<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PHYSICIAN SUPPORT SYSTEMS, INC.
-------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $.001 PAR VALUE
-------------------------------------------------------------
(Title of Class of Securities)
71940V105
-------------------------------------------------------------
(CUSIP Number)
Mr. Peter D. Cooper
c/o EE&C Financial Services, Inc.
60 Park Place
Newark, New Jersey 07102
(201) 624-8400
-------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copy To: Martin M. Goldwyn, Esq.
Tashlik, Kreutzer & Goldwyn P.C.
833 Northern Boulevard
Great Neck, NY 11021
(516) 466-8005
August 31, 1996
-------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|
Check the following box if a fee is being paid with the statement. |X| (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
===============================================================================
Schedule 13D
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CUSIP No. 71940V105 Page 2 of 12 pages
- -------------------------------------------------------------------------------
1. Name of Reporting Person: Peter D. Cooper
S.S. or I.R.S. Identification No. of Above Individual:
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) |X|
(b) |_|
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds 00
- -------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) |_|
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization: United States
- -------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
----------------------------------------
Beneficially 8. Shared Voting Power
947,649
Owned by Each ----------------------------------------
9. Sole Dispositive Power
Reporting Person ----------------------------------------
10. Shared Dispositive Power
With 947,649
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
947,649
- -------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares |_|
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
11.3%
- -------------------------------------------------------------------------------
14. Type of Reporting Person: IN
===============================================================================
<PAGE>
===============================================================================
Schedule 13D
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CUSIP No. 71940V105 Page 3 of 12 pages
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1. Name of Reporting Person: Elaine Scialo
S.S. or I.R.S. Identification No. of Above Individual:
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) |X|
(b) |_|
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds 00
- -------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) |_|
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization: United States
- -------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
----------------------------------------
Beneficially 8. Shared Voting Power
947,649
Owned by Each ----------------------------------------
9. Sole Dispositive Power
Reporting Person ----------------------------------------
10. Shared Dispositive Power
With 947,649
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
947,649
- -------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares |_|
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
11.3%
- -------------------------------------------------------------------------------
14. Type of Reporting Person: IN
===============================================================================
<PAGE>
===============================================================================
Schedule 13D
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CUSIP No. 71940V105 Page 4 of 12 pages
- -------------------------------------------------------------------------------
1. Name of Reporting Person: Eltman, Eltman & Cooper, P.C.
IRS Employer's Identification No. for Above Corporation:
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) |X|
(b) |_|
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds 00
- -------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) |_|
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization: New York
- -------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
----------------------------------------
Beneficially 8. Shared Voting Power
90,376
Owned by Each ----------------------------------------
9. Sole Dispositive Power
Reporting Person ----------------------------------------
10. Shared Dispositive Power
With 90,376
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
90,376
- -------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares |_|
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
1.1%
- -------------------------------------------------------------------------------
14. Type of Reporting Person: CO
===============================================================================
<PAGE>
CUSIP NO. 71940V105 Page 5 of 12 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PHYSICIAN SUPPORT SYSTEMS, INC.
(Name of Issuer)
ITEM 1. Security and Issuer.
The title of the class of equity security to which this statement
relates is the Common Stock, $.001 par value per share (the "Common Stock") of
Physician Support Systems, Inc., a Delaware corporation (the "Issuer"), whose
principal executive offices are located at Route 230 and Eby-Chiques Road, Mt.
Joy, Pennsylvania 17552.
ITEM 2. Identity and Background.
This statement is filed by (i) Peter D. Cooper, a United States
citizen with a business address at c/o EE&C Financial Services, Inc., 60 Park
Place, Newark, New Jersey 07102; (ii) Elaine Scialo, a United States citizen
with a business address at c/o EE&C Financial Services, Inc., 60 Park Place,
Newark, New Jersey 07102; and (iii) Eltman, Eltman and Cooper, P.C., a New York
professional corporation ("EECPC") with a business address at 845 North
Broadway, White Plains, New York 10603-2403. Peter D. Cooper and Elaine Scialo
are husband and wife. The sole shareholder and the sole director of EECPC is
Peter D. Cooper. The principal business of EECPC is the practice of law.
Peter D. Cooper's present principal occupation is Chief Executive
Officer and President of EE&C Financial Services, Inc., a New York corporation
("EECFSI"). Elaine Scialo's present principal occupation is Vice President -
Client Services of EECFSI. The principal business of EECFSI is the provision of
accounts receivable and business management services. During the last five
years, neither Peter D. Cooper, Elaine Scialo nor EECPC has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) nor
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction subjecting them to a judgment, decree or final order
enjoining future
<PAGE>
CUSIP NO. 71940V105 Page 6 of 12 Pages
violations of, or prohibiting or mandating activities subject to, Federal or
State securities laws or finding any violation with respect to such laws.
ITEM 3. Source and Amount of Funds or Other Consideration.
The transactions contemplated by the EECFSI Merger Agreement (as
hereinafter defined) were consummated on August 31, 1996. On August 31, 1996,
Elaine Scialo acquired 739,048 shares of the Common Stock in exchange for her
shares of EECFSI pursuant to the terms of that certain Merger Agreement dated as
of August 30, 1996, by and among the Issuer, PSS EE & C Financial Services, Inc.
and EECFSI (the "EECFSI Merger"), a copy of which is annexed hereto as Exhibit
7.2 (the "EECFSI Merger Agreement"). In connection with the EECFSI Merger,
Elaine Scialo also received 40,772 shares of the Common Stock in full
satisfaction of the principal and accrued interest of a promissory note made by
EECFSI, as maker, to Elaine Scialo, as payee. No cash consideration was
paid for any of such shares of Common Stock.
In connection with the EECFSI Merger, EECPC received 90,376 shares
of the Common Stock in full satisfaction of the principal and accrued interest
of a promissory note made by EECFSI, as maker, to EECPC, as payee. No cash
consideration was paid for any of such shares of Common Stock.
On September 3, 1996, in a separate transaction, Peter D. Cooper
acquired 77,453 shares of the Common Stock in exchange for his shares of EE&C
Health Services, Inc., a Delaware corporation ("HSI"), pursuant to the terms of
that certain Merger Agreement dated as of August 30, 1996, by and among the
Issuer, PSS EE&C Health Services, Inc., PSS Med-Data Interface Systems, Inc.,
PSS Medical Intercept Systems, Inc., HSI, Med-Data Interface Systems, LLC
("MDI") and Medical Intercept Systems, LLC ("MIS") (the "HSI Merger" and
collectively with the EECFSI Merger, the "Mergers"), a copy of which is annexed
hereto as Exhibit 7.3 (the "HSI Merger Agreement", and collectively with the
EECFSI Merger Agreement, the "Merger Agreements"). Prior to the HSI Merger,
Peter D. Cooper did not have a controlling interest in HSI, MDI or MIS. No cash
consideration was paid for any of such shares of Common Stock.
ITEM 4. Purpose of Transaction.
Peter D. Cooper acquired his shares of the Common Stock pursuant to
the HSI Merger. Peter D. Cooper intends to hold such securities for
investment purposes. Pursuant to the terms of the EECFSI Merger Agreement, the
Issuer has agreed to take such action as shall be necessary so that Peter D.
Cooper shall be appointed to the Board of Directors of the Issuer. In addition,
as long as Peter D. Cooper and the shareholders of EECFSI immediately
prior to the effective time of the EECFSI Merger together shall beneficially
own, in the aggregate, at least 10%
<PAGE>
CUSIP NO. 71940V105 Page 7 of 12 Pages
of the issued and outstanding shares of the Common Stock, the Issuer's board of
directors shall (i) include Peter D. Cooper in the slate of nominees recommended
by the Issuer's board of directors to stockholders for election as directors at
each annual meeting of stockholders of the Issuer, commencing with the next
annual meeting of stockholders (unless Mr. Cooper dies or becomes incapacitated,
in which event Mr. Cooper's heirs or representatives shall have the right to
designate a nominee in Mr. Cooper's stead); and (ii) use its best efforts to
cause the shares of Common Stock for which the Issuer's management or board of
directors holds proxies or is otherwise entitled to vote, to be voted in favor
of the election of Mr. Cooper. In addition, Mr. Cooper shall have the right to
include an additional nominee in the slate of nominees so recommended by the
Issuer's board of directors in the event the Issuer's board of directors is
expanded to include fourteen or more directorships.
Mr. Cooper intends to review, on a continuing basis, his investment
in the Issuer and the Issuer's business and prospects. Mr. Cooper is not
currently considering the acquisition, directly or indirectly through EECPC, of
additional shares of Common Stock. Whether Mr. Cooper purchases additional
shares or sells shares will depend upon his evaluation of pertinent factors,
including without limitation, the availability of shares of Common Stock for
purchase and the market for the sale of shares of Common Stock at particular
price levels, the business and prospects of the Issuer, economic and stock
market conditions, other business and investment opportunities available to Mr.
Cooper, regulatory requirements, and the desires of Mr. Cooper. Depending upon
his assessment of these factors from time to time, Mr. Cooper may change his
present intention as stated above by possibly determining to acquire additional
shares of Common Stock or dispose of some or all of the Common Stock held by him
or deemed to be beneficially owned by him.
Except as described above, Mr. Cooper has not formulated any plans
or proposals of the type referred to in clauses (a)-(j) of Item 4 of Schedule
13D. However, as a director of the Issuer, Mr. Cooper may from time to time
consider such plans or proposals as may be presented to or considered by the
board of directors of the Issuer.
In connection with the EECFSI Merger, EECPC acquired its shares
of Common Stock as payment in full of a promissory note made by EECFSI and held
by EECPC. EECPC intends to hold such securities for investment purposes. EECPC
intends to review, on a continuing basis, its investment in the Issuer and the
Issuer's business and prospects. EECPC is not currently considering the
acquisition, directly or indirectly, of additional shares of Common Stock.
Whether EECPC purchases additional shares or sells shares will depend upon its
evaluation of pertinent factors, including without limitation, the availability
of shares of Common Stock for purchase and the market for the sale of shares of
Common Stock at particular price levels, the business and prospects of each of
the Issuer and EECPC, economic and stock market conditions, other business and
<PAGE>
CUSIP NO. 71940V105 Page 8 of 12 Pages
investment opportunities available to EECPC and regulatory requirements.
Depending upon its assessment of these factors from time to time, EECPC may
change its present intention as stated above by possibly determining to acquire
additional shares of Common Stock or dispose of some or all of the Common Stock
held by it.
Except as described above, EECPC has not formulated any plans or
proposals of the type referred to in clauses (a)-(j) of Item 4 of Schedule 13D.
Elaine Scialo acquired 739,048 shares of Common Stock pursuant to
the EECFSI Merger and acquired an additional 40,772 shares of Common Stock in
connection with the EECFSI Merger as payment in full of a promissory note made
by EECFSI to her. Ms. Scialo intends to hold all of such securities for
investment purposes. Ms. Scialo intends to review, on a continuing basis, her
investment in the Issuer and the Issuer's business and prospects. Ms. Scialo is
not currently considering the acquisition of additional shares of Common Stock.
Whether Ms. Scialo purchases additional shares or sells shares will depend upon
her evaluation of pertinent factors, including without limitation, the
availability of shares of Common Stock for purchase and the market for the sale
of shares of Common Stock at particular price levels, the business and prospects
of the Issuer, economic and stock market conditions, other business and
investment opportunities available to Ms. Scialo, and regulatory requirements.
Depending upon her assessment of these factors from time to time, Ms. Scialo may
change her present intention as stated above by possibly determining to acquire
additional shares of Common Stock or dispose of some or all of the Common Stock
held by her or deemed to be beneficially owned by her.
Except as described above, Ms. Scialo has not formulated any plans
or proposals of the type referred to in clauses (a)-(j) of Item 4 of Schedule
13D.
ITEM 5. Interest in Securities of the Issuer.
(a) Peter D. Cooper owns of record 77,453 shares of Common Stock
and may be deemed to beneficially own an additional 870,196 shares of Common
Stock (including Elaine Scialo's 779,820 shares of Common Stock and EECPC's
90,376 shares of Common Stock). Based on the Issuer's representation that it
had 7,221,628 shares of Common Stock issued and outstanding as of August 29,
1996, Peter D. Cooper has in the aggregate a beneficial ownership of 11.3% of
the Issuer's outstanding shares of Common Stock.
As of the date hereof, Elaine Scialo owns of record 779,820 shares
of Common Stock and may be deemed to beneficially own an additional 167,829
shares.
<PAGE>
CUSIP NO. 71940V105 Page 9 of 12 Pages
of Common Stock (including Peter D. Cooper's 77,453 shares of Common Stock and
EECPC's 90,376 shares of Common Stock), or an aggregate beneficial ownership of
11.3% of the Issuer's outstanding shares of Common Stock.
As of the date hereof, EECPC beneficially owns 90,376 shares of
Common Stock, or a beneficial ownership of 1.1% of the Issuer's outstanding
shares of Common Stock.
(b) Peter D. Cooper, as the sole shareholder and sole director of
EECPC, may be deemed, for purposes of determining beneficial ownership pursuant
to Rule 13d-3, to have the shared power with his spouse Elaine Scialo to vote
and direct the vote of, and to dispose of and to direct the disposition of, the
90,376 shares of the Common Stock owned by EECPC. Peter D. Cooper shares with
his spouse Elaine Scialo the power to vote and to direct the vote of, and the
power to dispose and direct the disposition of, the 77,453 shares of Common
Stock owned directly by him and the 90,376 shares of Common Stock owned by EECPC
and deemed to be beneficially owned by him and the 779,820 shares of Common
Stock owned by Elaine Scialo. Elaine Scialo shares with her spouse Peter D.
Cooper the power to vote and to direct the vote of, and the power to dispose and
direct the disposition of, the 779,820 shares of Common Stock owned by her, the
77,453 shares of Common Stock owned directly by Peter D. Cooper and the 90,376
shares of Common Stock held by EECPC and deemed to be beneficially owned by
Peter D. Cooper.
(c) Not applicable.
(d) Peter D. Cooper may be deemed to have the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Common Stock
owned by him, EECPC and Elaine Scialo. Elaine Scialo may be deemed to have the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the Common Stock owned by her, EECPC and Peter D. Cooper.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
The Issuer entered into (i) a registration rights agreement for the
benefit of the shareholders of EECFSI (the "EECFSI Registration Rights
Agreement") and (ii) a registration rights agreement for the benefit of the
shareholders of HSI and the members of each of MIS and MDI (the "HSI
Registration Rights Agreement", and collectively with the EECFSI Registration
Rights Agreement, the "Registration Rights
<PAGE>
CUSIP NO. 71940V105 Page 10 of 12 Pages
Agreements"). The Registration Rights Agreements provide the holders of shares
of Common Stock received pursuant to the Mergers ("Registrable Securities") with
piggyback registration rights in respect of such shares. Such piggyback
registration rights become exercisable after the expiration of the Pooling
Period (as such term is defined in the Registration Rights Agreements). The
underwriters for an underwritten offering have a right to limit the number of
Registrable Securities sold by the holders of such Registrable Securities
("Holders") in an offering pursuant to any such piggyback registration
request.
Pursuant to the terms of the HSI Registration Rights Agreement,
in the event that the Holders who are signatories thereto (including Peter D.
Cooper) were unable to register certain specified amounts of their Registrable
Securities during certain specified periods, such Holders may require the Issuer
to effect up to three demand registrations of a specified limited number of
Registrable Securities during such specified periods. The underwriters for an
underwritten offering have a right to limit the number of Registrable
Securities sold by such Holders pursuant to such a demand registration request.
