[ON LETTERHEAD OF CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS, INC.]
Letter of Intent
This is a Letter of Intent (this "Letter") entered into as of this 24th
day of July, 2002, by and among CGI Group Inc., a corporation organized under
the laws of the Province of Quebec ("CGI"), INSpire Insurance Solutions, Inc., a
corporation organized under the laws of the State of Delaware ("Solutions") and
INSpire Claims Management, Inc., a corporation organized under the laws of the
State of Texas ("Management" and, together with Solutions, "INSpire").
Solutions and Management have each filed petitions under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the Northern District of Texas (the "Bankruptcy Court"),
such petitions jointly administered as Bankruptcy Case No. ▇▇-▇▇▇▇▇▇▇; and
CGI desires to make a proposal to purchase all or substantially all of
the assets of INSpire in consideration of a certain cash payment and the
assumption of certain specified liabilities of INSpire, as more fully described
in this Letter; and
INSpire desires to encourage CGI to make such proposal by making
certain agreements more fully described in this Letter;
In consideration of the foregoing and the mutual agreements of the
parties set forth in this Letter, the parties to this Letter hereby agree as
follows:
1. Structure of the Transaction. CGI's proposal is structured as a
purchase of substantially all of the assets of INSpire and the
assumption of certain specified liabilities of INSpire. Except for the
liabilities and obligations specifically assumed by CGI, CGI will have
no liability for any administrative, tax, priority, secured or
unsecured claims against the bankruptcy estates of Solutions or
Management or for any other liabilities or obligations. Such purchase
of assets and assumption of liabilities will be made pursuant to a plan
of reorganization or other appropriate order(s) of the Bankruptcy
Court, in each case in form and substance satisfactory to CGI (such
plan or order(s), a "Plan of Reorganization").
2. Negotiation in Good Faith. CGI and INSpire will negotiate in good faith
to reach agreement on the terms and conditions of a mutually agreeable
Asset Purchase Agreement (the "Definitive Agreement"). As soon as
practicable, CGI's legal counsel will tender a proposed draft of
Definitive Agreement for INSpire's review. Unless and until the
Definitive Agreement is executed and delivered by CGI, CGI will have no
obligation whatsoever to enter into any transaction with INSpire with
respect to any matter, including the purchase of any assets and the
assumption of any liabilities of INSpire. Subject to the parties'
obligation to negotiate in good faith, no party will have any
obligation to enter into a Definitive Agreement and each party may
withhold, in its sole and absolute discretion, its agreement to any
such Definitive Agreement.
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3. Anticipated Terms of Definitive Agreement. The parties currently
anticipate that the Definitive Agreement will contain substantially the
terms and conditions set forth in this Section 3. However, this Section
3 is not all inclusive and changes in such terms and conditions may be
made as the parties to this Letter and their respective legal counsel
deem necessary, prudent or desirable.
(a) Purchased Assets. The Definitive Agreement will provide for
the purchase by CGI of the business conducted by INSpire (the
"Business"), the goodwill associated with the Business (the
"Goodwill") and all of INSpire's right, title and interest in
and to the assets related to, employed in or reasonably
necessary for the conduct of the Business (the "Purchased
Assets"). The Purchased Assets will include all of INSpire's
(i) real property and improvements thereon, (ii) equipment,
inventory and other personal property, (iii) intellectual
property, (iv) cash, cash equivalents, accounts receivable,
prepaid expenses, tax credits and refunds, (v) rights under
the Assumed Contracts (as defined below), (vi) claims,
warranties, guarantees and similar intangible rights, (vii)
rights under contracts, licenses, leases and permits, (viii)
books, records and other documentary assets relating to the
Business and (ix) other assets specifically identified on a
schedule to be attached to the Definitive Agreement. The
Purchased Assets will also include any claims that INSpire may
have, whether pursuant to Chapter 5 of the Bankruptcy Code or
otherwise, against certain key employees, customers or vendors
of the Business that are identified in the Definitive
Agreement. The Purchased Assets will not include certain
assets specifically identified in the Definitive Agreement,
including without limitation, prepaid expenses relating to D&O
insurance, certain specified tax refunds, claims that INSpire
may have under Chapter 5 of the Bankruptcy Code (except those
described above as Purchased Assets) and other specified
causes of actions that INSpire may presently have.
