Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

MERGER AGREEMENT

 

dated as of April 3, 2006

 

by and among

 

HEALTH BENEFITS DIRECT CORPORATION, a Delaware corporation,

 

ISG MERGER ACQUISITION CORP., a Delaware corporation,

 

INSURANCE SPECIALIST GROUP INC., a Florida corporation,

 

and

 

IVAN SPINNER

 

 

 

 

 

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Table of Contents

 

Page      

ARTICLE I

THE MERGER

1

 

Section 1.1

The Merger

1

 

Section 1.2

Effective Time

2

 

Section 1.3

Closing of the Merger

2

 

Section 1.4

Effects of the Merger

2

 

Section 1.5

Directors and Officers

2

 

Section 1.6

Certificate of Incorporation and Bylaws

2

 

Section 1.7

Tax-Free Treatment of Merger

2

ARTICLE II

CONVERSION OF SECURITIES

3

 

Section 2.1

Effect on Capital Stock

3

 

Section 2.2

Working Capital Adjustment.

3

 

Section 2.3

Exchange Procedures

4

 

Section 2.4

Rights of Spinner

5

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF ISG AND SPINNER

5

 

Section 3.1

Corporate Organization, Etc

5

 

Section 3.2

Capitalization

5

 

Section 3.3

ISG’s Subsidiaries

6

 

Section 3.4

Authority Relative to this Agreement

6

 

Section 3.5

Consents and Approvals; No Violations

6

 

Section 3.6

Financial Statements

6

 

Section 3.7

No Undisclosed Liabilities

7

 

Section 3.8

Absence of Certain Changes

7

 

Section 3.9

Compliance with Law

7

 

Section 3.10

Material Contracts.

7

 

Section 3.11

No Default.

8

 

Section 3.12

Litigation

8

 

Section 3.13

Taxes

9

 

Section 3.14

Title to Properties

9

 

Section 3.15

Patents, Trademarks, Etc.

10

 

Section 3.16

Insurance

12

 

Section 3.17

Environmental Matters.

13

 

Section 3.18

Employee and Labor Matters

14

 

Section 3.19

Employee Plans.

14

 

Section 3.20

Brokers and Finders

16

 

Section 3.21

Additional Representations

16

 

Section 3.22

Shareholder Vote Required

17

 

Section 3.23

Absence of Questionable Payments; Subsidies.

17

 

Section 3.24

Minute Books; Stock Record Books

17

 

Section 3.25

Bank Accounts; Powers of Attorney

18

 

i

 

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Table of Contents

(continued)

Page      

 

 

Section 3.26

Disputes with Customers

18

 

Section 3.27

Accounts Receivable

18

 

Section 3.28

Certain Transactions

18

 

Section 3.29

Reliance

18

 

Section 3.30

Disclosure

18

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND MERGER SUB

19

 

Section 4.1

Corporate Organization; Etc

19

 

Section 4.2

Capitalization

19

 

Section 4.3

Authority Relative to this Agreement

19

 

Section 4.4

Consents and Approvals; No Violations

19

 

Section 4.5

Brokers and Finders

20

 

Section 4.6

Reliance

20

ARTICLE V

COVENANTS

20

 

Section 5.1

Consents and Approvals

20

 

Section 5.2

Filings.

20

 

Section 5.3

Employment Agreement for Spinner

21

 

Section 5.4

Transfer of Contracts

21

 

Section 5.5

Further Assurances

21

ARTICLE VI

ADDITIONAL AGREEMENTS

21

 

Section 6.1

Public Announcements

21

 

Section 6.2

Indemnification.

21

 

Section 6.3

Notification of Certain Matters

23

 

Section 6.4

Asserted Objections

23

 

Section 6.5

Reorganization

23

ARTICLE VII

CLOSING

24

 

Section 7.1

Conditions to Each Party’s Obligations to Effect the Merger

24

 

Section 7.2

Conditions to the Obligations of Health Benefits and Merger Sub

24

 

Section 7.3

Conditions to the Obligations of ISG and Spinner

25

ARTICLE VIII

MISCELLANEOUS

25

 

Section 8.1

Entire Agreement; Assignment.

25

 

Section 8.2

Notices

25

 

Section 8.3

Governing Law; Consent to Jurisdiction

26

 

Section 8.4

Expenses

26

 

Section 8.5

Descriptive Headings

27

 

 

ii

 

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Table of Contents

(continued)

Page      

 

 

Section 8.6

Parties in Interest

27

 

Section 8.7

Severability

27

 

Section 8.8

Specific Performance

27

 

Section 8.9

Counterparts

27

 

Section 8.10

Further Assurances

27

 

Section 8.11

Interpretation.

27

 

Section 8.12

Amendment and Modification; Waiver.

28

 

Section 8.13

Definitions

28

 

 

 

iii

 

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INDEX OF ISG DISCLOSURE SCHEDULES

Section 2.2

Working Capital Adjustment

Section 3.2

Capitalization

Section 3.5

ISG Consents

Section 3.7

Undisclosed Liabilities

Section 3.8

Absence of Certain Changes

Section 3.10

Material Contracts

Section 3.12

Litigation

Section 3.13

Taxes

Section 3.14

Title to Properties

Section 3.15(b)

ISG Intellectual Property

Section 3.15(c)

List of Intellectual Property and Agreements Relating to Intellectual Property

Section 3.15(d)

Third Party Intellectual Property

Section 3.15(k)

ISG Software

Section 3.16

Insurance

Section 3.19

Employee Plans

Section 3.25

Bank Accounts

Section 3.28

Certain Transactions

 

 

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INDEX OF MERGER SUB DISCLOSURE SCHEDULES

Section 1.5

Officers and Directors of Surviving Corporation

Section 4.2

Capitalization

Section 4.4

Health Benefits Consents

 

 

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INDEX OF HEALTH BENEFITS DISCLOSURE SCHEDULES

Section 4.2

Capitalization

Section 4.4

Health Benefits Consents

 

 

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INDEX OF EXHIBITS

 

Exhibit A – Employment Agreement between HBDC II, Inc. and Ivan Spinner

Exhibit B – ISG Counsel Opinion

 

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MERGER AGREEMENT

THIS MERGER AGREEMENT (this “Agreement”), dated as of April 3, 2006, is by and
among Health Benefits Direct Corporation, a Delaware corporation (“Health
Benefits”), ISG Merger Acquisition Corp., a newly-formed Delaware corporation
and wholly-owned subsidiary of Health Benefits (“Merger Sub”), Insurance
Specialist Group Inc., a Florida corporation (“ISG”), and Ivan Spinner
(“Spinner”). Certain capitalized and non-capitalized terms used herein are
defined in Section 8.13.

RECITALS

WHEREAS, each of the parties hereto desires Merger Sub to consummate a business
combination with ISG in a transaction whereby, upon the terms and subject to the
conditions set forth in this Agreement, Merger Sub will merge with and into ISG
(the “Merger”), and each outstanding share of common stock, par value $1.00 per
share, of ISG (“ISG Common Stock”) will be converted into the right to receive
the Merger Consideration, and ISG will be the surviving corporation in the
Merger;

WHEREAS, for federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the “Code”);

WHEREAS, the board of directors of ISG unanimously has determined and resolved
that the Merger and all of the Contemplated Transactions are in the best
interest of the holders of ISG Capital Stock and that the Merger is fair and
advisable, and has approved this Agreement in accordance with the Florida
Business Corporation Act, as amended (the “FBCA”), and Spinner, as the sole
shareholder of ISG, has adopted this Agreement in accordance with the FBCA;

WHEREAS, the boards of directors of Health Benefits and Merger Sub unanimously
have determined and resolved that the Merger and all of the Contemplated
Transactions are in the best interest of Merger Sub and have adopted this
Agreement in accordance with the Delaware General Corporation Law, as amended
(the “DGCL”), and the shareholders of Merger Sub, have adopted this Agreement in
accordance with the DGCL; and

WHEREAS, Health Benefits, Merger Sub, ISG and Spinner desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger as set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:

ARTICLE I

THE MERGER

Section 1.1        The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement, and in accordance with the
applicable provisions of the DGCL and

 

 

 

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FBCA, Merger Sub shall be merged with and into ISG. Following the Merger, ISG
shall continue as the surviving corporation (the “Surviving Corporation”) under
the laws of the State of Florida and will be a wholly-owned subsidiary of Health
Benefits, and the separate corporate existence of Merger Sub shall cease. The
name of the Surviving Corporation shall be Insurance Specialists Group. The
address of the principal office of the Surviving Corporation will be 2200 S.W.
10th Street, Deerfield Beach, Florida 33442.

Section 1.2        Effective Time. Subject to the provisions of this Agreement,
the parties hereto will cause a Certificate of Merger (the “Certificate of
Merger”) and other appropriate documents to be delivered and properly filed in
such form as required by, and executed in accordance with, the relevant
provisions of the DGCL and the FBCA, as soon as practicable on the Closing Date.
The Merger shall become effective upon the filing of a Certificate of Merger
with each of the Secretary of State of the State of Delaware and the Secretary
of State of the State of Florida (the “Effective Time”).

Section 1.3        Closing of the Merger. The closing of the Merger (the
“Closing”) will take place at the offices of Olshan Grundman Frome Rosenzweig &
Wolosky LLP, 65 East 55th Street, New York, New York 10022, upon execution of
this Agreement (the “Closing Date”) or at such other time, date or place as
agreed to by the parties hereto.

Section 1.4        Effects of the Merger. The Merger shall have the effects set
forth in this Agreement, the Certificates of Merger and the applicable
provisions of the FBCA and the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all of the properties,
rights, privileges, powers and franchises of Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.

Section 1.5        Directors and Officers. The directors of the Surviving
Corporation shall consist of the persons specified in Section 1.5 of the Merger
Sub Disclosure Schedule and shall hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation until their successors
are duly elected or appointed and qualified or until their earlier death,
resignation or removal. The persons specified in Section 1.5 of the Merger Sub
Disclosure Schedule shall be the initial officers of the Surviving Corporation
and shall hold office in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation and their respective employment agreements
(if any), until their successors are duly elected or appointed and qualified or
until their earlier death, resignation, removal or termination of their
respective employment (if applicable).

