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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Among
HEALTH MANAGEMENT SYSTEMS, INC.,
HISCO ACQUISITION CORP.
And
HEALTH INFORMATION SYSTEMS CORPORATION
And HSA MANAGED CARE SYSTEMS, INC.
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TABLE OF CONTENTS
RECITALS ............................................................................................................1
ARTICLE 1. DEFINITIONS........................................................................................1
1.1 Certain Definitions.......................................................................1
1.2 Other Definitions.........................................................................3
ARTICLE 2. THE MERGER.........................................................................................3
2.1 Effective Time of the Merger..............................................................3
2.2 Effects of the Merger.....................................................................3
2.3 Effect on HISCo Securities................................................................3
2.4 Conversion of Sub Capital Stock...........................................................5
2.5 Cancellation of HSA Capital Stock. ......................................................5
2.6 Payment of Per Share Purchase Price.......................................................5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF HISCo and HSA....................................................6
3.1 Organization and Standing.................................................................6
3.2 Capital Structure.........................................................................6
3.3 Equity Investments........................................................................7
3.4 Authority.................................................................................7
3.5 Governmental Consents.....................................................................8
3.6 Financial Statements......................................................................8
3.7 Absence of Changes........................................................................9
3.8 Properties...............................................................................11
3.9 Taxes....................................................................................12
3.10 Compliance with Law......................................................................12
3.11 Litigation...............................................................................12
3.12 Material Agreements......................................................................12
3.13 Certificate Proprietary Rights...........................................................14
3.14 No Conflict..............................................................................14
3.15 No Default...............................................................................15
3.16 Information Supplied.....................................................................15
3.17 Labor Relations; Employees...............................................................16
3.18 Customers and Suppliers..................................................................16
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HMS AND SUB.....................................................16
4.1 Organization.............................................................................16
4.2 Capital Structure of Sub.................................................................17
4.3 Authority................................................................................17
4.4 Governmental Consents....................................................................17
4.5 No Conflict..............................................................................18
4.6 No Prior Activities......................................................................18
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ARTICLE 5. COVENANTS RELATING TO CONDUCT OF BUSINESS.........................................................18
5.1 Ordinary Course..........................................................................18
5.2 Dividends; Changes in Stock..............................................................19
5.3 Issuance of Securities...................................................................19
5.4 Governing Documents......................................................................19
5.5 No Acquisitions..........................................................................19
5.6 No Dispositions..........................................................................19
5.7 Indebtedness.............................................................................20
5.8 Benefit Plans, Etc.......................................................................20
5.9 Accounting Practices.....................................................................20
5.10 Other Agreements.........................................................................20
ARTICLE 6. ADDITIONAL AGREEMENTS.............................................................................20
6.1 Access to Information....................................................................20
6.2 Legal Conditions to the Merger...........................................................21
6.3 HISCo Stockholders' Approval.............................................................21
6.4 Dissenting Shares........................................................................21
6.5 Employee Benefits........................................................................21
6.6 Communications...........................................................................21
6.7 Notification of Certain Matters..........................................................22
6.8 Sub Sole Stockholder's Approval..........................................................22
6.9 Repurchase of HISCo Founders Shares......................................................22
6.10 Cancellation of HISCo Options............................................................22
ARTICLE 7. CONDITIONS PRECEDENT..............................................................................23
7.1 Conditions to Each Party's Obligations
to Effect the Merger.....................................................................23
7.2 Conditions to Obligations of HMS and Sub.................................................24
7.3 Conditions to Obligations of HISCo and HSA...............................................25
ARTICLE 8. CLOSING...........................................................................................25
8.1 Closing Date.............................................................................25
8.2 Filing Date..............................................................................26
ARTICLE 9. TERMINATION OF REPRESENTATIONS, WARRANTIES
AND COVENANTS............................................................................26
ARTICLE 10. PAYMENT OF EXPENSES...............................................................................26
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ARTICLE 11. TERMINATION, AMENDMENT AND WAIVER.................................................................26
11.1 Termination..............................................................................26
11.2 Effect of Termination....................................................................27
11.3 Amendment................................................................................27
11.4 Extension; Waiver........................................................................28
ARTICLE 12. GENERAL...........................................................................................28
12.1 Notices..................................................................................28
12.2 Headings.................................................................................29
12.3 Counterparts.............................................................................29
12.4 Binding Nature...........................................................................29
12.5 Other Agreements.........................................................................29
12.6 Good Faith...............................................................................29
12.7 Applicable Law...........................................................................29
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Exhibits
Exhibit A - List of Directors and Officers of Surviving
Corporation
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is made and entered into as of the 18th day of March
1997, by and among HEALTH MANAGEMENT SYSTEMS, INC., a New York corporation
("HMS"), HISCO ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of HMS ("Sub"), HEALTH INFORMATION SYSTEMS CORPORATION ("HISCo"), a
Delaware corporation, and HSA MANAGED CARE SYSTEMS, INC. (formerly HEALTH
SYSTEMS ARCHITECTS, INC.) ("HSA"), a Delaware corporation and a wholly-owned
subsidiary of HISCo.
RECITALS
A. The parties wish to provide for the merger (the "Merger") of Sub and HSA into
HISCo, whereby it is contemplated, among other things, that all shares of common
stock, $0.01 par value, of HISCo issued and outstanding ("HISCo Common Stock")
immediately prior to the Effective Time of the Merger, as hereinafter defined,
other than (1) HISCo Common Stock held by HMS and (2) Dissenting Shares, if any,
as defined, will be converted into the right to receive $11.96 per share (the
"Per Share Purchase Price") in cash, subject to adjustment as provided for in
Section 2.3(e) of this Agreement.
B. The parties hereto desire to set forth certain representations, warranties
and covenants made by HMS and Sub to HISCo and HSA, and by HISCo and HSA to HMS
and Sub, and the conditions precedent to the consummation of the Merger.
C. The Boards of Directors of HMS, Sub, HISCo and HSA, respectively, have
approved and adopted this Agreement and the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants herein contained, HMS, Sub, HISCo and HSA
hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Certain Definitions. The terms defined in this Section 1.1 shall,
for all purposes of this Agreement, have the meanings herein specified, unless
the context expressly or by necessary implication otherwise requires:
(a) "Dissenting Shares" shall mean shares of HISCo Common Stock which
shall be owned by stockholders who shall duly perfect appraisal rights in
accordance with Section 262 of the Delaware General Corporation Law (the "GCL").
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(b) "Dissenting Stockholders" shall mean those stockholders of HISCo
who are holders of Dissenting Shares and are entitled to appraisal rights.
(c) "HISCo Founders Shares" shall mean the shares of HISCo Common Stock
purchased in connection with the formation of HSA (then known as "Health
Information Systems Corporation") for a cash purchase price of $0.01 per share,
as set forth on Schedule 3.2 attached hereto.
(d) "HISCo Stockholders" shall mean all holders of HISCo Common Stock
immediately prior to the Effective Time of the Merger.
