Exhibit 10.26
________________________________________________________________________
STOCK PURCHASE AGREEMENT
dated as of May 24, 1999
among
CAREINSITE, INC.
("Purchaser")
and
SPS PAYMENT SYSTEMS, INC.
("Seller")
________________________________________________________________________
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS.......................................................1
ARTICLE II.
PURCHASE AND SALE OF PURCHASED ASSETS; LIABILITIES;
PURCHASE PRICE...................................................10
2.1. Purchase and Sale................................................10
2.2. Liabilities......................................................10
2.3. Purchase Price...................................................10
2.4. Guarantee of Accounts Receivable.................................10
2.5. Section 338(h)(10) Election......................................11
ARTICLE III. REPRESENTATION AND WARRANTIES OF SELLER..............................11
3.1. Organization; Good Standing, Qualification; Subsidiaries.........11
3.2. Authority; No Conflict...........................................11
3.3. Capitalization; Corporate Records................................12
3.4. Financial Statements.............................................13
3.5. Title to Properties; Encumbrances................................13
3.6. Accounts Receivable..............................................14
3.7. No Undisclosed Liabilities.......................................14
3.8. Taxes............................................................14
3.9. No Material Adverse Effect.......................................15
3.10. Title to Intellectual Property...................................15
3.11. Accounts Payable; Bank Accounts..................................16
3.12. Customers........................................................16
3.13. Employee Benefit Plans...........................................16
3.14. Insurance........................................................18
3.15. Compliance with Legal Requirements; Governmental Authorizations..19
3.16. Legal Proceedings; Orders........................................20
3.17. Absence of Certain Changes and Events............................21
3.18. Contracts; No Default............................................22
3.19. Environmental Matters............................................23
3.20. Employees........................................................23
3.21. Labor Relations; Compliance......................................24
3.22. Certain Payments.................................................24
3.23. Disclosure.......................................................24
3.24. Relationships with Related Persons...............................25
3.25. Brokers or Finders...............................................25
3.26. Year 2000 Compliance.............................................25
3.27. Adequacy of Documentation........................................25
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3.28. Third-Party Software.............................................26
3.29. Third-Party Interests in Software................................26
3.30. General System Warranties........................................26
3.31. Non-Interfering Disabling Procedures.............................26
3.32. System Reliability...............................................27
3.33. Hardware.........................................................27
3.34. Software.........................................................27
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER......................27
4.1. Organization and Good Standing...................................27
4.2. Authority; No Conflict...........................................28
4.3. Legal Proceedings................................................28
4.4. Brokers or Finders...............................................28
ARTICLE V COVENANTS OF SELLING PARTIES............................................28
5.1. Access to Information and Records................................28
5.2. Conduct of Business Pending Closing..............................29
5.3. Consents.........................................................31
5.4. Schedules........................................................31
5.5. Confidentiality..................................................31
5.6 Additional Disclosure............................................31
5.7. Intentionally deleted............................................31
5.8. Seller's Obligations After the Closing...........................31
5.9. Med-Link Litigation..............................................33
5.10. Use of Intellectual Property.....................................33
5.11. Purchaser's Obligations After the Closing........................33
ARTICLE VI. TERMINATION...........................................................34
6.1. Termination Events...............................................34
6.2. Effect of Termination............................................34
ARTICLE VII. INDEMNIFICATION; REMEDIES............................................35
7.1. Indemnification by Seller........................................35
7.2. Indemnification by Purchaser.....................................36
7.3. Undisputed Claims................................................36
7.4 Disputed Claims..................................................37
7.5. Notice and Defense of Third-Party Claims.........................37
7.6. Survival of Representations, Warranties and Covenants............37
7.7. Exclusivity of Remedies..........................................38
7.8 Insured Claims...................................................38
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ARTICLE VIII. THE CLOSING.........................................................38
8.1. Closing Date.....................................................38
8.2. Obligations of Purchaser to Purchase the Stock...................38
8.3. Obligations of Seller to Sell the Stock..........................39
8.4. Seller Deliveries................................................40
8.5. Purchaser Deliveries.............................................41
ARTICLE IX. EXPENSES..............................................................42
9.1. Other............................................................42
9.2. Costs of Litigation..............................................42
ARTICLE X. MISCELLANEOUS..........................................................42
10.1. Notice...........................................................42
10.2. Dispute Resolution...............................................43
10.3. Remedies at Law or in Equity.....................................44
10.4. Disclosure Schedules.............................................44
10.5. Disclosures and Announcements....................................45
10.6. Assignment; Parties in Interest..................................45
10.7. Further Assurance................................................45
10.8. Law Governing Agreement..........................................45
10.9. Amendment and Modification.......................................45
10.10. Entire Agreement.................................................45
10.11. Counterparts.....................................................46
10.12. Headings.........................................................46
10.13. No Third-Party Beneficiaries.....................................46
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of May 24, 1999, by and between
CAREINSITE, INC., a Delaware corporation ("Purchaser"), and SPS PAYMENT
SYSTEMS, INC., a Delaware corporation ("Seller").
Recitals:
A. Seller owns all of the issued and outstanding shares of capital
stock (the "Stock") of Med-Link Technologies, Inc., a Delaware corporation
(the "Company"), which is engaged in the business of operating an
electronic medical claims and data interchange network between health care
providers and health care payors.
B. Purchaser desires to acquire the Company and Seller desires to
cause the sale of the Company to Purchaser.
C. Contemporaneously herewith, each of ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇
is entering into an Employment Agreement with the Company.
D. Contemporaneously herewith, Seller, Purchaser and the Company have
entered into an Interim Services Agreement (the "Interim Services
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Agreement") to be effective on the Closing Date whereby Seller will provide
certain services to the Company in order to facilitate the smooth
transition of the transition of the ownership of the Company from Seller to
Purchaser.
NOW, THEREFORE, the parties intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"Accounts Receivable" shall have the meaning assigned to that term in
Section 3.6 of this Agreement.
"Affiliate" shall mean with respect to any Person, (i) each Person
that controls, is controlled by or is under common control with any such
Person or any Affiliate of such Person, (ii) each of such Person's
officers, directors, joint venturers, members and partners and (iii) such
Person's spouse, children, siblings and parents. For purposes of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of
the power to direct or cause the direction of its management of policies,
whether through the ownership of voting interests, by contract or
otherwise.
"Agreement" shall mean this Stock Purchase Agreement, as amended or
supplemented from time to time.
"Balance Sheet" shall have the meaning assigned to that term in
Section 3.4(a) of this Agreement.
"Business" shall mean all business engaged in by the Company,
including the business described in Recital A to this Agreement.
"Claim" shall mean a claim pursuant to Article VII for which a party
is entitled, or may become entitled, to indemnification under this
Agreement.
"Closing" shall mean the closing of the sale and purchase of the
Shares and the other transactions contemplated by this Agreement.
"Closing Date" shall have the meaning assigned to that term in Section
8.1 of this Agreement.
"Code" shall include both (i) the machine-readable computer
programming code of the Software (or "object code") and (ii) Source Code.
"Company" shall have the meaning assigned to that term in Recital A to
this Agreement.
"Company Real Property" shall mean the premises leased by the Company
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and all other real
property which has been owned, leased, occupied or under the control of the
Company.
"Competing Business" shall mean any business or activity in the United
States (i) engaged in competition with the Company; (ii) of a similar type
and character as the Business; or (iii) relating to the development or
production of products or services competitive with those of the Business.
"Confidential Information" shall include, without limitation by reason
of specification, any information, including, without limitation, trade
secrets or proprietary information, processes, patent applications, Source
Code product development and product development techniques, price lists,
pricing data, subscriber, advertiser, vendor and customer lists, pricing
policies and marketing plans, operational methods, methods of doing
business, technical processes, formulae, designs and design projects,
inventions, research projects, policies and strategic plans, product
information, manufacturing and advertising know-how, possible acquisition
information, including business and personnel acquisition plans, and other
business affairs of the Company or
2
any Affiliate of the Company, which is or are designed to be used in the
Business, or which, in the case of any of these entities, results from any
of the research or development activities relating to the Business, and (i)
is private or confidential in that it is not generally known or available
to the public, or (ii) gives the Company an opportunity or the possibility
of obtaining an advantage over competitors who may not know or use such
information or who are not lawfully permitted to use the same.
"Contracts" shall mean executory contracts related to the Business of
the Company or an Affiliate of the Company, including without limitation,
any supplier agreement, consulting agreement, customer agreement, software
or hardware contract, systems agreement, service agreement, distribution
agreement, outsourcing agreement, license agreement, security agreement,
indemnity agreement, subordination agreement, mortgage, equipment lease or
other lease or sublease (whether or not capitalized), conditional sale or
title retention agreement, any purchase order and any contract with any
health care provider, payor or supplier.
"CPR" shall have the meaning assigned to that term in Section 10.2(b)
of this Agreement.
"Derivative Work" shall mean a work that is based upon one or more
preexisting works, such as a revision, modification, translation,
abridgement, condensation, expansion, or any other form in which such
preexisting works may be recast, transformed, or adapted, and which, if
prepared without authorization of the owner of the copyright in such
preexisting work, would constitute a copyright infringement. For purposes
of this Agreement, a Derivative Work shall also include any compilation
that incorporates such a preexisting work.
"Development Documentation" shall mean Documentation used in
conjunction with Source Code in the development or maintenance process,
including design or development specifications, flow charts, error reports
and related correspondence and memoranda.
"Development Environment" shall mean any programming, Documentation,
media, and other objects, including assemblers, compilers, workbenches,
tools, logic manuals, flow charts, and principles of operation and higher-
level or proprietary languages, used or anticipated to be used by a party
for the development, maintenance, and implementation of the System, or to
the extent such objects may be practically required by such party or its
assigns for any subsequent maintenance or enhancement of the System;
development of other programming in the course of the Business; or the
comprehension by a skilled technician of the operation of such System in
the context of the Business.
"Disabling Procedures" shall have the meaning assigned to that term in
Section 3.31 of this Agreement.
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"Documentation" shall mean written materials (and machine-readable
text subject to human-readable display or printout) in the possession or
control of Seller that relate to the System or elements of the System. For
purposes of clarification, Documentation shall include Development
Documentation and all materials regarding keys to encryption or
cryptographic elements of Code in the possession or control of the Company
or Seller.
"Employee Benefit Plan(s)" shall have the meaning assigned to that
term in Section 3.13(a) of this Agreement.
"Employees or Beneficiaries" shall have the meaning assigned to that
term in Section 3.13(a) of this Agreement.
"Encumbrance" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment" shall mean soil, land surface or subsurface strata,
surface waters, groundwaters, drinking water supply, ambient air (including
indoor air), plant and animal life and any other environmental medium or
natural resource.
"Environmental Law" shall mean any Legal Requirement that requires or
relates to the protection of natural resources, the Environment, the health
and safety of the public, the regulation of Hazardous Substances, or
pollution of any type whatsoever, including, but not limited to the
Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. (S) 9601 et. seq. ("CERCLA"), the Resource Conservation and Recovery
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Act ("RCRA"), as amended, 42 U.S.C. (S)(S) 6910 et seq., the Hazardous
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Materials Transportation Act, as amended, 49 U.S.C. (S)(S) 1801 et seq.,
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the Federal Mine Safety and Health Act of 1977, as amended, 30 U.S.C. (S)
801 et seq. and the regulations and guidelines promulgated under any such
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modifications, and any other state, federal, local or foreign law,
regulation, rule, ordinance or order, currently in existence, which govern:
(i) the existence, cleanup and/or remedy of contamination on
property;
(ii) the emission or discharge of Hazardous Substances into the
Environment;
(iii) the Release, use, generation, transport, treatment,
storage, disposal, removal or recovery or management of Hazardous
Substances, including building materials; or
(iv) the level of Hazardous Substances in any workplace.
