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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE TRIZETTO GROUP, INC.,
FINSERV ACQUISITION CORP.,
FINSERV HEALTH CARE SYSTEMS, INC. AND
SECURITYHOLDERS OF FINSERV HEALTH CARE SYSTEMS, INC.
DATED AS OF DECEMBER 22, 1999 ----------------------------------------------
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of December 22, 1999, by and among The TriZetto Group, Inc., a
Delaware corporation ("TriZetto"), Finserv Acquisition Corp, a Delaware
corporation and wholly owned subsidiary of TriZetto ("Merger Sub"), Finserv
Health Care Systems, Inc., a New York corporation ("Finserv"), the holders of
the capital stock of Finserv listed on the signature pages attached hereto
(collectively, the "Finserv Shareholders" and individually, a "Finserv
Shareholder"), and Stuart Schloss, as a holder of certain promissory notes made
by Finserv ("Finserv Noteholder" and together with Finserv Shareholders, the
"Finserv Securityholders"). Certain other capitalized terms used in this
Agreement are defined in Exhibit A attached hereto. RECITALS
WHEREAS, the respective Boards of Directors of TriZetto, Merger Sub and
Finserv believe it is in the best interest of each company and their respective
shareholders to consummate the business combination transaction provided for
herein in which Merger Sub would merge with and into Finserv (the "Merger");
WHEREAS, the respective Boards of Directors of TriZetto, Merger Sub and
Finserv have approved the Merger, upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, the Finserv Securityholders are the record and beneficial
owners of 100% of the issued and outstanding shares of Finserv's common stock,
without par value (the "Finserv Stock"), as set forth on Schedule 1 attachedhereto;
WHEREAS, the Finserv Noteholder is the holder of the promissory notes
listed on Schedule 2 attached hereto, each made by Finserv and payable to the
Finserv Noteholder (collectively, the "Finserv Notes");
WHEREAS, at the time of the Closing, the Finserv Securityholders will
be the record and beneficial owners of 100% of the issued and outstanding shares
of Finserv Stock as set forth on Schedule 1 attached hereto;
WHEREAS, each of TriZetto, Merger Sub, Finserv and the Finserv
Securityholders desire to make certain representations, warranties, covenants
and agreements in connection with the Merger and also to prescribe various
conditions to the consummation thereof; and
WHEREAS, for Federal income tax purposes, the Merger is intended to be
qualified as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"). AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree asfollows:
3 ARTICLE 1
THE MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL") and the New York General Corporation Law ("NYGCL"), Merger Sub
shall be merged with and into Finserv at the Effective Time of the Merger (as
defined in Section 1.3). Following the Merger, the separate corporate existence
of Merger Sub shall cease, and Finserv shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights, properties, liabilities and obligations of Merger Sub in accordance
with the DGCL and the NYGCL.
1.2. CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Stradling Yocca Carlson & Rauth at 660 Newport Center
Drive, Suite 1600, Newport Beach, California 92660 or by facsimile, on December
22, 1999, or, if the conditions to Closing set forth in Section 9 of this
Agreement shall not have been satisfied or waived by the appropriate party by
such time of day on such date, at such time of day as the parties shall agree on
the first business day to occur following the date on which all of the
conditions to Closing set forth in Section 9 shall have been satisfied or waived
as provided therein (subject to the provisions of Section 10 hereof, such other
date and time as shall be mutually agreed upon by the parties, but in no event
later than December 31, 1999. The date on which the Closing actually occurs and
the transactions contemplated hereby become effective is hereinafter referred to
as the "Closing Date." At the time of the Closing, TriZetto, Merger Sub, Finserv
and the Finserv Securityholders shall deliver the certificates and other
documents and instruments required to be delivered hereunder.
1.3. EFFECTIVE TIME. At the Closing, a certificate of merger (the
"Certificate of Merger") shall be executed in accordance with the relevant
provisions of the DGCL and the NYGCL and the parties shall make all other
filings, recordings or publications required by the DGCL and the NYGCL in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State and
the New York Secretary of State, or at such other time as may be specified in
the Certificate of Merger (the "Effective Time").
1.4. EFFECTS OF THE MERGER. Subject to the foregoing, the effects of
the Merger shall be as provided in the applicable provisions of the DGCL and theNYGCL.
1.5. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation and Bylaws of Finserv as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or in accordance with applicable law.
1.6. DIRECTORS AND OFFICERS. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected or
appointed and qualified in accordance with applicable law or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws. 2
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EFFECT OF THE MERGER ON THE CAPITAL STOCK OF FINSERV AND MERGER SUB
2.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of TriZetto, Merger Sub, Finserv or
the Finserv Securityholders:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share
of capital stock of Merger Sub (the "Merger Sub Stock") shall by virtue of the
Merger and without any action on the part of any holder thereof, be converted
into one share of Finserv Stock.
(b) CONVERSION OF FINSERV COMMON STOCK. Subject to Sections 2.1(c)
and 2.1(d):
(i) Each issued and outstanding share of Finserv Stock will be
converted automatically into the right to receive, the number of validly issued,
fully paid and non-assessable shares of common stock, $0.001 par value, of
TriZetto (the "TriZetto Stock") which equals the Conversion Number, subject to
adjustment as set forth in Sections 2.5, 2.6 and 2.7. As used herein, the
"Conversion Number" shall equal the number obtained by dividing:
(A) the quotient obtained by dividing $1,500,000 by the
average of the closing sales prices of the TriZetto Stock for the five trading
days immediately preceding December 18, 1999, as reported on the Nasdaq National
Market System ("NMS"), by
(B) the number that is equal to the total number of shares
of Finserv Stock that are issued and outstanding immediately prior to the
Effective Time of the Merger.
(ii) At the Effective Time, all such shares of Finserv Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of any such certificates, certificates representing
the shares of TriZetto Stock ( the "Merger Consideration") to be issued or paid
in consideration therefor upon the surrender of such certificate in accordance
with Section 2.2, without interest.
