtain in any court of competent jurisdiction injunctive relief to restrain
any breach or threatened breach or otherwise specifically to enforce any of the
obligations of the other under this Agreement if the other shall fail to perform
any of its obligations hereunder.
Section 8.8 Entire Agreement. This Agreement shall be construed together to
-----------------------------
constitute the entire agreement and to supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.
Section 8.9 Governing Law. This Agreement shall be governed by, and
--------------------------
construed and enforced in accordance with, the laws of the State of Minnesota
without giving effect to the conflict of law principles thereof.
Section 8.10 Dispute Resolution and Remedies. Any dispute arising between
---------------------------------------------
the parties relating to this Agreement or the transactions contemplated hereby,
including any dispute relating to termination of this Agreement, shall be
resolved by binding arbitration pursuant to the Rules of the American
Arbitration Association. In no event may the arbitration be initiated more than
one year after the date one party first gave written notice of the dispute to
the other party. The arbitrators shall have no power to award any punitive or
exemplary damages or to ignore or vary the terms of this Agreement and shall be
bound by controlling law. The provisions of this Section 8.10 shall survive any
termination of this Agreement.
Section 8.11 Counterparts. This Agreement may be executed in one or more
--------------------------
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
Section 8.12 No Third Party Benefit. This Agreement is solely for the
------------------------------------
benefit of, and shall be enforceable by and against only, the parties and their
respective successors, and permitted assigns, and does not and shall not be
construed to confer on or provide to any other person any obligations,
privileges, rights or remedies.
[INTENTIONALLY LEFT BLANK]
36
IN WITNESS WHEREOF, the Seller and Buyer have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the date
first written above.
UNITED HEALTHCARE SERVICES, INC.
By: /s/ David P. Koppe
---------------------------
Its: CFO
---------------------------
CRA MANAGED CARE, INC.
By: /s/ Donald J. Larson
---------------------------
Its: CEO
---------------------------
37