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"Equipment" shall have the meaning assigned to that term in Section
3.5 of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"GAAP" shall mean generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the
Balance Sheet and the other financial statements referred to in Section
3.4(a) and (b) were prepared.
"Governmental Authorization" shall mean any approval, consent,
license, permit, waiver or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"Hardware" shall mean the hardware, including any operating systems
software loaded thereon listed on Schedule 3.33.
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"Hazardous Substances" shall mean (a) any toxic, hazardous or
otherwise dangerous material, substance, waste or pollutant, including
without limitation petroleum products, flammable substances, explosives,
radioactive materials, asbestos, asbestos coating and asbestos containing
materials, polychlorinated biphenyls, toxic wastes or substances or any
other wastes, materials or pollutants defined or regulated by Environmental
Laws; and (b) any other chemical, material or substances, exposure to which
is prohibited, limited or regulated by any Governmental Body or which
otherwise presents a risk to human health, safety or the environment, or
could cause a diminution in value to any of the assets or operations of the
Company.
5
"Indemnified Party" shall have the meaning assigned to that term in
Section 7.3 of this Agreement.
"Indemnifying Party" shall have the meaning assigned to that term in
Section 7.3 of this Agreement.
"Intellectual Property" shall mean the interests of the Company in any
of the following:
(i) United States and foreign registered and unregistered
copyrights in and to any works used, or intended by the Company to be used,
in conjunction with the operation of the Business, including, without
limitation (a) Registered Copyrights set forth in Schedule 3.10(a); (b) all
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common law or other rights to register and obtain any renewal or extension
of copyright; (c) all other interests accruing by reason of international
copyright conventions, moral rights laws or otherwise; and (d) the right to
▇▇▇ for, settle, or release any past, present, or future infringement of
any of the foregoing and to collect and retain all damages and profits
therefor;
(ii) United States and foreign registered patents, as such
patents may now exist or hereinafter come into existence, and
registrations, licenses, and applications therefor, relating to, used in,
or intended to be used in conjunction with the operation of the Business,
including: (a) without limitation of the foregoing, all right, title and
benefit of the Company in and to the inventions, discoveries, improvements,
processes and formulae, including generalized features of the sequence,
structure and organization of the System, used in the Business or otherwise
necessary for the ownership and use of the Software; and (b) the filed
patent applications and issued patents listed in Schedule 3.10(a), or such
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patents that may be granted therefor and thereon and all continuations-in-
part, divisions, reissues and extensions thereof;
(iii) United States and foreign registered and common law
trademarks, service marks, trade names, and any corporate names used in, or
intended to be used in conjunction with the operation of the Business,
including without limitation: (a) the Registered and unregistered
trademarks, service marks and trade names set forth in Schedule 3.10(a);
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(b) all other trademark or service ▇▇▇▇ interests accruing therefor by
reason of international trademark conventions, accompanied by the goodwill
of all Business connected with the use of and symbolized by such marks or
names; and (c) the right to ▇▇▇ for, settle, or release any past, present,
or future infringement thereof or unfair competition involving any of the
foregoing and retain all damages and profits therefor; and
(iv) to the extent not otherwise provided in the interests set
forth in (i), (ii) or (iii) above, (1) any hardware, software, idea,
design, product drawings, concept, data, customer list(s), documentation,
method, technique, process, skill, tool, library, adaptation, invention,
discovery, or improvement, whether or not patentable, but including trade
secrets, and know-how, that are used, or intended to be used, in
conjunction with the operation of the Business or otherwise pertaining to
the Business.
6
"Interim Services Agreement" shall have the meaning assigned to that
term in Recital D to this Agreement.
"IRC" shall mean of the Internal Revenue Code of 1986, as amended.
"IRS" shall have the meaning assigned to that term in Section 2.5 of
this Agreement.
"Knowledge" shall mean, with respect to any representation or warranty
made in this Agreement, the knowledge of any party, after due inquiry, of
the existence or absence of facts which would change such representation or
warranty.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute
or treaty. The foregoing shall be deemed to include laws and regulations
relating to the federal patent, copyright, and trademark laws, state trade
secret and unfair competition laws.
"Liability" shall have the meaning assigned to that term in Section
2.2 of this Agreement.
"Losses" shall have the meaning assigned to that term in Section 7.1
of this Agreement.
"Material Adverse Effect" shall mean a material adverse change in the
Business or the financial condition and results of operations, employee
relations, customer relations or prospects of the Company.
"Med-Link Litigation" shall mean the counterclaims and third-party
claims brought by ▇▇▇▇ ▇▇▇▇▇▇ and Sita Kapoor in the action brought by the
Company against former owners of the Company's predecessor known as Med-
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Link Technologies, Inc. v. ▇▇▇▇▇▇ ▇▇▇▇▇▇ a/k/a ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
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▇▇▇▇ ▇▇▇▇▇▇, Infotech Global, Inc., Intrak Software Systems, Private
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Limited, and Med-Link Systems, Docket Number SOM-C-12016-99, presently
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pending in the Superior Court of New Jersey, Chancery Division, Equity
Part, and any other related claim or litigation that may be brought against
the Company, Purchaser or the Business by the former shareholders of the
Company's predecessor and any related claims or actions.
"Negotiation Period" shall have the meaning assigned to that term in
Section 10.2(a) of this Agreement.
"Notes Receivable" shall have the meaning assigned to that term in
Section 3.6 of this Agreement.
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"Objection Period" shall have the meaning assigned to that term in
Section 7.3 of this Agreement.
"Order" shall have the meaning assigned to that term in Section
3.16(c) of this Agreement.
"Organizational Documents" shall mean (a) the articles or certificates
of incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership; (c)
the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) the certificate of formation and
the operating agreement of a limited liability company; (e) any character
or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (f) any amendment to any of the
foregoing.
"Outstanding Accounts Receivable" shall have the meaning assigned to
that term in Section 2.4 of this Agreement.
"Panel" shall have the meaning assigned to that term in Section
10.2(b) of this Agreement.
"Payor Customers" shall have the meaning assigned to that term in
Section 3.12 of this Agreement.
"Person" shall mean any individual, corporation (including any non-
profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor
union, or other entity or Governmental Body.
"Proceeding" shall have the meaning assigned to that term in Section
3.16(a) of this Agreement.
"Purchase Price" shall have the meaning assigned to that term in
Section 2.3 of this Agreement.
"Purchaser's Indemnified Persons" shall have the meaning assigned to
that term in Section 7.1 of this Agreement.
"Release" shall mean any spilling, leaking, pumping, pouring,
emptying, emitting, discharging, depositing, escaping, leaching, dumping or
other releasing into the Environment, whether intentional or unintentional.
"Resolution Period" shall have the meaning assigned to that term in
Section 7.4 of this Agreement.
"Restricted Period" shall have the meaning assigned to that term in
Section 5.8(a) of this Agreement.
8
"Section 338(h)(10) Election" shall have the meaning assigned to that
term in Section 2.5 of this Agreement.
"Seller" shall have the meaning assigned to that term in the preamble
of this Agreement.
"Seller's Indemnified Persons" shall have the meaning assigned to that
term in Section 7.2 of this Agreement.
"Software" shall mean the software listed on Schedule 3.34.
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"Source Code" shall mean the human-readable (as opposed to machine-
readable) form of the computer programming code for the Software, including
source code listings as commented, including all necessary support or
library routines, all of which shall be on media able to be read and
processed on the System.
"Stock" shall have the meaning assigned to that term in Recital A of
this Agreement.
"Subsidiary" shall mean with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's board
of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other
than securities or other interests having such power only upon the
happening of a contingency that has not occurred) are held by the Owner or
one or more of its Subsidiaries.
"System" shall mean the Hardware, Software and Documentation.
"Tax" shall mean any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other
fee, and any related share or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or under
the authority of any Governmental Body or payable pursuant to any tax-
sharing agreement or any other Governmental Body or payable pursuant to any
tax-sharing agreement or any other contract relating to the sharing or
payment of any such tax, levy, assessment, tariff, duty, deficiency, or
fee.
"Third-Party Software" shall mean software or technology in which any
person or entity claims any right, title, or interest superior to the
Company, including any restrictions or obligations (including obligations
to obtain consents or approvals, and restrictions that may be eliminated
only by obtaining consents or approvals) applicable to the Software.
9
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS;
LIABILITIES; PURCHASE PRICE
2.1. Purchase and Sale. Seller hereby agrees to sell, convey,
transfer and deliver to Purchaser, and Purchaser hereby agrees to purchase
and accept from Seller, the Stock, upon the terms, conditions,
representations, warranties, covenants and agreements set forth herein.
Subject to the terms and conditions of this Agreement, on the Closing Date
Seller shall transfer and deliver to Purchaser, against payment of the
Purchase Price in accordance with Section 2.3, certificates representing
the Stock, duly endorsed in blank by Seller or accompanied by stock powers
duly executed in blank.
2.2. liabilities. As used in this Agreement, the term "Liability"
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shall mean and include any and all obligations for the payment of monetary
amounts including, without limitation, indebtedness for borrowed money,
trade accounts payable and other monetary obligations arising in the
ordinary course of business. Seller shall assume and cause the payment of
all Liabilities of the Company that are outstanding on the Closing Date.
Seller shall provide Purchaser such evidences of payment, from and after
the Closing Date, as Purchaser shall reasonably request. The Company shall
remain responsible for all of its Liabilities arising on and after the
Closing Date.
2.3. Purchase Price. The purchase price (the "Purchase Price") for
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the Stock shall be Fourteen Million Dollars ($14,000,000). The Purchase
Price and all other amounts payable under or in connection with this
Agreement shall be paid in United States dollars as follows: At the
Closing, Purchaser shall pay to Seller, by wire transfer or certified check
of immediately available funds, the amount of the Purchase Price to an
account specified by Seller.
2.4. Guarantee of Accounts Receivable. Seller guarantees payment of
any Account Receivable outstanding as of the Closing Date that remains
outstanding for more than one hundred eighty (180) days after the Closing
Date (the aggregate amount of which, net of reserves not in excess of
$28,079.52, are hereinafter, the "Outstanding Accounts Receivable");
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provided, however, that any Outstanding Accounts Receivable that is not
paid, due to the action or inaction of the Company or Purchaser following
the Closing Date outside of the ordinary course of business, shall not be
so guaranteed. Seller shall remit to the Company the aggregate amount of
any Outstanding Accounts Receivable within thirty (30) days of receipt of
the written notice of Purchaser indicating the aggregate amount of
Outstanding Accounts Receivable; provided, however, Seller shall not have
the obligation to remit any amount to the Company unless the aggregate of
Outstanding Accounts Receivable exceeds $25,000, in which event Seller
shall be liable for all Outstanding Accounts Receivable. If following
payment by Seller, the Company collects sums on the Outstanding Accounts
Receivable, the amounts collected, to a maximum of the payment made by
Seller to the Company, shall be returned to Seller.
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2.5. Section 338(h)(10) Election. Seller will join with Purchaser in
making an election under Section 338(h)(10) of the IRC (and any
corresponding elections under state or local tax law) (collectively, the
"Section 338(h)(10) Election") with respect to the purchase and sale of the
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Stock by preparing and filing Internal Revenue Service Form 8023 (and any
similar state or local forms), which shall be executed no later than ninety
(90) days after Closing. Purchaser shall retain custody of such executed
forms and timely file them with the appropriate taxing authorities and
provide a copy of such forms to Seller. Seller will include a copy of such
form with its federal income tax return as required by law. If any changes
are required in any of these forms subsequent to the execution of such
forms, the parties will promptly agree on such changes and file the
requisite changes with the Internal Revenue Service ("IRS"). Seller will
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pay any Tax attributable to Seller for the making of the Section 338(h)(10)
Election.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1. Organization; Good Standing; Qualification; Subsidiaries
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct the
Business as it is now being conducted and to own or use the its properties
and assets. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires
such qualification, all of which are set forth in Schedule 3.1(a).