(c) DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, shares of Finserv Stock that are outstanding immediately prior
to the Effective Time and that are held by a holder who is entitled to and has
demanded and perfected his right of appraisal for such Finserv Stock in
accordance with Article 9 of the NYGCL (the "Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration as provided in
Section 2.1(b) of this Agreement, unless and until such holder fails to perfect
or withdraws or otherwise loses his right to an appraisal of the Dissenting
Shares and payment under the NYGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to an appraisal of the
Dissenting Shares under the NYGCL, such Dissenting Shares shall thereupon be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration to which such holder is entitled, without
interest thereon. Finserv agrees to give all notices acquired under Article 9 of
the NYGCL and otherwise comply with the requirements of Article 9 of the NYGCL.
In addition, Finserv shall give TriZetto (i) prompt notice of any written
demands for appraisal of any Dissenting 3
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Shares, withdrawals of such demands, and any other instruments served pursuant
to the NYGCL and received by Finserv and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
NYGCL. Finserv shall not, except with the prior written consent of TriZetto,
voluntarily offer to make or make any payment with respect to any demands for
appraisal for Dissenting Shares or offer to settle any such demands.
(d) STOCK OPTIONS AND STOCK PLANS. As of the date of this Agreement
and as of the Effective Time, there will be no outstanding Finserv Derivative
Securities and no outstanding Finserv Options.
2.2. EXCHANGE OF CERTIFICATES.
(a) TRIZETTO STOCK EXCHANGE PROCEDURES. Immediately following the
Closing, upon receipt of the certificates representing all of the outstanding
shares of Finserv Stock from the Finserv Securityholders, TriZetto and Finserv
shall submit to TriZetto's registrar and transfer agent, U.S. Stock Transfer
Corporation (the "Exchange Agent"), an instruction letter including a list of
the names, addresses and social security numbers or taxpayer identification
numbers of each Finserv Securityholder who has delivered the certificate or
certificates representing all shares of Finserv Stock held by such Finserv
Securityholder to TriZetto and for which the holders thereof are not entitled to
claim dissenter's rights. As soon as reasonably practicable following the
Effective Time, TriZetto shall cause the Exchange Agent to issue in exchange
therefor (i) a certificate representing that number of whole shares of TriZetto
Stock, which such shareholder has the right to receive pursuant to the
provisions of this Article 2 (less the proportionate number of shares to placed
into Escrow as provided in Section 2.4 below) and as further described on
Exhibit B attached hereto, and (ii) the cash payment in lieu of fractional
shares, if any. Upon delivery of the above mentioned consideration, the Finserv
stock certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 2.2, each certificate shall be deemed at any time
after the Effective Time for all corporate purposes of TriZetto to represent
ownership of the number of shares of TriZetto Stock into which the number of
shares of Finserv Stock shown thereon have been converted as contemplated by
this Article 2.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to TriZetto Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered certificate
with respect to the shares of TriZetto Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid pursuant to Section 2.2(d)
until the surrender of such certificate in accordance with this Article 2.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the record holder of the certificates
representing whole shares of TriZetto Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions, if any, with a record date on or after the Effective Time which
theretofore became payable, but which were not paid by reason of the immediately
preceding sentence, with respect to such whole shares of TriZetto Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date on or after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of TriZetto Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All shares of
TriZetto Stock issued upon the surrender for exchange of certificates in
accordance with the terms of this Article 2 (including any cash paid pursuant to
Section 2.2(d)) shall be deemed to have been issued 4
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(and paid) in full satisfaction of all rights pertaining to the shares of
Finserv Stock represented thereby. From and after the Effective Time, the stock
transfer books of Finserv shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Finserv Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
(d) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of TriZetto Stock shall be issued upon the surrender for
exchange of certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a TriZetto stockholder. Each
holder of shares of Finserv Stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of TriZetto Stock
shall receive, in lieu thereof, cash without interest in an amount equal to such
fractional share of TriZetto Stock multiplied by $30.6125.
(e) WITHHOLDING TAXES; PAYMENTS TO PUBLIC OFFICIALS. TriZetto and
Merger Sub shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable to any Finserv Securityholder pursuant to this
Agreement such amounts as TriZetto and Merger Sub may be required to deduct or
withhold therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Finserv Securityholder to whom such amounts would otherwise have
been paid. Neither TriZetto nor Merger Sub shall be liable to any Finserv
Securityholder for any shares of TriZetto Stock (or dividends or distributions
with respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or similar law.
2.3. NOTE CONSIDERATION.
(a) NOTE PURCHASE. On the terms and subject to the conditions of
this Agreement, in reliance upon the representations, warranties and agreements
of the parties contained herein, concurrently with the Closing, the Finserv
Noteholder shall sell, transfer and deliver to TriZetto, and TriZetto shall
purchase from the Finserv Noteholder, all of the issued and outstanding Finserv
Notes except for $25,000 which shall remain outstanding; provided however, that
TriZetto shall not be obligated to pay more than $1,224,592.21 for the Finserv
Notes, net of the debt owed by the Finserv Noteholder to TriZetto pursuant to
that certain Secured Promissory Note executed by the Finserv Noteholder on
December 16, 1999 (the "Note Consideration" and together with the Merger
Consideration and Earnout Consideration, the "Consideration").
(b) PAYMENT OF THE NOTE CONSIDERATION. TriZetto will withhold
$125,000 of the Note Consideration that would otherwise be delivered to the
Finserv Noteholder at the Closing (the "Cash Holdback") and that will be held by
TriZetto for one year to secure the adjustment to the Note Consideration which
may be made pursuant to Sections 2.5 and 2.6 below; provided, however, that the
Cash Holdback will be released sooner upon the complete resolution of the
adjustments set forth in Sections 2.5 and 2.6 below. Subject to the adjustment
set forth in Sections 2.5 and 2.6, at the Closing, TriZetto will deliver the
Note Consideration minus the Cash Holdback, by wire transfer to the Finserv
Noteholder in accordance with wire instructions provided by the FinservNoteholder. 5
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2.4. DELIVERY OF TRIZETTO STOCK TO ESCROW. Pursuant to an Escrow
Agreement to be entered into on or before the Closing in substantially the form
of Exhibit C (the "Escrow Agreement"), by and among TriZetto, the Finserv
Securityholders, Bankers Trust Company of California N.A. (the "Escrow Agent")
and the Representative, TriZetto will deposit stock certificates representing
20,000 shares of TriZetto Stock that would otherwise be delivered to the Finserv
Securityholders at the Closing (the "Escrow Shares") in Escrow together with
related stock powers which will be held in escrow for one year to secure the:
(i) accounts receivable and accounts payable covenants in Section 2.5 below;
(ii) The Flex Group Excess covenant in Section 2.6 below; (iii) claims made by
or on behalf of Steven Kramer against Finserv, TriZetto or any of their
Affiliates; and (iv) indemnification obligations of Finserv and the Finserv
Securityholders with respect to claims made under Article 8 hereof and to secure
the purchase price adjustments of the Finserv Securityholders which may be made
pursuant to Sections 2.5 and 2.6 below and in accordance with the EscrowAgreement.