(e) "HISCo Stockholders' Meeting" shall mean the meeting, and any
adjournments thereof, of the holders of HISCo Common Stock called and convened
for the purpose of their consideration of and voting upon the transactions
contemplated by this Agreement and the Merger (the parties hereto agreeing that
approval of this Agreement and the Merger may instead be obtained by means of
written consents in accordance with Section 228(a) of the GCL).
(f) "Material Adverse Effect" on any entity (or group of entities taken
as a whole) shall mean an effect that is materially adverse to the consolidated
financial condition, assets, liabilities, business or results of operations of
such entity (or, if with respect thereto, of such group of entities taken as a
whole).
(g) "Material Agreements," as used in relation to HISCo and HSA, shall
have the meaning ascribed to such term in Section 3.12.
(h) "Subsidiary" means a corporation whose voting securities are owned
directly or indirectly by a "parent" corporation in such amounts as are
sufficient to elect at least a majority of the Board of Directors of the
Subsidiary.
(i) "Taxes" shall mean all taxes, charges, fees, levies or other
assessments including, without limitation, income, gross receipts, excise,
property, sales, withholding, social security, occupation, use, service,
license, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any interest,
fines, penalties or additional amounts attributable or imposed with respect to
any taxes, charges, fees, levies or other assessments.
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1.2 Other Definitions. In addition to the terms defined in Section 1.1,
certain other terms are defined elsewhere in this Agreement; whenever such terms
are used in this Agreement they shall have their respective defined meanings,
unless the context expressly or by necessary implication otherwise requires.
ARTICLE 2.
THE MERGER
2.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, a Certificate of Merger, together with all other required
certificates, shall be filed in accordance with the requirements of Section 251
of the GCL as soon as practicable on or after the Closing Date. The Merger shall
become effective upon the filing of such certificate with the Secretary of State
of the State of Delaware (the "Effective Time of the Merger").
2.2 Effects of the Merger. At the Effective Time of the Merger:
(a) the separate existence of Sub and HSA shall cease and Sub and HSA
shall be merged with and into HISCo as the surviving corporation (the "Surviving
Corporation");
(b) HISCo's Certificate of Incorporation, as amended by the Certificate
of Merger, and By-laws shall be the Certificate of Incorporation and By-laws of
the Surviving Corporation; and
(c) the persons listed on Exhibit A shall be the directors and officers
of the Surviving Corporation, and such officers shall continue to act as such
and hold such offices in the Surviving Corporation, until their respective
successors are duly elected and qualified.
2.3 Effect on HISCo Securities. As of the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the holder of any
shares of the issued and outstanding shares of HISCo Common Stock:
(a) Cancellation of HISCo Common Stock Owned by HISCo. All shares of
HISCo Common Stock that are owned directly or indirectly by HISCo or any
Subsidiary of HISCo shall be cancelled, and no cash or other consideration shall
be delivered in exchange therefor.
(b) Conversion of HISCo Common Stock Owned by HMS. All shares of HISCo
Common Stock, if any, that are owned directly or indirectly by HMS or any
Subsidiary of HMS shall be converted into
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shares of issued and outstanding common stock of the Surviving Corporation on
the basis of 1,600 shares of HISCo Common Stock for each share of capital stock
of the Surviving Corporation.
(c) Conversion of HISCo Common Stock Owned by HISCo Stockholders Other
Than HMS. Other than shares of HISCo Common Stock owned directly or indirectly
by HMS or any Subsidiary of HMS to be converted pursuant to Section 2.3(a) and
Dissenting Shares, each share of HISCo Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted,
without any action on the part of the holders thereof, into the right to receive
the Per Share Purchase Price.
(d) Adjustments of Price. If, after the date of this Agreement, the
outstanding shares of HISCo Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment or a stock dividend thereon shall be declared with a record date
within said period, then, in addition to all other rights and remedies that HMS
and Sub may have by reason of such event, HMS and Sub, in their sole discretion,
may elect that the Per Share Purchase Price shall be correspondingly adjusted.
(e) Dissenters' Rights of HISCo Stockholders. Any Dissenting Shares
shall not be converted into the right to receive the Per Share Purchase Price
but shall be converted into the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to the GCL.
HISCo shall give HMS prompt notice of any demand received by HISCo for the right
to receive payment of the fair market value for the HISCo Common Stock, and HMS
shall have the right to participate in all negotiations and proceedings with
respect to such demand. HISCo agrees that, except with the prior written consent
of HMS, or as required under the GCL, HISCo will not voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
appraisal. Each Dissenting Stockholder who, pursuant to Section 262 of the GCL,
becomes entitled to payment of the value of shares of HISCo Common Stock shall
receive payment therefor (but only after the value therefor shall have been
agreed upon or finally determined pursuant to such provisions). In the event of
the legal obligation, after the Effective Time of the Merger, to deliver the Per
Share Purchase Price to any Dissenting Stockholder who shall have failed to make
an effective demand for appraisal or shall have lost his status as a Dissenting
Stockholder, HMS shall issue and deliver, upon surrender by such Dissenting
Stockholder of his certificate or certificates representing shares of HISCo
Common Stock, the aggregate Per Share Purchase Price to which such
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Dissenting Stockholder is then entitled under this Section 2.3, and Section 262
of the GCL.
2.4 Conversion of Sub Capital Stock. Each share of Sub capital stock
issued and outstanding immediately prior to the Effective Time of the Merger
shall be converted, without any action on the part of the holder thereof, into
one share of issued and outstanding capital stock of the Surviving Corporation.
2.5 Cancellation of HSA Capital Stock. Each share of HSA capital stock
issued and outstanding immediately prior to the Effective Time of the Merger
shall be cancelled, and no cash or other consideration shall be delivered in
exchange therefor.
2.6 Payment of Per Share Purchase Price.
(a) As soon as practicable after the Effective Time of the Merger, HMS
shall mail to each holder (other than HMS or any Subsidiary of HMS) of record of
a certificate or certificates representing then outstanding shares of HISCo
Common Stock (the "Certificates"), a Letter of Transmittal or similar instrument
for use in effecting the surrender of the Certificates in exchange for the Per
Share Purchase Price pursuant to Section 2.3 hereunder. Upon surrender to HMS of
a Certificate for cancellation after the Effective Time of the Merger, the
holder of such Certificate shall be entitled to receive in exchange therefor the
aggregate Per Share Purchase Price to which the holder of HISCo Common Stock is
entitled pursuant to Section 2.3 of this Agreement and is represented by the
Certificate so surrendered. The Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of HISCo Common Stock which is
not registered in the transfer records of HISCo, the aggregate Per Share
Purchase Price may be paid to a transferee if the Certificate representing the
right to receive such aggregate Per Share Purchase Price is presented to HMS and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent the right
to receive upon such surrender the aggregate Per Share Purchase Price as
provided by Section 2.3 and the provisions of the GCL.