---------------
(b) The Company has no Subsidiaries.
(c) Seller has delivered to Purchaser copies of the Company's
Organizational Documents, as currently in effect.
3.2. Authority; No Conflict
(a) This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its
terms. Seller has the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and to perform its
respective obligations under this Agreement.
11
(b) Except as set forth in Schedule 3.2, neither the execution
------------
and delivery of this Agreement nor the consummation or performance of the
transactions contemplated hereby will, directly or indirectly:
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the Company or
Seller, or (B) any resolution adopted by the board of directors or the
stockholders of the Company or Seller;
(ii) give any Governmental Body or other Person grounds
to challenge the transactions contemplated hereby;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the
grounds to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or Seller;
(iv) cause Purchaser to become subject to, or to become
liable for the payment of, any Tax;
(v) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any of the Contracts;
or
(vi) result in the imposition or creation of any
Encumbrance upon or with respect to the Stock.
(c) Except as set forth in Schedule 3.2, each of the Company and
------------
Seller is not required to give any notice to or obtain any consent from any
Person in connection with the execution and deliver of this Agreement or
the consummation of the transactions contemplated hereby.
3.3. Capitalization; Corporate Records.
(a) The authorized capital stock of the Company consists solely
of 1,000 shares of common stock, all of which are issued and currently
outstanding and constitute the Stock. The Company has no treasury stock.
All of the Stock is fully paid and nonassessable.
(b) Seller is and will be on the Closing Date the record and
beneficial owner and holder of the Stock, in the amount set forth on
Schedule 3.3(b), free and clear of all Encumbrances of every nature. The
---------------
Stock is not subject to any restrictions with respect to transferability.
None of the Stock has been issued in violation of any preemptive rights.
Seller has full power and authority to assign and transfer the Stock to
Purchaser in accordance with the terms of this Agreement without obtaining
the consent
12
or approval of any other Person or Governmental Body (other than the
consents set forth in Schedule 3.2), and the delivery of the Stock
------------
to Purchaser pursuant to this Agreement will transfer valid title thereto,
free of all Encumbrances of any kind.
(c) Except as contemplated by this Agreement, there are no
outstanding options, contracts, calls, commitments, demands, voting
agreements or other any other agreements of any character relating to
capital stock of the Company generally, and there are no outstanding
securities or other instruments convertible into or exchangeable for shares
of capital stock of the Company, and there are no commitments to issue and
such securities or instruments.
(d) Corporate Records. The minute books, stock certificate books
and stock transfer ledgers of the Company are in Seller's possession, are
complete and accurate in all material respects and reflect all those
transactions and corporate acts which properly should be set forth therein,
including but not limited to records of all formal meetings of, and
corporate action taken by, the stockholders and directors of the Company.
No meetings of such stockholders and directors have been held for which
minutes have not been prepared and are not contained in such minute books.
3.4. Financial Statements. The Company has delivered to Purchaser
the following financial statements, including in each case, as applicable,
the notes thereto:
(a) the audited balance sheet of the Company as at each of
December 31, 1996, December 31, 1997 and December 31, 1998, the related
audited statements of operations, shareholders' equity and cash flows for
the fiscal years ended December 31, 1996, December 31, 1997 and December
31, 1998, together with the reports thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (and
predecessors, as applicable), certified public accountants (the balance
sheet contained as at December 31, 1998 is hereinafter referred to as the
"Balance Sheet"); and
--------------
(b) the unaudited balance sheet of the Company as at March 31,
1998 and March 31, 1999, and the related unaudited statements of
operations, shareholders' equity and cash flows for the periods then ended.
Such financial statements and notes fairly present the financial condition
and the results of operations, changes in stockholders' equity and cash
flow of the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP,
subject, in the case of interim financial statements, to normal year-end
adjustments.
3.5. Title to Properties; Encumbrances.
Schedule 3.5 contains a complete and accurate list of all real
------------
property, leaseholds, or other interests therein owned by the Company.
Schedule 3.5 also contains a complete and accurate list of all of the
------------
Company's machinery and equipment, business
13
machines, vehicles, furniture and fixtures employed in the conduct of the
Business other than the Software and the Hardware (the "Equipment"). The
----------------------------- ---------
Equipment consists of items of a quality and quantity usable by the Company
in the ordinary course of business. The Company owns all of the properties
and assets reflected in the Balance Sheet (except for property and assets
sold since the date of the Balance Sheet in the ordinary course of
business). All material properties and assets reflected in the Balance
Sheet are free and clear of all Encumbrances, except as disclosed in
Schedule 3.5. The Company holds valid and binding lease agreements for all
------------
personal property which is used in and material to the Business and which
is not owned by the Company.
3.6. Accounts Receivable. Schedule 3.6 contains a complete and
------------
accurate list of accounts receivable ("Accounts Receivable") and notes
-------------------
receivable ("Notes Receivable") of the Company as of April 30, 1999, sets
----------------
forth the aging of the Accounts Receivable and, with respect to each Note
Receivable, the maturity date thereof, the outstanding principal amount and
the accrued and unpaid interest. All Accounts Receivable and Notes
Receivable that are reflected on Schedule 3.6 represent or will represent
------------
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business. Unless paid prior to the
Closing Date, and except as disclosed in Schedule 3.6, the Accounts
------------
Receivable and Notes Receivable are or will be as of the Closing Date
collectible net of the respective reserves shown on the Balance Sheet or on
the accounting records of the Company as of the Closing Date (which
reserves are adequate and calculated consistent with past practice).
3.7. No Undisclosed Liabilities. Except as set forth in Schedule
--------
3.7, the Company has no material liabilities or obligations of any nature
---
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved
against in the Balance Sheet and current liabilities incurred in the
ordinary course of business since the respective dates thereof.
3.8. Taxes. The Company has filed or caused to be filed all federal,
state and local Tax returns and reports that are or were required to be
filed by or with respect to the Company, pursuant to applicable Legal
Requirements. All such returns were correct and complete in all respects.
Schedule 3.8 contains a complete and accurate list of, all such Tax returns
------------
relating to income or franchise taxes filed since December 31, 1995. The
Company has paid, or has provided for the payment of, all Taxes that have
or may have become due pursuant to those tax returns or otherwise, or
pursuant to any assessment received by the Company, except such Taxes, if
any, as are listed in Schedule 3.8 and are being contested in good faith
------------
and as to which adequate reserves (determined in accordance with GAAP) have
been provided in the Balance Sheet. Except as set forth in Schedule 3.8,
------------
no audit of any tax return of the Company is in progress or, to the
Knowledge of Seller, threatened, and no waiver or agreement by the Company
is in force for the extension of time for the assessment or payment of any
Tax. To Seller's Knowledge, no claim has ever been made by any Government
Body in a jurisdiction where the Company does not file tax returns that it
is or may be subject to taxation by
14
that jurisdiction. There are no security interests on any of the assets of
the Company that arose in connection with any failure (or alleged failure)
to pay any Tax.
The Company has withheld and paid or collected and remitted all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, supplier, vendor, creditor,
stockholder or other third party. There is no dispute or claim concerning
any Tax liability of the Company (i) claimed or raised by any Governmental
Body in writing or (ii) as to which Seller or the directors and officers of
the Company has Knowledge. The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
3.9. No Material Adverse Effect. Since the date of the Balance
Sheet, there has not been any Material Adverse Effect, and no event has
occurred or circumstance exists that may result in such a Material Adverse
Effect.
3.10. Title to Intellectual Property.
(a) Ownership. Schedule 3.10(a) sets forth all registered
----------------
trademarks and service marks, all reserved trade names, all registered
copyrights, and all filed patent applications, issued patents and all other
Intellectual Property. Except as set forth on Schedule 3.10(a), the
----------------
Company is the sole and exclusive owner of, the entire right, title, and
interest in and to the Intellectual Property, free and clear of any
Encumbrances of any nature whatsoever.
(b) Trade Secret Protection. The Source Code relating to the
Software (other than Third-Party Software) and other Confidential
Information (1) has at all times been maintained in confidence and (2) has
been disclosed by the Company only to employees and consultants having "a
need to know" the contents thereof in connection with the performance of
their duties to the Company.
(c) Personnel Agreements. All personnel, including employees,
agents, consultants, and contractors, who have contributed to or
participated in the conception and development of the System (other than
Third-Party Software) and other Confidential Information, including the
Documentation and Intellectual Property, on behalf of the Company either
(1) have been party to a "work-for-hire" arrangement or agreement with the
Company, in accordance with applicable federal and state law, that has
accorded the Company full, effective, exclusive, and original ownership of
all tangible and intangible property thereby arising, or (2) have executed
appropriate instruments of assignment in favor of the Company as assignee
that have conveyed to the Company full, effective, and exclusive ownership
of all tangible and intangible property thereby arising.
15
(d) No Infringement; Absence of Claims. The System and all
components thereof, do not infringe upon the intellectual property rights,
including without limitation the patent, copyright, trademark or trade
secret rights, of any third parties, nor will the use of the System by the
Company or Seller in the conduct of the Business subject any third party to
such an infringement. Seller further warrants and represents that no claims
have been asserted by any Person or entity to the use of the System, and
neither Seller nor the Company knows of any valid basis for any such claim.
3.11. Accounts Payable; Bank Accounts.
(a) Accounts Payable. Except as set forth in Schedule 3.11(a),
----------------
there are no accounts payable of the Company in excess of $10,000 as at
April 30, 1999 which have been past due and payable in accordance with
their terms for more than sixty (60) days.
(b) Bank Accounts. Schedule 3.11(b) contains an accurate and
----------------
complete list showing the name and address of each bank in which the
Company has an account or safe deposit box, the number of any such account
or safe deposit box and the names of all persons authorized to draw thereon
or have access thereto.
3.12. Customers. Schedule 3.12 lists the names and addresses of the
-------------
health care payor customers of the Company (the "Payor Customers"). The
---------------
relationships of the Company with the Payor Customers and its health care
providers, provider groups and suppliers are reasonably good commercial or
other working relationships. Except as set forth in Schedule 3.12, no Payor
-------------
Customers who individually on a monthly basis, accounted for more than (i)
$15,000 of the Company's revenue, or (ii) 5% of the Company's revenue
during the year ended December 31, 1998 or three months ended March 31,
1999 has canceled or otherwise modified, or threatened in writing or
otherwise to cancel or modify, its relationship with the Company. The
Company has not received any notices that any material Payor Customer will
cease to use the Company's services or substantially reduce the services it
purchases from the Company.
3.13. Employee Benefit Plans.
(a) Schedule 3.13 sets forth a true and complete list of all
-------------
written and oral pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive compensation, bonus,
vacation, severance, sickness or disability, hospitalization, individual
and group health and accident insurance, individual and group life
insurance and other material employee benefit plans, programs, commitments
or funding arrangements maintained by the Company or any Affiliate of the
Company, to which the Company or any Affiliate of the Company is a party
and has any obligations, present or future (other than obligations to pay
current wages, salaries or sales commissions terminable on notice of thirty
(30) days or less) in respect of, or which otherwise cover or benefit, any
of the current or former officers, employees or sales representatives
(whether or not employees) of the Company, or their beneficiaries
16
(collectively, the "Employees or Beneficiaries") (hereinafter individually
--------------------------
referred to as "Employee Benefit Plan" and collectively referred to as
---------------------
"Employee Benefit Plans"). The Company has delivered or made available to
----------------------
Purchaser true and complete copies of all documents, as they may have been
amended to the date hereof, embodying the terms of the Employee Benefit
Plans.
(b) Except for the Employee Benefit Plans identified in Schedule
--------
3.13, there is no "employee pension benefit plan", "employee welfare
----
benefit plan" or "employee benefit plan" within the meaning of Sections
3(1), 3(2) and 3(3) of ERISA. No Employee Benefit Plan to which the
Company, any Affiliate of the Company or any ERISA Affiliate (as
hereinafter defined) has maintained or contributed to is subject to Title
IV of ERISA or Section 412 of the IRC. For purposes of this Section 3.13,
the term "ERISA Affiliate" shall mean a trade or business (whether or not
incorporated) which is under common control with the Company or any
Affiliate of the Company within the meaning of Sections 414(b) and 414(c)
of the IRC or the regulations promulgated thereunder.