Pursuant to the terms of the EECFSI Registration Rights Agreement,
the Holders who are signatories thereto, including Elaine Scialo and EECPC (the
"EECFSI Holders") may, at the request of such EECFSI Holders and subject to the
conditions that (i) the greater of at least 65% or 153,000 shares of such
Registrable Securities are included in such demand registration, (ii) not more
than 15% of the Registrable Securities held by the EECFSI Holders may be
registered pursuant to an underwritten public offering prior to August 31, 1997
and (iii) not more than one such demand right may be exercised in any nine-month
period, require the Issuer to effect up to three demand registrations, pursuant
to an underwritten offering or a non-underwritten offering. Such registration
rights become exercisable after the expiration of the Pooling Period. The
underwriters for an underwritten offering have a right to limit the number of
Registrable Securities sold by such EECFSI Holders pursuant to such a demand
registration request.
In the event that certain principal stockholders of the Issuer
or any of their respective affiliates (other than the Issuer) causes the Issuer
to register any of their shares of Common Stock under the Securities Act, the
Issuer is required to
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CUSIP NO. 71940V105 Page 11 of 12 Pages
use its reasonable best efforts to include, at its expense, up to the pro
rata portion of each of such Holder's Registrable Securities in such
registration. Such registration rights become exercisable after the expiration
of the Pooling Period. The underwriters have a right to limit the number of
Registrable Securities sold by such Holders pursuant to such a registration
request.
The Issuer is required to pay certain expenses in connection with
all such registrations.
ITEM 7. Material to Be Filed as Exhibits.
The following are filed as exhibits to this Statement on Schedule
13D:
Exhibit 7.1 Agreement of Joint Filing by and among Peter D.
Cooper, Elaine Scialo and Eltman, Eltman & Cooper, P.C.
Exhibit 7.2 Merger Agreement by and among Physician Support
Systems, Inc., PSS EE&C Financial Services, Inc. and
EE&C Financial Services, Inc.
Exhibit 7.3 Merger Agreement by and among Physician Support
Systems, Inc., PSS EE&C Health Services, Inc., PSS
Med-Data Interface Systems, Inc., PSS Medical Intercept
Systems, Inc., EE&C Health Services, Inc., Med-Data
Interface Systems, LLC and Medical Intercept Systems,
LLC
Exhibit 7.4 Registration Rights Agreement by and among Physician
Support Systems, Inc., Peter D. Cooper, Elaine Scialo
and the other stockholders of EE & C Financial Services,
Inc.
Exhibit 7.5 Registration Rights Agreement by and among Physician
Support Systems, Inc., Peter D. Cooper, the other
stockholders of EE&C Health Services, Inc. and the
members of Med-Data Interface Systems, LLC and Medical
Intercept Systems, LLC
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: September 9, 1996
/s/ Peter D. Cooper
-------------------------------
Peter D. Cooper
/s/ Elaine Scialo
-------------------------------
Elaine Scialo
ELTMAN, ELTMAN & COOPER, P.C.
By: /s/ Peter D. Cooper
____________________________
Peter D. Cooper, President
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ------------------------------------- -------------------------------------
7.1 Agreement of Joint Filing by and among
Peter D. Cooper, Elaine Scialo and
Eltman, Eltman & Cooper, P.C.
7.2 Merger Agreement by and among
Physician Support Systems, Inc., PSS
EE&C Financial Services, Inc. and EE&C
Financial Services, Inc.
7.3 Merger Agreement by and among
Physician Support Systems, Inc., PSS
EE&C Health Services, Inc., PSS Med-
Data Interface Systems, Inc., PSS
Medical Intercept Systems, Inc., EE&C
Health Services, Inc., Med-Data
Interface Systems, LLC and Medical
Intercept Systems, LLC
7.4 Registration Rights Agreement by and
among Physician Support Systems, Inc.,
Peter D. Cooper, Elaine Scialo and the
other stockholders of EE & C Financial
Services, Inc.
7.5 Registration Rights Agreement by and
among Physician Support Systems, Inc.,
Peter D. Cooper, the other stockholders
of EE&C Health Services, Inc. and the
members of Med-Data Interface
Systems, LLC and Medical Intercept
Systems, LLC
<PAGE>
EXHIBIT 7.1
AGREEMENT OF JOINT FILING
Peter D. Cooper, Elaine Scialo and Eltman, Eltman & Cooper, P.C.
hereby agree that the Statement on Schedule 13D to which this Agreement is
attached as an exhibit, as well as all future amendments to such Statement,
shall be filed jointly on behalf of each of them. This agreement is intended to
satisfy the requirements of Rule 13d-1(f)(1)(iii) under the Securities Exchange
Act of 1934, as amended.
Dated September 6, 1996
/s/ Peter D. Cooper
--------------------------------
Peter D. Cooper
/s/ Elaine Scialo
--------------------------------
Elaine Scialo
Eltman, Eltman & Cooper, P.C.
By: /s/ Peter D. Cooper
----------------------------
Peter D. Cooper, President
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 30, 1996
AMONG
PHYSICIAN SUPPORT SYSTEMS, INC.,
PSS EE&C FINANCIAL SERVICES, INC.
AND
EE&C FINANCIAL SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION...................................................................1
ARTICLE I
THE MERGER....................................................................1
SECTION 1.1. The Merger........................................................1
SECTION 1.2. Closing...........................................................1
SECTION 1.3. Effective Time....................................................1
SECTION 1.4. Effects of the Merger.............................................2
SECTION 1.5. Articles of Incorporation and By-Laws.............................2
SECTION 1.6. Directors.........................................................2
SECTION 1.7. Officers..........................................................2
SECTION 1.8. Parent Directors..................................................2
SECTION 1.9. Tax-Free Reorganization...........................................2
SECTION 1.10. Accounting Treatment.............................................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES................................3
SECTION 2.1. Effect on Capital Stock...........................................3
(a) Capital Stock of Merger Subsidiary................................3
(b) Cancellation of Treasury Stock and Parent-Owned Stock.............3
(c) Conversion of Company Common Stock................................3
(d) Adjustment of Exchange Ratio......................................3
SECTION 2.2. Exchange of Certificates..........................................3
(a) Parent To Provide Merger Consideration............................3
(b) Exchange Procedure................................................3
(c) Distributions with Respect to Unexchanged Shares..................4
(d) No Further Ownership Rights in Common Stock.......................4
(e) No Liability......................................................4
(f) No Fractional Shares..............................................5
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES.................................................5
SECTION 3.1. Representations and Warranties of the Company.....................5
(a) Organization, Standing and Power..................................5
(b) Authority; Binding Agreements.....................................5
(c) Capitalization; Equity Interests..................................5
(d) Conflicts; Consents...............................................6
(e) Financial Information.............................................7
(f) Absence of Changes................................................7
(g) Assets, Property and Related Matters; Real Property...............8
(h) Patents, Trademarks and Similar Rights............................9
(i) Insurance........................................................10
(j) Agreements, Etc..................................................10
(k) Litigation, Etc..................................................10
(l) Compliance; Governmental Authorizations..........................10
(m) Labor Relations; Employees.......................................11
(n) Accounts Receivable..............................................12
(o) Customers........................................................12
(p) Accounts Payable.................................................13
(q) Related Party Transactions.......................................13
(r) Billing and Collection Practices.................................13
(s) Tax Matters......................................................14
(t) Disclosure.......................................................14
(u) Bank Accounts; Powers-of-Attorney................................15
(v) Accounting Matters...............................................15
(w) Brokers..........................................................15
(x) Accredited Investor..............................................15
SECTION 3.2. Representations and Warranties by Merger Subsidiary and Parent...15
(a) Organization, Standing and Power.................................15
(b) Authority; Binding Agreements....................................16
(c) Conflicts; Consents..............................................16
(d) Capitalization...................................................16
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities..17
(f) Absence of Certain Changes or Events.............................17
(g) Litigation, Etc..................................................17
(h) Compliance; Governmental Authorizations..........................17
(i) Accounting Matters...............................................18
(j) Brokers..........................................................18
(k) Billing and Collection Practices.................................18
ii
<PAGE>
(l) Insurance........................................................18
(m) Labor Relations..................................................19
ARTICLE IV
ADDITIONAL AGREEMENTS.........................................................19
SECTION 4.1. Expenses.........................................................19
SECTION 4.2. Affiliates.......................................................19
SECTION 4.3. Agreements of Parent Affiliates..................................19
SECTION 4.4. Nasdaq...........................................................19
SECTION 4.5. Pooling..........................................................19
SECTION 4.6. Public Announcements.............................................19
SECTION 4.7. Confidentiality..................................................20
SECTION 4.8. Parent Agreement.................................................20
ARTICLE V
DOCUMENTS TO BE DELIVERED AT CLOSING..........................................20
SECTION 5.1. Documents to be Delivered at Closing.............................20
(a) Representations and Warranties.................................21
(b) Performance of Obligations of the Company......................21
(c) Consents, Amendments and Terminations..........................21
(d) Opinion of Counsel.............................................21
(e) Indemnification Agreement......................................21
(f) Employment Agreements..........................................21
(g) Non-Competition Agreement......................................21
(h) Investment and Affiliate Letter; Affiliate Agreement...........21
(i) Resignation Letters............................................21
(j) Representations and Warranties.................................21
(k) Registration Rights Agreement..................................22
(l) Opinion........................................................22
(m) Other Documents................................................22
ARTICLE VI
MISCELLANEOUS.................................................................22
SECTION 6.1. Entire Agreement.................................................22
SECTION 6.2. Descriptive Headings; Certain Interpretations....................22
SECTION 6.3. Notices..........................................................22
SECTION 6.4. Counterparts.....................................................23
SECTION 6.5. Survival.........................................................23
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SECTION 6.6. Benefits of Agreement............................................23
SECTION 6.7. Amendments and Waivers...........................................24
SECTION 6.8. Assignment.......................................................24
SECTION 6.9. Enforceability...................................................24
SECTION 6.10. GOVERNING LAW...................................................24
EXHIBITS
A Form of Letter of Transmittal
B Form of Indemnification Agreement
C Form of Opinion of Counsel of the Company and the Shareholders
D Form of Employment Agreement
E Form of Non-Competition Agreement
F Form of Investment and Affiliate Letter
G Form of Affiliate Agreement
H Form of Registration Rights Agreement
I Form of Opinion of Counsel of Parent and Merger Subsidiary
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AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
August 30, 1996, among Physician Support Systems, Inc., a
Delaware corporation ("Parent"), PSS EE&C Financial Services,
Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Subsidiary"), and EE&C Financial Services,
Inc., a New York corporation (the "Company").
INTRODUCTION
The Board of Directors of each of Parent, Merger Subsidiary
and the Company, and the stockholders of the Company, each have unanimously
approved the merger of Merger Subsidiary into the Company (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement. As a result
of the Merger, each issued and outstanding share of the Common Stock, no par
value per share (the "Company Common Stock"), of the Company not owned directly
or indirectly by Parent or the Company will be converted into the right to
receive the consideration provided in this Agreement.
The parties to this Agreement intend that the Merger qualify
as a "reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
Parent, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
The parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the New York
Business Corporation Law ("New York Law") and the Delaware General Corporation
Law ("Delaware Law"), Merger Subsidiary shall be merged with and into the
Company at the Effective Time of the Merger (defined below in Section 1.3).
Following the Merger, the separate corporate existence of Merger Subsidiary
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Merger Subsidiary in accordance with New York Law and Delaware
Law.
SECTION 1.2. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on August 30, 1996 at the offices of
Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New York 10019,
unless another date or place is agreed to in writing by the parties hereto (such
date upon which the Closing occurs, the "Closing Date").
SECTION 1.3. Effective Time. As soon as practicable, the
parties shall file a copy of a certificate of merger or other appropriate
documents in the office of the New York Secretary of State (the "New York
Certificate of Merger") executed in accordance with the relevant provisions of
New York Law and a certificate of merger or other appropriate documents in the
office of the Delaware Secretary of State (the "Delaware Certificate of Merger")
executed in accordance with the relevant provisions of Delaware Law, and shall
make all other filings or recordings required under New York Law or Delaware
Law. The Merger shall become effective at such time as a copy of the New York
Certificate of Merger is duly filed with the New York
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Secretary of State and the Delaware Certificate of Merger is duly
filed with the Delaware Secretary of State (the time the Merger
becomes effective, the "Effective Time of the Merger").
SECTION 1.4. Effects of the Merger. The Merger shall have the
effects set forth in the New York Law and the Delaware Law.
SECTION 1.5. Articles of Incorporation and By-Laws.
(a) The Articles of Incorporation of the Company as in effect at the
Effective Time of the Merger shall be the Articles of Incorporation
of the Surviving Corporation, until changed or amended.
(b) The By-Laws of the Company as in effect at the Effective
Time of the Merger shall be the By-Laws of the Surviving Corporation, until
changed or amended.
SECTION 1.6. Directors. Following the Effective
Time of the Merger, the directors of the Surviving Corporation shall
be Peter D. Cooper, Hamilton F. Potter III, Peter W. Gilson and David
S. Geller, until the earlier of their resignation or removal or until
their successors are duly elected and qualified. As long as Peter D.
Cooper is an employee of the Surviving Corporation, Parent shall
take such action as shall be necessary so that Peter D. Cooper is elected
to the Board of Directors of the Surviving Corporation.
SECTION 1.7. Officers. The officers of the Company at
the Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or
until their successors are duly elected and qualified.
SECTION 1.8. Parent Directors. Parent shall take such action
as shall be necessary so that, promptly after the Effective Time of the Merger,
Peter D. Cooper shall be appointed to the Board of Directors of Parent with a
term in office expiring at Parent's next annual meeting of its stockholders. As
long as Peter D. Cooper and the holders of record of shares of Company Common
Stock immediately prior to the Effective Time of the Merger together shall
beneficially own, in the aggregate, at least 10% of the issued and outstanding
shares of Parent Common Stock (as hereinafter defined), Parent's Board of
Directors shall (i) include Peter D. Cooper in the slate of nominees recommended
by Parent's Board of Directors to stockholders for election as directors at each
annual meeting of stockholders of Parent, commencing with the annual meeting of
stockholders next following the date hereof (unless Mr. Cooper dies, becomes
incapacitated or no longer wishes to serve as a director, in which case, in the
event of his death or incapacity, Mr. Cooper's heirs or representatives shall
have the right to designate a nominee in Mr. Cooper's stead), and (ii) use its
best efforts to cause the shares for which Parent's management or Board of
Directors holds proxies or is otherwise entitled to vote to be voted in favor of
the election of Mr. Cooper or such other nominee. In the event that the Board of
Directors of Parent is expanded to include fourteen or more directorships, the
provisions of the preceding sentence shall apply to two directorships, one to be
held by a person designated by Mr. Cooper or such heirs or representatives and
approved by a majority of Parent's Board of Directors, such approval not to be
unreasonably withheld.
SECTION 1.9. Tax-Free Reorganization. The Merger is
intended to be a reorganization within the meaning of Section 368 of the
Code, and this Agreement is intended to be a "plan of reorganization" within
the meaning of the regulations promulgated under Section 368 of the Code.
SECTION 1.10. Accounting Treatment. The business
combination to be effected by the Merger is intended to be treated for
accounting purposes as a "pooling of interests."
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock. As of the Effective Time
of the Merger, by virtue of the Merger and without any action on the part of the
holder of any shares of Company Common Stock or any shares of capital stock of
Merger Subsidiary:
(a) Capital Stock of Merger Subsidiary. Each issued and
outstanding share of the capital stock of Merger Subsidiary shall be converted
into and become one fully paid and nonassessable share of Common Stock, no par
value per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock that is owned by the Company or by any
subsidiary (defined in Section 3.1(c)) of the Company and each share of Company
Common Stock that is owned by Parent, Merger Subsidiary or any other subsidiary
of Parent shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section
2.2(f), each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted into
the right to receive (the "Merger Consideration") 14,212.48 fully paid and
nonassessable shares of Common Stock, par value $.001 per share (the "Parent
Common Stock"), of Parent (rounded to the nearest ten-thousandth of a share)
(the "Exchange Ratio"). As of the Effective Time of the Merger, all such shares
of Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued in exchange therefor upon surrender of such certificate in
accordance with Section 2.2(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(c), in each case, without
interest.