(b) No Further Ownership Rights in HISCo Common Stock. Payment of the
aggregate Per Share Purchase Price upon the surrender for exchange of shares of
HISCo Common Stock in accordance with the terms hereof shall be deemed to have
been paid in full satisfaction of all rights pertaining to such shares of
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HISCo Common Stock. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of HISCo Common
Stock which were outstanding immediately prior to the Effective Time of the
Merger. If, after the Effective Time of the Merger, Certificates, with respect
to shares of HISCo Common Stock owned by HISCo Stockholders other than HMS or
any Subsidiary of HMS are presented to the Surviving Corporation for any reason,
they shall be canceled and the aggregate Per Share Purchase Price or Per Option
Purchase Price, as the case may be, shall be paid therefor as provided in this
Article 2.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF HISCo and HSA
Each of HISCo and HSA represents and warrants to HMS and Sub as of the
date hereof and as of the Closing Date as follows:
3.1 Organization and Standing. Each of HISCo and HSA is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation, and has the full power and authority
(corporate and otherwise) to carry on its business in the places and as it is
now being conducted and to own and lease the properties and assets which it now
owns or leases.
3.2 Capital Structure. The authorized capital stock of HISCO consists
of 17,000,000 shares of Common Stock, $.01 par value, of which 3,894,396 shares
are issued and outstanding, inclusive of 2,500,000 HISCo Founders Shares,
1,500,000 shares of which are to be repurchased by HISCo immediately prior to
the Effective Time of the Merger as provided in Section 6.09, and 5,000,000
shares of Preferred Stock, $.01 par value, of which no shares are issued and
outstanding. All of the issued and outstanding HISCo Common Stock is owned of
record and beneficially by the stockholders as set forth on Schedule 3.2
attached hereto. All of the outstanding shares of HISCo Common Stock were issued
in compliance with applicable federal and state securities laws, and no further
registration, qualification or other compliance under such securities laws is
required. All of the outstanding shares of HISCo Common Stock are validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, HISCo's Certificate of Incorporation or By-laws or any
agreement to which HISCo is a party or is bound. There are 312,829 HISCo Options
outstanding, which are owned of record and beneficially by the holders thereof
as set forth on Schedule 3.2 attached hereto, all of which HISCo Options are to
be cancelled immediately prior to the
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Effective Time of the Merger as provided in Section 6.10. The authorized capital
stock of HSA consists of 1,000 shares of common stock, $.01 par value, of which
1,000 shares are issued and outstanding, all of which are owned by HISCo. Except
for the foregoing, there are no equity securities of any class of HISCo or HSA
or any security exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. There are no other
options, warrants, calls, rights, commitments or agreements of any character to
which HISCo or HSA is a party or by which they are bound obligating HISCo or HSA
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of HISCo or HSA or obligating HISCo or HSA to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no voting trusts or other agreements or understandings with
respect to the shares of capital stock of HISCo or HSA.
3.3 Equity Investments. Neither HISCo nor HSA owns, directly or
indirectly, any equity interest in any corporation, partnership, joint venture,
trust or other business entity; provided, however, that HISCo owns all of the
outstanding capital stock of HSA.
3.4 Authority. Each of HISCo and HSA has all requisite corporate power
and authority to enter into this Agreement and, subject to approval of this
Agreement by the stockholders of HISCo and by HISCo in its capacity as the sole
stockholder of HSA, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of each of HISCo and HSA, subject to such approval by the stockholders
of each of HISCo and HSA. This Agreement has been duly executed and delivered by
each of HISCo and HSA and, subject to such approval by the stockholders of each
of HISCo and HSA, constitutes a valid and binding obligation of each of HISCo
and HSA, enforceable against each of HISCo and HSA in accordance with its terms,
except as such terms may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
(including fraudulent transfer laws), and (ii) subject to general principles of
equity, including without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Subject to satisfaction of the
conditions set forth in Sections 7.1 and 7.3, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or
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acceleration of any obligation or to loss of a material benefit under (i) any
provision of the Certificate of Incorporation or Bylaws of HISCo or HSA or (ii)
any Material Agreement or permit, license, judgment, order, statute, rule or
regulation applicable to either HISCo or HSA or their respective properties or
assets, other than any such conflicts, violations, defaults, terminations,
cancellations or accelerations which individually or in the aggregate would not
have a Material Adverse Effect on HISCo or HSA.
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality (a
"Governmental Entity"), is required by or with respect to HISCo or HSA in
connection with the execution and delivery of this Agreement by HISCo and HSA or
the consummation by HISCo and HSA of the transactions contemplated hereby,
except for (i) the filing of a Certificate of Merger with the Secretary of State
of the State of Delaware, and appropriate documents with the relevant
authorities of other states in which HISCo or HSA is qualified to do business,
(ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws and the laws of any foreign country and (iii) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a Material Adverse Effect on HISCo or HSA.
3.6 Financial Statements. HISCo has furnished to HMS: (i) the
consolidated balance sheet of HISCo as of October 31, 1996 (the "1996
Consolidated Balance Sheet") and the related consolidated statements of
earnings, stockholders' equity and cash flows for the year then ended (together
with the 1996 Consolidated Balance Sheet, the "1996 Consolidated Financial
Statements"), certified by Ernst & Young LLP, (ii) the unaudited balance sheet
of HSA as of October 31, 1996 (the "1996 HSA Balance Sheet") and the related
statements of earnings of HSA for the year then ended, certified by Controller
of HSA (together with the 1996 HSA Balance Sheet, the "1996 HSA Financial
Statements"), and (iii) the unaudited balance sheet of HSA as of January 31,
1997 (the "January Balance Sheet"), and the related statement of earnings of HSA
for the three months then ended, certified by the Controller of HSA (together
with the January Balance Sheet, the "Interim Financial Statements"). The 1996
Consolidated Financial Statements and 1996 HSA Financial Statements (including
any related schedules and/or notes, if any) and the Interim Financial Statements
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles, consistently applied
("GAAP") and, in the case of the Interim Financial Statements, subject to normal
year-end adjustments. The 1996 Consolidated
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Balance Sheet and 1996 HSA Balance Sheet fairly present the consolidated
financial position of HISCo and the financial position of HSA as of their
respective dates, and the 1996 Consolidated Financial Statements and the 1996
HSA Financial Statements fairly present the consolidated results of operations
of HISCo and the unconsolidated results of operations of HSA, respectively, for
the period then ended. Except as described in Schedule 3.6 hereto, the Interim
Financial Statements are complete and correct in all material respects, fairly
present the financial position and earnings of HSA at the dates and for the
periods presented, and have been compiled in accordance with GAAP (except that
the Interim Financial Statements are subject to normal year-end adjustments
which, both individually and in the aggregate, will not differ materially and
adversely from the Interim Financial Statements). Except as described in
Schedule 3.6 hereto, there has been no material adverse change in the operations
or condition (financial or other) of HISCo since October 31, 1996 or HSA since
January 31, 1997. Except as reflected in the 1996 Consolidated Financial
Statements or the Interim Financial Statements, neither HISCo nor HSA had any
obligations or liabilities, absolute, accrued or contingent, as of October 31,
1996 and January 31, 1997, respectively, that are material to the business or
assets of either HISCo or HSA taken as a whole other than performance
obligations under contracts or agreements with customers.