2.5. ADJUSTMENT TO CONSIDERATION BASED ON ACCOUNTS RECEIVABLE AND
PAYABLE SCHEDULE.
(a) ACCOUNTS RECEIVABLE AND PAYABLE SCHEDULE.
(i) No later than 60 business days after the Closing Date,
Finserv shall deliver to TriZetto a schedule of accounts receivable and accounts
payable which shall be dated as of the Closing Date and which shall be prepared
in a manner in accordance with generally accepted accounting principles
consistently applied ("GAAP"), including normal accruals through December 31,
1999 which reflects accounts receivable earned, but which were not billed as of
the Closing Date ("Accounts Receivable and Payable Schedule"). TriZetto may,
within 90 days after the Closing Date at its sole option with notice to Stuart
Schloss as the representative of the Finserv Securityholders (the
"Representative"), prepare from Finserv's books and records (in accordance GAAP
consistently applied) its own version of such Accounts Receivable and Payable
Schedule, and if the two versions vary, TriZetto's Chief Financial Officer or
his designee and the Representative shall meet to reconcile the versions and
arrive at a final Accounts Receivable and Payable Schedule. In the event the
parties cannot agree on a reconciled version, the dispute shall be determined in
accordance with Section 2.5(c) below. The Accounts Receivable and Payable
Schedule, if accepted by TriZetto, or in the alternative the reconciled Accounts
Receivable and Payable Schedule resulting from the procedure described in the
immediately preceding sentence, shall be the "Final Accounts Receivable and
Payable Schedule."
(ii) It is acknowledged that after the Closing Date all
billings and collections of Finserv will be the property of TriZetto as holder
of 100% of the Finserv Stock (except any payments received from U.S. Imaging,
U.S. Diagnostics, or their affiliates, relating to the Dow Corning breast
implant litigation, which shall be paid to the Finserv Securityholders on a pro
rata basis); provided, however, that the Representative and TriZetto's Chief
Financial Officer shall meet to determine (A) the amount of unbooked accounts
receivable related to New York Presbyterian which shall be deemed to have
accrued prior to the Closing Date and which shall be included as an accrual on
the Accounts Receivable and Payable Schedule; and (B) the amount of moving
expenses incurred by Finserv which shall be deducted from the account payable
section of the Accounts Receivable and Payable Schedule.
(b) EXCESS ACCOUNTS PAYABLE ADJUSTMENT. 6
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(i) If the Final Accounts Receivable and Payable Schedule
reflects accounts payable of Finserv in excess of the sum of Finserv's accounts
receivable, less a reserve for uncollectible accounts (the "Excess"), then the
Note Consideration shall be reduced dollar-for-dollar by the amount of the
Excess. The Excess shall be applied first against the Cash Holdback until it is
reduced to zero, then if necessary against the Escrow Shares at a valuation
determined pursuant to the Escrow Agreement, then if necessary, against the
TriZetto Stock held by the Finserv Securityholders.
(ii) Assuming no disputes exist regarding the Final Accounts
Receivable and Payable Schedule, the Excess shall be paid within 15 business
days of the determination of the Accounts Receivable and Payable Schedule in
accordance with Section 2.5(a).
(c) VALUATION DISPUTE RESOLUTION. To initiate a dispute between
TriZetto and the Finserv Securityholders with respect to the Accounts Receivable
and Payable Schedule, the Representative must notify TriZetto of such dispute
within ten business days of the delivery of TriZetto's version of the Accounts
Receivable and Payable Schedule. In the event the parties disagree as to the
reconciliation of the Accounts Receivable and Payable Schedule under Section
2.5(a), this Section 2.5(c) shall be triggered automatically and the parties
shall resolve the disagreement as set forth herein. In the case of such
challenge or disagreement, the amount or amounts of any line items in the
Accounts Receivable and Payable Schedule which are in dispute (the "Valuation")
shall be determined as follows: (a) first, TriZetto and the Representative shall
engage in good faith discussions of the Valuation, following which a definitive
Valuation may be agreed to; and (b) if a definitive Valuation is not determined
within 30 days of the date of the Representative's notice, the CPA shall
determine the calculation of the Valuation, in which case the amount so
determined shall control. The costs of the CPA shall be borne equally by
TriZetto and the Finserv Securityholders.
2.6. ADJUSTMENT TO CONSIDERATION BASED ON LIABILITIES OWED TO THE FLEX
GROUP, DONALD FELLNER OR THEIR AFFILIATES.
(a) LIABILITIES OWED. Based upon the representations and warranties
of Finserv and the Finserv Securityholders, TriZetto is informed and believes
that Finserv owes The Flex Group, Donald Fellner and their Affiliates
approximately $175,000, of which $100,000 is reflected on Finserv's books and
records (the "Flex Group Indebtedness"). Pursuant to Section 3.8 of the FinServ
Disclosure Schedule, Finserv and the Finserv Securityholders represent and
warrant that The Flex Group Indebtedness can be paid off, and a General Release
may be obtained upon Finserv's payment of $180,932.79 to The Flex Group.
(b) CONSIDERATION ADJUSTMENT. If The Flex Group, Donald Fellner and
their Affiliates require more than $180,932.79 in order to execute a General
Release of all claims (the "Flex Group Excess"), then the Merger Consideration
shall be reduced dollar-for-dollar by the amount of The Flex Group Excess. The
Flex Group Excess shall first be applied against the Cash Holdback until it is
reduced to zero, then if necessary against the Escrow Shares at a valuation
determined pursuant to the Escrow Agreement.