Section 1.6        Certificate of Incorporation and Bylaws. Effective
immediately following the Merger, the certificate of incorporation of ISG, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation. Effective immediately following the
Merger, the bylaws of ISG, as in effect immediately prior to the Effective Time,
shall be the bylaws of the Surviving Corporation until amended in accordance
with applicable law.

Section 1.7        Tax-Free Treatment of Merger. It is the intention of the
parties that the transactions contemplated by this Agreement constitute a
tax-free exchange pursuant to

 

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Section 368(a) of the Code. Notwithstanding the foregoing, each of the parties
hereby expressly agrees that any tax consequences resulting from the
transactions contemplated hereby will be the respective sole obligation of the
affected party, unless such adverse tax consequences are exclusively and solely
the result of the actions of the other party. Neither party hereto or any
representative of either party makes or has made any representation with respect
to the tax consequences of the transactions contemplated hereby.

ARTICLE II

CONVERSION OF SECURITIES

Section 2.1        Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and automatically without any action on the part of any holder of
capital stock of Health Benefits, Merger Sub or ISG, respectively:

(a)          Subject to the adjustments set forth in Section 2.2 below, the
outstanding shares of ISG Common Stock shall automatically be converted into and
become the right of Spinner to receive, in the aggregate: (i) cash payments
equal to $920,000 (the “Cash Consideration”) and (ii) 1,000,000 shares of Health
Benefits Common Stock, (the “Equity Consideration” and together with the Cash
Consideration, the “Merger Consideration”). The amount of the Cash Consideration
shall equal the greatest amount permissible (up to 20% of the Merger
Consideration) without jeopardizing the tax-free nature of the transaction
pursuant to Section 368 of the Code.

(b)          Each outstanding share of common stock of Merger Sub shall be
converted into one fully paid and non-assessable share of common stock of the
Surviving Corporation and the stock of the Surviving Corporation issued on that
conversion will constitute all of the issued and outstanding shares of capital
stock of the Surviving Corporation.

Section 2.2

Working Capital Adjustment.

(a)          ISG and Spinner shall use their best efforts to ensure that at
Closing, ISG shall have Closing Date Working Capital of approximately $0,
exclusive of $124,000 received by ISG as consideration for the discount medical
business sold to Spinner prior to Closing (the “Working Capital Threshold”).
Within twenty (20) days after the Closing, Spinner or his representatives shall
prepare a statement (the “Closing Date Working Capital Statement”) setting forth
the Working Capital of ISG as of the close of business on the Closing Date (the
“Closing Date Working Capital”). Except for adjustments set forth on Section 2.2
of the Merger Sub Disclosure Schedule, the Closing Date Working Capital
Statement shall (i) fairly and accurately present the Closing Date Working
Capital, applied on a basis consistent with the manner in which the Audited
Financial Statements were prepared, and (ii) be presented in a manner consistent
with the format set forth in the Audited Financial Statements. Spinner shall
send to the Surviving Corporation a copy of the Closing Date Working Capital
Statement within five (5) days of the completion thereof.

(b)          The Surviving Corporation shall have a period of thirty (30) days
after the date on which the Closing Date Working Capital Statement is delivered
to such Person (the “Review Period”) to review the Closing Date Working Capital
Statement. If the Surviving

 

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Corporation objects to the calculation of the Closing Date Working Capital as
set forth on such Closing Date Working Capital Statement, the Surviving
Corporation shall so inform Spinner in writing (the “Objection”), on or before
the last day of the Review Period, setting forth a specific description of the
basis of the Objection and the adjustments to the Closing Date Working Capital
Statement which the Surviving Corporation believes should be made. In the event
that Spinner does not receive an Objection on or before the last day of the
Review Period, the Surviving Corporation shall be deemed to have agreed to the
Closing Date Working Capital Statement. Spinner shall have fifteen (15) days
after the delivery of the Objection to review and respond to the Objection and
the parties shall attempt in good faith to reach an agreement with respect to
any matters in dispute. If Spinner and the Surviving Corporation are unable to
resolve all of their differences within thirty (30) days after delivery of the
Objection to Spinner, they shall refer their remaining differences to a
nationally recognized firm of independent public accountants as to which the
Surviving Corporation and Spinner shall mutually agree (the “WC Arbiter”). The
WC Arbiter shall determine whether or not the Objection is correct and shall
finally determine the Closing Date Working Capital. The WC Arbiter’s
determination shall be conclusive and binding upon the Surviving Corporation and
Spinner, and shall be set forth in a written determination of the WC Arbiter.
The non-prevailing party shall pay the fees of the WC Arbiter (unless the WC
Arbiter otherwise determines). The Surviving Corporation and Spinner shall make
readily available to the WC Arbiter all relevant books and records and any work
papers (including those, if any, of its accountants) in its possession relating
to the Closing Date Working Capital, and all other items reasonably requested by
the WC Arbiter.

(c)          The “Final Working Capital Amount” shall be (i) if no Objection is
sent to Spinner prior to the end of the Review Period, the amount of Closing
Date Working Capital set forth on the Closing Date Working Capital Statement
delivered by the Spinner, (ii) if Objection(s) are made but finally determined
among Spinner and the Surviving Corporation prior to referring any such dispute
to a WC Arbiter, the amount of Closing Date Working Capital so finally
determined among such Persons; and (iii) if any Objection(s) are sent to a WC
Arbiter, the amount of Closing Date Working Capital finally determined by such
WC Arbiter.

(d)          If the Final Working Capital Amount is less than the Working
Capital Threshold, then Spinner shall pay Health Benefits, in cash, within
thirty (30) days of the determination of the Final Working Capital Amount, an
amount equal to the difference between the Final Working Capital Amount and the
Working Capital Threshold.

(e)          If the Final Working Capital Amount is greater than the Working
Capital Threshold, then the excess balance shall be distributed to Spinner
within thirty (30) days of the determination of the Final Working Capital
Amount.

Section 2.3      Exchange Procedures. At the Closing, Spinner shall surrender
the certificate(s) representing his shares of ISG Common Stock to Health
Benefits and shall promptly upon surrender thereof receive in exchange therefor
the Merger Consideration. The certificate(s) of ISG Common Stock so surrendered
shall be duly endorsed in blank for transfer or accompanied by separate stock
powers duly executed in blank, and upon surrender shall subsequently be
cancelled.

 

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Section 2.4

Rights of Spinner.

(a)          At and after the Effective Time, no transfer of ISG Common Stock
shall thereafter be made or recognized. Until surrender for exchange in
accordance with the provisions of Section 2.3, each certificate theretofore
representing shares of ISG Common Stock shall from and after the Effective Time
represent for all purposes only the right to receive the Merger Consideration in
exchange therefor.

(b)          Spinner shall have the same registration rights and lock-up
restrictions regarding the Equity Consideration as the founders of Health
Benefits have on their shares of Health Benefits Common Stock, which are
described in Health Benefits’ public filings with the SEC.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF ISG AND SPINNER

Except as set forth in ISG’s disclosure schedule provided herewith (the “ISG
Disclosure Schedule”), ISG and Spinner, jointly and severally, hereby represent
and warrant to Health Benefits and Merger Sub as follows:

Section 3.1        Corporate Organization, Etc. ISG is an S corporation (within
the meaning of Sections 1361 and 1362 of the Code) duly organized, validly
existing and good standing under the laws of the State of Florida and has all
requisite corporate power and authority to conduct its business as it is now
being conducted and to own, lease and operate its property and assets, except
where the failure to be so organized, existing and in good standing or to have
such power or authority will not, in the aggregate, either (i) have a material
adverse effect on the business, operations, assets, financial condition or
results of operations of ISG or (ii) materially impair the ability of ISG or
Spinner to perform any of their obligations under this Agreement (either of such
effects, an “ISG Material Adverse Effect”). ISG is qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which ownership of property or the conduct of its business requires such
qualification or license, except where the failure to be so qualified or
licensed will not have a ISG Material Adverse Effect. True and complete copies
of the organizational and governing documents of ISG as presently in effect have
been heretofore delivered to Health Benefits.

Section 3.2        Capitalization. The authorized and issued share capital of
ISG is as set forth in Section 3.2 of the ISG Disclosure Schedule. The
outstanding shares of ISG Capital Stock and the beneficial and record owners
thereof, are as set forth in Section 3.2 of the ISG Disclosure Schedule. All
such shares of the capital stock of ISG are duly authorized, validly issued,
fully paid and non-assessable, issued in compliance with all applicable U.S.
state and federal securities laws and free of any preemptive rights in respect
thereto. There are no outstanding (a) securities convertible into or
exchangeable for ISG Capital Stock, (b) options, warrants or other rights to
purchase or subscribe for ISG Capital Stock or (c) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the issuance
of any ISG Capital Stock, any such convertible or exchangeable securities or any
such options, warrants or rights, pursuant to which, in any of the foregoing
cases, ISG is subject or bound. There are no voting trusts, stockholders’
agreements or other similar instruments restricting or

 

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relating to the rights of the holders of shares of ISG Capital Stock to vote,
transfer or receive dividends with respect to the shares of ISG Capital Stock.
All outstanding shares of ISG Capital Stock held by Spinner are free and clear
of all Encumbrances or restrictions on voting.

Section 3.3

ISG’s Subsidiaries. ISG has no subsidiaries.

Section 3.4        Authority Relative to this Agreement. ISG and Spinner have
all requisite authority and power to execute and deliver this Agreement and to
consummate the Contemplated Transactions. The execution and delivery of this
Agreement and the consummation of the Contemplated Transactions have been duly
and validly authorized by all required corporate or other action on the part of
ISG and Spinner and no other corporate or other proceedings on the part of ISG
or Spinner are necessary to authorize this Agreement or to consummate the
Contemplated Transactions. This Agreement has been duly and validly executed and
delivered by ISG and Spinner and, assuming this Agreement has been duly
authorized, executed and delivered by Health Benefits and Merger Sub, this
Agreement constitutes a valid and binding agreement of ISG and Spinner,
enforceable against ISG and Spinner in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors’ rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers and subject to the
limitations imposed by general equitable principles (regardless whether such
enforceability is considered in a proceeding at law or in equity).