(b) Consideration. The aggregate consideration to be given by CGI
for the Business, the Goodwill and the Purchased Assets will
be (i) the payment by CGI, in cash, of $8,200,000 (the "Cash
Purchase Price"), adjusted as set forth herein, and (ii) the
assumption by CGI of certain liabilities and obligations of
INSpire relating to the Purchased Assets and specifically
identified in the Definitive Agreement; provided, however,
that the aggregate liability to be assumed by CGI pursuant to
all such assumed liabilities will not exceed $14,000,000.
Subject to such proviso, the assumed liabilities will include,
to the extent specifically identified in the Definitive
Agreement, (A) performance and payment obligations under the
Assumed Contracts, (B) liabilities for unearned revenue
related to Assumed Contracts as reflected in the financial
statements of the Business, (C) liabilities for accrued
property and sales taxes, (D) to the extent permitted by
applicable bankruptcy law, pre-petition obligations for
accrued payroll and compensation and deferred compensation
owed to employees of the Business and other pre-petition
liabilities and obligations (including accounts payable)
incurred by INSpire in the ordinary course of business and (E)
post-petition liabilities and
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(c) obligations incurred by INSpire in the ordinary course of
business. Any liability or obligation of INSpire not
specifically assumed by CGI in the Definitive Agreement will
be retained by INSpire, including without limitation certain
particular liabilities identified in the Definitive Agreement
(e.g., liabilities related to indebtedness for borrowed money,
disputed services under contracts, the Sul America claim, the
Lockheed claim or terminated services or office closures).
(d) Cash Purchase Price Adjustment.
(i) The amount of the Cash Purchase Price is based on the
assumption that the "Net Asset Value" (as further
described in Section 3(c)(iv) below) will be equal to
$7,000,000 (the "Assumed Net Asset Value").
(ii) Seven business days prior to the closing, INSpire
will deliver to CGI a revised estimate of the Net
Asset Value (the "Estimated Net Asset Value"). Such
estimate will be subject to the approval of CGI's
financial advisors. The Cash Purchase Price payable
at closing will be adjusted (upward or downward, as
appropriate) by the amount by which the Estimated Net
Asset Value (as approved) differs from the Assumed
Net Asset Value; provided, however, that no
adjustment will be made to the extent that the
Estimated Net Asset Value exceeds $8,400,000.
(iii) Within thirty business days following the closing,
CGI will have the right to audit the books and
records of INSpire to determine the actual Net Asset
Value (the "Actual Net Asset Value"). CGI will be
entitled to withdraw from the Escrow Account (as
defined below) the amount by which the Estimated Net
Asset Value (or $8,400,000, if less) exceeds the
Actual Net Asset Value. INSpire will have the right
to review CGI's determination of the Actual Net Asset
Value and any dispute relating thereto will be
resolved, by an independent certified public
accounting firm, whose fees will be paid by the party
not substantially prevailing in the dispute.
(iv) Net Asset Value will be calculated by subtracting the
value of all liabilities assumed by CGI pursuant to
the Definitive Agreement from the value of the
Purchased Assets, all such values to be calculated as
of the date of closing. A schedule to the Definitive
Agreement will set forth an example of the
calculation of Net Asset Value (including the manner
in which each type or class of assets and liabilities
will be valued) and the determination of Estimated
Net Asset Value and Actual Net Asset Value will be
made on a basis consistent with such schedule. This
schedule will be prepared by the parties in the
course of CGI's due diligence investigation of
INSpire.
(e) Escrow Holdback. Twenty-five percent (25%) of the Cash
Purchase Price will be deposited by CGI into an account (the
"Escrow Account") with an escrow agent selected by CGI but
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reasonably acceptable to INSpire. For nine (9) months
following the closing date, CGI will be entitled to draw upon
the Escrow Account for satisfaction of (i) the post-closing
Net Asset Value adjustment described in Section 3(c)(iii),
(ii) any damages suffered by CGI or its related parties
relating to breaches by INSpire of its representations,
warranties and covenants and (iii) any damages suffered by CGI
or its related parties relating to any liability or obligation
not expressly assumed by CGI pursuant to the Definitive
Agreement. After the one year anniversary of the closing date,
any monies remaining in the Escrow Account and not subject to
any outstanding claim by CGI will be paid by the escrow agent
to or for the benefit of INSpire.
(f) Representations, Warranties and Covenants. The Definitive
Agreement will contain representations, warranties and
covenants of the parties customary in an asset purchase
transaction of like size and subject matter, including without
limitation, (i) representations and warranties relating to
enforceability, INSpire's financial statements and
liabilities, the Purchased Assets and the state of the
Business and (ii) covenants relating to the conduct of the
Business in the ordinary course prior to closing and certain
actions to be taken with respect to INSpire's bankruptcy case.