(d) Adjustment of Exchange Ratio. If after the date hereof and
prior to the Effective Time of the Merger, Parent shall have declared a stock
split (including a reverse split) of Parent Common Stock or a dividend payable
in Parent Common Stock, or any other distribution of securities or extraordinary
dividend (in cash or otherwise) to holders of Parent Common Stock with respect
to their Parent Common Stock (including such a distribution or dividend made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction), then the Exchange Ratio referred to in
Section 2.1(c) shall be appropriately adjusted to reflect such stock split or
dividend or other distribution of securities.
SECTION 2.2. Exchange of Certificates. (a) Parent To
Provide Merger Consideration. Parent shall take all necessary steps to
have available promptly after the Effective Time of the Merger the
certificates representing the shares of Parent Common Stock issuable
in exchange for the outstanding shares of Company Common Stock
pursuant to Section 2.1 and, from time to time, cash for payment in
lieu of fractional shares pursuant to Section 2.2(f).
(b) Exchange Procedure. At or prior to the Effective Time of
the Merger, Parent shall make available to each holder of record of a
certificate or certificates which immediately prior to the Effective Time of the
Merger represented outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.1, (i) a Letter of Transmittal in the form
3
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set forth as Exhibit A to this Agreement and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to Parent or to
such agent or agents as may be appointed by the Parent, together with such
Letter of Transmittal, duly executed, and such other documents as may reasonably
be required by Parent or such agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration into which the
shares of Company Common Stock shall have been converted pursuant to Section
2.1, cash in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(f) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(c), and
the Certificate so surrendered shall be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. At any time after the Effective
Time of the Merger, each Certificate shall be deemed to represent only the right
to receive upon surrender the Merger Consideration into which the shares of
Company Common Stock shall have been converted pursuant to Section 2.1, cash in
lieu of any fractional shares of Parent Common Stock as contemplated by Section
2.2(f) and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), in each case, without interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time of the Merger shall be paid to the holder
of any unsurrendered Certificate with respect to the shares of Parent Common
Stock, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(f), in each case until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable escheat laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificate representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(f) and the amount of dividends or other distributions with a record
date after the Effective Time of the Merger theretofore paid with respect to
such whole shares of Parent Common Stock and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time of the Merger but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(d) No Further Ownership Rights in Common Stock. All Merger
Consideration paid upon the surrender of Certificates in accordance with the
terms of this Article II (including any cash paid pursuant to Section 2.2(f))
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock represented by such Certificates, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time of the Merger. If, after the
Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
(e) No Liability. If any Certificates shall not have been
surrendered prior to six months after the Effective Time of the Merger, the
Merger Consideration (and any cash payable pursuant to Section 2.2(c) or 2.2(f))
payable in respect of such Certificates shall be held by Parent, after which
time any holders of such Certificates shall look only to Parent for such Merger
Consideration (and such cash) in respect of such Certificates. None of Parent,
Merger Subsidiary or the Company shall be liable to any person in respect of any
Merger Consideration
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(or any cash payable pursuant to Section 2.2(c) or 2.2(f)) delivered to
a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Parent Common
Stock (after taking into account all Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Parent Common Stock multiplied by $21.75.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company
The Company represents and warrants to Parent and Merger
Subsidiary as follows:
(a) Organization, Standing and Power. The Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company is duly qualified to do business and is in
good standing in each jurisdiction set forth in Section 3.1(a) of the Disclosure
Schedule. Section 3.1(a) of the Disclosure Schedule also sets forth each other
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by it or because of the nature of its business as now
being conducted. The Company has delivered to Parent complete and correct copies
of its Articles of Incorporation and By-Laws and all amendments thereto to the
date hereof and has made available to Parent its minute books and stock records.
Section 3.1(a) of the disclosure schedule delivered by the Company to Parent and
Merger Subsidiary simultaneously with the execution of this Agreement (the
"Disclosure Schedule") contains (i) a true and correct list of the jurisdictions
in which the Company is qualified to do business as a foreign corporation and
(ii) a true and correct list of the directors and officers of the Company as of
the date of this Agreement and at all times since the last action of the board
of directors and the shareholders of the Company.
(b) Authority; Binding Agreements. The execution and delivery
of this Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action of the Company. The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the Merger and the
other transactions contemplated hereby and the Company has duly executed and
delivered this Agreement. The stockholders of the Company have approved this
Agreement, the Merger and the other transactions contemplated hereby in
accordance with the requirements of New York Law and the Articles of
Incorporation and By-Laws of the Company. This Agreement is the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(c) Capitalization; Equity Interests. The authorized capital
stock of the Company consists of 1,000 shares of Company Common Stock. At the
time of execution of this
5
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Agreement, 72.25 shares of Company Common Stock were issued and
outstanding. Section 3.1(c) of the Disclosure Schedule contains a true
and correct list of all of the owners (of record and beneficial) of the
issued and outstanding shares of Company Common Stock specifying the
number of such shares owned by, and the address of, each such person.
Except as set forth above, at the time of execution of this Agreement,
no shares of capital stock or other voting securities of the Company are
issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. There are
not any bonds, debentures, notes or other indebtedness or securities of
the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which shareholders of the Company may vote. Except as set forth in
Section 3.1(c) of the Disclosure Schedule, there are not any securities,
options, warrants, calls, rights, commitments, agreements, arrangements
or undertakings of any kind to which the Company is a party or by which
the Company is bound obligating the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call right, commitment, agreement, arrangement or undertaking.
Except as set forth in Section 3.1(c) of the Disclosure Schedule, there
are no outstanding rights, commitments, agreements, arrangements or
undertakings of any kind obligating the Company to repurchase, redeem or
otherwise acquire any shares of capital stock or other voting securities
of the Company or any securities of the type described in the two
immediately preceding sentences. Except as set forth in Section 3.1(c)
of the Disclosure Schedule, the Company does not have any subsidiaries
and does not own or hold any equity or other security interests in any
other entity. For purposes of this Agreement, a "subsidiary" of any
person means another person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient
to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more
of the equity interests of which ) is owned directly or indirectly by
such first person; and a "person" means an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity (governmental or private).
(d) Conflicts; Consents. The execution and delivery of this
Agreement, the consummation of the Merger and the other transactions
contemplated hereby and the compliance by the Company with the provisions hereof
do not and will not (i) conflict with or result in a breach of the charter,
by-laws or other constitutive documents of the Company, (ii) conflict with or
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, or any material license, franchise, permit, agreement or other
instrument or obligation to which the Company is a party, or by which the
Company or any of the Company's properties or assets, may be bound or affected,
except for such conflicts, breaches or defaults as are set forth in Section
3.1(d) of the Disclosure Schedule, which disclosure also shall set forth what,
if any, waivers or consents to such conflicts, breaches or defaults shall have
been obtained on or before the Closing), (iii) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to the Company or any
of the Company's properties or assets, except for any such violations that are
immaterial to the Company or any of the Company's properties or assets or (iv)
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets used or held by the Company. Except as
set forth in Section 3.1(d) of the Disclosure Schedule, no consent or approval
by, or any notification of or filing with, any person is required in connection
with the execution, delivery and performance by the Company of this Agreement or
the consummation of the Merger and the other transactions expressly contemplated
hereby except for (i) the filing with the Securities and Exchange Commission
(the "SEC") such reports under Sections 13 and 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the Merger and the other transactions contemplated hereby,
(ii) such filings as may be required under state securities or "blue sky" laws
in connection with the issuance of the Parent Common Stock in connection with
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the Merger, (iii) the filing of a copy of the New York Certificate of Merger
with the New York Secretary of State and the Delaware Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (iv) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as are set forth in Section 3.1(d) of the Disclosure
Schedule.
(e) Financial Information. (i) The following financial
statements are contained in Section 3.1(e) of the Disclosure Schedule:
(A) the audited balance sheet of the Company at December 31,
1995 and the related statement of operations for the year ended
December 31, 1995;
(B) the unaudited, internally prepared quarterly balance
sheets of the Company as of the end of each quarter commencing January
1, 1995 through the quarter end prior to the date of this Agreement and
the related statement of operations for each such quarter; and
Except as indicated in Section 3.1(e) of the Disclosure Schedule, all such
financial statements have been prepared in conformity with United States
generally accepted accounting principles ("GAAP") and, except that the quarterly
financial statements referred to in subsection (B) above do not contain foot
notes and except as set forth in Section 3.1(e) of the Disclosure Schedule,
applied on a basis consistent with prior periods and fairly present the
financial condition, results of operations and cash flows of the Company. The
balance sheets of the Company as at the dates set forth present fairly the
financial position of the Company as at the dates thereof, and the related
statements of operations of the Company for each of the respective specified
periods then ended present fairly the results of operations of the Company for
each of the respective periods then ended. For the purposes of this Agreement,
all financial statements referred to in this paragraph shall include any notes
and schedules to such financial statements.
(ii) There were no liabilities or obligations (whether
absolute, accrued, contingent or otherwise, and whether due or to become due) in
respect of the Company which were required to be, in accordance with GAAP, and
were not shown or provided for on the balance sheets of the Company to which
such liabilities or obligations related. All reserves established by the Company
are reflected on the balance sheets of the Company or in the footnotes to the
financial statements of the Company and are adequate and there are no loss
contingencies that are required to be accrued by Statement of Financial
Accounting Standard No. 5 of the Financial Accounting Standards Board which are
not provided for on such balance sheets.
(f) Absence of Changes. Except as set forth in Section 3.1(f)
of the Disclosure Schedule, since December 31, 1995, the Company has been
operated in the ordinary course consistent with past practice and there has not
been:
(i) any material adverse change in its condition
(financial or otherwise), assets, liabilities, operations, customer
contracts or other customer arrangements, management personnel,
billings, revenues, earnings or business;
(ii) any obligation or liability (whether absolute,
accrued, contingent or otherwise, and whether due or to become due)
incurred by the Company, other than obligations under customer
contracts, current obligations and liabilities incurred in the ordinary
course of business and consistent with past practice;
7
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(iii) any payment, discharge or satisfaction of any
claim or obligation of the Company, except in the ordinary course of
business and consistent with past practice;
(iv) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock of the Company or any direct or indirect redemption, purchase or
other acquisition of any such shares;
(v) any issuance or sale, or any contract entered into
for the issuance or sale, of any shares of capital stock or securities
convertible into or exercisable for shares of capital stock of the
Company;
(vi) any sale, assignment, pledge, encumbrance,
transfer or other disposition of any tangible asset of the Company,
except as contemplated by this Agreement, or any sale, assignment,
transfer or other disposition of any patents, trademarks, service
marks, trade names, copyrights, licenses, franchises, know-how or any
other intangible assets;
(vii) any creation of any material claim or other
encumbrance on any property of the Company;
(viii) any material write-down of the value of any
asset or inventory of the Company or any material write-off as
uncollectible of any accounts or notes receivable or any portion
thereof;
(ix) any cancellation of any debts or claims or any
amendment, termination or waiver of any rights of value to the Company;
(x) any capital expenditure or commitment or addition
to property, plant or equipment of the Company, individually or in the
aggregate, in excess of $25,000;
(xi) any general increase in the compensation of
employees of the Company (including any increase pursuant to any bonus,
pension, profit-sharing or other benefit or compensation plan, policy
or arrangement or commitment), or any increase in any such compensation
or bonus payable to any officer, shareholder, director, consultant or
agent of the Company having an annual salary or remuneration in excess
of $40,000;
(xii) any material damage, destruction or loss
(whether or not covered by insurance) affecting any asset or
property of the Company;
(xiii) any change in the independent public accountants
of the Company or in the accounting methods or accounting practices
followed by the Company or any change in depreciation or amortization
policies or rates;
(xiv) any agreement or action not otherwise referred to
in items (i) through (xiii) above entered into or taken that is
material to the Company; or
(xv) any agreement, whether in writing or otherwise, to
take any of the actions specified in the foregoing items (i) through
(xiv).
(g) Assets, Property and Related Matters; Real Property.
Except as set forth in Section 3.1(g) of the Disclosure Schedule, (i) the
Company has good title to, or a valid leasehold interest in, as applicable, all
of the assets reflected on the financial statements contained in Section 3.1(e)
of the Disclosure Schedule, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind. Such assets (A) are in good operating
condition and repair, subject
8
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to ordinary wear and tear and (B) constitute all of the material
properties, interests, assets and rights held for use or used in
connection with the business and operations of the Company and
constitute all those necessary to continue to operate the business of
the Company consistent with current and historical practice. All items
of personal property owned by the Company as of June 30, 1996 with an
original cost or book value in excess of $5,000 are listed in Section
3.1(g)(i) of the Disclosure Schedule.
(ii) Section 3.1(g)(ii) of the Disclosure
Schedule sets forth a list of all real property and of all personal
property owned or leased by the Company. The Company does not own any
real property. With respect to property leased by the Company (I) the
Company is the owner and holder of all the leasehold interests and
estates purported to be granted by such leases, (II) all leases to which
the Company is a party are in full force and effect and constitute valid
and binding obligations of the Company and, to the knowledge of the
Company, of the other parties thereto, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equitable
principles, and (III) the Company has made available to Parent true and
complete copies of all written leases referred to in Section 3.1(g)(ii)
of the Disclosure Schedule. There exists no default, or any event which
upon notice or the passage of time, or both, would give rise to any
default, in the performance by the Company or by any lessor under any
lease. Except as set forth in Section 3.1(g) of the Disclosure Schedule,
the Company has not, and to the knowledge of the Company, no other
person has, granted any oral or written right to anyone other than the
Company to lease, sublease or otherwise occupy any of the properties
described in Section 3.1(g)(ii) of the Disclosure Schedule through the
end of the applicable lease periods.
(iii) The real estate listed in Section 3.1(g)(ii)
of the Disclosure Schedule and all appurtenances and improvements, as used,
constructed or maintained by the Company at any time, to the knowledge of
the Company, conform to applicable Federal, state, local and foreign
laws and regulations, except for any non-conformities that are immaterial
to the Company or any of the Company's properties or assets. To the
knowledge of the Company, the use of the buildings and structures located
on such real property or any appurtenances or equipment does not violate any
restrictive covenants or encroach on any property owned by others. No
condemnation proceeding is pending or, to the knowledge of the Company,
threatened which would preclude or impair the use of any such property
by the Company for the uses for which they are intended.
(h) Patents, Trademarks and Similar Rights. The Company owns
or licenses all patents, trademarks, service marks, trade names and copyrights,
in each case registered or unregistered, inventions, software (including
documentation and object and source code listings), know-how, trade secrets and
other intellectual property rights (collectively, the "Intellectual Property")
used in its business as presently conducted. Section 3.1(h) of the Disclosure
Schedule contains a list of all Intellectual Property owned and used by the
Company and any Intellectual Property which is licensed for use by others. No
Intellectual Property which is material to the business of the Company infringes
any rights owned or held by any other person. There is no pending or, to the
knowledge of the Company, threatened claim or litigation against the Company
contesting its right exclusively to use any Intellectual Property. To the
knowledge of the Company, no person is infringing the rights of the Company in
any Intellectual Property. No product or service sold by the Company violates or
infringes any intellectual property right owned or held by any other person. To
the knowledge of the Company, in the case of commercially available
"shrink-wrap" software programs (such as Lotus 1-2-3), neither the Company nor
any of its employees has made or is using any unauthorized copies of any such
software programs at any Company location.
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(i) Insurance. Section 3.1(i) of the Disclosure Schedule
contains a true and complete list of all policies of casualty, liability, theft,
fidelity, life and other forms of insurance held by the Company. True and
complete copies of such policies have been delivered or made available for
inspection and copy by Parent. All insurance policies are in the name of the
Company, outstanding and in full force and effect, all premiums with respect to
such policies are currently paid and such policies will not be affected by, or
terminated or lapse by reason of, the transactions contemplated by this
Agreement. The Company has not received notice of cancellation or termination of
any such policy, nor has it been denied or had revoked or rescinded any policy
of insurance, nor borrowed against any such policies. No claim under any such
policy is pending.