3.7 Absence of Changes. Since October 31, 1996 and January 31, 1997,
respectively, neither HISCo nor HSA have, except as disclosed on Schedule 3.7
attached hereto:
(a) suffered any changes in its condition (financial or otherwise), net
worth, assets, properties, obligations or liabilities which, in the aggregate,
have a Material Adverse Effect on HISCo or HSA or become aware of any event
which may result in any such Material Adverse Effect;
(b) issued, or authorized for issuance, or entered into any commitment
to issue, any equity security, bond, note or other security of HISCo or HSA,
except for those stock options set forth on Schedule 3.7 attached hereto;
(c) incurred additional debt for borrowed money, except in the ordinary
and usual course of business;
(d) paid any obligation or liability, or discharged, settled or
satisfied any claim, lien or encumbrance, except for current liabilities in the
ordinary and usual course of business;
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(e) declared, promised, or paid any dividend, payment or other
distribution on or with respect to any share of HISCo Common Stock;
(f) purchased, redeemed or otherwise acquired or committed itself to
acquire, directly or indirectly, any share or shares of HISCo Common Stock,
except as contemplated in this Agreement;
(g) mortgaged, pledged, or otherwise, voluntarily or involuntarily
encumbered any of its assets or properties, except for liens for current taxes
which are not yet due and payable and purchase-money liens arising out of the
purchase or sale of products or services made in the ordinary and usual course
of business consistent with past practices;
(h) transferred, assigned, licensed, conveyed or liquidated any of its
assets or entered into any transaction or incurred any liability or obligation
which affected its assets, other than transactions occurring in the ordinary and
usual course of business consistent with past practices;
(i) suffered any material destruction, damage or loss relating to its
assets whether or not covered by insurance;
(j) committed, suffered, permitted or incurred any default in any
liability or obligation which, in the aggregate, has had or will have any
Material Adverse Effect upon HISCo or HSA;
(k) made any expenditure or commitment for the purchase, acquisition,
construction or improvement of a capital asset, except in the ordinary and usual
course of business consistent with past practices;
(l) sold, assigned, transferred or conveyed, or committed itself to
sell, assign, transfer or convey, any Proprietary Rights (as defined in Section
3.14), except in the ordinary course of business consistent with past practices
(including non-exclusive licensing in connection with the sale of equipment);
(m) effected or agreed to effect any amendment or supplement to any
employee benefit plan or arrangement or paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other amount to or with
respect to, any employee benefit plan, or paid any bonus to, or granted any
increase in the compensation of, its officers, agents or employees, or made any
increase in the pension, retirement or other benefits of its directors,
officers, agents or other employees;
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(n) paid or committed itself to pay to or for the benefit of any of its
directors, officers, employees or stockholders any compensation of any kind
other than wages, salaries and benefits at times and rates in effect prior to
October 31, 1996 or January 31, 1997, respectively, except for increases and
bonuses to employees in the ordinary course of business consistent with past
practices;
(o) effected or committed itself to effect any amendment or
modification in its Certificate of Incorporation or By-laws, except as
contemplated in this Agreement, or to any change in the terms of any contract or
instrument to which it is a party which may have a Material Adverse Effect on
HISCo or HSA;
(p) incurred any other material liability or obligation or entered into
any transaction other than in the ordinary course of business consistent with
past practices; or
(q) received any notices, or has reason to believe, that any supplier
or customer of HISCo or HSA has taken or contemplates any steps which could
disrupt the business relationship of HISCo or HSA with said supplier or customer
or could result in the diminution in the value of HISCo or HSA as a going
concern.
3.8 Properties. Neither HISCo nor HSA owns any fee interest in real
property. The 1996 Consolidated Financial Statements and the Interim Financial
Statements reflect all of the personal property used by HISCo or HSA in its
business or otherwise held by HISCo or HSA, as of their respective dates, except
for (i) property acquired or disposed of in the ordinary and usual course of the
business of HISCo or HSA since the dates of the 1996 Consolidated Balance Sheet
and the January Balance Sheet, and (ii) property not required under generally
accepted accounting principles to be reflected thereon. Each of HISCo and HSA
has good and marketable title to all assets and properties listed on the 1996
Consolidated Balance Sheet and the January Balance Sheet and thereafter
acquired, free and clear of any imperfections of title, security interests,
liens, pledges, claims, charges, escrows, encumbrances, options, rights of first
refusal, mortgages, indentures, easements, licenses, security agreements or
other agreements, arrangements, contracts, commitments, understandings or
obligations (collectively, the "Encumbrances"), except (i) liens for current
taxes not yet due and payable or (ii) Encumbrances referred to in the 1996
Consolidated Balance Sheet, the January Balance Sheet or in Schedule 3.8
attached hereto (provided that the foregoing representation does not extend to
Proprietary Rights as to which Section 3.13 applies).
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3.9 Taxes. Each of HISCo and HSA has duly filed or caused to be filed
with the appropriate United States, state, local and foreign governmental
agencies all tax returns and reports required to be filed, and all such reports
are true, correct and complete in all material respects. Each of HISCo and HSA
has paid all Taxes shown thereon as owing. All Taxes due through the date of the
Closing will have been fully paid by that date or provided for by adequate
reserves. The 1996 Consolidated Financial Statements and the Interim Financial
Statements reflect all Taxes accrued through the period indicated thereon.
Neither HISCo nor HSA is a party to any pending action or proceeding, nor is any
such action or proceeding threatened by any governmental authority for the
assessment or collection of Taxes, and no claim for assessment or collection of
Taxes has been asserted against HISCo or HSA. For purposes of this Agreement, an
action shall be deemed pending, and a claim shall be deemed to have been
asserted, only after service of summons or other notice has been made upon HISCo
or HSA.
3.10 Compliance with Law. Except for possible minor exceptions, the
curing or non-curing of which would not have a Material Adverse Effect on HISCo
or HSA, the business of HISCo and HSA has been conducted in accordance with all
applicable laws, regulations, orders and other requirements of governmental
authorities.
3.11 Litigation. Except as otherwise set forth on Schedule 3.11
attached hereto, there is no claim, dispute, action, proceeding, suit or appeal,
or investigation, at law or in equity, pending against HISCo or HSA or affecting
any of its assets or properties (including the Proprietary Rights), before any
court, agency, authority, arbitration panel or other tribunal and none has been
threatened against HISCo or HSA. There are no facts which, if known to
stockholders, customers, governmental authorities or other persons, would be a
basis for any such claim, dispute, action, proceeding, suit or appeal or
investigation which would have a Material Adverse Effect on HISCo or HSA.
Neither HISCo nor HSA is subject to any order, writ, injunction or decree of any
court, agency, authority, arbitration panel or other tribunal.
3.12 Material Agreements. Schedule 3.12 attached hereto consists of a
true and complete list of all Material Agreements relating to HISCo or HSA, and
not listed on another schedule hereto, to which HISCo or HSA is a party and
which have been entered into by HISCo or HSA after June 30, 1995. Schedule 3.12
further identifies each of the Material Agreements which contain change of
control provisions. Prior to the execution of this Agreement, HISCo and HSA have
delivered or made available to HMS a true and complete copy of each such
Material Agreement. Except as
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set forth on Schedule 3.12 attached hereto or any other schedule to this
Agreement, neither HISCo nor HSA is a party or subject to any other Material
Agreements.