Section 3.5       Consents and Approvals; No Violations. Neither the execution
and delivery of this Agreement by ISG and Spinner nor the consummation of the
Contemplated Transactions by ISG and Spinner will (a) violate any provision of
the organizational or governing documents of ISG, (b) require any consent,
waiver, approval, exemption, registration, declaration, license, authorization
or permit of, or filing with or notification to, any Federal, state, local or
foreign government, executive official thereof, governmental or regulatory
authority, agency or commission, including courts of competent jurisdiction,
domestic or foreign (a “Governmental Entity”), except for such consents,
waivers, approvals, exemptions, registrations, declarations, licenses,
authorizations, permits, filings or notifications which are listed in Section
3.5 of the ISG Disclosure Schedule (the “ISG Consents”), or which, if not
obtained or made, will not, in the aggregate, have an ISG Material Adverse
Effect, (c) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or any obligation to repay) under, any
of the terms, conditions or provisions of any indenture, mortgage, note, bond,
encumbrance, license, government registration, contract, lease, franchise,
permit, agreement or other instrument or obligation to which ISG or Spinner are
a party or by which ISG or Spinner or any of their respective properties or
assets may be bound, except such violations, breaches and defaults of ISG which,
in the aggregate, will not have an ISG Material Adverse Effect or (d) violate
any order, writ, judgment, injunction, decree, statute, ordinance, rule or
regulation of any Governmental Entity applicable to ISG or Spinner or by which
any of their respective properties or assets may be bound, except such
violations of ISG which, in the aggregate, will not have an ISG Material Adverse
Effect.

Section 3.6        Financial Statements. Health Benefits has previously been
furnished with the audited balance sheets of ISG and the related audited profit
and loss statements of ISG

 

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(including any related notes) for the fiscal years ended December 31, 2004 and
December 31, 2005 (the “ISG Financial Statements”). Each balance sheet included
in the ISG Financial Statements, fairly presents the consolidated financial
position of ISG as of its date, and the other related statements included in the
ISG Financial Statements, fairly present the results of operations and changes
in financial position of ISG for the periods presented therein, applied on a
consistent basis during the periods involved, except as otherwise noted therein.

Section 3.7        No Undisclosed Liabilities. Except as and to the extent set
forth in the ISG Financial Statements or in Section 3.7 of the ISG Disclosure
Schedule, ISG has not incurred any liabilities (absolute, accrued, contingent or
otherwise) other than those which were incurred in the ordinary course of
business.

Section 3.8        Absence of Certain Changes. Except as set forth on the ISG
Financial Statements and as set forth on Section 3.8 of the ISG Disclosure
Schedule, ISG has not (a) suffered any change in its business, operations,
condition (financial or otherwise) or prospects, (b) conducted business not in
the ordinary and usual course consistent with past practice, (c) declared, set
aside for payment or paid any dividend or other distribution (whether in cash,
stock, property or any combination thereof) in respect of the ISG Capital Stock,
or redeemed or otherwise acquired any shares of ISG Capital Stock, (d) incurred
any indebtedness, or issued any debt securities or assumed, guaranteed or
endorsed the obligations of any other Person, (e) Transferred or entered into a
contract to Transfer any of its property or assets, other than this Agreement,
(f) created any Encumbrance on any of its property or assets, (g) increased in
any manner the rate or terms of compensation of any of its directors, officers
or other employees, (h) paid or agreed to pay any pension, retirement allowance
or other employee benefit not required by any existing Plan or other agreement
or arrangement to any such director, officer or employee, whether past or
present, (i) entered into or amended any employment, bonus, severance or
retirement contract, (j) made or revoked any election relating to Taxes, (k)
changed any methods of reporting income or deductions for federal income tax
purposes, (l) made any capital expenditures, (m) suffered any damage,
destruction or loss (whether or not covered by insurance) to any of its material
assets or (n) had any key officer, consultant or employee resign or terminate
employment.

Section 3.9        Compliance with Law. The business of ISG is not being
conducted in violation of any applicable order, writ, judgment, injunction,
decree, statute, ordinance, rule or regulation of any Governmental Entity. ISG
is and at all times has been in compliance with federal and state criminal and
civil laws, and the regulations promulgated pursuant to such laws.

Section 3.10

Material Contracts.

(a)          Section 3.10 of the ISG Disclosure Schedule sets forth a list of
all agreements ISG would be required to file as material contracts under Item
601 of Regulation S-K, including contracts entered into by Spinner, were ISG
subject to the Exchange Act and the disclosure requirements of Regulation S-K
(the “Material Contracts”). ISG has heretofore delivered to Health Benefits
true, correct and complete copies of all Material Contracts. ISG is not a party
to nor bound by any severance or other agreement with any employee, consultant
or contractor pursuant to which such Person would be entitled to receive any
additional

 

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compensation or an accelerated payment of compensation as a result of the
consummation of the Contemplated Transactions.

(b)          Each of the Material Contracts constitutes the valid and legally
binding obligation of ISG or Spinner, as the case may be, enforceable in
accordance with its terms, and is in full force and effect. ISG and Spinner do
not have any knowledge of any termination or breach or anticipated termination
or breach by the other parties to any Material Contract or commitment to which
it is a party or to which any of its assets are subject.

(c)          No party to any such Material Contract has given notice to ISG or
Spinner of, or made a claim against ISG or Spinner in respect of, any breach or
default thereunder.

Section 3.11

No Default.

(a)          Nether ISG nor Spinner is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default
by ISG or Spinner, or permit termination, modification or acceleration, under
the Material Contracts and, to the knowledge of ISG or Spinner, no other party
to any of the Material Contracts is as of the date of this Agreement in breach
or default (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) under any of the Material
Contracts.

(b)          ISG is not in default or violation (and no event has occurred which
with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (i) its organizational or
governing documents or (ii) any order, writ, judgment, injunction, decree,
statute, ordinance, rule or regulation of any Governmental Entity applicable to
ISG, except (for clause (ii) only) such defaults and violations which, in the
aggregate, will not have an ISG Material Adverse Effect. ISG has all
governmental permits, licenses and authorizations necessary for the conduct of
its business as presently conducted (the “Permits”) and is in compliance with
the terms of the Permits, except for such Permits the absence of which would not
have an ISG Material Adverse Effect or any non-compliance which will not have an
ISG Material Adverse Effect.

Section 3.12     Litigation. Except as set forth in Section 3.12 of the ISG
Disclosure Schedule, as of the date of this Agreement, there is no action, suit
or proceeding pending, or, to the knowledge of ISG and Spinner, action, suit or
proceeding threatened, against ISG or any properties or rights of ISG, before
any Governmental Entity which (a) involves a claim, (b) seeks injunctive relief
or (c) questions the validity of this Agreement or any action to be taken in
connection with the consummation of the Contemplated Transactions or could
otherwise prevent or delay the consummation of the Contemplated Transactions. As
of the date of this Agreement, ISG has not received notice that it is subject to
any outstanding injunction, writ, judgment, order or decree of any Governmental
Entity. There is no action, suit or proceeding or investigation pending or, to
ISG’s or Spinner’s knowledge, threatened against any current or former officer,
director, employee, consultant, contractor or agent of ISG (in his or her
capacity as such) which gives rise or could reasonably be expected to give rise
to a claim for contribution or indemnification against ISG.

 

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Section 3.13

Taxes. Except as set forth in Section 3.13 of the ISG Disclosure Schedule,

(a)          ISG has, within the time and manner prescribed by law, (i) filed
with the appropriate taxing authorities, or each such Tax Return was complete
and accurate and (ii) paid in full all Taxes shown to be due and payable
thereon. ISG has withheld and paid all taxes required to have been withheld and
paid in connection with any amounts paid or owing to any employee or independent
contractor and all Forms W-2 and 1099 required with respect thereto have been
properly completed and timely filed.

(b)          No deficiencies for any Taxes have been asserted in writing or, to
the knowledge of ISG or Spinner, verbally proposed or assessed against ISG which
remain unpaid, or which are not being contested in good faith by appropriate
proceedings; and as of the dates of ISG Financial Statements, ISG has adequately
reserved for all Taxes payable by ISG for which no Tax Return has yet been
filed.

(c)          ISG has not (i) entered into a closing agreement or other similar
agreement with a taxing authority relating to Taxes of ISG with respect to a
taxable period for which the statute of limitations is still open, or (ii)
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any income Tax, in either case,
that is still outstanding. There are no Liens relating to Taxes upon the assets
of ISG other than Liens relating to Taxes not yet due. ISG is not a party to nor
is it bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement in respect of Taxes.

(d)          ISG has been a validly electing “S corporation” within the meaning
of Section 1361 and 1362 of the Code since inception and up to and including the
Closing Date.

(e)          For purposes of this Agreement, (i) “Taxes” shall mean all
national, federal, state, local or foreign and other taxes, assessments, duties
and similar charges of any kind imposed by any taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers’ compensation,
unemployment compensation or net worth, and taxes or other charges in the nature
of excise, withholding, ad valorem or value added, and including interest,
penalties and additions thereto, and (ii) “Tax Return” shall mean any return,
report, information return or other document (including any related or
supporting information) with respect to Taxes.

Section 3.14      Title to Properties. ISG has good and valid title to, or a
valid leasehold or contractual interest in, all of the assets and properties
(real and personal) which they own and which are reflected on ISG Financial
Statements (except for assets and properties sold, consumed or otherwise
disposed of by it in the ordinary course of business), and such assets and
properties are owned free and clear of all Encumbrances, except for Encumbrances
which, in the aggregate, are not reasonably likely to impair the continued use
of such asset or property. As of the date hereof, Section 3.14 of the ISG
Disclosure Schedule contains a complete and correct list of all real property
owned or leased by ISG, copies of which have been delivered or made available to
Health Benefits, and a complete and correct list of each title insurance policy
insuring title to any of such real properties. All rents and mortgages due for
such real properties have been paid.

 

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Section 3.15

Patents, Trademarks, Etc.