(j) Agreements, Etc. Section 3.1(j) of the Disclosure Schedule
contains a true and complete list of all written or oral contracts, agreements
and other instruments to which the Company is a party (i) relating to
indebtedness for money borrowed or capital leases, (ii) of duration of six
months or more from the date hereof and not cancelable without penalty on 30
days or less notice, (iii) relating to commitments in excess of $10,000, (iv)
relating to the employment or compensation of any director, officer, employee,
consultant or other agent of the Company, (v) relating to the sale or other
disposition of any assets, properties or rights, (vi) relating to the lease or
similar arrangement of any machinery, equipment, motor vehicles, furniture,
fixture or similar property, (vii) between the Company and any shareholder of
the Company or affiliates of any shareholder of the Company, (viii) that
restricts the operation of the Company anywhere in the world or (ix) that is
otherwise material to the Company or entered into other than in the ordinary
course of business. The Company is not in default under any such agreement or
instrument where such default could, singly or in the aggregate with defaults
under other agreements or instruments, have a material adverse effect on the
Company's condition (financial or otherwise), assets, liabilities, operations,
customer contracts or other customer arrangements, management personnel,
billings, revenues, earnings or business (a "Company Adverse Effect"), and, to
the knowledge of the Company, all such agreements or instruments are in full
force and effect. The Company has furnished to, or made available for inspection
and copy by, Parent true and complete copies of all documents described in
Section 3.1(j) of the Disclosure Schedule.
(k) Litigation, Etc. Except as set forth in Section 3.1(k) of
the Disclosure Schedule, there have not been for the past two years, nor are
there, any suits, actions, claims, investigations or legal or administrative or
arbitration proceedings in respect of the Company, pending or, to the knowledge
of the Company, threatened, whether at law or in equity, or before or by any
Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Except as set forth in
Section 3.1(k) of the Disclosure Schedule, there are no judgments, decrees,
injunctions or orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against the Company or any of its assets or
properties.
(l) Compliance; Governmental Authorizations. (i) The Company
has complied and is in compliance with all Federal, state, local and foreign
laws, ordinances, regulations, interpretations and orders (including those
relating to disposal of materials, environmental protection and occupational
safety and health) applicable to the Company, except where the failure, singly
or in the aggregate, to so be in compliance would not have a Company Adverse
Effect. The Company has all Federal, state, local and foreign governmental
licenses and permits necessary to conduct its business as presently being
conducted, which licenses and permits (and any exceptions thereto) are set forth
in Section 3.1(l) of the Disclosure Schedule. Such licenses and permits are in
full force and effect, no violations are or have been recorded in respect of any
thereof, no proceeding is pending or, to the knowledge of the Company,
threatened, to revoke or limit any thereof, and the Company does not know of any
basis for any such proceeding.
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(ii) There are no conditions relating to the
Company or relating to the Company's ownership, use or maintenance
of any real property previously owned or operated by the Company or any
of its affiliates, and the Company does not know or have reason to know
of any such condition in respect of such real property not related to
the ownership, use or maintenance, that could lead to any liability for
violation of any Federal, state, county or local laws, regulations,
orders or judgments relating to pollution or protection of the
environment or any other applicable environmental, health or safety
statutes, ordinances, orders, rules, regulations or requirements. The
Company has received, handled, used, stored, treated, shipped and
disposed of all hazardous or toxic materials, substances and wastes
(whether or not on its properties or properties owned or operated by
others) in material compliance with all applicable environmental, health
or safety statutes, ordinances, orders, rules, regulations or
requirements, except where the failure, singly or in the aggregate, to
be so in compliance would not have a Company Adverse Effect.
(m) Labor Relations; Employees. (i) Within the last five
years, the Company has not experienced any labor disputes with, or any work
stoppages by, a group of employees due to labor disagreements and, to the
knowledge of the Company, there is no such dispute or work stoppage threatened
against the Company. No employee of the Company is represented by any union or
collective bargaining agent and, to the knowledge of the Company, there has been
no union organizational effort in respect of any employees of the Company within
the past five years.
(ii) Section 3.1(m)(ii) of the Disclosure
Schedule contains a list of each pension, retirement, savings, deferred
compensation, and profit-sharing plan and each stock option, stock
appreciation, stock purchase, performance share, bonus or other
incentive plan, severance plan, health, group insurance or other welfare
plan, or other similar plan and any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), under which the Company has any current
or future obligation or liability or under which any employee or former
employee (or beneficiary of any employee or former employee) of the
Company has or may have any current or future right to benefits (the
term "plan" shall include any contract, agreement, policy or
understanding, each such plan being hereinafter referred to individually
as a "Plan"). The Company has delivered to Parent true and complete
copies of (A) each Plan, (B) the summary plan description for each Plan
and (C) the latest annual report, if any, which has been filed with the
IRS for each Plan. Each Plan intended to be tax qualified under Sections
401(a) and 501(a) of the Internal Revenue Code of 1986 (the "Code") has
been determined by the IRS to be tax qualified under Sections 401(a) and
501(a) of the Code and, since such determination, no amendment to or
failure to amend any such Plan adversely affects its tax qualified
status. There has been no prohibited transaction within the meaning of
Section 4975 of the Code and Section 406 of Title I of ERISA with
respect to any Plan.
(iii) No Plan is subject to the provisions of
Section 412 of the Code or Part 3 of Subtitle B of Title I of ERISA.
No Plan is subject to Title IV of ERISA. During the past five years,
neither the Company nor any business or entity then controlling,
controlled by, or under common control with the Company contributed
to or was obliged to contribute to an employee pension plan that was subject
to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or
arbitrations (other than routine claims for benefits) pending, or, to
the knowledge of the Company, threatened, with respect to any Plan or
the assets of any Plan, and the Company has no knowledge of any facts
which could give rise to any such actions, claims, lawsuits or
arbitrations (other than routine claims for benefits). The Company has
satisfied all funding, compliance and reporting requirements for all
Plans. With respect to each Plan, the Company has paid all contributions
(including employee salary reduction contributions) and all insurance
premiums that have
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become due and any such expense accrued but not yet due has been properly
reflected in the financial information in Section 3.1(e) of the
Disclosure Schedule.
(v) Except as described in Section
3.1(m)(ii) of the Disclosure Schedule, no Plan provides or is
required to provide, now or in the future, health, medical, dental,
accident, disability, death or survivor benefits to or in respect of any
person beyond termination of employment, except to the extent required
under any state insurance law or under Part 6 of Subtitle B of Title I
of ERISA and under Section 4980(B) of the Code. No Plan covers any
individual other than an employee of the Company, other than dependents
of employees under health and child care policies listed in Section
3.1(m)(ii) of the Disclosure Schedule and delivered to Parent.
(vi) Except as described in Section 3.1(m)(ii)
of the Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not (A) entitle any employee of the
Company to severance pay or termination benefits for which Parent or any
of its affiliates may become liable, (B) accelerate the time of payment
or vesting, or increase the amount of compensation due to any such
employee or former employee for which Parent or any of its affiliates
may become liable or (C) obligate Parent or any of its affiliates to pay
or otherwise be liable for any compensation, vacation days, pension
contribution or other benefits to any employee, consultant or agent of
the Company for periods before the Closing Date or for personnel whom
Parent does not actually employ.
(vii) The Company has made no representations
or warranties (whether written or oral, express or implied)
contractually or otherwise to any client or customer of the Company that
the Company's employees rendering services to such client or customer
are not "leased employees" (within the meaning of Section 414(n) of the
Code) or that such employees would not be required to participate under
any pension benefit plan (within the meaning of Section 3(2) of ERISA)
(a "Pension Benefit Plan") of such client or customer of the Company
relating either to (A) providing benefits to employees of the Company
under a Pension Benefit Plan of the Company or (B) making contributions
to or reimbursing such client or customer for any contributions made to
a Pension Benefit Plan of such client or customer on behalf of employees
of the Company.
(n) Accounts Receivable. Section 3.1(n) of the Disclosure
Schedule contains a true aged list of unpaid accounts and notes receivable owing
to the Company as of July 31, 1996 (which is the most recent date for which such
information is available), all of which, to the Company's knowledge and except
as set forth in Section 3.1(n) of the Disclosure Schedule, are collectible in
the ordinary course of business.
(o) Customers. Section 3.1(o) of the Disclosure Schedule
contains (i) a true and complete list of the customers of the Company for each
of the years ended December 31, 1993, 1994 and 1995 and the period beginning
January 1, 1996 and ended June 30, 1996 and, as of the date hereof, any
additions or deletions of customers from June 30, 1996 to the date of this
Agreement, (ii) a description of the revenues for each of the years ended
December 31, 1993, 1994 and 1995 and each month commencing January 1, 1996 and
ended June 30, 1996 under contracts with each of the customers of the Company
listed on Section 3.1(o) of the Disclosure Schedule, (iii) a true and complete
list of all contracts as of June 30, 1996 pursuant to which the Company provides
goods or services to its customers (the "Client Contracts") and (iv) a true and
correct description of (A) the terms and conditions of each oral Client
Contract, (B) to the knowledge of the Company, any and all disputes or defaults
arising under or with respect to the Client Contracts in connection with which a
client has threatened, or is expected to, terminate its contract with the
Company or claim for damages, and (C) all loans or advances made by the Company
to or on behalf of its customers, which description includes the date of such
loan or advance and the principal balance outstanding as of the date of this
Agreement under each such
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loan or advance. The Client Contracts are valid and enforceable in
accordance with their respective terms with respect to the Company,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles. To the
Company's knowledge and except as set forth in Section 3.1(o) of the
Disclosure Schedule, no customer of the Company has threatened to
terminate, fail to renew or adversely modify any relationship with the
Company.
(p) Accounts Payable. Section 3.1(p) of the Disclosure
Schedule contains a true and complete list of all accounts payable of the
Company as of July 31, 1996 (which is the most recent date for which such
information is available).
(q) Related Party Transactions. Except as set forth in Section
3.1(q) of the Disclosure Schedule, no current or former partner, director,
officer, employee or shareholder of the Company or any associate or affiliate
(as defined in the rules promulgated under the Exchange Act) thereof, or any
relative with a relationship of not more remote than first cousin of any of the
foregoing, is presently, or during the 12-month period ending on the date hereof
has been, (i) a party to any transaction with the Company (including, but not
limited to, any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such director, officer, employee or
shareholder or such associate) or (ii) to the knowledge of the Company, the
direct or indirect owner of an interest in any corporation, firm, association or
business organization which is a present (or potential) competitor, supplier or
customer of the Company, nor does any such person receive income from any source
other than the Company which relates to the Company's business or should
properly accrue to the Company.
(r) Billing and Collection Practices. (i) The current
practices and procedures of the Company with respect to (A) billing on behalf of
customers, (B) receiving and processing Medicare and Medicaid payments due to
customers, (C) holding and transfer of such payments and (D) the method of
determining and collecting the fees received by the Company for services
provided by providers and physicians participating in the Medicare or Medicaid
programs are not in violation of the restriction on assignment as set forth in
42 U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C. Section
1396a(a)(32), and the regulations promulgated thereunder or similar provisions
of any state Medicaid program, except where such violations, singly or in the
aggregate, would not have a Company Adverse Effect.
(ii) The Company is not engaged in any activity, whether alone
or in concert with one or more of its clients, which would constitute a
violation of any Federal laws or the laws of any state (including, without
limitation, (A) Federal antifraud and abuse or similar laws pertaining to
Medicare, Medicaid, or any other Federal health or insurance program, (B) state
laws pertaining to Medicaid or any other state health or insurance program, (C)
state or Federal laws pertaining to billings to insurance companies, health
maintenance organizations, and other managed care plans or to insurance fraud,
and (D) Federal and state laws relating to collection agencies and the
performance of collection services) prohibiting fraudulent, abusive or unlawful
practices connected in any way with the provision of health care services, the
determination of eligibility for health care services, the billing for such
services provided to a beneficiary of any state, Federal or private health or
insurance program or credit collection services, except where such violations,
singly or in the aggregate, would not have a Company Adverse Effect. Without
limiting the generality of the foregoing, the Company has not, directly or
indirectly, paid, offered to pay or agreed to pay, or solicited or received, any
fee, commission, sum of money, property or other remuneration to or from any
person which the Company knows or has reason to believe to have been illegal
under 42 U.S.C. Section 1320a-7b(b) or any similar state law.
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(iii) Except as set forth in Section 3.1(r) of the Disclosure
Schedule, the Company does not currently use, and has not in the past
established or used, trust accounts in connection with its business.
(s) Tax Matters. The Company is a "small business corporation"
and has maintained a valid election to be an "S" corporation under Subchapter S
of the Code, and the equivalent provisions of all applicable state income tax
statutes since January 1, 1991. Except as set forth in Section 3.1(s) of the
Disclosure Schedule, all Federal, state, local and foreign tax returns and tax
reports for periods ending on or prior to the Closing Date by the Company have
been or will be filed, or a valid request for extension has been or will be
filed with respect thereto, on a timely basis (including any extensions) with
the appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are and will
be true, correct and complete. Except as set forth in Section 3.1(s) of the
Disclosure Schedule, all Federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise, employment and other taxes
(including interest, penalties and withholdings of tax) due from and payable by
the Company on or prior to the Closing Date have been fully paid on a timely
basis. Except as set forth in Section 3.1(s) of the Disclosure Schedule, the
Company is not currently the beneficiary of any extension of time within which
to file any tax return. To the Company's knowledge, no claim has ever been made
by an authority in a jurisdiction where the Company does not file tax returns
that it is or may be subject to taxation by that jurisdiction, and the Company
has not received any notice, or request for information from any such authority.
Except as set forth in Section 3.1(s) of the Disclosure Schedule, no issues have
been raised with the Company by the Internal Revenue Service (the "IRS") or any
other taxing authority in connection with any tax return or report filed by the
Company and there are no issues which, either individually or in the aggregate,
could result in any liability for tax obligations of the Company relating to
periods ending on or before December 31, 1995 in excess of the accrued liability
for taxes shown on the financial statements contained in Section 3.1(e)(i) of
the Disclosure Schedule. No waivers of statutes of limitations have been given
or requested with respect to the Company. Except as set forth in Section 3.1(s)
of the Disclosure Schedule, no differences exist between the amounts of the book
basis and the tax basis of assets that are not accounted for by an accrual on
the books of the Company for Federal income tax purposes. Except as set forth in
Section 3.1(s) of the Disclosure Schedule, the Company is not required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company, and
the IRS has proposed no adjustment or change in accounting method. The Company
is not a party to any agreement, contract or arrangement that would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. All transactions or
methods of accounting that could give rise to an understatement of Federal
income tax (within the meaning of Section 6661 of the Code for tax returns filed
on or before December 31, 1990, and within the meaning of Section 6662 of the
Code for tax returns filed after December 31, 1990) have been adequately
disclosed on the tax returns in accordance with Section 6661(b)(2)(B) of the
Code for tax returns filed on or prior to December 31, 1990, and in accordance
with Section 6662(d)(2)(B) of the Code for tax returns filed after December 31,
1990. The Company is not and has not been a United States real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(ii) of the Code. The Company has complied
(and until the Closing will comply) with all applicable laws relating to the
payment and withholding of taxes (including withholding and reporting
requirements under Section 1441 through 1464, 3401 through 3406, 6041 and 6049
of the Code and similar provisions under any other laws) and, within the time
and in the manner prescribed by law, has withheld from wages, fees and other
payments and paid over to the proper governmental or regulatory authorities all
amounts required.
(t) Disclosure. To the Company's knowledge, there have been no
events, transactions or information relating to the Company which, singly or in
the aggregate, could
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reasonably be expected to have a Company Adverse Effect, other than
general events prevailing throughout the medical billing and accounts
receivable management services industry which affect firms that directly
compete in such industry. No representation or warranty of the Company
contained in this Agreement, as modified by the Disclosure Schedule, and
no statement contained in any certificate, schedule, annex, list or
other writing furnished to Parent, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances
under which they were made, not misleading.