(c) DISPUTE RESOLUTION. In the event that TriZetto and the
Representative disagree on the amount of The Flex Group Excess, the CPA shall
determine The Flex Group Excess, in which case such amount so determined shall
control. The costs of the CPA shall be borne equally by TriZetto and the FinServSecurityholders. 7
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2.7. ADJUSTMENT TO CONSIDERATION BASED ON FUTURE NET REVENUES.
(a) EARNOUT PROVISIONS. The Finserv Securityholders may receive an
additional $750,000 payable in shares of TriZetto Common Stock (the "Earnout
Consideration") if certain milestones are met in fiscal year ending December 31,
2000 and fiscal year ending December 31, 2001.
(i) FISCAL YEAR 2000. The maximum Earnout Consideration of
$375,000 for fiscal year 2000 shall be calculated as follows:
(A) If Finserv's Net Revenues and EBITDA for fiscal year
2000 are equal to or greater than $5,400,000 and $600,000, respectively, then
$250,000 payable in shares of TriZetto Stock shall be delivered to the Finserv
Securityholders on a pro rata basis on or before March 31, 2001;
(B) If Finserv's Net Revenues and EBITDA meet the
thresholds set forth in Section 2.7(a)(i)(A) above, and Net Revenues or EBITDA
for fiscal year 2000 are equal to or greater than $5,700,000 or $900,000,
respectively, then $62,500 payable in shares of TriZetto Stock, in addition to
any amounts payable pursuant to 2.7(a)(i)(A) above, shall be delivered to the
Finserv Securityholders on a pro rata basis on or before March 31, 2001;
(C) If Finserv's Net Revenues and EBITDA for fiscal year
2000 are equal to or greater than $5,700,000 and $900,000, respectively, then
$62,500 payable in shares of TriZetto Stock, in addition to any amounts payable
pursuant to Section 2.7(a)(i)(A) and Section 2.7(a)(i)(B) above, shall be
delivered to the Finserv Securityholders on a pro rata basis on or before March
31, 2001;
(ii) FISCAL YEAR 2001. The maximum Earnout Consideration of
$375,000 for fiscal year 2001 shall be calculated as follows:
(A) If Finserv's Net Revenues or EBITDA for fiscal year
2001 are equal to or greater than $6,000,000 or $900,000, respectively, then
$125,000 payable in shares of TriZetto Stock shall be delivered to the Finserv
Securityholders on a pro rata basis on or before March 31, 2002;
(B) If Finserv's Net Revenues and EBITDA for fiscal year
2001 are equal to or greater than $6,000,000 and $900,000, respectively, then
$125,000 payable in shares of TriZetto Stock, in addition to any amounts payable
pursuant to Section 2.7(a)(ii)(A) above, shall be delivered to the Finserv
Securityholders on a pro rata basis on or before March 31, 2002;
(C) If Finserv's Net Revenues and EBITDA meet the
thresholds set forth in Section 2.7(a)(ii)(B) above, and Net Revenues or EBITDA
for fiscal year 2001 are equal to or greater than $6,600,000 or $1,020,000,
respectively, then $62,500 payable in shares of TriZetto Stock, in addition to
any amounts payable pursuant to Section 2.7(a)(ii)(A) and Section 2.7(a)(ii)(B)
above, shall be delivered to the Finserv Securityholders on a pro rata basis on
or before March 31, 2002; 8
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(D) If Finserv's Net Revenues and EBITDA for fiscal year
2001 are equal to or greater than $6,600,000 and $1,020,000, respectively, then
$62,500 payable in shares of TriZetto Stock, in addition to any amounts payable
pursuant to Section 2.7(a)(ii)(A), Section 2.7(a)(ii)(B) and Section
2.7(a)(ii)(C) above, shall be delivered to the Finserv Securityholders on a pro
rata basis on or before March 31, 2002;
(iii) As used here, "Net Revenues" shall mean Finserv's
revenues less subsequent adjustments determined in accordance with GAAP and
consistent with the practices used in preparing the FinServ Financial Statements
certified by PricewaterhouseCoopers LLP or such other independent certified
public accountant as chosen by TriZetto.
(iv) As used here, "EBITDA" shall mean Finserv's earnings
before interest, taxes, depreciation and amortization, determined in accordance
with GAAP and consistent with the practices used in preparing the FinServ
Financial Statements certified by PricewaterhouseCoopers LLP or such other
independent certified public accountant as chosen by TriZetto. The calculation
for EBITDA shall not include the following items: (A) expenses attributable to
TriZetto or any of the TriZetto Subsidiaries (other than Finserv), except to the
extent that such expenses are directly related to Finserv or are required to be
entered into the books and records of Finserv pursuant to GAAP; and (B) any
costs relating to any claim or liability which was ultimately paid to TriZetto
pursuant to Article 8 of this Agreement. In the event that TriZetto expenses
costs relating to the implementation of Finserv's computer system, including
without limitation, system interfaces, such expenses shall be deducted from
EBITDA as if they were amortized over the longest term permitted by GAAP.
(b) REVENUE CALCULATION. As soon as reasonably practicable, but not
later than March 1, 2001 and March 1, 2002, as applicable, TriZetto shall
deliver to the Representative a calculation of Finserv's Net Revenues for (i)
the 12 months and six months ended December 31, 2000 and (ii) the 12 months and
six months ended December 31, 2001, respectively, determined in accordance with
GAAP and consistent with the practices used in preparing the Finserv Financial
Statements certified by PricewaterhouseCoopers LLP or such other independent
certified public accountant as chosen by TriZetto (the "Revenue Calculation").
The cost of such accounting firm shall be borne by TriZetto. The Representative
shall have 30 days to review and approve the Revenue Calculation. If the
Representative does not notify TriZetto in writing within such 30 day period
that it disputes any matter set forth in the Revenue Calculation, the Revenue
Calculation shall be deemed to have been accepted by the Finserv Securityholders
and shall be binding upon the Finserv Securityholders and TriZetto. If any
disputes arise regarding the Revenue Calculation which the Finserv
Securityholders and TriZetto cannot resolve between themselves within 30 days,
such questions shall be referred to the CPA, and the CPA shall be directed to
resolve such questions within 7 days thereafter, and the CPA's decision shall be
final and binding on all parties. The cost of the CPA shall be borne equally by
the Finserv Securityholders and TriZetto.