(c) Neither the Company nor any Affiliate of the Company
maintains or has maintained a plan on behalf of the Employees or
Beneficiaries that meets the safe harbor requirements of Section 414(n)(5)
of the IRC and neither the Company nor any Affiliate of the Company has
made any representations (including oral representations) with respect to
the existence of such a plan on behalf of the Employees or Beneficiaries to
any customers, clients, employees or any other person. Neither the Company
nor any Affiliate of the Company maintains or has maintained any "voluntary
employees' beneficiary association" within the meaning of Section 501(c)(9)
of the IRC.
(d) Except as set forth in Schedule 3.13, each Employee Benefit
-------------
Plan described therein is in full force and effect in accordance with its
terms and there are no material actions, suits or claims pending (other
than routine claims for benefits), or, to Seller's Knowledge, threatened,
against any Employee Benefit Plan or any fiduciary thereof and the Company
or its Affiliate has performed all material obligations required to be
performed by it under, and is not in default under or in violation of, any
Employee Benefit Plan, in any material respect, and the Company or its
Affiliate is in compliance in all material respects with the requirements
prescribed by all statutes, laws, ordinances, orders or governmental rules
or regulations applicable to the Employee Benefit Plans, including, without
limitation, ERISA and the IRC. With respect to each Employee Benefit Plan,
the Company has delivered or made available to Purchaser true and complete
copies of the following documents where applicable: (i) the most recent
annual report (Form 5500 series) and accompanying schedules filed with the
IRS, any financial statement and opinion required by Section 103(a)(3) of
ERISA; (ii) the most recent determination letter issued by the IRS and any
outstanding request for a determination letter; (iii) the most recent
summary plan description and all modifications; and (iv) the text of each
Employee Benefit Plan and of any trust, insurance or annuity contract
maintained in connection therewith. Neither the Company, any of its
Affiliates nor any other "party-in-interest", as defined in Section 3(14)
of ERISA, has engaged in any
17
"prohibited transaction," as defined in Section 406 of ERISA, which could
subject any Employee Benefit Plan, the Company or Purchaser or any officer,
director, partner or employee of the Company or Purchaser or any fiduciary
of any Employee Benefit Plan to a material penalty or excise tax imposed
under Section 502(i) of ERISA and Section 4975 of the IRC.
(e) Except as set forth in Schedule 3.13, neither the Company
-------------
nor any of its Affiliates is a party to any agreement to provide or does it
have an obligation to provide (except pursuant to Section 162(k) of the IRC
with respect to tax years beginning before January 1, 1989 and Section
4980B of the IRC thereafter), any employee of the Company, or such
individual's spouse or dependent, with any benefit following his or her
retirement or termination of employment, nor his or her spouse, any
dependent or any beneficiary subsequent to his or her death, with
retirement, medical or life insurance or any benefit under any employee
pension benefit plan and any employee welfare benefit plan. The Company and
any Affiliate of the Company has complied with all its obligations under
Section 162(k) and Section 4980B of the IRC.
3.14. Insurance.
(a) Schedule 3.14 lists all material policies or binders of
-------------
fire, liability (including product liability), worker's compensation,
vehicular, casualty, title or other insurance held by or on behalf of the
Company (specifying the insurer, the policy number or covering note number
with respect to binders, the amount of coverage thereunder and describing
each pending claim thereunder other than routine claims for coverage under
a group medical plan insurance policy).
(b) All policies described in Schedule 3.14 (i) are sufficient
-------------
for compliance with all Legal Requirements and of all applicable agreements
to which the Company is a party or by which the Company is bound, (ii) are
valid, outstanding and enforceable policies and (ii) provide adequate
insurance coverage for the assets and operations of the Company for all
material risks normally insured against by a Person carrying on the same
business as the Company. The Company is not in default with respect to any
provision contained in any policy described in Schedule 3.14 and has not
-------------
failed to give any material notice or present any material claim under any
such policy in a due and timely fashion. Except for claims set forth in
Schedule 3.14 and routine medical claims, there are no outstanding unpaid
-------------
claims under any such policy.
(c) The Company has not received a notice of cancellation or
non-renewal of any such policy or binder and, there is no material
inaccuracy in any application for any such policy or binder, failure to pay
premiums when due or other similar state of facts which would form the
basis for termination of any such insurance. Schedule 3.14 contains a brief
-------------
description of the Company's general liability loss history under the
policies of insurance therein listed.
18
3.15. Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Schedule 3.15:
-------------
(i) The Company is, and at all times since December 31,
1998, has been, in material compliance with each Legal Requirement that is
or was applicable to it or to the conduct or operation of the Business;
(ii) The Company has filed all reports, statements,
documents, registrations, filings or submissions required to be filed, in
connection with the operation of the Business, by the Company with any
Governmental Body. All such filings complied with applicable Legal
Requirements when filed and no deficiencies have been asserted by any such
Governmental Body with respect to such filings and submissions;
(iii) no event has occurred that (with or without notice
or lapse of time) (A) may constitute or result in a violation by the
Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of
the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iv) The Company has not received, at any time since
December 31, 1998, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible or
potential obligation on the part of the Company to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature.
(b) Schedule 3.15 contains a complete and accurate list of
-------------
each Governmental Authorization that is held by the Company, that otherwise
relates to the Business, or that is necessary for the Company to lawfully
conduct the Business. Each Governmental Authorization listed in Schedule
--------
3.15 is valid and in full force and effect. Except as set forth in Schedule
---- --------
3.15:
----
(i) the Company is, and at all times since December 31,
1998 has been, in full compliance with all of the terms and requirements of
each Governmental Authorization identified in Schedule 3.15;
-------------
(ii) no event has occurred that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in
a violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed in Schedule 3.15, or (B) result directly
-------------
or indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authority listed
or required to be listed in Schedule 3.15;
-------------
19
(iii) the Company has not received, at any time since
December 31, 1998, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or required to be
listed in Schedule 3.15 have been duly filed on a timely basis with the
-------------
appropriate Governmental Bodies, and all other filings required to have
been made with respect to each Governmental Authorizations have been duly
made on a timely basis with the appropriate Governmental Bodies.
(c) Schedule 3.15(c) lists all instruments of conveyance,
----------------
transfer, or assignment filed, recorded or otherwise required with respect
to the Intellectual Property.
3.16. Legal Proceedings; Orders
(a) Except as set forth in Schedule 3.16, there is no pending
-------------
litigation or judicial, administration or arbitration proceeding or
investigation (each a "Proceeding"):
----------
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the Business, or the Stock; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with the
transactions contemplated by this Agreement.
(b) To the Knowledge of Seller, (1) no such Proceeding has been
threatened, and (2) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such
Proceeding. The Company has delivered to Purchaser copies of all pleadings,
correspondence, and other material documents relating to each Proceeding
listed in Schedule 3.16. The Proceedings listed in Schedule 3.16 will not
------------- -------------
have a Material Adverse Effect.
(c) (i) There is no decision, injunction, judgment, order,
or ruling by any Court, administrative agency, other Governmental Body or
by any arbitrator (each, an "Order") to which the Company is subject.
-----
(ii) No officer, director, agent or employee of the
Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the Business.
20
3.17. Absence of Certain Changes and Events. Except as set forth in
Schedule 3.17, since December 31, 1998, the Company has conducted the
-------------
Business only in the ordinary course of business consistent with past
practice and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock;
or declaration or payment of any dividend or other distribution or payment
in respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) any extraordinary payment or increase by the Company of any
bonuses, salaries, or other compensation to any stockholder, director,
officer, or employee or entry into any employment, severance, or similar
contract with any director, officer or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with
any employees of the Company;
(e) damage to or destruction or loss of any asset or property of
the Company (including the System), whether or not covered by insurance,
having a Material Adverse Effect;
(f) entry into, amendment to, termination of or modification of,
or receipt of notice of termination of or modification of (i) any license,
distributorship, dealer, sales representative, joint venture, credit, or
similar agreement, or (ii) any contract or transaction involving a total
remaining commitment by or to the Company of at least $25,000;
(g) sale, lease or other disposition of any asset or property of
the Company or mortgage, pledge or imposition of any lien or other
Encumbrance on the Stock except in the ordinary course of business;
(h) amendment, termination, compromise, cancellation or waiver
of any claims or rights with a value to the Company in excess of $25,000 or
waiver of any other rights of substantial value to the Company;
(i) material change in the accounting methods or practices used
by the Company other than such changes required by GAAP;
21
(j) discharge or release of any Encumbrance, except in the
ordinary course of the Business consistent with past practice; or payment
or discharge of any Liability, other than current liabilities reflected on
the Balance Sheet and current liabilities incurred in the ordinary course
of the Business consistent with past practice;
(k) write down or write up (or failure to write down or write up
in accordance with GAAP consistent with past practice) the value of any
Accounts Receivable or Notes Receivable other than in the ordinary course
of business consistent with past practice and in accordance with GAAP;
(l) capital expenditure or commitment for any capital
expenditure in excess of $5,000 individually or $25,000 in the aggregate;
(m) express or deemed election or settled or compromised any
liability, with respect to Taxes of the Company;
(n) incurrence of any indebtedness in excess of $5,000
individually or $25,000 in the aggregate;
(o) loan to, guarantee of any indebtedness or other incurrence
of any indebtedness on behalf of any Person;
(p) failure to pay when due any indebtedness or other amounts
owed to creditors in excess of $5,000 individually or $25,000 in the
aggregate;
(q) entering into of any agreement, arrangement or transaction
with any of the Company's directors, officers, employees or shareholders
(or with any relative, beneficiary, spouse or Affiliate of such Persons);
(r) disclosure of any Confidential Information or grant of,
lapsing of, or abandonment of any Intellectual Property (or any right
associated with any registration, grant or any application relating
thereto);
(s) lapse, termination, or failure to renew any consent, permit
or insurance policy held by the Company; or
(t) agreement, whether oral or written, by the Company to do any
of the foregoing.
3.18. Contracts; No Defaults.
(a) Schedule 3.18(a) contains a complete and accurate list, and
----------------
the Company has delivered to Purchaser true and complete copies (if in
writing), of each Contract, which are all of the Company's contracts.
22
(b) Except as set forth in Schedule 3.18(b), each Contract
----------------
identified in Schedule 3.18(a) is in full force and effect and is valid and
----------------
enforceable in accordance with its terms.
(c) Except as set forth in Schedule 3.18(c), no event has
----------------
occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of,
or give the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify any Contract identified in Schedule
--------
3.18(a).
-------
3.19. Environmental Matters.
(a) The Company's Standard Industrial Classification (SIC)
Number as designated in the Standard Industrial Classification Manual is
7374. Accordingly, the transactions contemplated by this Agreement will not
be subject to the New Jersey Industrial Site Recovery Act, N.J.S.A. (S)
-------
13:1K-8 et seq.
------
(b) There have not been any activities, events or conditions in,
on or under any Company Real Property at any time such Company Real
Property was owned, leased, occupied or controlled by the Company,
involving the presence, handling, use, generation, treatment, storage, or
disposal of any Hazardous Substances in violation of, or subject to any
unsatisfied material liability under, applicable Environmental Laws.
(c) The Company has been at all times and is now in compliance
with all, and the Company has not received notice that it is otherwise
subject to any unsatisfied liability under any, Environmental Laws; there
is no pending or threatened litigation, investigation or enforcement
action, administrative order or notice of violation brought under any
Environmental Law concerning any of the Company's operations or the Company
Real Property; and the Company has not received any unsatisfied request for
information, notice of claim, demand or other notification or allegation
that it is or may be potentially responsible for any threatened or actual
Release of Hazardous Substances.