(g) Plan of Reorganization. The Definitive Agreement will contain
covenants of INSpire relating to the preparation, filing, and
confirmation of the Plan of Reorganization, including without
limitation, (i) the preparation and filing with the Bankruptcy
Court of a Disclosure Statement and proposed Plan of
Reorganization (providing for the consummation of the
transactions contemplated by the. Definitive Agreement)
promptly following the execution of the Definitive Agreement,
(ii) the opportunity of CGI to review and comment on the
proposed form of the Plan of Reorganization and other filings
with the Bankruptcy Court relating thereto prior to filing,
(iii) the terms and provisions of the proposed Plan of
Reorganization, as they relate to the Definitive Agreement,
the Purchased Assets, the Assumed Contracts, the Business
and/or the liabilities proposed to be assumed by CGI, being
reasonably satisfactory to CGI, (iv) the making of no
modifications, amendments, additions or other changes to the
terms and provisions of the proposed Plan of Reorganization,
as they relate to the Definitive Agreement, the Purchased
Assets, the Assumed Contracts, the Business and/or the
liabilities proposed to be assumed by CGI, without the prior
written consent of CGI, such consent to not be unreasonably
withheld and (v) the use by INSpire of its best efforts to
cause (A) the Disclosure Statement to be approved by the
Bankruptcy Court, (B) the creditors of INSpire and other
interest-holders to vote for confirmation of the Plan of
Reorganization and (C) the Bankruptcy Court to confirm the
Plan of Reorganization.
(h) Acceptance and Rejection of Contracts by INSpire. All INSpire
leases and executory contracts that CGI desires to assume
pursuant to the Definitive Agreement (the "Assumed Contracts")
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will be assigned to, and assumed by, CGI pursuant to the Plan
of Reorganization. All cure costs associated with such Assumed
Contracts will be paid by CGI and identified as an assumed
liability on the appropriate schedule to the Definitive
Agreement. INSpire will file motions with the Bankruptcy Court
to reject all of its other leases and executory contracts (the
"Rejected Contracts").
(i) Employees. It is contemplated that the employees of INSpire,
as of the closing, will be offered employment with CGI
following the closing date. CGI will request that the
employees apply for continued employment, and will evaluate
each applicant in accordance with its standard hiring
procedures. CGI anticipates that such applicants will be given
offers of employment in accordance with CGI's standard
employment policies. It is also contemplated that salary,
bonus and employee benefits for each person who accepts such
an offer of continued employment by CGI will be on
substantially the same terms and conditions as their current
employment, but CGI reserves the right, in its sole
discretion, to refuse to employ and to make adjustments to
salary, bonus or benefits, as CGI deems necessary on a
case-by-case basis. CGI will attempt to continue insurance
coverage without interruption and to give credit for service
at their current employer for purposes of vacation, sick leave
and 401(k) benefits.
(j) Management Employees. CGI anticipates entering into employment
agreements with current INSpire management employees on
mutually acceptable terms and conditions, including agreements
not to compete with CGI and its affiliates during their
employment and for a three-year period thereafter.
(k) Liability for Pre-Closing Obligations to Employees. Except as
otherwise specifically provided in the Definitive Agreement,
CGI will not assume any liability of INSpire for salary, bonus
or employee benefits owing to any INSpire employee relating to
any period prior to the closing date, except that each person
who accepts an offer of continued employment with CGI will be
given full credit for prior service with INSpire with respect
to future vacation, sick and personal days as well as for all
current accrued and unused vacation, sick and personal days.