(c) DELIVERY OF SHARES. Upon any final determination of the Revenue
Calculation pursuant to Section 2.7(b), TriZetto shall promptly issue, or cause
to be issued by submitting an instruction letter to its Transfer Agent
instructing the Transfer Agent to issue an additional number of shares of
TriZetto Stock equal to the applicable amount of the Earnout Consideration, to
the Finserv Securityholders for such fiscal year, if any, as set forth in
Section 2.7(a). The shares delivered in satisfaction of the Earnout
Consideration, if any, shall be 9
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based upon the average closing sales price for the 5 trading days preceding
March 31, 2000 or March 31, 2001, as applicable.
(d) STRATEGIC AND OPERATIONAL DECISIONS. It is acknowledged that
after the Closing Date TriZetto shall, in its sole discretion, have complete
control over all strategic and operational decisions concerning the operation of
Finserv, notwithstanding that such decisions may or will impact the amount of
the Net Revenues. TriZetto agrees to exercise its discretion in making such
decisions in good faith and without regard to any effect such decisions may have
on the Net Revenues and the Earnout Consideration, if any, to be paid hereunder.
TriZetto shall introduce such of its customers to Finserv as it shall deem
appropriate in its reasonable business judgment in order to increase Finserv's
business. TriZetto shall provide Finserv with adequate working capital as it
shall determine in its reasonable business judgment.
(e) NET REVENUE STATEMENTS. TriZetto shall provide to the
Representative, as soon as reasonably practicable, but not later than 20 days
after the end of each month (except the month of December 2000) ending after the
Closing until November 30, 2001, a statement setting forth (i) Net Revenues for
such month and (ii) Net Revenues for the fiscal year to date. The revenue
statements shall be delivered upon receipt by TriZetto of a Confidentiality
Agreement in substantially the form of Exhibit D attached hereto
("Confidentiality Agreement") executed by the Representative.
2.8. ADJUSTMENT TO TRIZETTO STOCK. If the average closing sales price
of the TriZetto Stock as reported on the NMS (or other exchange or similar
market on which TriZetto Stock is regularly traded if not then traded on NMS)
for the 20 trading days preceding the one-year anniversary of the Closing Date
(the "Adjustment Date") is less than $30.6125, then TriZetto shall issue or
cause to be issued by submitting an instruction letter to its Transfer Agent
instructing the Transfer Agent to issue an additional number of shares of
TriZetto Stock within five business days after the Adjustment Date (the
"Adjusted Shares Closing") to the Finserv Securityholders such that the total
market value of all the shares of TriZetto Stock issued and delivered by
TriZetto, as required this Section 2.8 as well as by Section 2.1(b) is
$1,500,000, based upon the average closing sales price for the 20 trading days
preceding the Adjustment Date; provided, however, that in no event shall
TriZetto be required to issue a number of additional shares at the Adjustment
Shares Closing in excess of 12,249 shares of TriZetto Stock. The adjustment
called for by this Section 2.8 shall be made after shares of TriZetto Stock are
returned from Escrow to TriZetto or otherwise sold in satisfaction of claims
under Article 8 or for adjustments in pursuant to Sections 2.5 and 2.6, or for
any other purpose.
2.9. LOST CERTIFICATES. In the event any certificate representing any
shares of Finserv Stock shall have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and upon satisfaction of the conditions set forth
below, the holder of such lost, stolen or destroyed certificate shall be
entitled to receive, in accordance with the terms of this Agreement, the Merger
Consideration payable in respect of the Finserv Stock evidenced by such
certificate. When authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the person to whom the Merger Consideration is to be paid
shall, as a condition precedent to the payment thereof, give Finserv a bond
satisfactory to TriZetto in such sum as it may direct or otherwise indemnify
Finserv and TriZetto in a manner satisfactory to TriZetto against any claim that
may be made against Finserv or TriZetto with respect to the certificate alleged
to have been lost, stolen or destroyed. 10
12
2.10. DELIVERY OF CONSIDERATION. By executing this Agreement, each of
the Finserv Securityholders agrees to the method and timing of the delivery of
the Consideration as set forth herein and in the Flow of Funds Memorandum
attached hereto as Exhibit J. ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FINSERV AND THE
FINSERV SECURITYHOLDERS
Finserv and the Finserv Securityholders, jointly and severally,
represent and warrant to TriZetto and Merger Sub that, except as set forth in
the Finserv Disclosure Schedule:
3.1. CORPORATE EXISTENCE AND POWER. Finserv is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York, and has all corporate powers and authority and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect on Finserv. Finserv is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on Finserv. Finserv has heretofore
delivered to TriZetto true and complete copies of Finserv's Articles of
Incorporation and Bylaws as currently in effect.
3.2. CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by Finserv of this
Agreement and the consummation of the transactions contemplated hereby are
within Finserv's corporate powers and, except for the required approval of the
holders of Finserv Stock in connection with the consummation of the Merger, have
been duly authorized by all necessary corporate action. The affirmative vote of
the holders of two-thirds of the outstanding shares of Finserv Stock is the only
vote of the holders of any of Finserv's capital stock necessary in connection
with the consummation of the Merger.
(b) Finserv's Board of Directors, at a meeting duly called and
held, has unanimously (i) determined that this Agreement and the transactions
contemplated hereby (including the Merger) are fair to and in the best interests
of the Finserv Shareholders, (ii) approved and adopted this Agreement and the
transactions contemplated hereby (including the Merger), which approval
satisfies in full any applicable requirements of the NYGCL, and (iii) resolved
to recommend approval and adoption of this Agreement by the holders of FinservStock.
(c) This Agreement has been duly executed and delivered by Finserv
and the Finserv Securityholders and is a legal, valid and binding obligation of
Finserv and the Finserv Securityholders, enforceable against Finserv and the
Finserv Securityholders, as applicable, in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles. 11
13
3.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Finserv and the Finserv Securityholders of this Agreement and the
consummation by Finserv and the Finserv Securityholders of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency, official or authority, other than (a) the filing of
the Certificate of Merger and other documents in accordance with the DGCL and
the NYGCL, (b) compliance with the Securities Act of 1933 (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act"), or foreign or state securities
or blue sky laws, and (c) any other filings, approvals or authorizations which,
if not obtained, would not, individually or in the aggregate, have a Material
Adverse Effect on Finserv or materially impair the ability of Finserv and the
Finserv Securityholders to consummate the transactions contemplated by thisAgreement.