3.20. Employees.
(a) Schedule 3.20(a) contains a complete and accurate list of
----------------
the following information for each employee or director of the Company:
employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1998; vacation accrued; and
service credited for purposes of vesting and eligibility to participate
under the Company's pension, retirement, profit-sharing, thrift-savings,
deferred compensation, stock bonus, stock option, cash bonus, employee
stock ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
employee pension benefit plan or employee welfare benefit plan.
23
(b) No employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between
such employee or director and any other Person that in any way adversely
effects or will affect (i) the performance of his duties as an employee of
the Company, or (ii) the ability of the Company to conduct the Business.
Except as set forth in Schedule 3.20(b), no director, officer, or other key
----------------
employee of the Company has advised the Company of an intention to
terminate his employment with the Company.
3.21. Labor Relations; Compliance. The Company has not been or is not a
party to any collective bargaining or other labor contract. Since December
31, 1998, there has not been, there is not presently pending or existing,
and to Seller's Knowledge there is not threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
proceeding against or affecting the Company relating to the alleged
violation of any requirement of law pertaining to labor relations or
employment matters, including any charge or complaint filed by any employee
or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organization
activity, or other labor or employment dispute against or affecting any of
the Company or their premises, or (c) any application for certification of
a collective bargaining agent. To Seller's Knowledge, no event has occurred
or circumstance exists that could provide the basis for any work stoppage
or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all requirements of law relating to
employment, equal employment opportunity, non-discrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social
security and similar taxes, occupational safety and health, and plant
closing. The Company is not liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however, designated,
for failure to comply with any for the foregoing requirements of law.
3.22. Certain Payments. Neither the Company nor any director, officer,
agent, or employee of the Company or to Seller's Knowledge, any other
Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence, payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to
pay for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect
of the Company or any Affiliate of the Company, or (iv) in violation of any
requirement of law; or (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company.
3.23. Disclosure. No representation, warranty or statement of the
Company in this Agreement or the Schedules hereto omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading. Except as expressly
set forth in this Agreement and the Schedules hereto,
24
Seller does not have any Knowledge of any facts that will or may reasonably
be expected to have a Material Adverse Effect.
3.24. Relationships with Related Persons. Except as set forth in
Schedule 3.24, no Affiliate of the Company or Affiliate of Seller has, or
-------------
since December 31, 1998, has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to the Business. No Affiliate of the Company or Affiliate of
Seller is, or since December 31, 1998 has owned (of record or as a
beneficial owner) an equity interest or any other financial or other profit
interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company (other than business
dealings or transactions conducted in the ordinary course of business with
the Company at substantially prevailing market prices and on substantially
prevailing market terms), or (ii) engaged in a Competing Business except
for ownership of less than one percent (1%) of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except as set forth in Schedule
--------
3.24, no Affiliate of the Company or Affiliate of Seller is a party to any
----
contract with, or has any claim or right against, the Company.
3.25. Brokers or Finders. None of the Company or Seller nor their
respective Affiliates has incurred any obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or
other similar payment in connection with this Agreement, and Seller will
indemnify and hold Purchaser and the Company harmless from any such payment
alleged to be due by or through the Company or Purchaser as a result of the
action of Seller or its officers or agents.
3.26. Year 2000 Compliance. Seller has (i) caused the Company to conduct
a comprehensive review and assessment of all areas of the Company's
business that could be adversely affected by the "year 2000 problem" (that
is, the risk that computer applications may not be able to perform properly
date-sensitive functions after December 31, 1999), (ii) developed a
detailed plan and timeline, each as set forth on Schedule 3.26, for
-------------
addressing the year 2000 problem on a timely basis and (iii) to date,
implemented that plan in accordance with that timetable. Seller reasonably
anticipates that the computer applications that are material to the
Company's business will on a timely basis be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (i.e.,
be "year 2000 compliant") provided that the Company continues to follow the
plan and completes any remaining work required by the plan.
3.27. Adequacy of Documentation. The Documentation including system
documentation, statements of principles of operation, and schematics for
the System, as well as any pertinent commentary or explanation that may be
necessary to render such materials understandable and usable by a trained
computer programmer, and as of the Closing Date, is complete, accurate and
correct, comports with generally accepted industry standards in describing
the proper procedures for installing and operating the
25
System, and shall provide sufficient information to enable Company
personnel to install and operate the System.
3.28. Third-Party Software. The Company has validly and effectively
obtained the right and license to use, copy, modify, and distribute all
Documentation and Software (including, without limitation Third-Party
Software) contained in the System. Except as set forth on Schedule 3.28,
-------------
all Software and Documentation contain no other programming or materials in
which any third party may claim superior, joint, or common ownership,
including any right or license. Except as set forth on Schedule 3.28, such
-------------
Software and Documentation does not contain Derivative Works of any
programming or materials not owned in their entirety by the Company and
included in the Software.
3.29. Third-Party Interests in Software. Except as identified on
Schedule 3.29, the Company has not granted, transferred, or assigned any
-------------
right or interest in the System, including the Intellectual Property and
Derivative Works of such System, to any Person. Except as identified on
Schedule 3.29, all licenses by the Company of any right or interest in the
-------------
Software constitute agreements with health care providers, each of which
grants the licensee thereunder solely the nonexclusive right and license to
use an identified program and related user documentation, for internal
purposes only. Except as identified on Schedule 3.29, the Company will have
-------------
the benefits of each contract with regard to any Third-Party Software,
without the requirement of obtaining any consent or approval, giving any
prior or subsequent notice, paying any further royalty or fee to any party
thereto or to any other third party, or performing any duty that has not
already been fully performed by the Company.
3.30. General System Warranties.
(a) Total Capacity. The System, as configured as of the date of
this Agreement, has the capacity to process fully and accurately up to
100,000 claims per day.
(b) Memory Storage. The System, as configured as of the date of
this Agreement, has the capacity to store within memory fully and
accurately simultaneously, all of the data relating to up to six months of
transaction history.
(c) Batch Communications Time. The System, as configured as of
the date of this Agreement, has the capacity to process accurately
(including without limitation, accepting claims, information and data from
health care providers and identifying, editing and otherwise processing
information, in each case in a manner consistent with industry practice)
and transmit claim information to health care payors within twenty-four
(24) hours from receipt of such data from physicians.
3.31. Non-Interfering Disabling Procedures. The Company has (i) run and
will continue to run to the Closing Date the latest version of widely-
recognized commercially available virus-checking software on the System,
including without limitation all workstations thereof, and to the best of
the Company's Knowledge, after
26
diligent inquiry and investigation, the System does not contain, any virus
or similar device that is capable of deleting, disabling, deactivating,
interfering with, or otherwise harming the System or the Company's
hardware, data, or computer programs or codes, or that is capable of
providing access or produce modifications not authorized by the Company
(collectively, "Disabling Procedures"); and (ii) performed an independent
--------------------
and thorough review and inspected all source code of all program modules or
other components of the System, and such inspection has not revealed any
program routine, device, or other undisclosed feature, including, without
limitation, a time bomb, software lock, drop-dead device, or trap door that
is capable of Disabling Procedures.
3.32. System Reliability. The System's on-line processing has been and
shall be to the Closing Date available twenty-four (24) hours per day
regardless of the performance of any backups, and all database backups will
be capable of being initiated by a person but completed on an automatic
basis without degradation of any of the warranties contained herein. Except
for regularly quarterly scheduled maintenance for the purpose of
reorganizing database files (such maintenance not to exceed 48 hours and
performed on Saturdays and Sundays), the System has been and shall be to
the Closing Date fully operational twenty-four (24) hours a day, seven days
a week.
3.33. Hardware. The Hardware constitutes all of the hardware that is
used, or intended to be used, in conjunction with the operation of the
Business by the Company.
3.34. Software. The Software, including without limitation, (a) the
Third-Party Software, software development kits ("SDKs"), and file
definitions for health care payors and health care providers; (b) software
updates, software upgrades, additions, error corrections, modifications,
enhancements, customizations and conversions made to the materials included
in (a) above (collectively, "Software Upgrades"); and (c) the Code and the
Development Environment, constitutes all of the software that is used, or
intended to be used, in conjunction with the operation of the Business by
the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1. Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power an authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.
27
4.2. Authority; No Conflict.
(a) This Agreement constitutes the legal, valid and binding
obligation of Purchaser and is enforceable against Purchaser in accordance
with its terms. Purchaser has the absolute and unrestricted right, power,
authority and capacity to execute and deliver this Agreement and to perform
its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, directly or
indirectly:
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of Purchaser, or (B)
any resolution adopted by the board of directors or the stockholders of
Purchaser;
(ii) give any Governmental Body or other Person the
right to challenge the transactions contemplated by this Agreement; or
(iii) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify, any contract
or agreement to which Purchaser is a party.
4.3. Legal Proceedings. There is no Proceeding that has been commenced
by or against Purchaser or that otherwise relates to or may affect the
business of Purchaser or that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement.
4.4. Brokers or Finders. Neither Purchaser nor any Affiliate of
Purchaser has incurred an obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar
payment in connection with this Agreement, and Purchaser will indemnify and
hold the Company and Seller harmless from any such payment alleged to be
due by or through Purchaser as a result of the action of Purchaser or its
officers or agents.
ARTICLE V
COVENANTS OF PARTIES
Seller agrees to the covenants contained in Sections 5.1 through 5.10.
Purchaser agrees to the covenants contained in Section 5.11.
5.1. Access to Information and Records.
(a) During the period from the date hereof to the Closing Date,
Seller shall cause the Company, and Seller shall give Purchaser, its
counsel, accountants and
28
other authorized representatives, reasonable access during normal business
hours to all of the Company's properties, books, records, contracts and
other documents and, with the prior consent of the Company (which shall not
be unreasonably withheld), to the salaried personnel of the Company; and
Seller shall furnish or cause to be furnished to Purchaser and its
representatives all information with respect to the Company as Purchaser
may reasonably request.
(b) Any investigation conducted by Purchaser pursuant to this
Section 5.1 shall be so conducted as not to interfere unreasonably with the
Business and the relationships of the Company with its employees, customers
and suppliers. No such investigation by Purchaser shall affect or be deemed
to modify any representation or warranty made by Seller.
5.2. Conduct of Business Pending Closing. Seller agrees that from the
date hereof to the Closing Date (through and including the Closing Date
with respect to Section 5.2(g) below), except as otherwise approved in
writing by Purchaser:
(a) Maintain Business and Organization. The Company will carry
on the Business in the ordinary course consistent with past practice and,
to the extent consistent therewith, will use its best efforts to maintain
and preserve its business organization intact and to maintain its current
relationships with distributors and other customers, suppliers, employees
and others having business relationships with the Company.
(b) Compensation. The Company will not enter into any employment
or severance agreement with any director, officer or other employee of the
Company; will not establish, adopt, enter into, or make any new grants or
awards under, or amend, any collective bargaining, bonus, profit sharing,
thrift, compensation, or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees, except
to comply with ERISA and the IRC; and will not give any increases in the
rates of salary or other compensation payable to employees.
(c) No Material Contracts. No contract or commitment will be
entered into, and no purchase of supplies and no sale of assets of the
Company will be made, by or on behalf of the Company, except contracts,
commitments, purchases or sales in the ordinary course of business
consistent with past practice which are not material to the Company.
(d) Capital Expenditures. The Company will not make any capital
expenditures or commitments therefor, for additions to property, plant or
Equipment, or agree to make any such expenditures or commitments, except
pursuant to existing expenditure or commitment programs in a manner
consistent with the performance of such programs to date.
29
(e) No Corporate Changes. The Company will not amend its
Organizational Documents or make any changes in its authorized or issued
capital stock.