(l) Conditions to Closing. The obligation of CGI to consummate the
transactions contemplated by the Definitive Agreement will be
subject to certain conditions, including without limitation,
(i) satisfactory conclusion of due diligence by CGI (such due
diligence to be completed within thirty (30) days of the
execution of the Definitive Agreement), (ii) the absence of
any material adverse change in the Business prior to the
closing date, (iii) the approval of the Board of Directors of
CGI, (iv) the Estimated Net Asset Value (as approved by CGI's
financial advisors) being no less than $5,600,000, (v) the
receipt of all consents and regulatory approvals required to
consummate the purchase of the Purchased Assets and the
assumption of the Assumed Contracts by CGI (including consents
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required to transfer intellectual property), (vi) the
employment by CGI of employees of the Business (including all
key employees) that are reasonably necessary for the conduct
of the Business following the closing on terms and conditions
that are mutually satisfactory to such employees and CGI,
(vii) the confirmation of the Plan of Reorganization by the
Bankruptcy Court and the entry of such other orders by the
Bankruptcy Court as CGI may deem necessary or advisable to
consummate the transactions contemplated by the Definitive
Agreement, (viii) the entry of the Buyer Protection Order (as
defined in Section 4) by the Bankruptcy Court; (ix) the
assumption by CGI of customer contracts of INSpire that will,
under their terms, generate gross revenues of at least
$28,700,000 during the twelve-month period immediately
following the closing date and (x) the Bankruptcy Court
entering an order approving the rejection of the Rejected
Contracts, such order to be in form and substance acceptable
to CGI. The obligation of CGI to consummate the transactions
contemplated by the Definitive Agreement will not be subject
to any financing contingency and CGI does not anticipate the
need to obtain any regulatory approvals, other than the
confirmation of the Plan of Reorganization and other approvals
required from the Bankruptcy Court.
(m) Termination. CGI will have the right to terminate the
Definitive Agreement if, among other things, (i) the Buyer
Protection Order is not entered by the Bankruptcy Court within
thirty (30) calendar days of the execution of the Definitive
Agreement, (ii) the Bankruptcy Court does not confirm the Plan
of Reorganization on or before October 31, 2002, (iii) the
consummation of the transactions contemplated by the
Definitive Agreement does not occur on or before November 15,
2002, (iv) any of the information provided to CGI in
connection with its due diligence investigation adversely
affects CGI's valuation of the Business or (v) CGI determines
that the provision of information to any third party may
adversely affect the ability of CGI to competitively conduct
the Business following the closing.
(n) Transfer Taxes. INSpire will be responsible for all transfer,
sales, use, gains, excise and similar taxes incurred in
connection with the transfer of the Business, the Goodwill and
the Purchased Assets.
(o) Expenses. CGI and INSpire will be responsible for their
respective fees and expenses incurred in connection with the
Definitive Agreement, except as otherwise provided in the
Buyer Protection Order.
4. Buyer Protection Order. Within three business days of the execution and
delivery of this Letter, INSpire will file a motion requesting a prompt
hearing before the Bankruptcy Court to establish by order of such court
(the "Buyer Protection Order") the right of CGI to receive from INSpire
a break-up fee if the closing of the transactions contemplated by the
Definitive Agreement does not occur on or before November 15, 2002,
other than due to the material fault of CGI. The break-up fee will be
an amount equal to $325,000, and will be payable in immediately
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available funds on or before November 18, 2002. INSpirewill thereafter
use its best efforts to obtain the entry by the Bankruptcy Court of the
Buyer Protection Order.
5. Due Diligence. As soon as practicable, and from time to time prior to
the closing of the Definitive Agreement, INSpire will permit CGI and
its employees, legal counsel, accountants and other representatives to
make such reasonable investigation of the properties, businesses and
operations of INSpire and such examination of the books, records and
financial condition of INSpire as it reasonably requests and to make
extracts and copies of such books and records. Such investigation and
examination will be conducted during regular business hours, under
reasonable circumstances and upon reasonable prior notice to INSpire.
6. Ordinary Course. Prior to the closing of the Definitive Agreement,
INSpire will conduct its business and affairs only in the ordinary
course of business, except as otherwise approved in advance in writing
by CGI or the Bankruptcy Court. Without limiting the foregoing, INSpire
will operate the Business in a manner that will preserve the Business,
the Purchased Assets and the Assumed Contracts, including by
maintaining good business relationships with customers, vendors and
others with whom INSpire does business. INSpire covenants that, prior
to the closing of the Definitive Agreement, it will not take any action
to assume or reject any contract, liability or obligation (including
seeking Bankruptcy Court approval thereof) without the prior, written
consent of CGI.
7. Non-Solicitation.
(a) Covenant. After the date of this Letter and before the first
to occur of the execution of the Definitive Agreement or
November 15, 2002, INSpire will not (and will not permit any
of its directors, officers, employees, consultants, agents or
representatives to), directly or indirectly, initiate, solicit
or encourage any third party to make, or facilitate, entertain
or discuss, or accept or enter into any agreement with respect
to, any proposal for an Acquisition (as defined below).