3.4. NON-CONTRAVENTION. The execution, delivery and performance by
Finserv and the Finserv Securityholders of this Agreement and the consummation
by Finserv and the Finserv Securityholders of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the Articles of
Incorporation or Bylaws of Finserv, (ii) assuming compliance with the matters
referred to in Section 3.3, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Finserv or the Finserv Securityholder,
(iii) require the consent or other action of any person under, constitute a
default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Finserv or to a loss of any benefit
to which Finserv is entitled under any provision of any agreement or other
instrument binding upon Finserv or any license, franchise, permit, certificate,
approval or other similar authorization affecting, or relating in any way to,
the assets or business of Finserv, or (iv) result in the creation or imposition
of any Lien on any asset of Finserv, except, in the case of clauses (ii) through
(iv), for such matters as would not, individually or in the aggregate, have a
Material Adverse Effect on Finserv or materially impair the ability of Finserv
to consummate the transactions contemplated by this Agreement.
3.5. COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. Finserv holds all
licenses, permits and authorizations necessary for the lawful conduct of its
business as now being conducted pursuant to all applicable statutes, laws,
ordinances, rules and regulations of all governmental bodies, agencies and other
authorities having jurisdiction over it or any part of its respective
operations, and there are no violations or claimed violations by Finserv of any
such license, permit or authorization or any such statute, law, ordinance, rule
or regulation.
3.6. CAPITALIZATION.
(a) The authorized capital stock of Finserv consists of 200 shares
of Finserv Stock. As of the date hereof, there are outstanding (i) 149 shares of
Finserv Stock, (ii) no employee stock options to purchase shares of Finserv
Stock, (iii) no warrants to purchase shares of Finserv Stock, and (iv) no shares
of Finserv Stock issued or relating to restricted stock awards, or other stock
based compensation arrangements.
(b) All outstanding shares of capital stock of Finserv have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in this Section 3.6, there are no outstanding (i) shares of capital
stock or other voting securities of Finserv, (ii) securities of Finserv
convertible into or exchangeable for shares of capital stock or voting
securities of Finserv, or (iii) options, restricted stock, other stock based
compensation awards or other rights to acquire from Finserv, or other obligation
of Finserv to issue, any capital stock, voting securities or securities
12
14
convertible into or exchangeable for capital stock or voting securities of
Finserv. There are no outstanding obligations of Finserv to repurchase, redeem
or otherwise acquire any securities referred to in clauses (i), (ii) or (iii)above.
(c) As of the date hereof, there are no outstanding bonds,
debentures, notes or other indebtedness of Finserv having the right to vote (or
convertible into or exercisable for Finserv Stock having the right to vote) on
any matters on which the Finserv Securityholders may vote.
3.7. SUBSIDIARY. Finserv has no Subsidiaries and does not own any stock
or equity interest in any other Person.
3.8. COMPANY FINANCIAL STATEMENTS. Finserv has delivered to TriZetto
(a) the audited balance sheet of Finserv as of December 31, 1997, the unaudited
balance sheet of Finserv as of December 31, 1998 and the related statements of
income and shareholders equity for the fiscal years ended December 31, 1997 and
1998, together with an unaudited balance sheet as of October 31, 1999 and the
related statement of income and shareholder's equity for the ten months then
ended (collectively the "Financial Statements"). The Finserv Financial
Statements present fairly, in conformity with GAAP applied on a consistent basis
(subject, in the case of the October 31, 1999 financial statements, to normal
year end adjustments none of which individually or in the aggregate are
material), the financial condition and results of operations of as of the dates
and for the periods indicated therein. For purposes of this Agreement, "Finserv
Balance Sheet" means the balance sheet of Finserv as of October 31, 1999.
3.9. ABSENCE OF CERTAIN CHANGES. Since the date of the Finserv Balance
Sheet, the business of Finserv has been conducted in the ordinary course
consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which would, individually or in the aggregate, have a
Material Adverse Effect on Finserv (other than adverse effects arising from the
execution and performance of this Agreement, changes in general economic
conditions or changes applicable generally to the industry);
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Finserv, or
any repurchase, redemption or other acquisition by Finserv of any outstanding
shares of capital stock or other securities of, or other ownership interests in
the Finserv;
(c) any amendment of any term of any outstanding security of Finserv;
(d) any incurrence, assumption or guarantee by Finserv of any
indebtedness for borrowed money other than in the ordinary course and in amounts
and on terms consistent with past practices;
(e) any creation or other incurrence by Finserv of any Lien on any
asset other than in the ordinary course consistent with past practices;
13
15
(f) any making of any loan, advance or capital contribution to or
investment in any person other than loans, advances or capital contributions to
or investments in wholly-owned subsidiaries of Finserv made in the ordinary
course consistent with past practices;
(g) any transaction or commitment made, or any contract or
agreement entered into, by Finserv relating to its assets or business (including
the acquisition or disposition of any assets) or any relinquishment by Finserv
of any contract or other right, in either case, material to Finserv, taken as a
whole, other than transactions and commitments in the ordinary course consistent
with past practices and those contemplated by this Agreement;
(h) any change in any method of accounting, method of tax
accounting or accounting practice by Finserv, except for any such change
required by reason of a concurrent change in GAAP;
(i) any (i) grant of any severance or termination pay to any
current or former director, officer or employee of Finserv, (ii) entering into
of any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any current or former director,
officer or employee of Finserv, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iv)
increase in compensation, bonus or other benefits payable or otherwise made
available to current or former directors, officers or employees of Finserv
(other than in the ordinary course of business salary increases for employees
other than officers and directors), (v) the declaration or payment of any
bonuses or year-end payments to any current or former directors, officers or
employees of Finserv, or (vi) establishment, adoption, or amendment (except as
required by applicable law), of any collective bargaining, bonus, profit
sharing, thrift, pension, retirement, deferred compensation, compensation, stock
option, restricted stock or other benefit plan or arrangement covering any
current or former director, officer or employee of Finserv;
(j) any material labor dispute, other than routine individual
grievances, or, to the Knowledge of Finserv or the Finserv Securityholders, any
activity or proceeding by a labor union or representative thereof to organize
any employees of Finserv, which employees were not subject to a collective
bargaining agreement on the date of the Finserv Balance Sheet, or any material
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees;
(k) any tax election or any settlement of tax liability, in either
case that is material to Finserv; or
(l) any incurrence of any indebtedness by Finserv to any Finserv Securityholder.