(f) Indebtedness. The Company will not create any indebtedness,
other than short-term indebtedness incurred in the ordinary course of
business consistent with past practices pursuant to existing contracts
disclosed in Schedule 3.18. There will be no indebtedness of the Company to
-------------
Seller or any other Affiliate on the Closing Date.
(g) Maintenance of Insurance. The Company will use its best
efforts, consistent with past practice and prudent business judgment, to
maintain all of the insurance held by the Company in effect as of the date
hereof.
(h) Maintenance of Property. The Company will use, operate,
maintain and repair all property of the Company in a normal business manner
consistent with past practice.
(i) Continued Administration. The Company will administer all
Employee Benefit Plans listed in Schedule 3.13 in accordance with the
-------------
provisions of the IRC and ERISA until they are terminated in accordance
therewith.
(j) Loans and Advances. The Company will not make any loan or
advance to any Person, including, without limitation, any officer, director
or employee of the Company.
(k) No Negotiations. Neither Seller nor any of its respective
Affiliates, officers, directors, representatives or agents will directly or
indirectly (through a representative or otherwise) (A) solicit, initiate,
consider, encourage or accept any other proposals or offers from any Person
(x) relating to any acquisition or purchase of all or any portion of the
Stock; (y) to enter into any business combination with the Company; or (z)
to enter into any other extraordinary business transaction involving or
otherwise relating to the Company; or (B) participate in any discussions,
conversations, negotiations or other communications regarding, or furnish
to any other Person any information with respect to, or otherwise cooperate
in any way, assist or participate in, facilitate or encourage any effort or
attempt by any other Person to seek to do any of the foregoing. Seller
shall immediately cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
Persons conducted heretofore with respect to the foregoing. Seller shall
notify Purchaser promptly if any such proposal or offer, or any inquiry or
other contract with any Person with respect thereto, is made and shall, in
any such notice to Purchaser, indicate in reasonable detail the identity of
the Person making such proposal, offer, inquiry or contact and the terms
and conditions of such proposal, offer, inquiry or other contract. Seller
agrees not to, without the prior written consent of Purchaser, release any
Person from, or waive any provision of, any confidentiality or standstill
agreement relating to the Business to which the Company or Seller is a
party.
30
(l) Advertising. The Company will continue its advertising and
promotional activities and pricing and purchasing policies in accordance
with past practice.
(m) Receivables. The Company will not shorten or lengthen the
customary payment cycles for its payables or receivables except as required
in the ordinary course of business.
(n) Representation or Warranty. The Company will not engage in
any practice, take any action, fail to take any action or enter into any
transaction that could cause any representation or warranty of Seller to be
untrue or result in a breach of any covenant made in this Agreement.
5.3. Consents. Seller will use its best efforts prior to the Closing
Date to obtain all consents identified in Schedule 3.2 and make all filings
------------
required by Legal Requirements, necessary for the consummation of the
transactions contemplated hereby.
5.4. Schedules. Seller shall have a continuing obligation to promptly
notify Purchaser in writing with respect to any material matter arising or
discovered after the date of execution of this Agreement, which matter, if
existing or known at the date hereof, would have been required to be set
forth or described in any Schedule.
5.5. Confidentiality. The Confidentiality Agreement dated March 17, 1999
among Associates First Capital Corporation, a Delaware corporation, and
Synetic, Inc., a Delaware corporation, shall remain in full force and
effect.
5.6. Additional Disclosure. From the date of this Agreement to and
including the Closing Date, Seller shall, promptly after the occurrence
thereof is known to the Company, advise Purchaser of each event subsequent
to the date hereof that causes (i) any covenant of Seller to be breached;
(ii) any representation or warranty of Seller contained herein to no longer
be true, correct or complete; or (iii) any material development with regard
to the Stock, the Business, the financial condition and results of
operations, employee relations, customer relations or prospects of the
Company.
5.7. Intentionally deleted.
5.8. Seller's Obligations After the Closing.
(a) Acknowledgment. Seller acknowledges that the covenants in
this Section 5.8 are an essential element of this Agreement and that, but
for the agreement of Seller to comply with these covenants, Purchaser would
not have entered into this Agreement. Seller further acknowledges that this
Section 5.8 constitutes an independent covenant and shall not be affected
by performance or nonperformance of any other provision of this Agreement
by Purchaser. Seller has independently consulted with its
31
counsel and after such consultation agrees that the covenants set forth in
this Section 5.8 are reasonable and proper.
(b) Seller agrees that in partial consideration of the Purchase
Price and following the Closing Date:
It will take all reasonable steps to protect the goodwill,
business reputation, employee relations, customer relations and prospects
of the Company. In furtherance but not in limitation of this general
obligation, Seller agrees that:
(i) for the period of five (5) years following the
Closing Date (the "Restricted Period"), it will not (x) engage in, or
become involved in or in any way associated with any Competing Business and
(y) without the prior written consent of Purchaser, own an interest in,
manage, operate, join, control or participate in or be connected with, as a
partner, shareholder, consultant or otherwise, any Person in a Competing
Business, except for ownership of less than one percent (1%) of the
outstanding capital stock of any Competing Business that is publicly traded
on any recognized exchange or in the over-the-counter market. This Section
5.8(b)(i) shall not restrict Seller from acquiring any Person that is not
primarily engaged in the Business. It is the specific intention of the
parties, any general considerations of public policy to the contrary
notwithstanding, that the provisions of this Section 5.8(b)(i) shall be
enforced as written to the fullest extent possible. If, however, this
covenant is held by any court of competent jurisdiction to be unenforceable
because of the duration of such covenant or the geographic area covered
thereby, the court making such determination shall have the power to reduce
the duration or geographic area of such covenant and, in its reduced form,
such covenant shall be enforceable.
(ii) during the Restricted Period and thereafter, it
will not disclose to any Person, or use for its own benefit, any
Confidential Information.
(iii) during the Restricted Period, it will not
interfere with or attempt to interfere with any officers, employees,
representatives or agents of Purchaser or the Business, induce or attempt
to induce any of them to leave the employ of Purchaser or the Business or
violate the terms of their contracts or any employment arrangements with
Purchaser or the Business.
(iv) during the Restricted Period, it will not (A) take
away, interfere, or attempt to interfere with any custom, trade, business
or patronage of Purchaser or the Business, or (B) for the purpose of
conducting or engaging in any business that develops or provides services
of the kind or nature developed or provided by the Business or the Company
as of the Closing Date, call upon, advise, solicit or offer to provide
services to any of the customers of the Business with whom the Company or
any Affiliate of the Company has had any dealings prior to the Closing
Date.
32
5.9. Med-Link Litigation. Seller shall retain full and complete
responsibility for the Med-Link Litigation, including, without limitation,
the obligation to pay the fees and expenses of counsel for itself, the
Company, counsel for Purchaser (if Purchaser shall become a party to the
Med-Link Litigation or threatened to be a party to the Med-Link Litigation)
and counsel for ▇▇▇▇▇ ▇▇▇▇ (related to the Med-Link Litigation). Seller
agrees to keep Purchaser informed on the status of the litigation and to
provide Purchaser and its counsel with all information regarding the
litigation which Purchaser or its counsel reasonably requests. Seller
further agrees that both prior to and after the Closing Date it will not
settle the Med-Link Litigation in a manner that includes a waiver or
compromise of any non-competition, non-solicitation or confidentiality
agreement in favor of the Company or otherwise has an adverse effect on the
Business.
5.10. Use of Intellectual Property.
(a) From and after the Closing Date, Seller, Seller and any of
its respective Affiliates shall not use any of the Intellectual Property
described in Schedule 3.10(a).
--------
(b) As promptly as practicable following the Closing Date,
Seller shall remove or obliterate any Intellectual Property from
letterheads and other materials remaining in its possession or under its
control, and Seller shall not use, incorporate or put into use after the
Closing Date any materials that bear any trademark, service ▇▇▇▇, trade
dress, logo, trade name or corporate name contained in the Intellectual
Property described in Schedule 3.10(a), or any trademark, service ▇▇▇▇,
--------
trade dress, logo, trade name or corporate name similar or related thereto.
5.11. Purchaser's Obligations After the Closing.
(a) Purchaser will cause the Company to offer continued
employment to all employees of the Company set forth on Schedule 3.20(a) as
----------------
of the Closing Date, and such employees will have compensation and benefit
packages, which include health and welfare benefits that in the aggregate
are equivalent or superior to the compensation and benefit packages
currently held by such employees, with the exception of a 401(k) matching
plan and a pension plan. Purchaser will cause the Company to provide
service credit to such employees for vacation accrual, sick pay and
severance plans in accordance with the practice of the Company as of the
Closing Date.
(b) Purchaser will, and will cause the Company to, cooperate
with Seller and provide Seller with reasonable access to employees, records
and other materials as such may relate to the Med-Link Litigation and
related matters. Purchaser and Seller agree that such access will be
coordinated between the parties to ensure that the Company does not suffer
a material interruption of the Business. Notwithstanding anything to the
contrary herein, this Section 5.11(b) will survive until the Med-Link
Litigation and related matters are brought to their final disposition.
33
ARTICLE VI
TERMINATION
6.1. Termination Events. This Agreement may be terminated up to the
Closing as follows:
(a) by Purchaser if any representation or warranty of Seller is
breached in any material respect and such breach has not been waived;
(b) by Seller if any representation or warranty of Purchaser is
or becomes untrue or breached in any material respect and such breach has
not been waived;
(c) by Purchaser if any covenant or condition of Seller is or
becomes breached in any material respect and such breach has not been
waived;
(d) (i) by Purchaser if satisfaction of a condition to the
performance of Seller is or becomes impossible (other than through the
failure of Purchaser to comply with its obligations under this Agreement)
and Purchaser has not waived such condition on or before the Closing Date;
or (ii) by the Company if satisfaction of such a condition is or becomes
impossible (other than through the failure of the Company to comply with
its obligations under this Agreement) and the Company has not waived such
condition on or before the Closing Date;
(e) by mutual consent of Purchaser and Seller;
(f) by Purchaser if there has occurred an event that constitutes
a Material Adverse Effect; or
(g) by either Purchaser or Seller if the Closing has not
occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement)
on or before June 30, 1999, or such later date as the parties may agree
upon.
6.2. Effect of Termination. In the event that this Agreement is
terminated pursuant to Sections 6.1(a), 6.1(b) or 6.1(c) due to the
intentional breach of a representation, warranty, covenant or condition by
the breaching party, then the non-breaching party shall be entitled to
pursue, exercise and enforce any and all remedies, rights, powers and
privileges available at law or in equity. In the event that this Agreement
is terminated pursuant to Sections 6.1(a), 6.1(b) or 6.1(c) as a result of
a breach of a representation, warranty, covenant or condition that is not
the result of an action or inaction by the breaching party that could be
reasonably anticipated to cause the breach or if this Agreement is
otherwise terminated pursuant to Sections 6.1(e) or (g), then no party
shall have any right to pursue, exercise or enforce any remedy.