(u) Bank Accounts; Powers-of-Attorney. (i) Section 3.1(u) of
the Disclosure Schedule contains a true and complete list of (A) all bank
accounts and safe deposit boxes of the Company and all persons who are
signatories thereunder or who have access thereto and (B) the names of all
persons holding general or special powers-of-attorney from the Company and a
summary of the terms thereof.
(ii) Except as set forth in Section 3.1(u) of the Disclosure
Schedule, the Company does not and has not maintained any escrow or custody
accounts with respect to customer funds.
(v) Accounting Matters. To the knowledge of the Company,
neither the Company nor any of its affiliates has taken or agreed to take any
action that, without giving effect to any action taken or agreed to be taken by
Parent or any of its affiliates, would prevent Parent from accounting for the
business combination to be effected by the Merger as a "pooling of interests."
(w) Brokers. No agent, broker, investment banker, person or
firm acting on behalf of the Company or under the authority of the Company is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with any of the transactions contemplated hereby.
(x) Accredited Investor. Each stockholder of the Company (i)
is an "accredited investor" as such term is defined in Rule 501 under the
Securities Act or (ii) has appointed Peter D. Cooper as his or her purchaser
representative in connection with the Merger.
SECTION 3.2. Representations and Warranties by Merger
Subsidiary and Parent. Merger Subsidiary and Parent jointly and severally
represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Merger
Subsidiary and Parent (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and (ii) has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of Parent, its
subsidiaries and Merger Subsidiary is duly qualified to do business and is in
good standing in each jurisdiction in which such qualification is necessary
because of the property owned, leased or operated by it or because of the nature
of its business as now being conducted, except where the failure, singly or in
the aggregate, to be so qualified or in good standing could not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, billings, revenues, earnings or
business of Parent and its subsidiaries taken as a whole (a "Parent Adverse
Effect"). Parent has provided the Company with complete and correct copies of
its and Merger Subsidiary's Certificate of Incorporation and By-Laws.
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(b) Authority; Binding Agreements. The execution and delivery
of this Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action (including any action by the shareholders thereof) on the part
of Parent and Merger Subsidiary. Each of Parent and Merger Subsidiary has all
requisite corporate power and authority to enter into this Agreement and to
consummate the Merger and the other transactions contemplated hereby and each of
Parent and Merger Subsidiary has duly executed and delivered this Agreement.
This Agreement constitutes a valid and binding obligation of each of Parent and
Merger Subsidiary enforceable against such party in accordance with its terms.
(c) Conflicts; Consents. The execution and delivery of this
Agreement, the consummation of the Merger and the other transactions
contemplated hereby and compliance by Parent and Merger Subsidiary with the
other provisions hereof do not and will not (i) conflict with or result in a
breach of the charter, by-laws or other constitutive documents of Parent or
Merger Subsidiary, (ii) conflict with or result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
provisions of any note, bond, lease, mortgage, indenture, license, franchise,
permit, agreement or other instrument or obligation to which Parent or Merger
Subsidiary is a party, or by which Parent or Merger Subsidiary or Parent's or
Merger Subsidiary's properties or assets, may be bound or affected, except for
such conflict, breach or default as to which requisite waivers or consents shall
be obtained before the Closing, or (iii) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to Parent or Merger
Subsidiary or Parent's or Merger Subsidiary's properties or assets. No consent
or approval by, or any notification of or filing with, any person is required in
connection with the execution, delivery and performance by Parent or Merger
Subsidiary of this Agreement or the consummation of the Merger and the other
transactions expressly contemplated hereby, except for (i) the filing with the
SEC such reports under Sections 13 and 16 of the Exchange Act, as may be
required in connection with this Agreement, the Merger and the other
transactions contemplated hereby, (ii) such filings as may be required under
state securities or "blue sky" laws in connection with the issuance of the
Parent Common Stock in connection with the Merger, and (iii) the filing of a
copy of the New York Certificate of Merger with the New York Secretary of State
and the Delaware Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business.
(d) Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock. At the close of business on August 29, 1996, (i) 7,221,628
shares of Parent Common Stock were issued and outstanding, (ii) no shares of
Parent Common Stock were held by Parent in its treasury, (iii) 195,000 shares of
Parent Common Stock were reserved for issuance upon exercise of outstanding
employee stock options to purchase shares of Parent Common Stock and (iv)
774,750 shares of Parent Common Stock were reserved for issuance upon exercise
of employee stock options that are not outstanding but may be issued in the
future under Parent's 1996 Stock Option Plan. Except as set forth above, at the
time of execution of this Agreement, no shares of capital stock or other voting
securities of Parent are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Parent are, and all shares which may be
issued pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness or securities of Parent
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of Parent may
vote. Except as set forth above, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Parent or any of
its subsidiaries is a party or by which any of them is bound obligating Parent
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Parent
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or of any of its subsidiaries or obligating Parent or any of its
subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding commitments, agreements,
arrangements or undertakings of any kind obligating Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock or other voting securities of Parent or any of its
subsidiaries. As of the date of this Agreement, the authorized capital
stock of Merger Subsidiary consists of 1,000 shares of common stock, par
value $.01 per share, all of which have been validly issued, are fully
paid and nonassessable and are owned by Parent free and clear of any
liens.
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities. Parent has filed all required reports, forms and other documents
with the SEC since the filing of Parent's Registration Statement on Form S-1 for
the initial public offering of Parent Common Stock on December 21, 1995 (the
"Parent SEC Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Documents, and none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be state therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Parent included in the Parent SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved and fairly present the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal and recurring year-end audit adjustments not material in scope or
amount). Except as set forth in the Parent Filed SEC Documents (defined in
Section 3.2(f)), neither Parent nor any of its subsidiaries has any material
liabilities or obligations required by generally accepted accounting principles
to be recognized or disclosed on a consolidated balance sheet of Parent and its
consolidated subsidiaries or in the notes thereto and which, singly or in the
aggregate, could reasonably be expected to have a Parent Adverse Effect.
(f) Absence of Certain Changes or Events. Except as disclosed
in the Parent SEC Documents filed and publicly available prior to the date of
this Agreement (the "Parent Filed SEC Documents"), since the date of the most
recent financial statements contained in the Parent Filed SEC Documents, there
has not been any material adverse change in the condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, billings, revenues, earnings or
business of Parent and its subsidiaries taken as a whole.
(g) Litigation, Etc. Except as disclosed in the Parent Filed
SEC Documents, there are no suits, actions, claims, investigations or legal or
administrative or arbitration proceedings in respect of Parent or any of its
subsidiaries, pending or, to the knowledge of Parent, threatened, whether at law
or in equity, or before or by any Federal, foreign, state or municipal or other
governmental department, commission, board, bureau, agency or instrumentality
that, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Parent and its subsidiaries taken as a whole.
(h) Compliance; Governmental Authorizations. Except as
disclosed in the Parent Filed SEC Documents, Parent and its subsidiaries have
complied and are in material compliance with all Federal, state, local and
foreign laws, ordinances, regulations, interpretations and order (including
those relating to disposal of materials, environmental protection and
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occupational safety and health) applicable to Parent and its subsidiaries,
except where the failure, singly or in the aggregate, to be so in compliance
would not have a Parent Adverse Effect. Parent and its subsidiaries have all
Federal, state, local and foreign governmental licenses and permits necessary to
conduct their businesses as presently being conducted. Such licenses and permits
are in full force and effect, no violations are or have been recorded in respect
of any thereof, no proceeding is pending, or, to the knowledge of Parent,
threatened, to revoke or limit any thereof, and Parent does not know of any
basis for any such proceeding.
(i) Accounting Matters. To the knowledge of Parent, neither
Parent nor any of its affiliates has taken or agreed to take any action that,
without giving effect to any action taken or agreed to be taken by the Company
or any of its affiliates, would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests."
(j) Brokers. Except for Williams Financial, no agent, broker,
investment banker, person or firm acting on behalf of Parent or Merger
Subsidiary or under the authority of Parent or Merger Subsidiary is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby.
(k) Billing and Collection Practices. (i) The current
practices and procedures of Parent and its subsidiaries with respect to (A)
billing on behalf of customers, (B) receiving and processing Medicare and
Medicaid payments due to customers, (C) holding and transfer of such payments
and (D) the method of determining and collecting the fees received by Parent and
its subsidiaries for services provided by providers and physicians participating
in the Medicare or Medicaid programs are not in violation of the restriction on
assignment as set forth in 42 U.S.C. Section 1395g(c), 42 U.S.C. Section
1395u(b)(6) and 42 U.S.C. Section 1396a(a)(32), and the regulations promulgated
thereunder or similar provisions of any state Medicaid program, except where
such violations, singly or in the aggregate, would not have a Parent Adverse
Effect.
(ii) Parent and its subsidiaries are not engaged in any
activity, whether alone or in concert with one or more of its clients, which
would constitute a violation of any Federal laws or the laws of any state
(including, without limitation, (A) Federal antifraud and abuse or similar laws
pertaining to Medicare, Medicaid, or any other Federal health or insurance
program, (B) state laws pertaining to Medicaid or any other state health or
insurance program, (C) state or Federal laws pertaining to billings to insurance
companies, health maintenance organizations, and other managed care plans or to
insurance fraud, and (D) Federal and state laws relating to collection agencies
and the performance of collection services) prohibiting fraudulent, abusive or
unlawful practices connected in any way with the provision of health care
services, the determination of eligibility for health care services, the billing
for such services provided to a beneficiary of any state, Federal or private
health or insurance program or credit collection services, except where such
violations, singly or in the aggregate, would not have a Parent Adverse Effect.
Without limiting the generality of the foregoing, Parent and its subsidiaries
have not, directly or indirectly, paid, offered to pay or agreed to pay, or
solicited or received, any fee, commission, sum of money, property or other
remuneration to or from any person which the Company knows or has reason to
believe to have been illegal under 42 U.S.C. Section 1320a-7b(b) or any similar
state law.
(l) Insurance. Parent and its subsidiaries maintain casualty,
liability, theft, fidelity, life and other forms of insurance which are
customary for businesses in Parent's industry. All insurance policies are in the
name of the Parent, outstanding and in full force and effect, all premiums with
respect to such policies are currently paid and such policies will not be
affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement. The Parent has not received notice of cancellation or
termination of any such policy,
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nor has it been denied or had revoked or rescinded any policy of
insurance, nor borrowed against any such policies. No claim under any
such policy is pending.
(m) Labor Relations. Within the last five years, Parent and
its subsidiaries have not experienced any labor disputes with, or any work
stoppages by, a group of employees due to labor disagreements and, to the
knowledge of Parent, there is no such dispute or work stoppage threatened
against Parent or its subsidiaries. No employee of Parent or its subsidiaries is
represented by any union or collective bargaining agent and, to the knowledge of
Parent, there has been no union organizational effort in respect of any
employees of Parent or its subsidiaries within the past five years.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1. Expenses. Each of Parent and Merger Subsidiary
shall pay its own fees, costs and expenses incurred in connection with this
Agreement and the Merger and the other transactions contemplated by this
Agreement, including, without limitation, the fees, costs and expenses of its
financial advisors, accountants and counsel. The Company's fees, costs and
expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement, including, without limitation, the
reasonable fees, costs and expenses of its financial advisors, accountants and
counsel, up to a maximum of $125,000, shall be paid by the Company. Parent shall
be indemnified by the Company's stockholders under the Indemnification Agreement
attached hereto as Exhibit B for any such fees, costs and expenses of the
Company which exceed the maximum amount set forth in the preceding sentence.
Notwithstanding the foregoing, Parent shall pay any fees and expenses due
Williams Financial as a result of the consummation of the Merger.
SECTION 4.2. Affiliates. The Company shall list in Section 4.2
of the Disclosure Schedule all persons who are "affiliates" of the Company for
purposes of the SEC's Accounting Series Releases concerning "pooling of
interests" treatment for business combinations, which list shall include all of
the Company's directors, executive officers and stockholders.
SECTION 4.3. Agreements of Parent Affiliates. Prior to the
Effective Time of the Merger, Parent will use its reasonable best efforts to
obtain the execution of agreements with respect to the sale of Parent Common
Stock with each person who is an "affiliate" of Parent for purposes of
compliance with pooling restrictions.
SECTION 4.4. Nasdaq. Parent shall use its reasonable best
efforts to have the Parent Common Stock to be issued in the Merger approved for
listing on the National Association of Securities Dealers, Inc. Automated
Quotations System (the "Nasdaq National Market"), subject to official notice of
issuance.
SECTION 4.5. Pooling. To the knowledge of any such person,
neither Parent, nor Merger Subsidiary, nor the Company shall take or cause to be
taken any action, whether before or after the Effective Time of the Merger,
which would disqualify the Merger as a "pooling of interests" for accounting
purposes.
SECTION 4.6. Public Announcements. Parent and Merger
Subsidiary, on the one hand, and the Company, on the other hand, will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to
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such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any
national securities exchange or the Nasdaq National Market.
SECTION 4.7. Confidentiality. (a) Parent, Merger Subsidiary
and the Company each agree that all financial or other information about Parent,
Merger Subsidiary or the Company, or other information of a confidential or
proprietary nature, disclosed to the other at any time in connection with the
proposed transaction shall be kept confidential by the party receiving such
information and shall not be disclosed to any person or used by the receiving
party (other than to its agents or employees or in connection with the
transactions contemplated by this Agreement) except: (i) with the prior written
consent of the disclosing party; (ii) as may be required by applicable law,
regulation, court process or by obligations pursuant to any listing agreement
with any national securities exchange (including the Nasdaq National Market);
(iii) such information which may have been acquired or obtained by such party
(other than through disclosure by the other party in connection with the
transaction contemplated by this Agreement); or (iv) such information which is
or becomes generally available to the public other than as a result of a
violation of this provision.
(b) In the event of a breach or threatened breach by any party
of the provisions of this Section, the non-breaching party shall be entitled to
an injunction restraining such party from such breach. Nothing contained in this
paragraph (b) or elsewhere in this Agreement shall be construed as prohibiting
the non-breaching party from pursuing any other remedies available at law or
equity for such breach or threatened breach of this Agreement nor limiting the
amount of damages recoverable in the event of a breach or threatened breach by
any party of the provisions of this Section.
SECTION 4.8. Parent Agreement. (a) Parent agrees to indemnify
and hold harmless any and all guarantors listed in Section 4.8(a) of the
Disclosure Schedule from and against any and all liabilities, judgments, claims,
settlements, losses, damages, fees, liens, taxes, penalties, obligations, costs
and expenses incurred or suffered (directly or indirectly) by any such person
(including, without limitation, reasonable costs of investigation and reasonable
attorney's fees and expenses) arising from, by reason of or in connection with
any failure by the Surviving Corporation to pay, discharge or otherwise satisfy,
as and when due, any debt, note or other obligation of the Company outstanding
at the Effective Date and listed in Section 4.8(a) of the Disclosure Schedule.
Any claim under this indemnity shall be made in accordance with the provisions
of Section 2(c) of the Indemnification Agreement in substantially the form of
Exhibit B, with such guarantor being deemed a "Stockholder Indemnified Party"
for such purpose; provided that such indemnification shall not be subject to or
count toward the PSS Basket Amount set forth in Section 2(d)(v) of the
Indemnification Agreement.
(b) Parent agrees to pay, or cause to be paid, on the Closing
Date the obligations of the Company listed in Section 4.8(b) of the Disclosure
Schedule; provided that any indemnification obligation arising out of a breach
by PSS of its obligations set forth in this Section 4.8(b) shall not be subject
to or count toward the PSS Basket Amount set forth in Section 2(d)(v) of the
Indemnification Agreement.