3.10. LITIGATION. There is no action, suit, investigation, audit or
proceeding pending against, or to the Knowledge of Finserv or the Finserv
Securityholders threatened against or affecting, Finserv, its officers or
directors or any of its properties before any court or arbitrator or any
governmental body, agency or official. No former shareholder, employee, officer
or director of Finserv has any claim pending or to the Knowledge of Finserv or
the Finserv Securityholders threatened against Finserv, its officers or
directors or any of its properties relating to sales of Finserv Stock by Finserv
or any of Finserv's current or former stockholders. Neither Finserv nor any of
its officers and directors nor any of its properties are subject to any order,
writ, judgment, decree or injunction of any court or arbitrator or any
governmental body, agency or official. Section 3.10 of 14
16
the Finserv Disclosure Schedule contains a complete list of all claims brought
against Finserv, or pending since January 1, 1997, together with a brief
statement of the nature and amount of the claim, the court and jurisdiction in
which the claim was brought, the resolution (if resolved), and the availability
of insurance to cover the claim. To the Knowledge of Finserv or the Finserv
Securityholders, there are no facts or circumstances that could reasonably be
expected to give rise to any actions set forth in this Section 3.10.
3.11. TAXES.
(a) TAX RETURNS. Finserv has filed all material Tax returns
required to have been filed on or before the date hereof, and all Taxes shown to
be due on such Tax returns have been timely paid. Finserv has not agreed in
writing to waive any statute of limitations in respect of Taxes of Finserv. No
issues that have been raised in writing by the relevant Taxing Authority in
connection with the examination of such Tax returns are currently pending,
except for any written notice of such issues the subject matter of which has
either been substantially resolved or would otherwise not have a Material
Adverse Effect on Finserv. The amounts provided for taxes on the Finserv
Financial Statements are sufficient for the payment of all accrued and unpaid
U.S. federal, state, provincial, or local Taxes, interest, penalties,
assessments and deficiencies for all periods prior to the dates of such balance
sheets to the extent such taxes are obligations of Finserv. Section 3.11 of the
Finserv Disclosure Schedule lists all unresolved audits, examinations, contests
and proceedings (including written notices of intent to audit or examine) with
respect to United States federal and state income Tax returns of Finserv for
periods beginning on or after January 1, 1995.
(b) TAX MATTERS. The Merger is intended to qualify as a
reorganization under Section 368(a)(1)(A) of the Code. In respect thereof, the
following representations are made: (i) the liabilities of Finserv were incurred
by Finserv in the ordinary course of business; (ii) Finserv is not under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code; (iii) Finserv continues to operate at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of Section
1.368-1(d) of the United States Treasury Regulations; and (iv) Finserv is not an
"investment company" as defined in Section 368(a)(2)(F) of the Code.
3.12. FINSERV EMPLOYEE BENEFIT PLANS.
(a) The attachment to Section 3.12 of the Finserv Disclosure
Schedule sets forth a list of all employee benefit plans, as defined in Section
3(3) of ERISA, of Finserv; and
(b) Section 3.12(b) of the Finserv Disclosure Schedule sets forth a
true and complete list of all other profit-sharing, deferred compensation,
bonus, stock option, stock purchase, stock bonus, phantom stock, vacation pay,
holiday pay, severance, dependent care assistance, excess benefit, incentive
compensation, salary continuation, medical, life or other insurance,
supplemental unemployment and other employee benefit plans, programs, agreements
or arrangements, including all unwritten employee benefit plans, programs,
agreements and arrangements, if any, maintained or contributed to by Finserv for
the benefit of its Employees (or former employees) and/or their beneficiaries.
Both of these types of plans shall be collectively referred to as "Benefit
Plans." An arrangement will not fail to be a Benefit Plan simply because it only
covers one individual, or because Finserv's obligations under the plan arise by
reason of its being a "successor employer" under applicable law. 15
17
(c) Finserv has delivered or made available to TriZetto a true and
complete copy of each Benefit Plan and any related funding agreements (e.g.,
trust agreements or insurance contracts), including all amendments (and Section
3.12(b) of the Finserv Disclosure Schedule includes a description of any such
amendment that is not in writing);
(d) Except as set forth in Section 3.12(d) of the Finserv
Disclosure Schedule, Finserv does not maintain or contribute to, nor has
maintained or contributed to, any Benefit Plan that is subject to Section 302 of
ERISA or Section 412 of the Code.
(e) No Benefit Plan is a "multi-employer plan," as defined in
Section 3(37) of ERISA, nor is a plan described in Section 4063(a) of ERISA.
(f) All costs of administering and contributions required to be
made by Finserv to each Benefit Plan under the terms of that Benefit Plan,
ERISA, the Code or any other applicable law have been timely made, and are fully
deductible. All amounts properly accrued to date as liabilities of Finserv under
or with respect to each Benefit Plan (including administrative expenses and
incurred but not reported claims) for the current plan year of the Benefit Plan
have been recorded on the appropriate books, to the extent required by law orGAAP.
(g) Except as set forth in Section 3.12(g)(i) of the Finserv
Disclosure Schedule, each Benefit Plan has been maintained and operated in
accordance with, and complies currently with, in all material respects, all
applicable laws, including but not limited to ERISA and the Code. Each Benefit
Plan has been operated in all material respects in accordance with its terms.
Furthermore, the Internal Revenue Service has issued a favorable determination
letter with respect to each Benefit Plan that is intended to qualify under
Section 401(a) of the Code, which letter, except as set forth in Section
3.12(g)(ii) of the Finserv Disclosure Schedule, takes into account any amendment
to each such Benefit Plan, and, no event had occurred (either before or after
the date of the letter) that would disqualify the plan.