 

 

(a)

For purposes of this Agreement, “Intellectual Property” means:

(i)           all issued patents, reissued or reexamined patents, revivals of
patents, utility models, certificates of invention, registrations of patents and
extensions thereof, regardless of country or formal name (collectively, “Issued
Patents”);

(ii)          all published or unpublished nonprovisional and provisional patent
applications, reexamination proceedings, invention disclosures and records of
invention (collectively “Patent Applications” and, with the Issued Patents, the
“Patents”);

(iii)         all copyrights and copyrightable works, including all rights of
authorship, use, publication, reproduction, distribution, performance
transformation, moral rights and rights of ownership of copyrightable works, and
all rights to register and obtain renewals and extensions of registrations
(collectively, “Copyrights”);

(iv)         common law trademarks, registered trademarks, applications for
registration of trademarks, common law service marks, registered service marks,
applications for registration of service marks, trade names, registered trade
names and applications for registrations of trade names and trade dress
(collectively, “Trademarks”);

(v)          all technology, ideas, inventions, designs, proprietary
information, manufacturing and operating specifications, know-how, formulae,
trade secrets, technical data, computer programs, hardware, software and
processes related to the business of ISG as such business is currently conducted
and as its business is proposed to be conducted;

 

(vi)

all domain names registered by ISG; and

(vii)       all other intangible intellectual property assets, properties and
rights (whether or not appropriate steps have been taken to protect, under
applicable law, such other intangible assets, properties or rights).

(b)          ISG owns and has good and marketable title to, or possesses legally
enforceable rights to use, all Intellectual Property used or currently proposed
to be used in the business of ISG as currently conducted or as proposed to be
conducted (the “ISG Intellectual Property”), free and clear of all Encumbrances.
The ISG Intellectual Property, as listed on Section 3.15(b) of the ISG
Disclosure Schedule constitutes all of the Intellectual Property necessary to
enable ISG to conduct its business as such business is currently being conducted
and as its business is proposed to be conducted. No current or former officer,
director, stockholder, employee, consultant or independent contractor has
asserted any right, claim or interest in or with respect to any ISG Intellectual
Property, and ISG and Spinner are not aware of a basis for any such claim. There
is no unauthorized use, disclosure or misappropriation of any ISG Intellectual
Property by any employee or, to ISG’s knowledge, former employee of ISG or, to
ISG’s or Spinner’s knowledge, by any other third party. There are no royalties,
fees or other payments payable by ISG to any third Person under any written or
oral contract or understanding by reason of the ownership, use, sale or
disposition of ISG Intellectual Property.

 

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(c)          With respect to each item of ISG Intellectual Property incorporated
into any product of ISG or otherwise used in the business of ISG, Section
3.15(c) of the ISG Disclosure Schedule lists: (i) all Patents and Patent
Applications, Trademarks and Copyrights, including the jurisdiction in which
each such Intellectual Property has been issued or registered or in which any
such application for such issuance and registration has been filed; and (ii) (A)
any exclusive licenses of Intellectual Property to or from ISG, (B) agreements
pursuant to which amounts are payable under firm commitments to ISG, (C) joint
development agreements, (D) any agreement by which ISG grants any ownership
right to any ISG Intellectual Property owned by ISG, (E) any judicial,
administrative, regulatory or other governmental order relating to ISG
Intellectual Property, (F) any option relating to any ISG Intellectual Property
and (G) agreements pursuant to which any party is granted any rights to access
source code or to use source code, including without limitation any rights to
create derivative works of ISG products.

(d)          Section 3.15(d) of the ISG Disclosure Schedule contains an accurate
list as of the date of this Agreement of all licenses, sublicenses and other
agreements to which ISG is a party and pursuant to which ISG is authorized to
use any Intellectual Property owned by any third party (“Third Party
Intellectual Property”). All Third Party Intellectual Property, including copies
of software, used by employees or consultants of ISG have been fully licensed by
ISG and such licenses have been fully paid for.

(e)          To the knowledge of ISG or Spinner, there is no unauthorized use,
disclosure, infringement or misappropriation of any ISG Intellectual Property,
including any Third Party Intellectual Property by any third party, including
any employee or former employee of ISG. Other than in respect of agreements with
ISG’s officers and directors, ISG has not entered into any agreement to
indemnify any other Person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
standard sales or agreements to end users arising in the ordinary course of
business. There are no royalties, fees or other payments payable by ISG to any
Person by reason of the ownership, use, sale or disposition of Intellectual
Property.

(f)           ISG is not in breach of any license, sublicense or other agreement
relating to the ISG Intellectual Property or Third Party Intellectual Property
rights. Neither the execution, delivery or performance of this Agreement or any
ancillary agreement contemplated hereby nor the consummation of the transactions
contemplated by this Agreement will contravene, conflict with or result in an
infringement on the ISG Intellectual Property, including any Third Party
Intellectual Property.

(g)          All Patents, registered Trademarks, registered service marks and
registered Copyrights held by ISG are valid and subsisting. All maintenance and
annual fees have been fully paid and all fees paid during prosecution and after
issuance of any patent comprising or relating to such item have been paid in the
correct entity status amounts. ISG is not infringing, misappropriating or making
unlawful use of, or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of any proprietary asset owned or used by any
third party. There is no proceeding pending or, to ISG’s or Spinner’s knowledge,
threatened nor has any claim or demand been made, which challenges the legality,
validity, enforceability or ownership of any item of the ISG Intellectual
Property or Third Party Intellectual Property or alleges a claim of

 

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infringement of any Patents, Trademarks, service marks, Copyrights or violation
of any trade secret or other proprietary right of any third party. ISG has not
brought a proceeding alleging infringement of ISG Intellectual Property or
breach of any license or agreement involving Intellectual Property against any
third party.

(h)          All current and former officers and employees of ISG have executed
and delivered to ISG an agreement (containing no exceptions or exclusions from
the scope of its coverage) regarding the protection of proprietary information
and the assignment to ISG of any Intellectual Property arising from services
performed for ISG by such Persons. All current and former consultants and
independent contractors to ISG involved in the development, modification,
marketing and servicing of ISG’s products, and/or the ISG Intellectual Property
have executed and delivered to ISG an agreement (containing no exceptions or
exclusions from the scope of its coverage) regarding the protection of
proprietary information and the assignment to ISG of any Intellectual Property
arising from services performed for ISG by such Persons. To ISG’s and Spinner’s
knowledge, no employee or independent contractor of ISG is in violation of any
term of any patent disclosure agreement or employment contract or any other
contract or agreement relating to the relationship of any such employee or
independent contractor with ISG.

(i)           ISG has taken all commercially reasonable and customary measures
and precautions necessary to protect and maintain the confidentiality of all the
ISG Intellectual Property (except such ISG Intellectual Property whose value
would be unimpaired by public disclosure) and otherwise to maintain and protect
the full value of all Intellectual Property it owns or uses. All Intellectual
Property not otherwise protected by Patents or Copyrights owned by ISG used by
or disclosed to a third party has been pursuant to the terms of a written
agreement between ISG and such third party.

(j)           No product liability claims have been communicated in writing to
or, to ISG’s and Spinner’s knowledge, threatened against ISG.

(k)          A complete list of ISG’s proprietary software (“ISG Software”),
together with a brief description of each, is set forth in Schedule 3.15(k) of
the ISG Disclosure Schedule. The ISG Software conforms in all material respects
with any specification, documentation, performance standard, representation or
statement provided with respect thereto by or on behalf of ISG.

(l)           ISG is not subject to any proceeding or outstanding decree, order,
judgment, or stipulation restricting in any manner the use, transfer, or
licensing thereof by ISG, or which may affect the validity, use or
enforceability of such ISG Intellectual Property. ISG is not subject to any
agreement that restricts the use, transfer, or licensing by ISG of the ISG
Intellectual Property.

Section 3.16      Insurance. ISG maintains policies of fire and casualty,
liability and other forms of insurance, including but not limited to directors
and officers liability insurance, in such amounts, with such deductibles and
against such risks and losses, and with such reputable insurers, as are
currently customary for businesses of a type and size, and with assets and
properties, comparable to those of the business of ISG as currently conducted.
Set forth on Section 3.16 of the ISG Disclosure Schedule is a description of
each such policy, setting forth the

 

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issuers, amounts, deductibles and coverages of each. All such policies of ISG
are in full force and effect and all premiums due and payable thereon have been
paid in full, and no notice of cancellation or termination has been received
with respect to any such policy that has not been replaced on substantially
similar terms prior to the date of such cancellation. As of the date of this
Agreement, there are no pending claims or, to the knowledge of ISG or Spinner,
threatened claims under the policies.

Section 3.17

Environmental Matters.

(a)          ISG has obtained all licenses, permits, authorizations, approvals
and consents from Governmental Entities which are required under any applicable
Environmental Law and necessary for it to carry on its business or operations as
now conducted (“Environmental Permits”). Each of such Environmental Permits is
in full force and effect, and ISG is in compliance with the terms and conditions
of all such Environmental Permits and with all applicable Environmental Laws.

(b)          There are no Environmental Claims pending or, to the knowledge of
ISG or Spinner, threatened against ISG, or, to the knowledge of ISG or Spinner,
any Person whose liability for any such Environmental Claim ISG has or may have
retained or assumed either contractually or by operation of law for which
reserves have not been established in accordance with GAAP.

(c)          There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
threatened release or presence of any Hazardous Material, that would form the
basis of any Environmental Claim against ISG, or for which ISG is liable.

(d)          For purposes of this Section 3.17, the following terms shall have
the following meanings:

(i)           “Environmental Claim” means any claim, action, lawsuit or
proceeding by any Governmental Entity or Person which seeks to impose liability
(including, without limitation, liability for investigatory costs, cleanup
costs, governmental response costs, natural resources, damages, property
damages, personal injuries or penalties) arising out of, based on or resulting
from (A) the presence or release or threatened release, of any Hazardous
Materials at any location, whether or not owned or operated by ISG, or (B)
circumstances which would give rise to any violation, or alleged violation, of
any Environmental Law.

(ii)          “Environmental Laws” means all foreign, federal, state and local
laws and regulations of any Governmental Entity relating to (A) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation or
shipment of Hazardous Materials, or (B) the environment or to emissions,
discharges, releases or threatened releases of Hazardous Materials into the
environment.

(iii)         “Hazardous Materials” means (A) any petroleum or petroleum
products, radioactive materials or friable asbestos; (B) any chemicals or other
materials or substances which are now defined as or included in the definition
of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely
hazardous wastes,” “restricted hazardous

 

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wastes,” “toxic substances,” or “toxic pollutants” under any Environmental Law;
and (C) pesticides.