For purposes of this Agreement, "Material Agreements" means the
following written and oral agreements, contracts, or arrangements:
(a) each partnership, joint venture or similar agreement of HISCo or
HSA with a third person;
(b) each contract or agreement under which HISCo or HSA has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
indebtedness of more than $25,000 in principal amount or under which HISCo or
HSA has imposed (or may impose) a security interest or lien on any of its
assets, whether tangible or intangible, securing indebtedness in excess of
$25,000;
(c) each contract or agreement which involves an aggregate payment or
commitment per contract or agreement on the part of HISCo or HSA of more than
$25,000;
(d) each contract or agreement relating to employment or consulting,
and each severance or indemnification agreement or arrangement with any of the
directors, officers, consultants or employees of HISCo or HSA, without regard to
the value thereof;
(e) all leases and subleases from any third person to HISCo or HSA;
(f) each contract or agreement to which HISCo, HSA or their affiliates
is a party limiting, in any material respect, the right of HISCo or HSA prior to
the Effective Date of the Merger, or the Surviving Corporation or any of its
subsidiaries or affiliates at or after the Effective Time of the Merger (i) 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 HISCo, HSA or any of their affiliates prior to the Effective Time
of the Merger, or the Surviving Corporation or any of its subsidiaries or
affiliates after the Effective Date or (iii) to solicit any customer or client;
(g) all material licenses, licensing agreements and other agreements
pertaining to any Proprietary Rights;
(h) all distribution and development agreements; and
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(i) all other contracts or agreements which are material to HISCo or
HSA or the conduct of its business, other than those made in the ordinary and
usual course of business or those which are terminable by HISCo or HSA upon no
greater than sixty (60) days prior notice and without penalty or other adverse
consequences.
Except for those matters which, individually or in the aggregate, do
not and will not have a Material Adverse Effect on HISCo or HSA, no third party
has made or raised any claim, dispute or controversy with respect to any of the
Material Agreements nor has HISCo or HSA received notice or warning of alleged
nonperformance, delay in delivery or other noncompliance by HISCo or HSA with
respect to its obligations under any of the Material Agreements, nor are there
any facts which exist indicating that any of the Material Agreements may be
totally or partially terminated or suspended by the other parties thereto.
3.13 Proprietary Rights. HISCo or HSA owns or possesses adequate
licenses or other rights to use all computer software, software programs,
patents, patent applications, trademarks, trademark applications, trade secrets,
service marks, trade names, copyrights, inventions, drawings, designs, customer
lists, proprietary know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the business of
HISCo or HSA, and the same are sufficient to conduct HISCo's or HSA's business
as it has been and is now being conducted or as it may foreseeably be conducted
in the future. All of such licenses are in full force and effect and constitute
legal, valid and binding obligations of the respective parties thereto; there
have not been and there currently are not any material defaults thereunder by
any party; and no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a material default thereunder. The validity, continuation and
effectiveness of all of such licenses under the current material terms thereof
will in no way be affected by the transactions contemplated in this Agreement
or, if any would be affected, HISCo, HSA and HMS shall use all necessary and
reasonable means at their disposal to cause an appropriate consent to such
transaction to be delivered to HMS prior to the Closing Date at no cost or other
adverse consequences to HMS. The operations of HISCo and HSA do not conflict
with or infringe, and no one has asserted to HISCo or HSA that such operations
conflict with or infringe, any Proprietary Rights owned, possessed or used by
any third party.
3.14 No Conflict. The execution and delivery of this Agreement by HISCo
and HSA, and the performance of each of their obligations hereunder, (i) are not
in violation or breach of, and
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will not conflict with or constitute a default under, any of the terms of the
Certificate of Incorporation or By-laws of HISCo or HSA or any Material
Agreement; (ii) will not give rise to a right by any party to terminate its
obligations under any Material Agreement; (iii) will not result in the creation
or imposition of any lien, encumbrance, equity or restriction in favor of any
third party upon any of the material assets or properties of HISCo or HSA; and
(iv) will not conflict with or violate any applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality or
court having jurisdiction over HISCo or HSA or any of its assets or properties.
Schedule 3.14 attached hereto contains a full and complete list of all necessary
consents, waivers and approvals required in connection with the execution and
delivery of this Agreement by HISCo and HSA and the performance of HISCo's and
HSA's obligations hereunder.
3.15 No Default. Each of HISCo and HSA has in all material respects
performed, or is now performing, the obligations of, and it is not in default
(nor would by the lapse of time and/or the giving of notice be in default) in
respect of, any Material Agreements. Each of the Material Agreements is a legal,
binding and enforceable obligation by or against HISCo or HSA, assuming in the
case of any such agreement, that it is a legal, binding and enforceable
obligation of the other party(ies) thereto, enforceable in accordance with its
terms, except as such terms may be (i) limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally (including fraudulent transfer laws), and (ii) subject to
general principles of equity, including without limitation, concepts of
materiality, reasonableness, good faith and fair dealing (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
3.16 Information Supplied. None of the information provided or to be
provided by HISCo and HSA to HMS in writing in connection with the transactions
contemplated by this Agreement contains or will contain, at the time such
information was or is provided, any untrue statement of a material fact or omits
or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. To the extent facts or circumstances
occur subsequent to the provision by HISCo or HSA of any written information to
HMS which causes such information to become materially misleading, HISCo and HSA
will update such information in order to make the statements made, in light of
the circumstances under which they were made, not misleading. HISCo's and HSA's
obligation to update hereunder shall commence as of the
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date of this Agreement and shall continue thereafter until the Closing Date.
3.17 Labor Relations; Employees. No past or current HISCo or HSA
employee has made a claim before any government agency or in any court against
HISCo or HSA or threatened to make such a claim. Each of HISCo and HSA will pay
in full to the extent possible or, if not, accrue by adequate reserves, all
wages, salaries, bonuses, sick pay, vacation pay and other direct and indirect
compensation earned by all employees of their respective employees through the
Closing Date (whether or not payable by such date). Upon termination of the
employment of any HISCo or HSA employee by HMS, HMS will not incur any liability
for any severance or termination pay or other similar payment except as
expressly provided in employment agreements listed on Schedule 3.12. Each of
HISCo and HSA is in compliance with all federal, state, local, and foreign laws
and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. There is no unfair labor practice
complaint against HISCo or HSA pending before the National Labor Relations Board
or strike, dispute, slowdown or stoppage pending or threatened against or
involving HISCo or HSA, and none has occurred since October 31, 1996. No
representation question exists respecting the employees of HISCo or HSA and no
collective bargaining agreement is currently being negotiated by HISCo or HSA.
3.18 Customers and Suppliers. Schedule 3.18 is a true and complete list
of each of HSA's 10 largest customers and suppliers (measured by dollar volume
in each case) during fiscal year 1996 and the first quarter of fiscal year 1997
showing, with respect to each, the name and address, dollar volume involved and
nature of the relationship (including the principal categories of products or
services bought and sold).