34
ARTICLE VII
INDEMNIFICATION; REMEDIES
7.1. Indemnification by Seller. Seller shall defend, indemnify and hold
harmless Purchaser, the Company and their respective Affiliates, employees,
consultants, successors and assigns (such persons, collectively,
"Purchaser's Indemnified Persons"), and shall reimburse Purchaser's
--------------------------------
Indemnified Persons, for, from and against each and every demand, claim,
loss (which shall include any diminution in value), liability, judgment,
damage, cost and expense (including, without limitation, interest,
penalties, costs of preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other professional
advisors) (collectively, "Losses") imposed on or incurred by Purchaser's
------
Indemnified Persons, directly or indirectly, relating to, resulting from or
arising out of:
(a) any inaccuracy in any representation or warranty in any
respect as of the Closing Date, whether or not Purchaser's Indemnified
Persons relied thereon or had Knowledge thereof, or any breach or
nonfulfillment of any covenant, agreement or other obligation of Seller
under this Agreement, the Schedules or any certificate or other document
delivered or to be delivered pursuant hereto;
(b) the payment of any Liability of the Company as of the
Closing Date not satisfied by Seller;
(c) all claims, liabilities, expenses and obligations of the
Company arising in connection with the Med-Link Litigation;
(d) any Tax liability of the Company for any period prior to the
Closing Date;
(e) any claim or cause of action of any third party to the
extent arising out of any action, inaction, event, condition, liability or
obligation of the Company occurring or existing prior to the Closing Date;
(f) any Tax liability incurred by Seller as a result of the
transactions contemplated by this Agreement, including, without limitation,
any Tax liability as a result of the Section 338(h)(10) Election; and
(g) any claim by any Person for a brokerage or finder's fee
based upon any arrangement allegedly made by such Person with the Company
or Seller; provided, however, that Seller shall have no liability under
-------- -------
this Section 7.1 unless and until the aggregate of all Losses together with
the aggregate amount of Outstanding Accounts Receivable, but exclusive of
all Losses attributable to breaches of Sections 3.26 through 3.34, exceeds
$25,000, in which event Seller shall be liable for all such non-
35
excluded Losses. Seller shall no liability under this Section 7.1 for
Losses related to breaches of Sections 3.26 through 3.34 unless and until
the aggregate of all such Losses exceeds $500,000, in which event Seller
shall be liable for all such Losses. The maximum liability of Seller for
Losses under this Section 7.1 shall be limited to the Purchase Price. The
foregoing is exclusive of Seller's obligation in respect of the Med-Link
Litigation as to which Seller shall be responsible for all Losses and as to
which Seller's liability shall be unlimited.
7.2. Indemnification by Purchaser. Purchaser shall defend, indemnify and
hold harmless Seller, its Affiliates, employees, consultants and successors
and assigns (Seller and such persons, collectively, "Seller's Indemnified
--------------------
Persons"), and shall reimburse Seller's Indemnified Persons, for, from and
-------
against all Losses imposed on or incurred by Seller's Indemnified Persons,
directly or indirectly, relating to, resulting from or arising out of:
(a) any inaccuracy in any representation or warranty in any
respect as of the Closing Date, whether or not Seller's Indemnified Persons
relied thereon or had Knowledge thereof, or any breach or nonfulfillment of
any covenant, agreement or other obligation of Purchaser under this
Agreement or any certificate or other document delivered or to be delivered
pursuant hereto;
(b) any Liabilities and other obligations of the Company arising
on and after the Closing Date; and
(c) any claim or cause of action of any third party to the
extent arising out of any action, inaction, event, condition, liability or
obligation of Purchaser occurring or existing on or after the Closing Date;
provided, however, that Purchaser shall have no liability under this
-------- -------
Section 7.2 unless and until the aggregate of all Losses exceeds $25,000,
in which event Purchaser shall be liable for all Losses. The maximum
liability of Purchaser for Losses shall be the Purchase Price.
7.3. Undisputed Claims. A party (the "Indemnified Party") may assert a Claim
-----------------
that it is entitled to, or may become entitled to, indemnification under
this Agreement by giving notice of its Claim to the party or parties that
are, or may become, required to indemnify the Indemnified Party (the
"Indemnifying Party"), providing reasonable details of the facts giving
-------------------
rise to the Claim and a statement of the Indemnified Party's Loss in
connection with the Claim, to the extent such Loss is then known to the
Indemnified Party and, otherwise, an estimate of the amount of the Loss
that it reasonably anticipates that it will incur or suffer. If the
Indemnifying Party does not object to the Claim during the twenty (20) day
period following the date of delivery of the Indemnified Party's notice of
its Claim (the "Objection Period"), the Claim shall be considered
----------------
undisputed and the Indemnified Party shall be entitled to recover the
amount of its Loss. The fact that a Claim is not disputed by the
Indemnifying Party shall not constitute an admission
36
or create any inference that the asserted Claim is valid for any purpose
other than the indemnity obligation of the Indemnifying Party as to such
Claim pursuant to this Article VII.
7.4. Disputed Claims. If the Indemnifying Party gives notice to the
Indemnified Party within the Objection Period that the Indemnifying Party
objects to the Claim, then (a) the parties shall attempt in good faith to
resolve their differences during the thirty (30) day period following the
date of delivery of the Indemnifying Party's notice of its objection (the
"Resolution Period"), and (b) if the parties fail to resolve their
------------------
disagreement during the Resolution Period, either party may unilaterally
submit the disputed Claim resolution in accordance with Section 10.2.
7.5. Notice and Defense of Third-Party Claims. If any action, claim or
proceeding shall be brought or asserted under this Article VII against an
Indemnified Party in respect of which indemnity may be sought under this
Article VII from an Indemnifying Party or any successor thereto, the
Indemnified Person shall give prompt written notice of such action or claim
to the Indemnifying Person who shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Person
and the payment of all expenses; except that any delay or failure to so
notify the Indemnifying Person shall relieve the Indemnifying Person of its
obligations hereunder only to the extent, if at all, that it is prejudiced
by reason of such delay or failure. The Indemnified Person shall have the
right to employ separate counsel in any of the foregoing actions, claims or
proceedings and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Person
unless both the Indemnified Person and the Indemnifying Person are named as
parties and the Indemnified Person shall in good faith determine that
representation by the same counsel is inappropriate. In the event that the
Indemnifying Person, within ten days after notice of any such action or
claim, fails to assume the defense thereof, the Indemnified Person shall
have the right to undertake the defense, compromise or settlement of such
action, claim or proceeding for the account of the Indemnifying Person,
subject to the right of the Indemnifying Person to assume to the defense of
such action, claim or proceeding with counsel reasonably satisfactory to
the Indemnified Person at any time prior to the settlement, compromise or
final determination thereof. Anything in this Article VII to the contrary
notwithstanding, the Indemnifying Person shall not, without the Indemnified
Person's prior written consent, settle or compromise any action or claim or
proceeding or consent to entry of any judgment with respect to any such
action or claim that requires solely the payment of money damages by the
Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such action, claim or proceeding.
7.6. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and obligations in this Agreement
and any other certificate or document delivered pursuant to this Agreement
will survive the Closing Date for twelve (12) months; except, however, that
the representations and warranties
37
made in (i) Sections 3.8, 3.13 and 3.19 shall terminate on 120 days after
the expiration of the applicable statute of limitations, including any
applicable extensions, to which the representation or warranty applies; and
(ii) Sections 5.5, 5.8 and 5.9, shall survive the Closing Date indefinitely
or as otherwise provided in such Sections. The rights to indemnification or
other remedy based on such representations, warranties, covenants and
obligations will not be affected by any investigation conducted with
respect to or any Knowledge acquired at any time, whether before or after
the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation.
7.7. Exclusivity of Remedies. The remedies provided for in this Article
VII are exclusive and shall be in lieu of all other remedies for breach of
this Agreement, including without limitation for breaches of the
representations, warranties, covenants and agreements hereunder; provided,
--------
however, that the foregoing clause of this sentence shall not be deemed a
-------
waiver by any party of any right to specific performance, equitable relief
or any remedy arising by reason of any claim of fraud with respect to this
Agreement.
7.8. Insured Claims. In case any event shall occur that would otherwise
entitle either party to assert a claim for indemnification hereunder, no
Loss shall be deemed to have been sustained by the Indemnified Party to the
extent of any proceeds received by the Indemnified Party from any insurance
policies with respect thereto.
ARTICLE VIII
THE CLOSING
8.1. Closing Date. The closing of this transaction ("Closing") shall
-------
take place at the offices of ▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger &
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ on May 24, 1999 (the
"Closing Date") at 10:00 a.m. Eastern Time, or at such other place and time
as the parties shall agree.
8.2. Obligations of Purchaser to Purchase the Stock. Purchaser's
obligation to purchase the Stock and to take the other actions required to
be taken by Purchaser at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may
be waived by Purchaser, in whole or in part):
(a) Accuracy of Seller's Representations and Warranties. All
representations and warranties by Seller in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the
date of this Agreement, and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date.
(b) Seller's Performance. All of the covenants and obligations
that Seller is required to perform or to comply with pursuant to this
Agreement at or prior to
38
the Closing (considered collectively), and each of these covenants
(considered individually), must have been duly performed and complied with
in all material respects.
(c) Closing Deliveries. Seller shall have delivered or caused
the delivery to Purchaser of each of the documents required by this
Agreement to be delivered by Seller on the Closing Date under Section 8.4.
(d) Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the
transaction contemplated by this Agreement or to its consummation, shall
have been instituted or threatened against the Company on or before the
Closing Date.
(e) Consents. All necessary certificates, licenses, agreements
and consents or other authorizations of any parties to the consummation of
the transaction contemplated by this Agreement, or otherwise pertaining to
the matters covered by it, shall have been obtained by Seller and delivered
to Purchaser, including without limitation, all third-party consents
required under Schedule 3.18.
-------------
(f) Approval of Documentation. The form and substance of all
certificates, instruments, and other documents delivered to Seller under
this Agreement shall be satisfactory in all reasonable respects to
Purchaser and its counsel.
(g) No Prohibition. Neither the consummation nor the performance
of any of the transactions contemplated by this Agreement will directly or
indirectly (with or without notice or lapse of time), materially
contravene, or conflict with, or result in a material violation of, or
cause Purchaser or any Affiliate of Purchaser to suffer any material
adverse consequence under, (i) any applicable Legal Requirement or Order,
or (b) any Legal Requirement or Order that has been published, introduced,
or otherwise proposed by or before any Governmental Body.
(h) Interim Services Agreement. The Interim Services Agreement
shall remain in full force and effect and shall not have been terminated by
Seller.
(i) Section 338(h)(10) Election. Seller shall have executed and
delivered Internal Revenue Service Form 8023, referenced in Section 2.5 of
this Agreement, to Purchaser.
8.3. Obligations of Seller to Sell the Stock. Seller's obligation to
sell the Stock to Purchaser and to take the other actions required to be
taken by Seller at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be
waived by Seller, in whole or in part):
(a) Accuracy of Representations. All representations and
warranties by Purchaser in this Agreement (considered collectively), and
each of these representations and warranties (considered individually),
must have been accurate in all
39
material respects as of the date of this Agreement, and must be accurate in
all material respects as of the Closing Date as if made on the Closing
Date.
(b) Purchaser's Performance. All of the covenants and
obligations that Purchaser are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants (considered individually), must
have been duly performed and complied with in all material respects.
(c) Closing Deliveries. Purchaser shall have delivered or caused
the delivery to Seller of each of the documents required to be delivered to
Seller on the Closing Date under Section 8.5.
(d) Consents. All necessary certificates, licenses, agreements
and consents or other authorizations of any parties to the consummation of
the transaction contemplated by this Agreement, or otherwise pertaining to
the matters covered by it, shall have been obtained by Purchaser and
delivered to Seller.
(e) Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the
transaction contemplated by this Agreement or to its consummation, shall
have been instituted or threatened against Purchaser on or before the
Closing Date.
(f) No Prohibition. Neither the consummation nor the performance
of any of the transactions contemplated by this Agreement will directly or
indirectly (with or without notice or lapse of time), materially
contravene, or conflict with, or result in a material violation of, or
cause Seller or any Affiliate of Seller to suffer any material adverse
consequence under, (i) any applicable Legal Requirement or Order, or (b)
any Legal Requirement or Order that has been published, introduced, or
otherwise proposed by or before any Governmental Body.
8.4. Seller Deliveries. At Closing, Seller shall deliver, or cause
to be delivered, the following documents to Purchaser, in each case duly
executed or otherwise in proper form:
(a) Stock Certificates. Certificates representing the Stock, in
the manner and form required by Section 2.1.
(b) Compliance Certificate. A certificate by a senior executive
officer of Seller that (i) all representations and warranties by Seller in
this Agreement are true and correct in all material respects on and as of
the Closing Date, with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date, and (ii)
all covenants, agreements and obligations of Seller hereunder to be
performed or fulfilled prior to or at Closing, have been timely performed
and fulfilled.