Section 3.18    Employee and Labor Matters. ISG is not a party to any collective
bargaining or other labor union contract applicable to persons employed by it,
no collective bargaining agreement is being negotiated by ISG, and ISG and
Spinner do not know of any activities or proceedings of any labor union to
organize any of its employees. As of the date hereof, (i) ISG is in compliance
with all applicable laws relating to employment and employment practices, wages,
hours, occupational safety, health standards, severance payments, equal
opportunity, payment of social security, national insurance and other Taxes, and
terms and conditions of employment, (ii) there are no charges with respect to or
relating to ISG pending, or to the knowledge of ISG and Spinner, threatened
before any Governmental Entity responsible for the prevention of unlawful,
unfair labor or discriminatory employment practices, and (iii) there is no labor
dispute, strike or work stoppage against ISG, pending or, to the knowledge of
ISG and Spinner, threatened which may interfere with the business activities of
ISG. To the knowledge of ISG and Spinner, all sums due for employee compensation
and benefits, including pension and severance benefits, and all vacation time
owing to any employees of ISG have been duly and adequately accrued on the
accounting records of ISG.

Section 3.19

Employee Plans.

(a)          Section 3.19 of the ISG Disclosure Schedule sets forth a true,
correct and complete list of:

(i)           all “employee benefit plans,” as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with
respect to which ISG has any obligation or liability, contingent or otherwise
(the “Benefit Plans”);

(ii)          all current employees, consultants and independent contractors of
ISG; and

(iii)         all employment, consulting, termination, profit sharing,
severance, change of control, individual compensation or indemnification
agreements, and all bonus or other incentive compensation, deferred
compensation, salary continuation, disability, severance, stock award, stock
option, stock purchase, educational assistance, legal assistance, club
membership, employee discount, employee loan, credit union or vacation
agreements, policies or arrangements under which ISG has any obligation or
liability (contingent or otherwise) in respect of any current or former officer,
director, employee, consultant or contractor of ISG (the “Employee
Arrangements”).

(b)          In respect of each Benefit Plan and Employee Arrangement, a
complete and correct copy of each of the following documents (if applicable) has
been made available to Health Benefits: (i) the most recent plan and related
trust documents, and all amendments thereto; (ii) the most recent summary plan
description, and all related summaries of modifications thereto; (iii) the most
recent Form 5500 (including, schedules and attachments); (iv) the most recent
Internal Revenue Service (“IRS”) determination, opinion or notification letter;
(v) each of the stock option grant agreements used to make grants under the ISG
Option

 

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Plan, and all amendments thereto; (vi) each written employment, consulting or
individual severance or other compensation agreement, and all amendments
thereto; and (vii) the most recent actuarial reports (including for purposes of
Financial Accounting Standards Board report nos. 87, 106 and 112).

(c)          None of Benefit Plans or Employee Arrangements is subject to Title
IV of ERISA, constitutes a defined benefit retirement plan or is a multiemployer
plan described in Section 3(37) of ERISA, and ISG has no obligation or liability
(contingent or otherwise) in respect of any such plans. ISG is not a member of a
group of trades or businesses under common control or treated as a single
employer pursuant to Section 414 of the Code.

(d)          The Benefit Plans and their related trusts intended to qualify
under Sections 401 and 501(a) of the Code, respectively, have either received a
favorable determination, opinion or notification letter from the IRS with
respect to each such Benefit Plan as to its qualified status under the Code, or
has remaining a period of time under applicable U.S. Treasury regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination as to the qualified status of each
such Benefit Plan. Any voluntary employee benefit association that provides
benefits to current or former employees of ISG, or their beneficiaries, is and
has been qualified under Section 501(c)(9) of the Code.

(e)          All contributions or other payments required to have been made by
ISG to or under any Benefit Plan or Employee Arrangement by applicable Law or
the terms of such Benefit Plan or Employee Arrangement (or any agreement
relating thereto) have been timely and properly made.

(f)           The Benefit Plans and Employee Arrangements have been maintained
and administered in accordance with their terms and applicable Laws. In
particular, no individual who has performed services for ISG has been improperly
excluded from participation in any Benefit Plan or Employee Arrangement.

(g)          There are no pending or, to ISG’s or Spinner’s knowledge,
threatened actions, claims, or proceedings against or relating to any Benefit
Plan or Employee Arrangement (other than routine benefit claims by persons
entitled to benefits thereunder), and, to the knowledge of ISG or Spinner, there
are no facts or circumstances that could form the basis for any of the
foregoing.

(h)          ISG does not have any obligation or liability (contingent or
otherwise) to provide post-retirement life insurance or health benefits coverage
for current or former officers, directors, employees, consultants or contractors
of ISG except (i) as may be required under Part 6 of Title I of ERISA, (ii) a
medical expense reimbursement account plan pursuant to Section 125 of the Code,
or (iii) through the last day of the calendar month in which the participant
terminates employment with ISG.

(i)           None of the assets of any Benefit Plan is stock of ISG or any of
its affiliates, or property leased to or jointly owned by ISG or any of its
affiliates.

 

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(j)           Neither the execution and delivery of this Agreement nor the
consummation of the Contemplated Transactions will (i) result in any payment
becoming due to any employee, consultant or contractor (current, former, or
retired) of ISG, (ii) increase any benefits under any Benefit Plan or Employee
Arrangement or (iii) result in the acceleration of the time of payment of,
vesting of, or other rights in respect of any such benefits (except as which may
be required by the partial or full termination of any Benefit Plan intended to
be qualified under Section 401 of the Code).

(k)          ISG has delivered to Health Benefits a true and correct list of the
following (if applicable) for each current employee, consultant and contractor
of ISG: base salary, any bonus obligations, immigration status, hire date,
time-off balance, an indication of the existence of a signed assignment of
invention agreement for each employee and including effective date and term for
the contract, pay rate, termination provisions and indication of a signed
assignment of invention agreement for each consultant and contractor.

(l)           To the knowledge of ISG and Spinner, all employees of ISG who are
not U.S. citizens but who are assigned to the U.S. operations of ISG or
otherwise travel, from time to time, to the United States on behalf of ISG,
possess all applicable passports, visas and other authorizations required by the
Laws of the United States and have otherwise complied with all applicable
immigration and similar Laws of the United States.

Section 3.20     Brokers and Finders. Neither Spinner nor ISG or any of their
respective Representatives have employed any broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders’ fees in connection with the Contemplated Transactions. ISG and Spinner
agree to indemnify and hold Health Benefits, Merger Sub and the Surviving
Corporation, including their officers, directors, agents or representatives,
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any Person on the
basis of any act or statement alleged to have been made by ISG, Spinner or their
Representatives.

Section 3.21     Additional Representations. Spinner acknowledges (i) that the
Merger Securities have not been registered under the Securities Act nor
qualified under any United States securities laws, (ii) that the Merger
Securities being offered and sold in the Merger is being done so pursuant to an
exemption from the Securities Act, and (iii) that Health Benefits will rely upon
Spinner’s representations in this Section 3.21 in order to qualify for such
exemption. Accordingly, Spinner hereby represents and warrants as follows:

(a)          Offering Exemption. Spinner understands that the Merger Securities
have not been registered under the Securities Act, nor qualified under any state
securities laws, and that they are being offered and sold pursuant to an
exemption from such registration and qualification based in part upon their
representations contained herein. Spinner is an “accredited investor” as defined
under Rule 501 promulgated under the Securities Act.

(b)          Knowledge of Offerees. Spinner has participated in, or has had made
available to him the conclusions of, ISG’s business, financial and legal due
diligence in respect of Health Benefits and Merger Sub, which due diligence has
been conducted in a manner customary for arm’s length merger transactions
between sophisticated business parties.

 

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(c)          Knowledge and Experience; Ability to Bear Economic Risks. Spinner
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the investment contemplated by
this Agreement; and he is able to bear the economic risk of this investment in
Health Benefits (including a complete loss of this investment).

(d)          Limitations on Disposition. Spinner understands that he must bear
the economic risk of this investment indefinitely unless the Merger Securities
are registered pursuant to the Securities Act or an exemption from such
registration is available, and unless the disposition of such Merger Securities
is qualified under applicable state securities laws or an exemption from such
qualification is available, and that Health Benefits has no obligation or
present intention of so registering the Merger Securities. Health Benefits
hereby consents to the transfer of 250,000 shares of the Merger Securities by
Spinner to Glenn Spinner, along with the applicable registration rights.

(e)          Investment Purpose. Spinner is acquiring the Merger Securities
solely for Spinner’s own account for investment and not with a view toward the
resale, Transfer, or distribution thereof, nor with any present intention of
distributing the Merger Securities. No other Person has any right with respect
to or interest in the Merger Securities, nor has Spinner agreed to give any
Person any such interest or right in the future.

Section 3.22      Shareholder Vote Required. The affirmative vote of Spinner
(the holder of all of the votes represented by the outstanding shares of the ISG
Capital Stock) is the only vote of the holders of ISG Capital Stock necessary to
approve and adopt the Merger, this Agreement and the Contemplated Transactions.

Section 3.23

Absence of Questionable Payments; Subsidies.

(a)          Neither ISG nor, to the knowledge of ISG or Spinner, any director,
officer, agent, employee, consultant, contractor or other Person acting on
behalf of ISG, has (i) used any corporate or other funds for unlawful
contributions, payments, gifts or expenditures, including payments to employees
of customers, (ii) made any unlawful expenditures relating to political activity
to government officials or others or (iii) established or maintained any
unlawful or unrecorded funds in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any other domestic or foreign law. Neither ISG nor, to
the knowledge of ISG or Spinner, any director, officer, agent, employee,
consultant, contractor or other Person acting on behalf of ISG, has accepted or
received any unlawful contributions, payments, gifts or expenditures.

(b)          No grants, subsidies or similar arrangements exist directly or
indirectly between or among ISG or Spinner, on the one hand, and any domestic or
foreign Governmental Entity or any other Person, on the other hand. Neither ISG
nor Spinner have requested, sought, applied for or entered into any grant,
subsidy or similar arrangement directly or indirectly from or with any domestic
or foreign Governmental Entity or any other Person.

Section 3.24     Minute Books; Stock Record Books. True and correct copies of
ISG’s minute books and stock record books have been made available to Health
Benefits. The minute books of ISG contain true and complete originals or copies
of all minutes of meetings of and

 

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actions by the stockholders, Board of Directors and all committees of the Board
of Directors of ISG, and accurately reflect all corporate actions of ISG which
are required by law to be passed upon by the Board of Directors or stockholders
of ISG.