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF HMS AND SUB
HMS represents and warrants to HISCo and HSA as of the date hereof and
as of the Closing Date as follows:
4.1 Organization. Each of HMS and Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the full power and authority
(corporate or otherwise) to carry on its business in the places and as it is now
being conducted and to own and lease the properties which it now owns and
leases.
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4.2 Capital Structure of Sub. The authorized capital stock of Sub
consists of 200 shares of Common Stock, $.01 par value ("Sub Common"). Upon the
execution of this Agreement, 200 shares of Sub Common were validly issued and
outstanding and were and, as of the Effective Time of the Merger will be, held
by HMS of record and beneficially.
4.3 Authority. HMS and Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of HMS and Sub. This Agreement has been duly executed
and delivered by HMS and Sub and constitutes valid and binding obligations of
HMS and Sub, enforceable against them in accordance with its terms, except as
such terms may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
(including fraudulent transfer laws), and (ii) subject to general principles of
equity, including without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Subject to satisfaction of the
conditions set forth in Sections 7.1 and 7.2, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under (i) any provision of the Certificate of Incorporation or
Bylaws of HMS, (ii) any provision of the Certificate of Incorporation or By-laws
of Sub, or (iii) any material agreement, permit, license, judgment, order,
statute, rule or regulation applicable to HMS, Sub or any Subsidiary of HMS or
their respective properties or assets, other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which
individually or in the aggregate would not have a Material Adverse Effect on
HMS, Sub and HMS's Subsidiaries.
4.4 Governmental Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to HMS or Sub in connection with the execution and
delivery of this Agreement by HMS and Sub or the consummation by HMS and Sub of
the transactions contemplated hereby, except for (i) the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which HMS or Sub is
qualified to do business, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state
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securities laws and the laws of any foreign country, (iii) the filing of such
reports under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby, and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a Material Adverse Effect on HMS, Sub and Subsidiaries.
4.5 No Conflict. The execution and delivery of this Agreement and the
Merger Agreement by HMS, and the performance of its obligations hereunder or
thereunder, (i) are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of the Certificate of Incorporation
or Bylaws of HMS or any of its Subsidiaries, or any material contract, agreement
or commitment binding upon HMS or any of its Subsidiaries or any of their assets
or properties; (ii) will not give rise to a right by any party to terminate its
obligations under any HMS material agreement; (iii) will not result in the
creation or imposition of any lien, encumbrance, equity or restriction in favor
of any third party upon any of the material assets or properties of HMS or any
of its Subsidiaries; and (iv) will not conflict with or violate any applicable
law, rule, regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over HMS or any of its Subsidiaries
or any of their assets or properties.
4.6 No Prior Activities. Sub has not incurred any liabilities or
obligations, except those incurred in connection with its incorporation or with
the negotiation and consummation of this Agreement and the transactions
contemplated hereby. Sub has not engaged in any business or activities of any
type or kind whatsoever, or entered into any agreements or arrangements with any
person or entity, and is not subject to or bound by any obligation or
undertaking which are not contemplated by this Agreement or incurred in
connection with its incorporation.
ARTICLE 5.
COVENANTS RELATING TO CONDUCT OF BUSINESS
During the period from the date of this Agreement and continuing until
the Effective Time of the Merger, each of HISCo and HSA agrees (except as
expressly contemplated by this Agreement or to the extent that HMS shall
otherwise consent in writing) that:
5.1 Ordinary Course. It will use all reasonable efforts, consistent
with its past practice and policy to: (i) carry on its business in the usual,
regular and ordinary course in substantially
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the same manner as heretofore conducted and, to the extent consistent with such
business; (ii) to preserve intact its present business organization; (iii) keep
available the services of its present officers and key employees and preserve
its relationship with customers, suppliers and others having business dealings
with it; and (iv) maintain continuously insurance coverage substantially
equivalent to the insurance coverage in existence on the date of this Agreement.
In addition, neither HISCo nor HSA will engage in any transaction not in the
ordinary course consistent with its past practices, nor will HISCo or HSA enter
into any new Material Agreement or amend any existing Material Agreement (other
than minor modifications) without the prior written consent of HMS.
5.2 Dividends; Changes in Stock. Neither HISCo nor HSA shall: (i)
declare, pay or promise to pay any dividends on or make other distributions in
respect of any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of HISCo
or HSA or (iii) repurchase or otherwise acquire any shares of its capital stock,
except for the repurchase of HISCo Founders Shares as provided in Section 6.09
and the cancellation of the HISCo Options as provided in Section 6.10.
5.3 Issuance of Securities. Neither HISCo nor HSA shall issue, deliver
or sell or authorize, promise or propose the issuance, delivery or sale of, or
purchase or promise or propose the purchase of, any shares of its capital stock
or any class of securities exercisable or convertible into or exchangeable for,
or rights, warrants or options to acquire, any such shares or other convertible
securities.
5.4 Governing Documents. Neither HISCo nor HSA shall amend its
Certificate of Incorporation or By-laws, except as contemplated in this
Agreement.
5.5 No Acquisitions. Neither HISCo nor HSA shall acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business of any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to either HISCo or HSA taken as a whole,
except with the prior written consent of HMS.
5.6 No Dispositions. Neither HISCo nor HSA shall sell, lease or
otherwise dispose of any of its assets, which are material,
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individually or in the aggregate, to either HISCo or HSA, except in the ordinary
course of business consistent with prior practice.
5.7 Indebtedness. Neither HISCo nor HSA shall incur any indebtedness
for borrowed money, or guarantee any such indebtedness or issue or sell or
promise to issue or sell, any debt securities of HISCo or HSA or guarantee any
debt securities of others.
5.8 Benefit Plans, Etc. Neither HISCo nor HSA shall adopt or amend in
any material respect any agreement with employees, other than as provided in
this Agreement.
5.9 Accounting Practices. Neither HISCo nor HSA shall alter the manner
of keeping its books, accounts or records, or change in any manner the
accounting practices therein reflected.
5.10 Other Agreements. Neither HISCo nor HSA shall agree, in writing or
otherwise, to do any of the foregoing.
ARTICLE 6.
ADDITIONAL AGREEMENTS
6.1 Access to Information. Each of HISCo and HSA shall afford to HMS
and to HMS's accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time of
the Merger to all of HISCo's and HSA's properties, books, contracts, commitments
and records and, during such period, HISCo and HSA shall use all reasonable
efforts to furnish promptly to HMS all other information concerning the
business, properties and personnel of HISCo and HSA as HMS may reasonably
request. HMS will not use such information for purposes other than this
Agreement and will otherwise hold such information in confidence (and will cause
its consultants and advisors also to hold such information in confidence) until
such time as such information otherwise becomes publicly available, and in the
event of termination of this Agreement for any reason, HMS shall promptly
return, or cause to be returned, to HISCo and HSA all nonpublic documents
obtained from HISCo and HSA which it would not otherwise have been entitled to
obtain, and any copies made of such documents, extracts and copies thereof, as
well as schedules, exhibits or other documents contained in or derived from such
information. Notwithstanding the foregoing, HMS shall be permitted to disclose
such information in its filings with the Securities and Exchange Commission as
and to the extent required under applicable federal securities laws.