ARTICLE V
DOCUMENTS TO BE DELIVERED AT CLOSING
SECTION 5.1. Documents to be Delivered at Closing. The
obligations of Parent, Merger Subsidiary and the Company to effect the Merger
are subject to the delivery by each party thereto of the following documents:
20
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(a) Representations and Warranties. Parent shall have received
a certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to the effect that the
representations and warranties of the Company set forth in the Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of the Company set forth in this Agreement that
are not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date.
(b) Performance of Obligations of the Company. Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to the effect
that the Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date.
(c) Consents, Amendments and Terminations. Parent shall have
received duly executed and delivered copies of all requisite approvals under New
York Law to the Merger by the Stockholders of the Company and such other
waivers, consents, terminations and approvals contemplated by Section 3.1(d) and
Section 3.1(d) of the Disclosure Schedule, all in form and substance reasonably
satisfactory to Parent. Parent acknowledges that as of the Closing it may not
have received al of the waivers, consents, terminations or approvals
contemplated by Section 3.1(d) of the Disclosure Schedule.
(d) Opinion of Counsel. Parent shall have received the opinion
dated the Closing Date of Tashlik, Kreutzer & Goldwyn P.C., counsel to the
Company and the Company's shareholders, in the form of Exhibit C.
(e) Indemnification Agreement. The Indemnification
Agreement, in the form of Exhibit B, shall have been duly executed
and delivered by the parties hereto.
(f) Employment Agreement. Peter D. Cooper and the Company
shall have executed and delivered to Parent an Employment Agreement, in
the form of Exhibit D.
(g) Non-Competition Agreement. Each of the stockholders of the
Company (other than Peter D. Cooper, whose Employment Agreement contains a
non-competition covenant) shall have executed and delivered to Parent a
Non-Competition Agreement, in the form of Exhibit E.
(h) Investment and Affiliate Letter; Affiliate Agreement. Each
person who is a stockholder of the Company shall have executed and delivered to
Parent an Investment and Affiliate Letter, in the form of Exhibit F. Each person
who is listed as an affiliate of the Company in Section 4.3 of the Disclosure
Schedule who is not also a stockholder of the Company shall have executed and
delivered to Parent an Affiliate Agreement, in the form of Exhibit G.
(i) Resignation Letters. Each of the directors of the Company
(other than Peter D. Cooper) shall have tendered to Parent their respective
resignations from such positions, effective immediately following the Closing
Date.
(j) Representations and Warranties. The Company shall have
received a certificate signed on behalf of each of Parent and Merger Subsidiary
by the chief executive officer and the chief financial officer of such entity to
the effect that the representations and warranties of Parent and Merger
Subsidiary set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of Parent and
Merger Subsidiary set forth in this Agreement that are not so qualified shall be
true and correct in all
21
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material respects, in each case as of the date of this Agreement and as
of the Closing Date, as though made on and as of the Closing Date.
(k) Registration Rights Agreement. Parent shall have entered
into the Registration Rights Agreement with the stockholders of the Company,
in the form of Exhibit H.
(l) Opinion. The Company shall have received an opinion dated
the Closing Date from Howard, Darby & Levin, counsel to Parent, in the form of
Exhibit I.
(m) Other Documents. Parent, Merger Subsidiary and the
Company shall have received such other documents, certificates or instruments
as they each may reasonably request.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement. This Agreement and the
schedules and exhibits hereto contain the entire agreement among the parties
with respect to the transactions contemplated by this Agreement and supersede
all prior agreements or understandings among the parties.
SECTION 6.2. Descriptive Headings; Certain Interpretations.
(a) Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or
other statement to such party's knowledge, such party will be deemed to have
made due inquiry into the subject matter of such representation, warranty or
other statement.
(c) Except as otherwise expressly provided in this Agreement,
the following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
SECTION 6.3. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient if
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Parent or Merger Subsidiary, to:
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
P.O. Box 36
Mt. Joy, Pennsylvania 17552
Telecopy: 717-653-0567
22
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Attention: Peter W. Gilson
Hamilton F. Potter III
David S. Geller
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Telecopy: 212-841-1010
Attention: Scott F. Smith, Esq.
If to the Company to:
EE&C Financial Services, Inc.
60 Park Place
Newark, New Jersey 07102
Telecopy: 201-624-8240
Attention: Peter D. Cooper
with a copy to:
Tashlik, Kreutzer & Goldwyn P.C.
833 Northern Boulevard
Great Neck, New York 11021
Telecopy: 516-829-6509
Attention: Martin M. Goldwyn, Esq.
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
SECTION 6.4. Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one agreement.
SECTION 6.5. Survival. All representations and warranties,
agreements and covenants contained herein or in any document delivered pursuant
hereto or in connection herewith (unless otherwise expressly provided herein or
therein) shall survive the Closing and shall remain in full force and effect
until the first anniversary of the Closing Date (the "Expiration Date"), except
the agreement contained in Section 4.8 shall survive until the satisfaction by
the Surviving Corporation or Parent of all obligations of the Company referred
to therein.
SECTION 6.6. Benefits of Agreement. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
is for the sole benefit of the parties hereto and not for the benefit of any
third party, except for the provisions of Article II and Section 4.8.
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SECTION 6.7. Amendments and Waivers. This Agreement may be
amended by the parties at any time before or after any required approval of the
transactions contemplated by this Agreement by the shareholders of the Company;
provided, however, that, after any such approval, there shall not be made any
amendment that by law requires further approval by such shareholders without the
further approval of such shareholders. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto.
SECTION 6.8. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
hereto without the prior written consent of the other parties hereto. Any
instrument purporting to make such assignment shall be void.
SECTION 6.9. Enforceability. It is the desire and intent of
the parties hereto that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
24
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
Attest PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ David S. Geller By: /s/ Peter W. Gilson
______________________________ ________________________________
Name: Name:
Title: Title:
Attest PSS EE&C FINANCIAL SERVICES, INC.
By: /s/ David S. Geller By: /s/ Peter W. Gilson
______________________________ ________________________________
Name: Name:
Title: Title:
Attest EE&C FINANCIAL SERVICES, INC.
By: /s/ William Hecht By: /s/ Peter D. Cooper
______________________________ ________________________________
Name: Name:
Title: Title:
25
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================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 30, 1996
AMONG
PHYSICIAN SUPPORT SYSTEMS, INC.,
PSS EE&C HEALTH SERVICES, INC.,
PSS MED-DATA INTERFACE SYSTEMS, INC.,
PSS MEDICAL INTERCEPT SYSTEMS, INC.,
EE&C HEALTH SERVICES, INC.,
MED-DATA INTERFACE SYSTEMS, LLC
AND
MEDICAL INTERCEPT SYSTEMS, LLC
================================================================================
<PAGE>
TABLE OF CONTENTS
INTRODUCTION..................................................................1
ARTICLE I
THE MERGER...................................................................2
SECTION 1.1. The Mergers......................................................2
SECTION 1.2. Closing..........................................................2
SECTION 1.3. Effective Time...................................................2
SECTION 1.4. Effects of the Mergers...........................................3
SECTION 1.5. Articles of Incorporation and By-Laws............................3
SECTION 1.6. Directors........................................................3
SECTION 1.7. Officers.........................................................4
SECTION 1.8. Tax-Free Reorganization..........................................4
SECTION 1.9. Accounting Treatment.............................................4
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES..............................................4
SECTION 2.1. Effect on Equity Interests.......................................4
(a) EE&C Merger......................................................4
(b) Med-Data Merger..................................................5
(c) MIS Merger.......................................................5
(d) Adjustment of Exchange Ratio.....................................5
SECTION 2.2. Exchange of Certificates.........................................6
(a) Parent To Provide Merger Consideration...........................6
(b) Exchange Procedure...............................................6
(c) Distributions with Respect to Unexchanged Shares.................7
(d) No Further Ownership Rights in Common Stock......................7
(e) No Liability.....................................................8
(f) No Fractional Shares.............................................8
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................................8
SECTION 3.1. Representations and Warranties of the Companies..................8
(a) Organization, Standing and Power.................................8
(b) Authority; Binding Agreements....................................9
(c) Capitalization; Equity Interests.................................9
(d) Conflicts; Consents.............................................11
(e) Financial Information...........................................11
(f) Absence of Changes..............................................12
(g) Assets, Property and Related Matters; Real Property.............13
(h) Patents, Trademarks and Similar Rights..........................14
(i) Insurance.......................................................14
(j) Agreements, Etc.................................................14
(k) Litigation, Etc.................................................15
(l) Compliance; Governmental Authorizations.........................15
(m) Labor Relations; Employees......................................16
(n) Accounts Receivable.............................................17
(o) Customers.......................................................17
(p) Accounts Payable................................................17
(q) Related Party Transactions......................................18
(r) Billing and Collection Practices................................18
(s) Tax Matters.....................................................18
(t) Disclosure......................................................19
(u) Bank Accounts; Powers-of-Attorney...............................19
(v) Brokers.........................................................20
(w) Accredited Investor.............................................20
SECTION 3.2. Representations and Warranties by Merger Subsidiary
and Parent....................................................20
(a) Organization, Standing and Power................................20
(b) Authority; Binding Agreements...................................20
(c) Conflicts; Consents.............................................20
(d) Capitalization..................................................21
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities...................................................21
(f) Absence of Certain Changes or Events............................22
(g) Litigation, Etc.................................................22
(h) Compliance; Governmental Authorizations.........................22
(i) Brokers.........................................................22
(j) Billing and Collection Practices................................23
(k) Insurance.......................................................23
(l) Labor Relations.................................................23
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ARTICLE IV
ADDITIONAL AGREEMENTS........................................................23
SECTION 4.1. Expenses........................................................23
SECTION 4.2. Nasdaq..........................................................24
SECTION 4.3. Public Announcements............................................24
SECTION 4.4. Confidentiality.................................................24
SECTION 4.5. Parent Agreement................................................24
ARTICLE V
DOCUMENTS TO BE DELIVERED AT CLOSING.........................................25
SECTION 5.1. Documents to be Delivered at Closing............................25
(a) Representations and Warranties..................................25
(b) Performance of Obligations of the Company.......................25
(c) Consents, Amendments and Terminations...........................25
(d) Indemnification Agreement.......................................25
(e) Opinion of Counsel..............................................25
(f) Employment Agreements...........................................25
(g) Non-Competition Agreement.......................................26
(h) Investment and Affiliate Letter; Affiliate Agreement............26
(i) Service Agreement...............................................26
(j) Representations and Warranties..................................26
(k) Performance of Obligations of the Parent and
Each Merger Subsidiary........................................26
(l) Registration Rights Agreement...................................26
(m) Opinion.........................................................26
(n) Other Documents.................................................26
ARTICLE VI
MISCELLANEOUS................................................................26
SECTION 6.1. Entire Agreement................................................26
SECTION 6.2. Descriptive Headings; Certain Interpretations...................26
SECTION 6.3. Notices.........................................................27
SECTION 6.4. Counterparts....................................................28
SECTION 6.5. Survival........................................................28
SECTION 6.6. Benefits of Agreement...........................................28
SECTION 6.7. Amendments and Waivers..........................................28
SECTION 6.8. Assignment......................................................28
SECTION 6.9. Enforceability..................................................28
SECTION 6.10. GOVERNING LAW..................................................29
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EXHIBITS
A Form of Letter of Transmittal
B Form of Indemnification Agreement
C Form of Opinions of Counsel of the Company and the Shareholders
D Form of Employment Agreement
E Form of Non-Competition Agreement
F Form of Investment and Affiliate Letter
G Form of Affiliate Agreement
H Form of Registration Rights Agreement
I Form of Opinion of Counsel of Parent and Merger Subsidiary
ANNEXES
Annex 1 EE&C Merger Consideration
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AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1996 (the
"Agreement"), among Physician Support Systems, Inc., a
Delaware corporation ("Parent"), PSS EE&C Health Services,
Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("EE&C Merger Subsidiary"), PSS Med-Data Interface
Systems, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Ed-Data Merger Subsidiary"), PSS
Medical Intercept Systems, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("MIS Merger Subsidiary"
and, together with EE&C Merger Subsidiary, the "Merger
Subsidiaries"), EE&C Health Services, Inc., a Delaware
corporation ("EE&C Health"), Med-Data Interface Systems, LLC,
a Texas limited liability company ("Med-Data"), and Medical
Intercept Systems, LLC, a Texas limited liability company
("Medical Intercept" and, together with EE&C Health and
Med-Data, the "Companies").
INTRODUCTION
The Board of Directors of each of Parent, EE&C Merger
Subsidiary and EE&C Health, and the stockholders of EE&C Health, each have
unanimously approved the merger of EE&C Merger Subsidiary into the Company (the
"EE&C Merger"), upon the terms and subject to the conditions set forth in this
Agreement. As a result of the EE&C Merger, each issued and outstanding share of
the Common Stock, no par value per share (the "EE&C Common Stock"), of EE&C
Health not owned directly or indirectly by Parent or any Company will be
converted into the right to receive the consideration provided in this
Agreement.
The Board of Directors of each of Parent and Med-Data Merger
Subsidiary, and the managers and members of Med-Data, each have unanimously
approved the merger of Med-Data Merger Subsidiary into Med-Data (the "Med-Data
Merger"), upon the terms and subject to the conditions set forth in this
Agreement. As a result of the Med-Data Merger, each outstanding interest of a
member in Med-Data (a "Med-Data Membership Interest") not owned directly or
indirectly by Parent or any Company will be converted into the right to receive
the consideration provided in this Agreement.
The Board of Directors of each of Parent and MIS Merger
Subsidiary, and the managers and members of Medical Intercept, each have
unanimously approved the merger of MIS Merger Subsidiary into Medical Intercept
(the "MIS Merger" and, together with the EE&C Merger and the Med-Data Merger,
the "Mergers"), upon the terms and subject to the conditions set forth in this
Agreement. As a result of the MIS Merger, each outstanding interest of a member
in Medical Intercept (a "MIS Membership Interest") not owned directly or
indirectly by Parent or any Company will be converted into the right to receive
the consideration provided in this Agreement.
The parties to this Agreement intend that the EE&C Merger
qualify as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
Parent, Merger Subsidiaries and the Companies desire to make
certain representations, warranties, covenants and agreements in connection with
the Mergers and also to prescribe various conditions to the Mergers.
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The parties agree as follows:
ARTICLE I
THE MERGERS
SECTION 1.1. The Mergers. (a) Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law ("Delaware Law"), EE&C Health shall be merged with and
into EE&C Merger Subsidiary at the EE&C Effective Time of the Merger (defined
below in Section 1.3). Following the EE&C Merger, the separate corporate
existence of EE&C Health shall cease and EE&C Merger Subsidiary shall continue
as the surviving corporation (the "EE&C Surviving Corporation") and shall
succeed to and assume all the rights and obligations of EE&C Health in
accordance with Delaware Law.
(b) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Texas Limited Liability Company Act
("Texas Law") and Delaware Law, Med-Data Merger Subsidiary shall be merged with
and into the Med-Data at the Med-Data Effective Time of the Merger (defined
below in Section 1.3). Following the Med-Data Merger, the separate existence of
Med-Data Merger Subsidiary shall cease and Med-Data shall continue as the
surviving entity (the "Med-Data Surviving Company") and shall succeed to and
assume all the rights and obligations of Med-Data Merger Subsidiary in
accordance with Texas Law and Delaware Law.
(c) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Texas Law and Delaware General Law, MIS
Merger Subsidiary shall be merged with and into Medical Intercept at the MIS
Effective Time of the Merger (defined below in Section 1.3). Following the MIS
Merger, the separate corporate existence of MIS Merger Subsidiary shall cease
and Medical Intercept shall continue as the surviving entity (the "MIS Surviving
Company") and shall succeed to and assume all the rights and obligations of MIS
Merger Subsidiary in accordance with Texas Law and Delaware Law.
SECTION 1.2. Closing. The closing of the Mergers (the
"Closing") will take place at 10:00 a.m. on August 30, 1996 at the offices of
Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New York 10019,
unless another date or place is agreed to in writing by the parties hereto (such
date upon which the Closing occurs, the "Closing Date").