40
(c) Certified Articles, Bylaws and Resolutions. (i) A certified
copy of the resolutions of the board of directors of Seller authorizing and
approving this Agreement and the consummation of the transactions
contemplated hereby; (ii) a copy of the Bylaws of each of Seller and the
Company certified by Seller's or the Company's secretary, as the case may
be, and a copy of the Certificate of Incorporation of Seller and the
Company certified by the Secretary of State of the State of Delaware; and
(iii) incumbency certificates relating to each person executing any
document executed and delivered to Purchaser pursuant to the terms hereof.
(d) Release of Encumbrances. UCC-3 termination statements or
other evidence of the release of all Liens on the Stock set forth on
Schedule 3.5.
------------
(e) Good Standing Certificates. A good standing certificate for
the Company, dated as close as practicable to the Closing Date, from
Secretary of the State of Delaware and the Secretaries of State in each of
the jurisdictions in which the Company is qualified to do business.
(f) Resignations. Resignations duly executed by each of the
elected and acting directors and officers (who also hold director
positions), of the Company, effective as of the Closing Date.
(g) Release. Purchaser shall have received from Seller evidence
of the elimination, prior to the Closing Date, of the Company's
indebtedness to Seller and any other Affiliates and a release in favor of
the Company, releasing it from all obligations to Seller with the exception
of those rights or obligations arising under this Agreement.
(h) Other Documents. All other documents, instruments or
writings required to be delivered to Purchaser at or prior to Closing
pursuant to this Agreement and such other certificates of authority and
documents as Purchaser may reasonably request.
8.5. Purchaser Deliveries. At Closing, Purchaser shall deliver the
following documents to Seller, in each case duly executed or otherwise in
proper form:
(a) Cash Closing Payment. A certified or bank cashier's check or
wire transfer, in the amount required by Section 2.3 hereof.
(b) Compliance Certificate. A certificate by a senior executive
officer of Purchaser that (i) all representations and warranties by
Purchaser in this Agreement are true and correct in all material respects
on and as of the Closing Date, with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date, and (ii) all covenants, agreements and obligations of
Purchaser thereunder, to be performed or fulfilled prior to or at Closing,
have been timely performed and fulfilled.
41
(c) Certified Resolutions. (i) A certified copy of the
resolutions of the board of directors of Purchaser authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement; and (ii) incumbency certificates relating
to each person executing any document executed and delivered to Seller by
Purchaser pursuant to the terms hereof.
(d) Other Documents. All other documents, instruments or
writings required to be delivered to Seller at or prior to Closing pursuant
to this Agreement and such other certificates of authority and documents as
Seller may reasonably request.
ARTICLE IX
EXPENSES
9.1. Other. Except as otherwise provided herein, each of the parties
shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
9.2. Costs of Litigation. The parties agree that the prevailing
party in any action brought with respect to or to enforce any right or
remedy under this Agreement shall be entitled to recover from the other
party or parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action, including
without limitation attorneys' fees and prejudgment interest.
ARTICLE X
MISCELLANEOUS
10.1. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or
other electronic means of transmitting written documents; or (c) sent to
the parties at their respective addresses indicated herein by registered or
certified U.S. mail, return receipt requested and postage prepaid, or by
private overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
If to Purchaser, to: (with a copy to)
CareInsite, Inc. ▇▇▇▇▇▇▇, Del Deo, Dolan,
River Drive Center 2 Griffinger & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Legal Counsel Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
42
or to such other person or address as Purchaser shall furnish to Seller in
writing.
If to Seller, to: (with a copy to)
SPS Payment Systems, Inc. Associates First Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other person or address as Seller shall furnish to Purchaser in
writing.
If personally delivered pursuant hereto, such communication shall be
deemed delivered upon actual receipt; if electronically transmitted
pursuant hereto, such communication shall be deemed delivered the next
business day after transmission, and sender shall bear the burden of proof
of delivery; if sent by overnight courier pursuant hereto, such
communication shall be deemed delivered upon receipt; and if sent by U.S.
mail pursuant hereto, such communication shall be deemed delivered as of
the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery, as of
the date of such failure or refusal. Any party to this Agreement may
change its address for the purposes of this Agreement by giving notice
thereof in accordance with this Article 10.
10.2. Dispute Resolution.
(a) Internal Negotiations. The parties shall endeavor to resolve
any dispute arising out of or relating to this Agreement by negotiations
between a designated senior executive officer of each of the parties. If
after forty-five (45) days (the "Negotiation Period"), such dispute remains
------------------
unresolved, such dispute shall be settled by arbitration in accordance with
Section 10.2(b) below.
(b) Arbitration. Upon the expiration of the Negotiation Period,
the parties hereby agree that any dispute regarding the rights and
obligations of any party under this Agreement must be resolved by
arbitration pursuant to this Section 10.2(b). Within seven (7) days of any
party's written notice to the other of its desire to submit any dispute to
arbitration, the parties will meet to attempt to amicably resolve their
differences and, failing such resolution, the parties may submit the matter
to mandatory and binding arbitration with the CPR Institute for Dispute
Resolution ("CPR"). The issue(s) in dispute shall be settled by
---
arbitration in Newark, New Jersey in accordance with the CPR Rules for Non-
Administered Arbitration of Business Disputes, by a panel of three
arbitrators (the "Panel"). The only issue(s) to be determined by the Panel
-----
will be those issues specifically submitted to the Panel. The Panel will
not extend, modify or suspend any of the terms of this Agreement. The
arbitration shall be governed by the United States Arbitration Act, 9
U.S.C. (S)1-16, and judgment upon the award rendered by
43
the Panel may be entered by any court having jurisdiction thereof. A
determination of the Panel shall be by majority vote.
Promptly following receipt of the request for arbitration, CPR shall
convene the parties in person or by telephone to attempt to select the
arbitrators by agreement of the parties. If agreement is not reached,
Buyers shall select one arbitrator and the Principals shall select one
other arbitrator. These two arbitrators shall select a third arbitrator. If
these two arbitrators are unable to select the third arbitrator by mutual
agreement, CPR shall submit to the parties a list of not less than eleven
(11) candidates. Such list shall include a brief statement of each
candidate's qualifications. Each party shall number the candidates in order
of preference, shall note any objection they may have to any candidate, and
shall deliver the list so marked back to CPR. Any party failing without
good cause to return the candidate list so marked within ten (10) days
after receipt shall be deemed to have assented to all candidates listed
thereon. CPR shall designate the arbitrator willing to serve for whom the
parties collectively have indicated the highest preference and who does not
appear to have a conflict of interest. If a tie should result between two
candidates, CPR may designate either candidate.
This agreement to arbitrate is specifically enforceable. Judgment upon
any award rendered by the Panel may be entered in any court having
jurisdiction. The decision of the Panel within the scope of the submission
is final and binding on all parties, and any right to judicial action on
any matter subject to arbitration hereunder hereby is waived (unless
otherwise provided by applicable law), except suit to enforce this
arbitration award or in the event arbitration is not available for any
reason. If the rules of the CPR differ from those of this Section 10.2(b),
the provisions of this Section 10.2(b) will control. The costs of
arbitration shall be shared by the parties.
10.3. Remedies at Law or in Equity. If any representation, warranty
covenant, or condition made by or on behalf of Seller in this Agreement or
in any certificate, report or other instrument delivered under or pursuant
to any term hereof shall be untrue, misleading or breached, as the case may
be, in any respect as of the date of this Agreement, or as of the date when
it was made, furnished or delivered, Purchaser may proceed to protect and
enforce its rights by suit in equity or action at law, whether for the
specific performance of any term contained in this Agreement or for an
injunction against the breach of any such term or in aid of the exercise of
any power granted in this Agreement, or to enforce any other legal or
equitable right of Purchaser, or to take any one or more of such actions.
10.4. Disclosure Schedules. Information set forth in the Schedules to
this Agreement specifically refers to the section of this Agreement to
which such information is responsive and such information shall not be
deemed to have been disclosed with respect to any other section of this
Agreement or for any other purpose. The Schedules shall not vary, change or
alter the language of the representations and warranties contained in this
Agreement, and to the extent the language in the Schedules does not conform
44
in every respect to the language of such representations and warranties,
such language shall be disregarded and be of no force or effect.
10.5. Disclosures and Announcements. The timing and content of all
disclosures to third parties and public announcements concerning the
transactions provided for in this Agreement, by either Seller or Purchaser,
shall be subject to the approval of the others in all essential respects;
provided, however, that Seller's approval shall not be required as to any
-------- -------
statements and other information that Purchaser may make pursuant to any
rule or regulation or as required by law and further provided that
Purchaser shall be permitted to make public announcements in connection
with the execution of this Agreement and the Closing, subject to the
reasonable approval of Seller.
10.6. Assignment, Parties in Interest. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be
assigned, transferred or encumbered without the prior written consent of
the other parties. Notwithstanding the foregoing, Purchaser may, without
consent of any other party, cause one or more subsidiaries or affiliates of
Purchaser to carry out all or part of the transactions contemplated hereby.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of the
parties hereto.
10.7. Further Assurance. From time to time, at Purchaser's request
and without further consideration, Seller will execute and deliver to
Purchaser such documents and take such other actions as Purchaser may
reasonably request in order to consummate more effectively the transactions
contemplated hereby, and to vest in Purchaser good, valid and marketable
title to the Stock.
10.8. Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal laws of the State of Delaware.
10.9. Amendment and Modification. Purchaser and Seller may amend,
modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
10.10. Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements,
representations or warranties between the parties other than those set
forth or provided for herein. Purchaser acknowledges that, except as
expressly set forth herein, neither Seller nor any other person has made
any representation or warranty, express or implied, as to (i) the physical
condition or state of repair of any of the Business property, the
improvements constituting a part thereof or the equipment and fixtures
appurtenant thereto, (ii) the gross or net income derived from the
Business, or (iii) any other matter affecting, or relating to, the
Business.
45
10.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.12. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
10.13 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns, and nothing
herein expressed or implied shall give or be construed to give any person,
other the parties hereto and such assigns any legal or equitable rights
hereunder.
46
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties by duly authorized representatives, on the
date first above written.
SPS PAYMENT SYSTEMS, INC.
By:________________________________
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
CAREINSITE, INC.
By:________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President-Chief Financial Officer
47
List of Schedules
Schedule 3.1(a) Foreign Jurisdiction
Schedule 3.2 Notices/Consents that the Company is Required to Give/Obtain
Schedule 3.3(b) Ownership of the Stock
Schedule 3.5 Title to Properties
Schedule 3.6 Accounts Receivable as of April 30, 1999
Schedule 3.7 Material Liabilities
Schedule 3.8 Taxes
Schedule 3.10(a) Intellectual Property
Schedule 3.11(a) Past Due Accounts Payable
Schedule 3.11(b) Bank Accounts
Schedule 3.12 Names and Addresses of Health Care Payor Customers
Schedule 3.13 Employee Benefit Plans
Schedule 3.14 Insurance
Schedule 3.15 Governmental Authorizations
Schedule 3.15(c) Instruments Filed with Respect to the Intellectual Property
Schedule 3.16 Pending Legal Proceedings; Orders
Schedule 3.17 Changes and Events
Schedule 3.18(a) List of Contracts Relating to the Business
Schedule 3.18(b) List of Contracts not in Full Force and Effect
Schedule 3.18(c) Events That May Be Cause For Default of the Contracts
Schedule 3.20(a) Information on Employees and Directors
Schedule 3.20(b) Persons Intending to Terminate Employment
Schedule 3.24 Relationships with Related Persons
Schedule 3.26 Year 2000 Plan and Timetable
Schedule 3.28 Third-Party Software
Schedule 3.29 Third-Party Interests in Software
Schedule 3.33 List of Hardware
Schedule 3.34 List of Software
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