Notwithstanding the foregoing, this covenant will not prohibit
INSpire from providing information about INSpire to any third
party to the extent required for the directors and officers of
INSpire to discharge their respective fiduciary duties under
applicable law, if the following conditions are satisfied: (i)
the information provided is requested by such thud party, (ii)
a copy of all information provided to such third party is
contemporaneously provided to CGI, (iii) the information does
not include the terms and conditions of this Letter or the
substance of any discussions between CGI, INSpire and their
related parties relating to the transactions contemplated by
this Letter, (iv) the third party is a qualified bidder, (v)
the third party enters into a confidentiality agreement with
INSpire no less restrictive than the Confidentiality Agreement
(as defined below) and (vi) INSpire has not breached its
obligations under this Section 7.
(b) Notice of Proposals. Upon receiving any Acquisition proposal,
INSpire will promptly notify CGI of such proposal (including
the identity of the offeror and a complete and accurate
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description of the material terms thereof), and thereafter
keep CGI informed, on a current basis, of the status and terms
of such Acquisition proposal. INSpire will promptly (by hand
delivery, fax and/or e-mail) provide CGI with a copy of all
pleadings filed in connection with its bankruptcy.
(c) "Acquisition" means (i) any merger, consolidation, share
exchange or business combination involving Solutions and/or
Management, (ii) any sale of 20% of more of the assets or
profit- or revenue-generating capacity of Solutions and/or
Management, (iii) any sale of 20% or more of the shares of
capital stock (including, without limitation, by way of a
tender offer) of Solutions and/or Management, (iv) any
recapitalization of Solutions and/or Management (regardless of
the form of transaction by which such recapitalization is
accomplished and whether pursuant to a filing under the
Bankruptcy Code or otherwise) or (v) any other similar
transaction involving any third parry and Solutions and/or
Management.
8. Confidentiality. The Confidentiality Agreement, dated as of February
18, 2002 (the "Confidentiality Agreement"), by and between CGI
Information Systems and Management Consultants, Inc. and Solutions will
remain in full force and effect. This Letter, the discussions of the
parties related to this Letter and/or the Definitive Agreement and all
information provided pursuant to Section 5 in each case whether oral or
written, will be deemed confidential information subject to the
Confidentiality Agreement.
9. Binding Effect. Section 1 through Section 3, inclusive, of this Letter
of Intent is provided for discussion purposes only, is non-binding and
does not constitute an offer by CGI to purchase the Purchased Assets or
an agreement of CGI to enter into any other transaction with INSpire.
No party will have any obligation with respect to any such purchase or
transaction unless a Definitive Agreement is executed by the parties
and only as provided therein. Section 4 through Section 15, inclusive,
of this Letter will be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. Nothing
in this Letter will create or be deemed to create any third party
beneficiary rights in any person or entity not party to this Letter.
10. Assignment. No assignment of this Letter or of any rights or
obligations under this Letter may be made by any party (by operation of
law or otherwise) without the prior written consent of each of the
other parties to this Letter and any attempted assignment without such
required consents will be void; provided, however, that CGI may assign
to one or more of its affiliates any or all of its rights and
obligations under this Letter without the prior written consent of any
other party.
11. Specific Performance. CGI and INSpire each acknowledge and agree that
the breach of any binding provision of this Letter would cause
irreparable damage to the other party and that the other party will not
have an adequate remedy at law. Therefore, the binding obligations of
each of CGI and INSpire under this Letter will be enforceable by a
decree of specific performance issued by any court of competent
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jurisdiction, and appropriate injunctive relief may be applied for and
granted in connection therewith. Such remedies, however, will be
cumulative and not exclusive and will be in addition to any other
remedies that any party may have under this Letter or otherwise.
12. GOVERNING LAW. THIS LETTER WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO THE
PRINCIPLES OF CONFLICTS OF LAWS OR ANY OTHER PRINCIPLE THAT COULD
RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
13. Dispute Resolution. Any dispute that may arise between the parties to
this Letter relating to the subject matter of this Letter will be
finally resolved in the Bankruptcy Court and each party consents to the
exclusive jurisdiction of such courts.
14. Duration of Offer. This Letter may be accepted by INSpire at any time
prior to 5:00 p.m., Central Daylight Time, on Friday, August 2, 2002.
If this Letter is not executed by 1NSpire prior to such time, this
Letter will thereafter be null and void and of no force and effect
whatsoever.
15. Counterparts. This Letter may be executed in any number of
counterparts, each of which, will be deemed an original, but all of
which together will constitute one and the same instrument.
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This Letter of Intent is agreed and acknowledged as of the date first written
above by:
CGI Group, Inc.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief Operating
Officer
INSpire Insurance Solutions, Inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
INSpire Claims Management, Inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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