SECTION 1.3. Effective Time. (a) As soon as practicable, EE&C
Health and EE&C Merger Subsidiary shall file a copy of a certificate of merger
or other appropriate documents in the office of the Delaware Secretary of State
(the "EE&C Delaware Certificate of Merger") executed in accordance with the
relevant provisions of Delaware Law, and shall make all other filings or
recordings required under Delaware Law. The EE&C Merger shall become effective
at such time as a copy of the EE&C Delaware Certificate of Merger is duly filed
with the Delaware Secretary of State (the time the EE&C Merger becomes
effective, the "EE&C Effective Time of the Merger").
(b) As soon as practicable, Med-Data Merger Subsidiary and
Med-Data shall file a copy of articles of merger or other appropriate documents
in the office of the Texas Secretary of State (the "Med-Data Texas Articles of
Merger") executed in accordance with the relevant provisions of Texas Law and a
certificate of merger or other appropriate documents in the office of the
Delaware Secretary of State (the "Med-Data Delaware Certificate of Merger")
executed in accordance with the relevant provisions of Delaware Law, and shall
make all other filings or recordings required under Texas Law or Delaware Law.
The Med-Data Merger shall become effective at such time as a copy of the
Med-Data Texas Articles of Merger is duly filed with the
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Texas Secretary of State and the Med-Data Delaware Certificate of Merger is
duly filed with the Delaware Secretary of State (the time the Med-Data Merger
becomes effective, the "Med-Data Effective Time of the Merger").
(c) As soon as practicable, Medical Intercept and MIS Merger
Subsidiary shall file a copy of articles of merger or other appropriate
documents in the office of the Texas Secretary of State (the "MIS Texas Articles
of Merger") executed in accordance with the relevant provisions of Texas Law and
a certificate of merger or other appropriate documents in the office of the
Delaware Secretary of State (the "MIS Delaware Certificate of Merger") executed
in accordance with the relevant provisions of Delaware Law, and shall make all
other filings or recordings required under Texas Law or Delaware Law. The MIS
Merger shall become effective at such time as a copy of the MIS Texas Articles
of Merger is duly filed with the Texas Secretary of State and the Delaware
Certificate of Merger is duly filed with the Delaware Secretary of State (the
time the MIS Merger becomes effective, the "MIS Effective Time of the Merger").
SECTION 1.4. Effects of the Mergers. The EE&C Merger shall
have the effects set forth in Delaware Law. The Med-Data Merger shall have the
effects set forth in Delaware Law and Texas Law. The MIS Merger shall have the
effects set forth in Delaware Law and Texas Law.
SECTION 1.5. Articles of Incorporation and By-Laws. (a) The
Articles of Incorporation of EE&C Merger Subsidiary as in effect at the EE&C
Effective Time of the Merger shall be the Articles of Incorporation of the EE&C
Surviving Corporation, until changed or amended. The By-Laws of EE&C Merger
Subsidiary as in effect at the EE&C Effective Time of the Merger shall be the
By-Laws of the EE&C Surviving Corporation, until changed or amended.
(b) The Articles of Organization of Med-Data as in effect at
the Med-Data Effective Time of the Merger shall be the Articles of Organization
of the Med-Data Surviving Company, until changed or amended. The Regulations of
Med-Data as in effect at the Med-Data Effective Time of the Merger shall be the
Regulations of the Med-Data Surviving Company, until changed or amended.
(c) The Articles of Organization of Medical Intercept as in
effect at the MIS Effective Time of the Merger shall be the Articles of
Organization of the MIS Surviving Company, until changed or amended. The
Regulations of Medical Intercept as in effect at the MIS Effective Time of the
Merger shall be the Regulations of the MIS Surviving Company, until changed or
amended.
SECTION 1.6. Directors. (a) Following the EE&C Effective
Time of the Merger, the directors of EE&C Surviving Corporation shall be Peter
D. Cooper, Hamilton F. Potter III, Peter W. Gilson and David S. Geller, until
the earlier of their resignation or removal or until their successors are
duly elected and qualified.
(b) Following the Med-Data Effective Time of the Merger, the
managers of the Med-Data Surviving Company shall be Peter D. Cooper, Hamilton F.
Potter III, Peter W. Gilson and David S. Geller, until the earlier of their
resignation or removal or until their successors are duly elected and qualified.
(c) Following the MIS Effective Time of the Merger, the
managers of the MIS Surviving Company shall be Peter D. Cooper, Hamilton F.
Potter III, Peter W. Gilson and David S. Geller, until the earlier of their
resignation or removal or until their successors are duly elected and qualified.
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(d) So long as Peter D. Cooper is an affiliate of the EE&C
Surviving Corporation, Med-Data Surviving Company or MIS Surviving Company,
Parent shall take such action as shall be necessary so that Peter D. Cooper is
elected to the Board of Directors of the EE&C Surviving Corporation and to the
board of managers of Med-Data Surviving Company or MIS Surviving Company, as the
case may be.
SECTION 1.7. Officers.(a) The officers of EE&C Health at the
EE&C Effective Time of the Merger shall be the officers of the EE&C Surviving
Corporation, until the earlier of their resignation or removal or until their
successors are duly elected and qualified.
(b) The officers of Med-Data at the Med-Data Effective Time of
the Merger shall be the officers of the Med-Data Surviving Company, until the
earlier of their resignation or removal or until their successors are duly
elected and qualified.
(c) The officers of Medical Intercept at the MIS Effective
Time of the Merger shall be the officers of the MIS Surviving Company, until the
earlier of their resignation or removal or until their successors are duly
elected and qualified.
SECTION 1.8. Tax-Free Reorganization. The EE&C Merger is
intended to be a reorganization within the meaning of Section 368 of the Code,
and this Agreement is intended to be a "plan of reorganization" within the
meaning of the regulations promulgated under Section 368 of the Code.
SECTION 1.9. Accounting Treatment. The business combinations
to be effected by the Mergers are intended to be treated for accounting
purposes as a purchase.
ARTICLE II
EFFECT OF THE MERGERS ON THE EQUITY INTERESTS OF THE
CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Equity Interests. (a) EE&C Merger. As
of the EE&C Effective Time of the Merger, by virtue of the EE&C Merger and
without any action on the part of the holder of any shares of EE&C Common Stock
or any shares of capital stock of EE&C Merger Subsidiary:
(i) Capital Stock of EE&C Merger Subsidiary. Each
issued and outstanding share of the capital stock of EE&C Merger Subsidiary
shall be converted into and become one fully paid and nonassessable share of
Common Stock, no par value per share, of the EE&C Surviving Corporation.
(ii) Cancellation of Treasury Stock and Parent-Owned
Stock. Each share of EE&C Common Stock that is owned by any Company or by any
subsidiary (defined in Section 3.1(c)) of any Company and each share of EE&C
Common Stock that is owned by Parent, any Merger Subsidiary or any other
subsidiary of Parent shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(iii) Conversion of EE&C Common Stock. The issued and
outstanding shares of EE&C Common Stock (other than shares to be canceled in
accordance with Section 2.1(a)(ii)) shall be converted in the aggregate into
the right to receive (the "EE&C Merger Consideration") 286,000 fully paid and
nonassessable shares of Common Stock, par value $.001 per share (the "Parent
Common Stock"), of Parent and $2,392,500 in cash. For their shares of
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EE&C Common Stock, each holder has previously elected to receive in the
aggregate such number of shares of Parent Common Stock and such amount in cash,
in each case as is set forth on Annex 1 attached hereto. As of the EE&C
Effective Time of the Merger, all such shares of EE&C Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
EE&C Common Stock shall cease to have any rights with respect thereto, except
the right to receive the EE&C Merger Consideration and any cash in lieu of
fractional shares, if any, of Parent Common Stock to be issued in exchange
therefor upon surrender of such certificate in accordance with Section 2.2(f)
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), in each case, without interest.
(b) Med-Data Merger. As of the Med-Data Effective Time of the
Merger, by virtue of the Med-Data Merger and without any action on the part of
any holder of any Med-Data Membership Interest or any shares of capital stock of
Med-Data Merger Subsidiary:
(i) Capital Stock of Merger Subsidiary. Each issued
and outstanding share of the capital stock of Med-Data Merger Subsidiary shall
together be converted into and become a 100% Med-Data Membership Interest and
shall constitute the only outstanding Med-Data Membership Interest.
(ii) Conversion of Med-Data Membership Interests. The
outstanding Med-Data Membership Interest of each member of Med-Data shall be
converted into the right to receive (the "Med-Data Merger Consideration") an
amount in cash equal to the product of (x) such member's Med-Data Membership
Interest (expressed in fractional terms) and (y) $1,196,250. As of the Med-Data
Effective Time of the Merger, all such Med-Data Membership Interests shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a Med-Data Membership Interest shall
cease to have any rights with respect thereto, except the right to receive the
Med-Data Merger Consideration, without interest.
(c) MIS Merger. As of the MIS Effective Time of the Merger, by
virtue of the MIS Merger and without any action on the part of the holder of any
MIS Membership Interest or any shares of capital stock of MIS Merger Subsidiary:
(i) Capital Stock of MIS Merger Subsidiary. Each
issued and outstanding share of the capital stock of MIS Merger Subsidiary
shall together be converted into and become a 100% MIS Membership Interest and
shall constitute the only outstanding MIS Membership Interest.
(ii) Conversion of MIS Membership Interests. The
outstanding MIS Membership Interest of each member of Medical Intercept shall
be converted into the right to receive (the "MIS Merger Consideration") an
amount equal to the product of (x) such member's MIS Membership Interest
(expressed in fractional terms) and (y) $108,750. As of the MIS Effective Time
of the Merger, all such MIS Membership Interests shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a MIS Membership Interest shall cease to have any rights with
respect thereto, except the right to receive the MIS Merger Consideration,
without interest.
(d) Adjustment of Exchange Ratio. If after the date hereof and
prior to the effective time of the Mergers, Parent shall have declared a stock
split (including a reverse split) of Parent Common Stock or a dividend payable
in Parent Common Stock, or any other distribution of securities or extraordinary
dividend (in cash or otherwise) to holders of Parent Common Stock with respect
to their Parent Common Stock (including such a distribution or dividend made in
connection with a recapitalization, reclassification, merger, consolidation,
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reorganization or similar transaction), then the EE&C Exchange Ratio referred to
in Sections 2.1(a) shall be appropriately adjusted to reflect such stock split
or dividend or other distribution of securities.
SECTION 2.2. Exchange of Certificates. (a) Parent To Provide
Merger Consideration. Parent shall take all necessary steps to have available
promptly after the effective time of the Mergers the certificates representing
the shares of Parent Common Stock issuable in exchange for the outstanding
shares of EE&C Common Stock pursuant to Section 2.1 and, from time to time,
cash for payment in lieu of fractional shares pursuant to Section 2.2(f).
(b) Exchange Procedure. (i) At or prior to the EE&C Effective
Time of the Merger, Parent shall make available to each holder of record of a
certificate or certificates which immediately prior to the EE&C Effective Time
of the Merger represented outstanding shares of EE&C Common Stock (the
"Certificates") whose shares were converted into the right to receive the EE&C
Merger Consideration pursuant to Section 2.1(a), (1) a Letter of Transmittal in
the form set forth as Exhibit A to this Agreement and (2) instructions for use
in effecting the surrender of the Certificates in exchange for the EE&C Merger
Consideration. Upon surrender of a Certificate for cancellation to Parent or to
such agent or agents as may be appointed by the Parent, together with such
Letter of Transmittal, duly executed, and such other documents as may reasonably
be required by Parent or such agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the EE&C Merger Consideration into
which the shares of EE&C Common Stock shall have been converted pursuant to
Section 2.1(a), cash in lieu of fractional shares, if any, of Parent Common
Stock to which such holder is entitled pursuant to Section 2.2(f) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(c), and the Certificate so surrendered shall be canceled. In the
event of a transfer of ownership of EE&C Common Stock which is not registered in
the transfer records of EE&C Health, payment may be made to a person other than
the person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the EE&C
Surviving Corporation that such tax has been paid or is not applicable. At any
time after the EE&C Effective Time of the Merger, each Certificate shall be
deemed to represent only the right to receive upon surrender the EE&C Merger
Consideration into which the shares of EE&C Common Stock shall have been
converted pursuant to Section 2.1(a), cash in lieu of any fractional shares of
Parent Common Stock as contemplated by Section 2.2(f) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(c), in
each case, without interest thereon.
(ii) At or prior to the Med-Data Effective Time of the Merger,
Parent shall make available to each member of Med-Data who immediately prior to
the Med-Data Effective Time of the Merger held a Med-Data Membership Interest
and whose Med-Data Membership Interest converted into the right to receive the
Med-Data Merger Consideration pursuant to Section 2.1(b), (1) a Letter of
Transmittal in the form set forth as Exhibit A to this Agreement and (2)
instructions for use in effecting the surrender of the Med-Data Membership
Interest in exchange for the Med-Data Merger Consideration. Upon surrender of a
Med-Data Membership Interest pursuant to such Letter of Transmittal, duly
executed, and such other documents as may reasonably be required by Parent or
such agent, the holder of such Med-Data Membership Interest shall be entitled to
receive in exchange therefor the Med-Data Merger Consideration into which the
Med-Data Membership Interest shall have been converted pursuant to Section
2.1(a) and the Med-Data Membership Interest so surrendered shall be deemed
canceled. In the event of a transfer of ownership of Med-Data Membership
Interest which is not registered in the transfer records of Med-Data, payment
may be made to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any
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transfer or other taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of the Med-Data Surviving Company that such tax has been paid or
is not applicable. At any time after the Med-Data Effective Time of the Merger,
each Med-Data Membership Interest shall be deemed to represent only the right to
receive upon surrender the Med-Data Merger Consideration into which the Med-Data
Membership Interest shall have been converted pursuant to Section 2.1(b),
without interest thereon.
(iii) At or prior to the MIS Effective Time of the Merger,
Parent shall make available to each member of MIS who immediately prior to the
MIS Effective Time of the Merger held a MIS Membership Interest and whose MIS
Membership Interest converted into the right to receive the MIS Merger
Consideration pursuant to Section 2.1(c), (1) a Letter of Transmittal in the
form set forth as Exhibit A to this Agreement and (2) instructions for use in
effecting the surrender of the MIS Membership Interest in exchange for the MIS
Merger Consideration. Upon surrender of a MIS Membership Interest, pursuant to
such Letter of Transmittal, duly executed, and such other documents as may
reasonably be required by Parent or such agent, the holder of such MIS
Membership Interest shall be entitled to receive in exchange therefor the MIS
Merger Consideration into which the MIS Membership Interest shall have been
converted pursuant to Section 2.1 and the MIS Membership Interest so surrendered
shall be canceled. In the event of a transfer of ownership of MIS Membership
Interest which is not registered in the transfer records of Medical Intercept,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the MIS Surviving Company that such tax has
been paid or is not applicable. At any time after the MIS Effective Time of the
Merger, each MIS Membership Interest shall be deemed to represent only the right
to receive upon surrender the MIS Merger Consideration into which the MIS
Membership Interest shall have been converted pursuant to Section 2.1.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the effective time of the Mergers shall be paid to the holder
of any unsurrendered Certificate or unsurrendered membership interest, as the
case may be, with respect to the shares of Parent Common Stock, and no cash
payment in lieu of fractional shares, if any, shall be paid to any such holder
pursuant to Section 2.2(f), in each case until the surrender of such Certificate
or such unsurrendered membership interest, as the case may be, in accordance
with this Article II. Subject to the effect of applicable escheat laws,
following surrender of any such Certificate or such unsurrendered membership
interest, as the case may be, there shall be paid to the holder of the
certificate representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(f) and the amount of dividends or
other distributions with a record date after the effective time of the Mergers
theretofore paid with respect to such whole shares of Parent Common Stock and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the effective time of the Mergers but
prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights. (i) All merger consideration
paid upon the surrender of Certificates or membership interests, as the case may
be, in accordance with the terms of this Article II (including any cash paid
pursuant to Section 2.2(f)) shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of EE&C Common Stock
represented by such Certificates or to the membership interests, as the case may
be, and there shall be no further registration of transfers on the stock or
membership interest transfer books of
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the EE&C Surviving Corporation, the Med-Data Surviving Company or the MIS
Surviving Company, as the case may be, of the shares of EE&C Common Stock or
membership interests, as the case may be, which were outstanding immediately
prior to the effective time of the Mergers. If, after the effective time of
the Mergers, Certificates are presented to the EE&C Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article II.