Section 3.25      Bank Accounts; Powers of Attorney. Section 3.25 of the ISG’s
Disclosure Schedule sets forth a complete and correct list showing: (a) all
banks in which ISG maintains a bank account or safe deposit box (collectively,
“Bank Accounts”), together with, as to each such Bank Account, the account
number, the names of all signatories thereof and the authorized powers of each
such signatory and, with respect to each such safe deposit box, if any, the
number thereof and the names of all Persons having access thereto; and (b) the
names of all Persons holding powers of attorney from ISG, true and correct
copies of which have been made available or delivered to Health Benefits.

Section 3.26     Disputes with Customers. There are no pending or, to the best
of ISG’s and Spinner’s knowledge and belief, threatened disputes between ISG and
any of its vendors, suppliers, customers or other parties that in any way relate
to the operation of the business of ISG.

Section 3.27     Accounts Receivable. All accounts receivable of ISG have arisen
from bona fide transactions by ISG in the ordinary course of business and are,
to the best of ISG’s and Spinner’s knowledge and belief, deemed collectible by
ISG in the ordinary course of business. There are no defenses, claims of
disabilities, offsets, refusals to pay or other rights of offset against any
such accounts receivable. Any allowances that ISG has established specifically
for doubtful accounts have been established on a basis consistent with ISG’s
prior practice, credit experience and GAAP, consistently applied. ISG has
delivered to Health Benefits a complete and accurate aging list of all of their
accounts receivables as of the date hereof.

Section 3.28     Certain Transactions. Except as set forth on Section 3.28 of
the ISG Disclosure Schedule, none of the stockholders, officers, directors or
employees of ISG, nor any member of any such Person’s or stockholder’s family is
presently a party to any transaction with ISG relating to the business of ISG,
including without limitation, any contract, agreement or other arrangement (i)
providing for the furnishing of services by, (ii) providing for the rental of
real or personal property from, or (iii) otherwise requiring payments to (other
than for services as officers, directors or employees of ISG), any such Person
or any corporation, partnership, trust or other entity in which any such Person
has a substantial interest as a stockholder, officer, director, trustee or
partner.

Section 3.29      Reliance. The foregoing representations and warranties are
made by ISG and Spinner, with the knowledge and expectation that Health Benefits
and Merger Sub are relying upon them.

Section 3.30      Disclosure. To the knowledge of ISG and Spinner, all factual
information (taken as a whole) heretofore or contemporaneously furnished by or
on behalf of ISG or Spinner to Health Benefits, Merger Sub or their
Representatives for purposes of or in connection with this Agreement or the
Contemplated Transactions has been true and accurate in all material respects on
the date as of which such information is dated and not incomplete by omitting to

 

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state any material fact necessary to make such information not misleading at
such time in light of the circumstances under which such information was
provided.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF HOLDINGS

AND MERGER SUB

Except as set forth in Merger Sub’s disclosure schedule provided herewith (the
“Merger Sub Disclosure Schedule”) or in Health Benefits’ disclosure schedule
provided herewith (the “Health Benefits Disclosure Schedule”), Merger Sub and
Health Benefits, as the case may be, hereby represent and warrant to ISG and
Spinner as follows:

Section 4.1         Corporate Organization; Etc. Each of Health Benefits and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. True and complete copies of
the organizational and governing documents of Health Benefits and Merger Sub as
presently in effect have been heretofore made available to ISG.

Section 4.2        Capitalization. The authorized and issued share capital of
Health Benefits and Merger Sub is as set forth in Section 4.2 of the Health
Benefits Disclosure Schedule and the Merger Sub Disclosure Schedule,
respectively. All of the outstanding shares of Health Benefits Capital Stock and
Merger Sub Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and free of any preemptive rights in respect thereto.

Section 4.3        Authority Relative to this Agreement. Health Benefits and
Merger Sub have all requisite corporate authority and power to execute and
deliver this Agreement and to consummate the Contemplated Transactions. The
execution and delivery of this Agreement and the consummation of the
Contemplated Transactions have been duly and validly authorized by all required
corporate action on the part of Health Benefits and Merger Sub and no other
corporate proceedings on the part of Health Benefits and Merger Sub are
necessary to authorize this Agreement or to consummate the Contemplated
Transactions. This Agreement has been duly and validly executed and delivered by
Health Benefits and Merger Sub and, assuming this Agreement has been duly
authorized, executed and delivered by each of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Health Benefits and
Merger Sub, enforceable against them in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors’ rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers and subject to the
limitations imposed by general equitable principles (regardless whether such
enforceability is considered in a proceeding at law or in equity).

Section 4.4       Consents and Approvals; No Violations. Neither the execution
and delivery of this Agreement by Health Benefits or Merger Sub nor the
consummation of the Contemplated Transactions by Health Benefits or Merger Sub
will (a) violate any provision of their certificates of incorporation or
by-laws, (b) require any consent, waiver, approval, exemption, registration,
declaration, license, authorization or permit of, or filing with or notification
to, any Governmental Entity, except for such consents, waivers, approvals,
exemptions, registrations, declarations, licenses, authorizations, permits,
filings or notifications

 

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which are listed in Section 4.4 of the Health Benefits Disclosure Schedule and
the Merger Sub Disclosure Schedule (the “Health Benefits Consents”), or which,
if not obtained or made, will not, in the aggregate, either (i) have a material
adverse effect on the business, operations, assets, financial condition or
results of operations of Health Benefits and Merger Sub, taken as a whole, or
(ii) impair, hinder or adversely affect the ability of Health Benefits or Merger
Sub to perform any of their obligations under this Agreement or to consummate
the Contemplated Transactions (either of such effects, a “Health Benefits
Material Adverse Effect”), (c) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or any obligation to repay)
under, any of the terms, conditions or provisions of any indenture, mortgage,
note, bond, encumbrance, license, government registration, contract, lease,
franchise, permit, agreement or other instrument or obligation to which Health
Benefits or Merger Sub is a party, except such violations, breaches and defaults
which, in the aggregate, will not have a Health Benefits Material Adverse Effect
or (d) violate any order, writ, judgment, injunction, decree, statute,
ordinance, rule or regulation of any Governmental Entity applicable to Health
Benefits or Merger Sub, except such violations which, in the aggregate, will not
have a Health Benefits Material Adverse Effect.

Section 4.5       Brokers and Finders. Neither Health Benefits nor Merger Sub
has employed any investment banker, broker or finder or incurred any liability
for any investment banking fees, brokerage fees, commissions or finders’ fees in
connection with the Contemplated Transactions.

Section 4.6       Reliance. The foregoing representations and warranties are
made by Health Benefits and Merger Sub with the knowledge and expectation that
ISG is relying upon them. ISG acknowledges that neither Health Benefits, Merger
Sub nor any of their Representatives has made any representations or warranties,
express or implied, except for those expressly set forth in this Agreement.

ARTICLE V

COVENANTS

Section 5.1        Consents and Approvals. Each of the parties hereto shall have
(i) obtained all consents, waivers, approvals, exemptions, licenses and
authorizations required in connection with the consummation of the Contemplated
Transactions under any Federal, state, local or foreign law or regulation, (ii)
lifted or rescinded any injunction or restraining order or other order adversely
affecting the ability of the parties hereto to consummate the Contemplated
Transactions and (iii) effected all necessary registrations and filings. The
parties hereto further covenant and agree, with respect to any threatened or
pending preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the Contemplated Transactions, to
prevent the entry, enactment or promulgation thereof, as the case may be.

Section 5.2

Filings.

(a)          Concurrently with the execution of this Agreement, each of the
parties hereto shall prepare and make or cause to be made any required filings,
submissions and notifications under the laws of any domestic or foreign
jurisdiction to the extent that such filings

 

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are necessary to consummate the Contemplated Transactions and will use its
commercially reasonable efforts to take all other actions necessary to
consummate the Contemplated Transactions in a manner consistent with applicable
law.

(b)          Spinner shall file the final tax returns for ISG on a timely basis
and pay any Taxes due with respect thereto.

Section 5.3       Employment Agreement for Spinner. HBDC II, Inc. and Spinner
shall execute an Employment Agreement in the form attached hereto as Exhibit A.

Section 5.4        Transfer of Contracts. ISG and Spinner agree to take all
actions necessary to transfer and/or assign all contracts, agreements, contract
rights, license agreements, franchise rights and agreements, purchase and sales
orders, quotations and executory commitments, instruments, third party
guaranties, indemnifications, arrangements and understandings, whether oral or
written, to which ISG or Spinner is a party (the “Contracts”), to Health
Benefits or its designee, effective upon Closing.

Section 5.5        Further Assurances. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its
commercially reasonable efforts to take or cause to be taken all action, to do
or cause to be done, and to assist and cooperate with the other parties hereto
in doing, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
practicable, the Contemplated Transactions, including, but not limited to, (i)
the satisfaction of the conditions precedent to the obligations of any of the
parties hereto; (ii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
performance of the obligations hereunder; and (iii) the execution and delivery
of such instruments, and the taking of such other actions as the other parties
hereto may reasonably require in order to carry out the intent of this
Agreement.

ARTICLE VI

ADDITIONAL AGREEMENTS

Section 6.1        Public Announcements. Each of Health Benefits and ISG will
consult with one another before issuing any press release or otherwise making
any public statements in respect of the Contemplated Transactions, including the
Merger, and shall not issue any such press release or make any such public
statement without the prior written consent of the other party, except as may be
required by applicable Law, in the opinion of counsel, in which case a copy of
such release shall be sent to the other party prior to such release.

Section 6.2

Indemnification.

 

(a)

Indemnification by Spinner.