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6.2 Legal Conditions to the Merger. Each party will take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on such party with respect to the Merger and will promptly cooperate
with and furnish information to the other party in connection with any such
requirements imposed upon such other party in connection with the Merger. Each
party will take all reasonable actions to obtain, and to cooperate with the
other party with respect to, any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity, or other third party, required to
be obtained or made by such party or its Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
6.3 HISCo Stockholders' Approval. HISCo agrees to submit this Agreement
and any related matters to its stockholders for approval, as provided by law and
its Certificate of Incorporation and By-laws, immediately following the
execution of this Agreement. The Board of Directors of HISCo will, subject to
its fiduciary duties, unanimously recommend to the HISCo stockholders that such
stockholders approve the transactions contemplated by this Agreement. In
addition, HISCo shall approve this Agreement and the transactions contemplated
hereby in its capacity as the sole stockholder of HSA. HMS agrees to vote its
shares in HISCo in favor of the transactions contemplated by this Agreement.
6.4 Dissenting Shares. As promptly as practicable after the date of the
HISCo Stockholders' Meeting, or the approval of this Agreement and the Merger by
means of written consents in accordance with Section 228(a) of the GCL, HISCo
shall furnish HMS with the name, address and number of Dissenting Shares owned
by each Dissenting Stockholder.
6.5 Employee Benefits. HMS agrees that, after the Closing Date, HSA
employees will be afforded the opportunity to continue to participate in
benefits programs that are currently available to them. In addition, they will
be afforded the opportunity to participate in equity acquisition programs that
are currently available to all HMS employees. For purposes of participating in
all such programs, HSA employees will be given length of service credit, to the
extent applicable, for the period of their employment by HSA and its
predecessors in interest.
6.6 Communications. Between the date hereof and the Effective Time of
the Merger, neither HISCo, HSA nor HMS will furnish any communication to its
stockholders or to the public generally if the subject matter thereof relates to
the other party or to the transactions contemplated by this Agreement without
the prior approval of the other parties as to the content hereof, which
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approval shall not be unreasonably withheld; provided, however, that HMS shall
be entitled to make any disclosure to the public as it shall reasonably believe
to be necessary to comply with the requirements of federal or state securities
laws or the Nasdaq National Market System (provided that, in such event, HMS
shall make reasonable efforts to advise HISCo and HSA in advance of such
disclosure).
6.7 Notification of Certain Matters. HISCo and HSA shall give prompt
notice to HMS and HMS shall give prompt notice to HISCo and HSA, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would, in the reasonable judgment of their respective management, be
likely to cause either (a) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Effective Time of the Merger or (b) any
condition set forth herein to be unsatisfied in any material respect at any time
from the date of this Agreement to the Effective Time of the Merger, and (ii)
any material failure of HISCo, HSA, HMS or Sub, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, provided that the delivery of any notice pursuant to
this Section 6.9 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.8 Sub Sole Stockholder's Approval. HMS agrees, in its capacity as the
sole stockholder of Sub, to approve this Agreement and any related matters, as
provided by law and Sub's Certificate of Incorporation and By-laws, immediately
following the execution of this Agreement.
6.9 Repurchase of HISCo Founders Shares. Prior to the Effective Time of
the Merger, HISCo shall repurchase the HISCo Founders Shares owned by HISCo
Stockholders other than HMS or any Subsidiary of HMS for $0.01196 in cash per
share.
6.10 Cancellation of HISCo Options. Prior to the Effective Time of the
Merger, HISCo shall cancel all of the HISCo Options then issued and outstanding
upon HSA's payment to the respective HSA employee optionholders and HMS's
payment to the remainder of the optionholders an amount in cash in respect of
each share issuable under such HISCo Options equal to the difference between (i)
the Per Share Purchase Price and (11) the exercise price of such HISCo Options.
Holders of HISCo Options cancelled as provided herein shall be afforded the
right to exercise dissenters' rights pursuant to Section 262 of the GCL as if
they had elected to exercise their respective HISCo Options immediately prior to
the
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cancellation thereof. Holders of HISCo Options that exercise dissenters' rights
shall be entitled to retain the payments provided in this Section 6.10 in
respect of cancelled HISCo Options regardless of whether the appraised value of
such HISCo Options turns out to be less than such payments.
ARTICLE 7.
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction, or to the waiver by such party, on or prior to the Closing
Date, of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the required affirmative vote of (i) the holders of the outstanding
shares of HISCo Common Stock, (ii) HISCo in its capacity as the sole stockholder
of HSA and (iii) HMS in its capacity as the sole stockholder of Sub.
(b) Government Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained, other than filings with and approvals by any Governmental Entity
relating to the Merger if failure to make such filings or obtain such approvals
would not be materially adverse to HMS or its Subsidiaries taken as a whole,
HISCo or HSA.
(c) Third-Party Approvals. Any and all consents or approvals required
from third parties that if not obtained would have a Material Adverse Effect on
HISCo or HSA shall have been obtained.
(d) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against HISCo, HSA or HMS of substantial damages if
the Merger is consummated, shall be pending or threatened which, in the good
faith judgment of HISCo's, HSA's or HMS's Board of Directors has a reasonable
probability of resulting in such order, injunction or damages. In the event any
such order or injunction shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
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(e) Statutes. No statute, rule or regulation shall have been enacted by
the government of the United States or any state or agency thereof which would
make the consummation of the Merger illegal.
7.2 Conditions to Obligations of HMS and Sub. The obligations of HMS
and Sub to effect the Merger are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived by HMS and Sub:
(a) Representations and Warranties. The representations and warranties
of HISCo and HSA set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
and HMS shall have received a certificate or certificates to such effect signed
by the Acting President of HISCo and the Chief Executive Officer and Controller
of HSA.
(b) Performance of Obligations of HISCo and HSA. HISCo and HSA shall
have performed in all material respects all obligations required to be performed
by them under this Agreement prior to the Closing Date, and HMS shall have
received a certificate signed by the Acting President of HISCo and the Chief
Executive Officer of HSA to such effect.
(c) No Adverse Change in the Business of HISCo and HSA. HMS shall have
received a certificate signed by the Acting President of HISCo and the Chief
Executive Officer and Controller of HSA that since the date of the 1996
Consolidated Financial Statements and the Interim Financial Statements,
respectively, there has been no Material Adverse Change in the business of HISCo
and HSA.
(d) Corporate Action. HMS shall have received from HISCo and HSA
certified copies of resolutions of HISCo's and HSA's stockholders and Board of
Directors approving and adopting this Agreement and the transactions
contemplated hereby, and HMS shall have received a certificate signed on behalf
of HISCo and HSA by the corporate secretaries or other authorized officers of
HISCo and HSA to such effect.
(e) Repurchase of HISCo Founders Shares. Immediately prior to the
Effective Time of the Merger, HISCo shall have repurchased the HISCo Founders
Shares (except for HISCo Founders Shares owned by HMS or any Subsidiary of HMS)
for a cash price of $0.01196 per share.
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(f) Cancellation of HISCo Options. Immediately prior to the Effective
Time of the Merger, HISCo shall have cancelled the HISCo Options.