(h) No Benefit Plan is intended to provide benefits which might
require compliance with Sections 419 or 419A of the Code.
(i) No prohibited transaction has occurred with respect to any of
the Benefit Plans which is not exempt under Section 4975 of the Code and Section
406 of ERISA, and Finserv has not engaged in any transaction with respect to any
Benefit Plan which could subject it to either a material civil penalty assessed
pursuant to Section 409, 502(i) or 502(l) of ERISA, or a material tax imposed
pursuant to Section 4975 or 4976 of the Code.
(j) Except as set forth in Section 3.12(j) of the Finserv
Disclosure Schedule, Finserv does not maintain any plan that provides (or will
provide) medical or death benefits to one or more, current or future former
employees (including retirees) beyond their retirement or other termination of
service, other than benefits that are required to be provided pursuant to
Section 4980B of the Code or state law continuation coverage or conversionrights.
(k) Except as set forth in Section 3.12(k) of the Finserv
Disclosure Schedule, there are no proceedings or lawsuits, pending or, to the
Knowledge of Finserv or the Finserv Securityholders, threatened, and, to the
Knowledge of Finserv or the Finserv Securityholders, are no investigations,
either currently in progress or expected to be instituted in the future,
relating to any 16
18
Benefit Plan, by any administrative agency, whether local, state or federal or
by any fiduciary, participant or beneficiary of such plan.
(l) Except as set forth in Section 3.12(l) of the Finserv
Disclosure Schedule, none of the Benefit Plans or any other employment agreement
or arrangement entered into by Finserv will entitle any current or former
employee to any benefits or other compensation that become payable solely as a
result of the consummation of this transaction.
(m) None of the Benefit Plans are subject to the tax on unrelated
business taxable income or unrelated debt-financed income under Section 511 of
the Code.
(n) Except as set forth in Section 3.12(n) of the Finserv
Disclosure Schedule, no Benefit Plan has any interest in any annuity contract or
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship, rehabilitation or similarproceeding.
(o) Section 3.12(o) of the Finserv Disclosure Schedule lists each
individual who (i) has elected to continue participating in a group health plan
of Finserv pursuant to an election under COBRA, or (ii) has not made an election
under COBRA but who is still eligible to make such election.
3.13. BANKING AND FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Finserv who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
3.14. ENVIRONMENTAL COMPLIANCE
(a) Finserv is in compliance with Environmental Laws and all
Environmental Permits.
(b) Since January 1, 1996, Finserv has not received any written
notice regarding any violation of any Environmental Laws, or any Finserv
Environmental Liabilities, including any investigatory, remedial or corrective
obligations, relating to Finserv or its facilities arising under Environmental
Laws, except for any such written notice the subject matter of which has either
been substantially resolved or would otherwise not reasonably be expected to
have a Material Adverse Effect on Finserv.
(c) Except as set forth in Section 3.14 of the Finserv Disclosure Schedule:
(i) Finserv has not caused, and is not causing or threatening
to cause, any disposals or releases of any Hazardous Material on or under any
properties which it (A) leases, occupies or operates or (B) previously owned,
leased, occupied or operated and, to the Knowledge of Finserv or the Finserv
Securityholders, no such disposals or releases occurred prior to Finserv having
taken title to, or possession or operation of, any of such properties; and to
the Knowledge of Finserv or the Finserv Securityholders no such disposals or
releases are migrating or have migrated off of such properties in subsurface
soils, groundwater or surface waters after Finserv has taken title to, or
possession or operation of any such properties and, to the Knowledge of Finserv
or the Finserv 17
19
Securityholders, no such disposals or releases are migrating or have migrated
off of such properties in subsurface soils, groundwater or surface water prior
to such time;
(ii) Finserv has neither (A) arranged for the disposal or
treatment of Hazardous Material at any facility owned or operated by another
person, or (B) accepted any Hazardous Material for transport to disposal or
treatment facilities or other sites selected by Finserv from which facilities or
sites there has been a release or there is a release or threatened release of a
Hazardous Material; any facility identified in Section 3.14(c)(ii)(A) was duly
licensed in accordance with law and has not been listed in connection with the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
by the United States Environmental Protection Agency's Comprehensive
Environmental Response, Compensation, and Liability Information System (CERCLIS)
or National Priorities List (NPL) or any equivalent or like listing of sites
under state or local law (whether for potential releases of substances listed in
CERCLA or other substances);
(iii) Neither Finserv nor the Finserv Securityholders have
actual Knowledge of, or any reason to believe or suspect that, any release or
threatened release of any Hazardous Material originating from a property other
than those leased or operated by Finserv has come to be (or may come to be)
located on or under properties leased, occupied or operated by Finserv;
(iv) Finserv has never installed, used, buried or removed any
surface impoundment or underground tank or vessel on properties owned, leased,
occupied or operated by Finserv;
(v) Finserv is and has been in compliance in all material
respects for the last three years with all federal, state, local or foreign
laws, ordinances, regulations, permits, approvals and authorizations relating to
air, water, industrial hygiene and worker health and safety, anti-pollution,
hazardous or toxic wastes, materials or substances, pollutants or contaminants,
and to the Knowledge of Finserv or the Finserv Securityholders no condition
exists on any of the real property owned by or used in the business of Finserv
that would constitute a material violation of any such law or that constitutes
or threatens to constitute a public or private nuisance; and
(vi) There has been no litigation, administrative proceedings
or investigations or any other actions, claims, demands notices of potential
responsibility or requests for information brought or, to the Knowledge of
Finserv, threatened against Finserv or any settlement reached by it with any
person or persons alleging the presence, disposal, release or threatened release
of any Hazardous Material on, from or under any of such properties or as
otherwise relating to potential environmental liabilities.
(d) This Section 3.14 contains the sole and exclusive
representations and warranties of Finserv and the Finserv Securityholders with
respect to any Environmental, Health and Safety Matters, including, without
limitation, any arising under any Environmental Laws.
3.15. COLLECTIVE BARGAINING ARRANGEMENTS. Finserv is not a party to or
bound by any employee collective bargaining agreement, nor is Finserv a party to
or affected by or, to the Knowledge of Finserv or the Finserv Securityholders,
threatened with, any dispute or controversy 18
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with a union or with respect to unionization