(i)           Spinner shall defend, indemnify and hold Health Benefits, Merger
Sub and the Surviving Corporation, for their own accounts and that of their
Representatives (collectively, the “Health Benefits Indemnified Parties”),
harmless from and against and in respect of any and all actual losses,
liabilities, damages, judgments, settlements and expenses, including reasonable
attorneys’ fees, incurred directly by Health Benefits, Merger Sub, the

 

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Surviving Corporation and their respective Affiliates which arise out of (A) any
failure of any of the representations or warranties made by ISG or Spinner to be
true and correct at the Closing, (B) any failure to comply with an undertaking
or covenant made by ISG or Spinner, (C) any act, omission or conduct of Spinner,
ISG, or their respective Representatives, prior to the Closing, whether asserted
or claimed prior to, or at or after, the Closing, (D) any Taxes incurred by ISG
or Spinner prior to the Closing or by virtue of the Contemplated Transactions,
or (E) any claim brought by Glen Spinner. Health Benefits, Merger Sub or the
Surviving Corporation, as the case may be, shall give Spinner prompt written
notice of any third party claim which may give rise to any indemnity obligation
under this Section 6.2(a) and Spinner shall have the right to assume the defense
of any such claim through counsel of his own choosing, by so notifying such
indemnified party within 30 days of receipt of such indemnified party’s written
notice; provided, however, that Spinner’s counsel shall be reasonably
satisfactory to such indemnified party. Failure to give prompt notice shall not
affect the indemnification obligations hereunder in the absence of actual
prejudice. If the indemnified party desires to participate in any such defense
assumed by Spinner, it may do so at its sole cost and expense. If Spinner
declines to assume any such defense, he shall be liable for all reasonable costs
and expenses of defending such claim incurred by the indemnified party,
including reasonable fees and disbursements of counsel. Neither party shall,
without the prior written consent of the other party, which shall not be
unreasonably withheld, settle, compromise or offer to settle or compromise any
such claim or demand on a basis which would result in the imposition of a
consent order, injunction or decree which would restrict the future activity or
conduct of the other party or any Affiliate thereof or if such settlement or
compromise does not include an unconditional release of the other party for any
liability arising out of such claim or demand or any related claim or demand.

(ii)          The foregoing obligation of Spinner to indemnify Health Benefits,
Merger Sub, the Surviving Corporation and their Representatives set forth in
this Section 6.2(a) shall survive the consummation of the Merger until the
second anniversary of the Closing Date; provided, however, that rights to
indemnification due to (A) breaches of Sections 3.1 (Organization), 3.2
(Capitalization), 3.3 (Subsidiaries), 3.4 (Authority), 3.5 (Consents) and 3.21
(Additional Representations), shall survive until the end of time and (B)
breaches of Sections 3.13 (Taxes), 3.17 (Environmental), 5.2(b) (Tax Filings)
and the indemnity for Taxes described in Section 6.2(a)(i)(D), shall survive
until the expiration of the applicable statute of limitations; and provided,
further, that claims first asserted in writing within such periods shall not
thereafter be barred.

 

(b)

Indemnification by Health Benefits.

(i)           Health Benefits shall defend, indemnify and hold Spinner, for his
own account and that of the Representatives of ISG and Spinner (collectively,
the “ISG Indemnified Parties”) harmless from and against and in respect of any
and all actual losses, liabilities, damages, judgments, settlements and
expenses, including reasonable attorney fees, incurred directly by the ISG
Indemnified Parties arising out of (A) any failure of any of the representations
and warranties made by Health Benefits or Merger Sub to be true and correct at
the Closing, (B) any failure to comply with an undertaking or covenant made by
Health Benefits or Merger Sub, or (C) any act, omission or conduct of Health
Benefits or Merger Sub or their Representatives, prior to the Closing, whether
asserted or claimed prior to, or at or after, the Closing, except for acts,
omissions or conduct specifically assumed under this Agreement.

 

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Spinner shall give Health Benefits prompt written notice of any third party
claim which may give rise to any indemnity obligation under this Section 6.2(b)
and Health Benefits shall have the right to assume the defense of any such claim
through counsel of its own choosing, by so notifying Spinner within 30 days of
receipt of the written notice; provided, however, that such counsel shall be
reasonably satisfactory to Spinner. Failure to give prompt notice shall not
affect the indemnification obligations hereunder in the absence of actual
prejudice. If Spinner desires to participate in any such defense assumed by
Health Benefits, Spinner may do so at his own individual sole cost and expense.
If Health Benefits declines to assume any such defense, it shall be liable for
all costs and expenses of defending such claim incurred by Spinner, including
reasonable fees and disbursements of counsel. Neither party shall, without the
prior written consent of the other party, which shall not be unreasonably
withheld, settle, compromise or offer to settle or compromise any such claim or
demand on a basis which would result in the imposition of a consent order,
injunction or decree which would restrict the future activity or conduct of the
other party or any Affiliate thereof or if such settlement or compromise does
not include an unconditional release of the other party for any liability
arising out of such claim or demand.

(ii)          The foregoing obligation of Health Benefits to indemnify Spinner
set forth in this Section 6.2(b) shall survive the consummation of the Merger
until the second anniversary of the Closing Date; provided, however, that rights
to indemnification due to breaches of Sections 4.1 (Organization), 4.2
(Capitalization), 4.3 (Subsidiaries) and 4.4 (Authority), shall survive until
the end of time; and provided, further, that claims first asserted in writing
within such periods shall not thereafter be barred.

Section 6.3        Notification of Certain Matters. ISG shall give prompt notice
to Health Benefits and Merger Sub, and Health Benefits and Merger Sub shall give
prompt notice to ISG, of (a) any failure of ISG, Health Benefits or Merger Sub,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, (b) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the Contemplated Transactions, or
(c) any facts or circumstances that could reasonably be expected to result in a
Health Benefits Material Adverse Effect or an ISG Material Adverse Effect;
provided, however, that the delivery of any notice pursuant to this Section 6.3
shall not cure such breach or non-compliance or limit or otherwise affect the
rights, obligations or remedies available hereunder to the party receiving such
notice.

Section 6.4        Asserted Objections. If any objections are asserted with
respect to the Contemplated Transactions or if any suit is instituted by any
Governmental Entity or any private party challenging any of the Contemplated
Transactions as violative of any regulatory Law, each of Health Benefits, Merger
Sub, ISG and Spinner shall use his or its commercially reasonable efforts to
resolve any such objections or challenge as such Governmental Entity or private
party may have to such transactions under such regulatory Law so as to stay the
consummation of the Contemplated Transactions.

Section 6.5        Reorganization. It is the intention of Health Benefits and
ISG that the Merger will qualify as a reorganization described in Section 368(a)
of the Code (and any comparable provisions of applicable state law). Neither
Health Benefits nor ISG will take or

 

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omit to take any action (whether before, on or after the Closing Date) that
would cause the Merger not to be so treated. The parties will characterize the
Merger as such a reorganization for purposes of all Tax Returns and other
filings.

ARTICLE VII

CLOSING

Section 7.1       Conditions to Each Party’s Obligations to Effect the Merger.
The respective obligations of each party to consummate the Contemplated
Transactions are subject to the fulfillment at or prior to the Effective Time of
each of the following conditions, any or all of which may be waived in writing
in whole or in part by the party being benefited thereby, to the extent
permitted by applicable Law:

(a)          Health Benefits, Merger Sub, ISG and Spinner shall have timely
obtained from each Governmental Entity all approvals, waivers and consents, if
any, necessary for consummation of or in connection with the Contemplated
Transactions, except for such authorizations, consents or approvals, the failure
of which to have been made or obtained does not and could not reasonably be
expected to have, individually or in the aggregate, an ISG Material Adverse
Effect or a Health Benefits Material Adverse Effect.

(b)          There shall not be in effect any Law of any Governmental Entity of
competent jurisdiction restraining, enjoining or otherwise preventing
consummation of the Contemplated Transactions and no Governmental Entity shall
have instituted or threatened to institute any proceeding which continues to be
pending seeking any such Law.

(c)          The employment/consulting agreement between the Surviving
Corporation and Ivan Spinner, in the form attached hereto as Exhibit A, shall be
in full force and effect.

Section 7.2        Conditions to the Obligations of Health Benefits and Merger
Sub. The obligations of Health Benefits and Merger Sub to consummate the
Contemplated Transactions are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in writing in whole or part by Health Benefits or Merger Sub
to the extent permitted by applicable Law:

(a)          ISG and Spinner shall have performed or complied in all material
respects with all agreements, covenants and conditions contained herein required
to be performed or complied with by them prior to or at the time of the Closing.

 

(b)

All the ISG Consents shall have been obtained.

(c)          Health Benefits and Merger Sub shall have received an opinion of
Richard S. Lehman, counsel to ISG, dated the Closing Date, in the form attached
hereto as Exhibit B.

(d)          Health Benefits shall have received a complete and absolute release
of ISG by Glen Spinner in a form satisfactory to Health Benefits.

(e)          All Contracts shall be properly transferred and/or assigned to
Health Benefits or its designee, to the satisfaction of Health Benefits.

 

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Section 7.3       Conditions to the Obligations of ISG and Spinner. The
respective obligations of ISG and Spinner to consummate the Contemplated
Transactions are subject to the fulfillment at or prior to the Effective Time of
each of the following conditions, any or all of which may be waived in writing
in whole or in part by ISG or Spinner to the extent permitted by applicable Law:

(a)          Health Benefits and Merger Sub shall have performed or complied in
all material respects with all agreements, covenants and conditions contained
herein required to be performed or complied with by them prior to or at the time
of the Closing.

 

(b)

All of the Health Benefits Consents shall have been obtained.

ARTICLE VIII

MISCELLANEOUS

Section 8.1

Entire Agreement; Assignment.

(a)          This Agreement (including the exhibits hereto, the Health Benefits
Disclosure Schedule, the Merger Sub Disclosure Schedule and the ISG Disclosure
Schedule) constitutes the entire agreement among the parties hereto in respect
of the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties in respect of the
subject matter hereof.

(b)          Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of Law (including, by
merger or consolidation) or otherwise, other than to the Surviving Corporation.
Any assignment in violation of the preceding sentence shall be void. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and permitted assigns.

Section 8.2        Notices. All notices, requests, demands, instructions or
other documents or communications to be given under this Agreement shall be in
writing and shall be deemed given, (a) five business days following sending by
registered or certified mail, postage prepaid, (b) when sent if sent by
facsimile; provided, however, that the facsimile is promptly confirmed by
telephone confirmation thereof by the intended recipient, (c) when delivered, if
delivered personally to the intended recipient, and (d) one business day
following sending by overnight delivery via a national courier service, and in
each case, addressed to a party at the following address for such party:

if to Health Benefits, Merger Sub or the Surviving Corporation:

Health Benefits Direct Corporation
2200 S.W. 10th Street
Deerfield Beach, Florida 33442
Attention: Scott Frohman, CEO

Facsimile: (954) 691-4010

 

 

 

 

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with copies to:

Olshan Grundman Frome Rosenzweig
& Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Harvey Kesner, Esq.
Facsimile: (212) 451-2222

 

 

if to ISG or Spinner, to:

4800 N. Federal Highway
Suite 108D

Boca Raton, Florida 33431
Attention: Ivan Spinner
Facsimile: (561) 362-3757

 

 

with a copy to:

Richard S. Lehman P.A.