7.3 Conditions to Obligations of HISCo and HSA. The obligations of
HISCo and HSA to effect the Merger are subject to the satisfaction on or prior
to the Closing Date of the following conditions unless waived by HISCo and HSA:
(a) Representations and Warranties. The representations and warranties
of HMS and Sub set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
and HISCo and HSA shall have received a certificate signed by the Chief
Executive and Chief Financial Officers of HMS to such effect.
(b) Performance of Obligations of HMS and Sub. HMS and Sub shall have
performed all obligations required to be performed by them under this Agreement
prior to the Closing Date, and HISCo and HSA shall have received a certificate
signed by the Chief Executive Officer of HMS to such effect.
(c) Corporate Action. HISCo and HSA shall have received from HMS
certified copies of resolutions of Sub's sole stockholder and of HMS's and Sub's
Boards of Directors approving and adopting this Agreement and the transactions
contemplated hereby, and HISCo and HSA shall have received a certificate signed
on behalf of each of HMS and Sub by the corporate secretary or other authorized
officer of each such company to such effect.
ARTICLE 8.
CLOSING
8.1 Closing Date. The Closing under this Agreement (the "Closing")
shall be held not more than five (5) business days following satisfaction of all
conditions precedent to the Merger specified in this Agreement, unless duly
waived by the party entitled to satisfaction thereof. The parties hereto
anticipate that the Closing will occur on or before March 18, 1997. In any
event, if the Closing has not occurred on or before April 17, 1997, this
Agreement may be terminated as provided in Article 11. Such date on which the
Closing is to be held is herein referred to as the "Closing Date." The Closing
shall be held at the offices of Coleman & Rhine LLP, 1120 Avenue of the
Americas, 19th Floor, New York, New York 10036, at 10:00 a.m. on such date, or
at such other time and place as the parties may mutually agree.
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8.2 Filing Date. Subject to the provisions of this Agreement, on the
Closing Date, a fully-executed and acknowledged copy of this Agreement, if
required, along with required related certificates of HISCo, HSA and Sub meeting
the requirements of the GCL, shall be filed with the Secretary of State of the
State of Delaware, all in accordance with the provisions of this Agreement.
ARTICLE 9.
TERMINATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties and covenants contained in this
Agreement shall terminate simultaneously with the Effective Time of the Merger.
ARTICLE 10.
PAYMENT OF EXPENSES
HMS, Sub HISCo and HSA shall each pay their own out-of-pocket expenses
incurred incident to the preparation and carrying out of the transactions herein
contemplated, whether or not such transactions are consummated; provided,
however, that if the Merger is consummated, HISCo's and HSA's out-of pocket
expenses (including reasonable attorneys fees) will be paid one-half by HMS and
one-half by Welsh, Carson, Anderson & Stowe VI, L.P.
ARTICLE 11.
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of matters
presented in connection with the Merger by the stockholders of HISCo:
(a) by mutual written consent of HISCo and HMS;
(b) by HMS or HISCo, as the non-defaulting party, if there has been a
material breach of any material representation, warranty, covenant or agreement
contained in this Agreement on the part of the other party set forth in this
Agreement and, if such breach is curable, such breach has not been cured within
a ten (10) day period after written notice of such breach;
(c) by either HMS or HISCo if the Merger shall not have been
consummated on or before April 17, 1997; provided, however, that if the Merger
shall not be consummated on or before April 17, 1997,
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because of a party's failure to satisfy any of the conditions set forth in
Sections 7.2 or 7.3, neither HMS nor HISCo may rely upon its own actions or lack
thereof to terminate the Agreement.
(d) by either HMS or HISCo if (i) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger or (ii) there shall be any action taken, or any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the Merger by
any Governmental Entity which would make consummation of the Merger illegal; and
(e) by either HMS or HISCo if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would (a) prohibit
HMS's, HISCo's or HSA's ownership or operation of all or a material portion of
the business or assets of HISCo, HSA or HMS and its Subsidiaries taken as a
whole, or compel HMS, HISCo or HSA to dispose of or hold separate all or a
material portion of the business or assets of HISCo and its Subsidiaries taken
as a whole or HMS and its Subsidiaries taken as a whole, as a result of the
Merger or (B) render HMS, HISCo or HSA unable to consummate the Merger, except
for any waiting period provisions;
Where action is taken to terminate this Agreement pursuant to this
Section 11.01, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
11.2 Effect of Termination. In the event of termination of this
Agreement by either HISCo or HMS as provided in Section 11.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of HMS, HISCo or HSA or their respective officers or directors except to
the extent that such termination results from the breach by a party hereto of
any of its covenants or agreements set forth in this Agreement.
11.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Board of Directors, at any time before or after
approval of matters presented in connection with the Merger by the stockholders
of HISCo, HSA and Sub but, after any such stockholder approval, no amendment
shall be made which by law requires the further approval of stockholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
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11.4 Extension; Waiver. At any time prior to the Effective Time of the
Merger, any party hereto, by such corporate action as shall be appropriate, may,
to the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE 12.
GENERAL
12.1 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, as follows:
If to HMS or Sub:
Health Management Systems, Inc.
401 Park Avenue South
New York, New York 10016
Attention: President
with a copy to
Coleman & Rhine LLP
1120 Avenue of the Americas
New York, New York 10036
Attention: Bruce S. Coleman, Esq.
If to HISCo or HSA:
Health Information Systems Corporation
401 Park Avenue South
New York, New York 10016
Attention: Acting President
with a copy to
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Robert A. Schwed, Esq.
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for to such other persons as may be designated in writing by the parties, by a
notice given as aforesaid.
12.2 Headings. The headings of the several sections of this Agreement
are inserted for convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
12.3 Counterparts. This Agreement may be executed in counter parts, and
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
12.4 Binding Nature. This Agreement shall be binding upon and inure to
the benefit of the parties hereto. Neither HMS, Sub, HISCo nor HSA may assign or
transfer any rights under this Agreement.
12.5 Other Agreements. This Agreement, together with all of the
Exhibits and Schedules hereto, constitute the entire agreement and understanding
of the parties with respect to the subject matter hereof. All other written
agreements heretofore made between the parties hereto in contemplation of this
Agreement are superseded by this Agreement and are hereby terminated in their
entirety.
12.6 Good Faith. Each of the parties hereto agrees that it shall act in
good faith in an attempt to cause all the conditions precedent to their
respective obligations to be satisfied.
12.7 Applicable Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of New
York, without regard to principles of conflicts of laws.
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IN WITNESS WHEREOF, HMS, Sub, HISCo and HSA have caused this Agreement
to be duly signed all as of the date first written
HEALTH MANAGEMENT SYSTEMS, INC.
By:_____________________________________
HISCO ACQUISITION CORP.
By:_____________________________________
HEALTH INFORMATION SYSTEMS CORPORATION
By:_____________________________________
HSA MANAGED CARE SYSTEMS, INC.
By:_____________________________________
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Agreed And Accepted
With Respect To Article 10 Only:
WELSH, CARSON, ANDERSON & STOWE
By:_____________________________