2600 N. Military Trail, Suite 270

Boca Raton, FL  33431
Attention: Richard S. Lehman, Esq.
Facsimile: (561) 998-9557

 

Section 8.3       Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the Laws of the State of
Delaware, without giving effect to the choice of law principles thereof to the
extent that the application of the laws of another jurisdiction would be
required thereby. Each of the parties hereto irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
Delaware and of the United States of America located in the State of Delaware
(the “Delaware Courts”) in any action or proceeding arising out of or relating
to this Agreement, any other agreement executed in connection with this
Agreement or the Contemplated Transactions, unless such other agreement contains
a separate jurisdictional requirement (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in the Delaware Courts and agrees not to plead or
claim in any Delaware Court that such litigation brought therein has been
brought in an inconvenient forum. Final judgment in any suit, action or
proceeding brought in any such court shall be conclusive and binding upon each
party duly served with process therein and may be enforced in the courts of the
jurisdiction of which either party or any of their property is subject, by a
suit upon such judgment. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.

Section 8.4       Expenses. Except as contemplated by this Agreement, all costs
and expenses incurred in connection with this Agreement and the consummation of
the Contemplated Transactions shall be paid by the party incurring such
expenses. To the extent an action or proceeding arising out of or relating to
this Agreement is brought by one of the parties hereto, and a final
non-appealable judgment is entered, the prevailing party shall be entitled to
reimbursement of its legal fees in connection with such action or proceeding
from the non-prevailing party.

 

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Section 8.5       Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

Section 8.6        Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Section 6.2, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.

Section 8.7        Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

Section 8.8        Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Delaware
Court, this being in addition to any other remedy to which they are entitled at
Law or in equity.

Section 8.9        Counterparts. This Agreement may be executed in multiple
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

Section 8.10     Further Assurances. Each party to this Agreement agrees (a) to
furnish upon request to the other party such further information, (b) to execute
and deliver to the other party such other documents and (c) to do such other
acts and things as the other party reasonably requests for the purpose of
carrying out the intent of this Agreement and the documents and instruments
referred to herein.

Section 8.11

Interpretation.

(a)          The words “hereof,” “herein,” “herewith” and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit, and schedule references are to the certificate,
sections, paragraphs, exhibits, and schedules of this Agreement unless otherwise
specified. Whenever the words “include,” “includes,” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation.”

 

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All terms defined in this Agreement shall have the defined meanings contained
herein when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter genders of such
terms. Any agreement, instrument, or statute defined or referred to herein or in
any agreement or instrument that is referred to herein means such agreement,
instrument, or statute as from time to time, amended, qualified or supplemented,
including (in the case of agreements and instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.

(b)          The phrases “the date of this Agreement,” “the date hereof,” and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the opening paragraph of this Agreement.

(c)          The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

Section 8.12

Amendment and Modification; Waiver.

(a)          This Agreement may be amended, modified and supplemented in any and
all respects by written agreement of the parties hereto, by action taken by
their respective boards of directors, at any time prior to the Effective Time
with respect to any of the terms contained herein.

(b)          At any time prior to the Effective Time, any party hereto may
(i) waive any inaccuracy in the representations and warranties of the other
parties contained herein or in any document, certificate or writing delivered by
the other parties pursuant hereto and (ii) subject to applicable law, waive
compliance with any agreement or condition to its obligations; provided that any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.

Section 8.13

Definitions. As used herein,

“Affiliate” has the meaning given to it in Rule 12b-2 of Regulation 12B under
the Exchange Act.

“Agreement” shall have the meaning set forth in the preamble hereof.

“Bank Accounts” shall have the meaning set forth in Section 3.25 hereof.

“Benefit Plans” shall have the meaning set forth in Section 3.19(a)(i) hereof.

“Cash Consideration” shall have the meaning set forth in Section 2.1(a) hereof.

 

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“Certificate of Merger” shall have the meaning set forth in Section 1.2 hereof.

“Closing” shall have the meaning set forth in Section 1.3 hereof.

“Closing Date” shall have the meaning set forth in Section 1.3 hereof.

“Closing Date Working Capital” shall have the meaning set forth in Section
2.2(a) hereof.

“Closing Date Working Capital Statement” shall have the meaning set forth in
Section 2.2(a) hereof.

“Code” shall have the meaning set forth in the recitals hereto.

“Contemplated Transactions” means the transactions contemplated by this
Agreement and the exhibits hereto, including, without limitation, the Merger.

“Contracts” shall have the meaning set forth in Section 5.4 hereof.

“DGCL” shall have the meaning set forth in the recitals hereof.

“Effective Time” shall have the meaning set forth in Section 1.2 hereof.

“Employee Arrangements” shall have the meaning set forth in Section 3.19(a)(iii)
hereof.

“Encumbrances” means any Lien, encumbrance, security interest, charge, surety,
mortgage, option, pledge or restriction on Transfer of any nature whatsoever
other than liens for Taxes not yet due or payable.

“Environment Permits” shall have the meaning set forth in Section 3.17(a)
hereof.

“Environmental Claim” shall have the meaning set forth in Section 3.17(d)
hereof.

“Environmental Laws” shall have the meaning set forth in Section 3.17(d) hereof.

“Equity Consideration” shall have the meaning set forth in Section 2.1(a)
hereof.

“ERISA” shall have the meaning set forth in Section 3.19(a)(i) hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FBCA” shall have the meaning set forth in the recitals hereof.

“Final Working Capital Amount” shall have the meaning set forth in Section
2.2(c) hereof.

 

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“GAAP” means United States generally accepted accounting principles as in effect
on the date or for the period with respect to which such principles are applied.

“Governmental Entity” shall have the meaning set forth in Section 3.5 hereof.

“Hazardous Materials” shall have the meaning set forth in Section 3.17(d)
hereof.

“Health Benefits” shall have the meaning set forth in the preamble hereof.

“Health Benefits Capital Stock” means the authorized capital stock of Health
Benefits, including Health Benefits Common Stock.

“Health Benefits Common Stock” means the common stock, par value $.001 per
share, of Health Benefits.

“Health Benefits Consents” shall have the meaning set forth in Section 4.4
hereof.

“Health Benefits Disclosure Schedule” shall have the meaning set forth in the
preamble to Article IV hereof.

“Health Benefits Indemnified Parties” shall have the meaning set forth in
Section 6.2(a)(i) hereof.

“Health Benefits Material Adverse Effect” shall have the meaning set forth in
Section 4.4 hereof.

“Intellectual Property” shall have the meaning set forth in Section 3.15(a)
hereof.

“IRS” shall have the meaning set forth in Section 3.19(b) hereof.

“ISG” shall have the meaning set forth in the preamble hereof.

“ISG Capital Stock” means the authorized capital stock of ISG, including ISG
Common Stock.

“ISG Common Stock” shall have the meaning set forth in the recitals hereto.

“ISG Consents” shall have the meaning set forth in Section 3.5 hereof.

“ISG Disclosure Schedule” shall have the meaning set forth in the preamble to
Article III hereof.

“ISG Financial Statements” shall have the meaning set forth in Section 3.6
hereof.

“ISG Indemnified Parties” shall have the meaning set forth in Section 6.2(b)(i)
hereof.

“ISG Intellectual Property” shall have the meaning set forth in Section 3.15(b)
hereof.

 

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“ISG Material Adverse Effect” shall have the meaning set forth in Section 3.1
hereof.

“Laws” means any order, writ, injunction, decree, judgment, permit, license,
ordinance, law, statute, rule or regulation.

“Lien” means, in respect of any asset (including any security) any mortgage,
lien, pledge, charge, security interest, or encumbrance of any kind in respect
of such asset.

“Material Contracts” shall have the meaning set forth in Section 3.10(a) hereof.

“Merger” shall have the meaning set forth in the recitals hereto.

“Merger Consideration” shall have the meaning set forth in Section 2.1(a)
hereof.

“Merger Securities” means the Health Benefits Common Stock issued as the Equity
Consideration.

“Merger Sub” shall have the meaning set forth in the preamble hereto.

“Merger Sub Capital Stock” means the authorized capital stock of Merger Sub.

“Merger Sub Disclosure Schedule” shall have the meaning set forth in the
preamble to Article IV hereof.

“Objection” shall have the meaning set forth in Section 2.2(b) hereof.

“Permits” shall have the meaning set forth in Section 3.11(b) hereof.

“Person” means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).

“Representative” means, with respect to any Person, each of such Person’s
Affiliates, directors, officers, employees, partners, members, representatives
and agents, and each of the heirs, executors and assigns of any of the
foregoing.

“Review Period” shall have the meaning set forth in Section 2.2(b) hereof.

“Securities Act” means the Securities Act of 1933, as amended.

“Spinner” shall have the meaning set forth in the preamble hereof.

“Surviving Corporation” shall have the meaning set forth in Section 1.1 hereof.

“Tax Return” shall have the meaning set forth in Section 3.13(e) hereof.

“Taxes” shall have the meaning set forth in Section 3.13(e) hereof.

 

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“Third Party Intellectual Property” shall have the meaning set forth in Section
3.15(d) hereof.

“Transfer” means any sale, assignment, pledge, hypothecation, or other
disposition or Encumbrances.

“WC Arbiter” shall have the meaning set forth in Section 2.2(b) hereof.

“Working Capital” means current assets less current liabilities.

“Working Capital Threshold” shall have the meaning set forth in Section 2.2(a)
hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the date first above written.

 

HEALTH BENEFITS DIRECT CORPORATION,

a Delaware corporation

 

By:  /s/ Scott Frohman                                                

Name: Scott Frohman

Title: CEO

 

 

ISG MERGER ACQUISITION CORP.,

a Delaware Corporation

 

 

By:  /s/ Scott Frohman                                               

Name: Scott Frohman

Title: President

 

 

INSURANCE SPECIALIST GROUP INC.,

a Florida Corporation

 

By:  /s/ Ivan Spinner                                                  

Name: Ivan Spinner

Title: President

 

 

/s/ Ivan Spinner                                                           

IVAN SPINNER

 

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