(e) No Liability. If any Certificates or membership interests,
as the case may be, shall not have been surrendered prior to six months after
the effective time of the Mergers, the merger consideration (and any cash
payable pursuant to Section 2.2(c) or 2.2(f)) payable in respect of such
Certificates or such membership interests, as the case may be, shall be held by
Parent, after which time any holders of such Certificates or such membership
interest, as the case may be, shall look only to Parent for such merger
consideration (and such cash) in respect of such Certificates. None of Parent,
Merger Subsidiary or the Company shall be liable to any person in respect of any
merger consideration (or any cash payable pursuant to Section 2.2(c) or 2.2(f))
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. Notwithstanding any other provision of this Agreement, each holder of
shares of EE&C Common Stock exchanged pursuant to the Mergers who would
otherwise have been entitled to receive a fraction of a share of Parent Common
Stock shall receive, in lieu thereof, cash (without interest) in an amount equal
to such fractional part of a share of Parent Common Stock multiplied by $21.75.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Companies
The Companies jointly and severally represent and warrant to
Parent and Merger Subsidiaries as follows:
(a) Organization, Standing and Power. Each Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware or is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Texas and
(ii) has all requisite corporate or limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each Company is duly qualified to do business and is in
good standing in each jurisdiction set forth in Section 3.1(a) of the Disclosure
Schedule (defined below). Section 3.1(a) of the Disclosure Schedule also sets
forth each other jurisdiction in which such qualification is necessary because
of the property owned, leased or operated by it or because of the nature of its
business as now being conducted. EE&C Health has delivered to Parent complete
and correct copies of its Articles of Incorporation and By-Laws and all
amendments thereto to the date hereof and has made available to Parent its
minute books and stock records. Med-Data and Medical Intercept each has
delivered to Parent complete and correct copies of its Articles of Organization,
Certificate of Organization and Regulations and, in each case, all amendments
thereto to the date hereof and has made available to Parent its minute books and
membership interest transfer records. Section 3.1(a) of the disclosure schedule
delivered by the Companies to Parent and Merger Subsidiaries simultaneously with
the execution of this Agreement (the "Disclosure Schedule") contains (i) a true
and correct list of the jurisdictions in which each
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Company is qualified to do business as a foreign corporation or other entity
and (ii) a true and correct list of the directors and officers or managers, as
the case may be, of each Company as of the date of this Agreement and at all
times since the last action of the board of directors and the shareholders or
the members and the managers, as the case may be, of each Company.
(b) Authority; Binding Agreements. (i) The execution and
delivery of this Agreement and the consummation of the EE&C Merger and the other
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action of EE&C Health. EE&C Health has all requisite
corporate power and authority to enter into this Agreement and to consummate the
EE&C Merger and the other transactions contemplated hereby and EE&C Health has
duly executed and delivered this Agreement. The stockholders of EE&C Health have
approved this Agreement, the EE&C Merger and the other transactions contemplated
hereby in accordance with the requirements of Delaware Law and the Articles of
Incorporation and By-Laws of EE&C Health. This Agreement is the valid and
binding obligation of EE&C Health enforceable against EE&C Health in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(ii) The execution and delivery of this Agreement and the
consummation of the Med-Data Merger and the other transactions contemplated
hereby have been duly and validly authorized by all necessary limited liability
company action of Med-Data. Med-Data has all requisite limited liability company
power and authority to enter into this Agreement and to consummate the Med-Data
Merger and the other transactions contemplated hereby and Med-Data has duly
executed and delivered this Agreement. The members and manager of Med-Data have
approved this Agreement, the Med-Data Merger and the other transactions
contemplated hereby in accordance with the requirements of Texas Law and the
Articles of Organization and Regulations of Med-Data. This Agreement is the
valid and binding obligation of Med-Data enforceable against Med-Data in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equitable principles.
(iii) The execution and delivery of this Agreement and the
consummation of the MIS Merger and the other transactions contemplated hereby
have been duly and validly authorized by all necessary limited liability company
action of Medical Intercept. Medical Intercept has all requisite limited
liability company power and authority to enter into this Agreement and to
consummate the MIS Merger and the other transactions contemplated hereby and
Medical Intercept has duly executed and delivered this Agreement. The members
and manager of Medical Intercept have approved this Agreement, the MIS Merger
and the other transactions contemplated hereby in accordance with the
requirements of Texas Law and the Articles of Organization and Regulations of
Medical Intercept. This Agreement is the valid and binding obligation of Medical
Intercept enforceable against Medical Intercept in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles.
(c) Capitalization; Equity Interests. (i) The authorized
capital stock of EE&C Health consists of 200 shares of EE&C Common Stock. At the
time of execution of this Agreement, 200 shares of EE&C Common Stock were issued
and outstanding. Section 3.1(c)(i) of the Disclosure Schedule contains a true
and correct list of all of the owners (of record and beneficial) of the issued
and outstanding shares of EE&C Common Stock specifying the number of such shares
owned by, and the address of, each such person. Except as set forth above, at
the time of execution of this Agreement, no shares of capital stock or other
voting securities of EE&C Health are issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of EE&C Health are duly
authorized, validly issued, fully paid and nonassessable and not
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subject to preemptive rights. There are not any bonds, debentures, notes or
other indebtedness or securities of EE&C Health having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of EE&C Health may vote. Except as set forth
in Section 3.1(c)(i) of the Disclosure Schedule, there are not any securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which EE&C Health is a party or by which EE&C Health
is bound obligating EE&C Health to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of EE&C Health or obligating EE&C Health to issue, grant, extend or
enter into any such security, option, warrant, call right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section 3.1(c)(i)
of the Disclosure Schedule, there are no outstanding rights, commitments,
agreements, arrangements or undertakings of any kind obligating EE&C Health to
repurchase, redeem or otherwise acquire any shares of capital stock or other
voting securities of EE&C Health or any securities of the type described in the
two immediately preceding sentences. EE&C Health does not have any subsidiaries
and does not own or hold any equity or other security interests in any other
entity. For purposes of this Agreement, a "subsidiary" of any person means
another person, an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person; and a "person" means an individual,
corporation, partnership, joint venture, association, trust, unincorporated
organization or other entity (governmental or private).
(ii) Section 3.1(c)(i) of the Disclosure Schedule contains a
true and correct list of all of the owners (of record and beneficial) of the
outstanding Med-Data Membership Interests specifying the Med-Data Membership
Interest (expressed in percentage terms) owned by, and the address of, each such
person. Except as set forth above, at the time of execution of this Agreement,
no Med-Data Membership Interests or other voting securities of Med-Data are
issued, reserved for issuance or outstanding. All outstanding Med-Data
Membership Interests are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are not any bonds,
debentures, notes or other indebtedness or securities of Med-Data having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which members of Med-Data may vote. Except as
set forth in Section 3.1(c)(i) of the Disclosure Schedule, there are not any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Med-Data is a party or by
which Med-Data is bound obligating Med-Data to issue, deliver or sell, or cause
to be issued, delivered or sold, additional Med-Data Membership Interests or
other voting securities of Med-Data or obligating Med-Data to issue, grant,
extend or enter into any such security, option, warrant, call right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section 3.1(c)(i)
of the Disclosure Schedule, there are no outstanding rights, commitments,
agreements, arrangements or undertakings of any kind obligating Med-Data to
repurchase, redeem or otherwise acquire any Med-Data Membership Interests or
other voting securities of Med-Data or any securities of the type described in
the two immediately preceding sentences. Med-Data does not have any subsidiaries
and does not own or hold any equity or other security interests in any other
entity.
(iii) Section 3.1(c)(i) of the Disclosure Schedule contains a
true and correct list of all of the owners (of record and beneficial) of the
outstanding MIS Membership Interests specifying the MIS Membership Interest
(expressed in percentage terms) owned by, and the address of, each such person.
Except as set forth above, at the time of execution of this Agreement, no MIS
Membership Interests or other voting securities of Medical Intercept are issued,
reserved for issuance or outstanding. All outstanding MIS Membership Interests
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are not any bonds, debentures, notes or
other indebtedness or securities of Medical
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Intercept having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which members of Medical
Intercept may vote. Except as set forth in Section 3.1(c)(i) of the Disclosure
Schedule, there are not any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Med-Data is a party or by which Medical Intercept is bound obligating Medical
Intercept to issue, deliver or sell, or cause to be issued, delivered or sold,
additional MIS Membership Interests or other voting securities of Medical
Intercept or obligating Medical Intercept to issue, grant, extend or enter
into any such security, option, warrant, call right, commitment, agreement,
arrangement or undertaking. Except as set forth in Section 3.1(c)(i) of the
Disclosure Schedule, there are no outstanding rights, commitments, agreements,
arrangements or undertakings of any kind obligating Medical Intercept to
repurchase, redeem or otherwise acquire any MIS Membership Interests or other
voting securities of Medical Intercept or any securities of the type described
in the two immediately preceding sentences. Medical Intercept does not have any
subsidiaries and does not own or hold any equity or other security interests
in any other entity.
(d) Conflicts; Consents. The execution and delivery of this
Agreement, the consummation of each of the Mergers and the other transactions
contemplated hereby and the compliance by each Company with the provisions
hereof do not and will not (i) conflict with or result in a breach of the
charter, by-laws, articles of organization, certificate of organization,
regulations or other constitutive documents of such Company, (ii) conflict with
or result in a default (or give rise to any right of termination, cancellation
or acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, or any material license, franchise, permit, agreement or other
instrument or obligation to which such Company is a party, or by which such
Company or any of such Company's properties or assets, may be bound or affected,
except for such conflicts, breaches or defaults as are set forth in Section
3.1(d) of the Disclosure Schedule, which disclosure schedule also shall set
forth what, if any, waivers or consents to such conflicts, breaches or defaults
shall have been obtained on or before Closing, (iii) violate any law, statute,
rule or regulation or order, writ, injunction or decree applicable to such
Company or any of such Company's properties or assets, except for any such
violations that are immaterial to such Company or any of such Company's
properties or assets or (iv) result in the creation or imposition of any
security interest, lien or other encumbrance upon any property or assets used or
held by such Company. Except as set forth in Section 3.1(d) of the Disclosure
Schedule, no consent or approval by, or any notification of or filing with, any
person is required in connection with the execution, delivery and performance by
each Company of this Agreement or the consummation of each of the Mergers and
the other transactions expressly contemplated hereby except for (i) the filing
with the Securities and Exchange Commission (the "SEC") such reports under
Sections 13 and 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
Mergers and the other transactions contemplated hereby, (ii) such filings as may
be required under state securities or "blue sky" laws in connection with the
issuance of the Parent Common Stock in connection with the Mergers, (iii) the
filing of a copy of each of the EE&C Delaware Certificate of Merger, the
Med-Data Delaware Certificate of Merger and the MIS Delaware Certificate of
Merger with the Delaware Secretary of State and a copy of each of the Med-Data
Texas Articles of Merger and MIS Texas Articles of Merger with the Texas
Secretary of State and appropriate documents with the relevant authorities of
other states in which any Company is qualified to do business, and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as are set forth in Section 3.1(d) of the Disclosure Schedule.
(e) Financial Information. (i) The following financial
statements are contained in Section 3.1(e) of the Disclosure Schedule:
(A) the unaudited, internally prepared combined balance sheet
of the Companies at December 31, 1995 and the related statements of
operations for the year ended December 31, 1995; and
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(B) the unaudited, internally prepared quarterly combined
balance sheets of the Companies as of the end of each quarter
commencing January 1, 1996 through the quarter end prior to the date of
this Agreement and the related statement of operations for each such
quarter.
Except as indicated in Section 3.1(e) of the Disclosure Schedule, all such
financial statements have been prepared in conformity with United States
generally accepted accounting principles ("GAAP") and, except that the financial
statements referred to in subsections (A) and (B) above do not contain footnotes
and except as set forth in Section 3.1(e) of the Disclosure Schedule, applied on
a basis consistent with prior periods and fairly present the combined financial
condition, results of operations and cash flows of the Companies. The combined
balance sheets of the Companies as at the dates set forth present fairly the
combined financial position of the Companies as at the dates thereof, and the
related combined statements of operations of the Companies for each of the
respective specified periods then ended present fairly the combined results of
operations of the Companies for each of the respective periods then ended. For
the purposes of this Agreement, all financial statements referred to in this
paragraph shall include any notes and schedules to such financial statements.
(ii) There were no liabilities or obligations (whether
absolute, accrued, contingent or otherwise, and whether due or to become due) in
respect of the Companies which were required to be, in accordance with GAAP, and
were not shown or provided for on the combined balance sheets of the Companies
to which such liabilities or obligations related. All reserves established by
the Companies are reflected on the combined balance sheets of the Companies or
in the footnotes to the combined financial statements of the Companies and are
adequate and there are no loss contingencies that are required to be accrued by
Statement of Financial Accounting Standard No. 5 of the Financial Accounting
Standards Board which are not provided for on such balance sheets.
(f) Absence of Changes. Except as set forth in Section 3.1(f)
of the Disclosure Schedule, since December 31, 1995, the Companies have been
operated in the ordinary course consistent with past practice and there has not
been:
(i) any material adverse change in the condition
(financial or otherwise), assets, liabilities, operations, customer
contracts or other customer arrangements, management personnel,
billings, revenues, earnings or business of the Companies taken as a
whole;
(ii) any obligation or liability (whether absolute,
accrued, contingent or otherwise, and whether due or to become due)
incurred by any Company, other than obligations under customer
contracts, current obligations and liabilities incurred in the ordinary
course of business and consistent with past practice;
(iii) any payment, discharge or satisfaction of any
claim or obligation of any Company, except in the ordinary course of
business and consistent with past practice;
(iv) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock or membership interests, as the case may be, of any Company or
any direct or indirect redemption, purchase or other acquisition of any
such shares or such membership interests;
(v) any issuance or sale, or any contract entered into
for the issuance or sale, of any shares of capital stock or membership
interests or securities convertible into or exercisable for shares of
capital stock or membership interests of any Company;
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<PAGE>
(vi) any sale, assignment, pledge, encumbrance,
transfer or other disposition of any tangible asset of any Company,
except as contemplated by this Agreement, or any sale, assignment,
transfer or other disposition of any patents, trademarks, service
marks, trade names, copyrights, licenses, franchises, know-how or any
other intangible assets;
(vii) any creation of any material claim or other
encumbrance on any property of any Company;
(viii) any material write-down of the value of any
asset or inventory of any Company or any material write-off as
uncollectible of any accounts or notes receivable or any portion
thereof;
(ix) any cancellation of any debts or claims or any
amendment, termination or waiver of any rights of value to any Company;
(x) any capital expenditure or commitment or addition
to property, plant or equipment of any Company, individually or in
the aggregate, in excess of $25,000;
(xi) any general increase in the compensation of
employees of any Company (including any increase pursuant to any bonus,
pension, profit-sharing or other benefit or compensation plan, policy
or arrangement or commitment), or any increase in any such compensation
or bonus payable to any officer, shareholder, director, consultant or
agent of any Company having an annual salary or remuneration in excess
of $40,000;
(xii) any material damage, destruction or loss
(whether or not covered by insurance) affecting any asset or property
of any Company;
(xiii) any change in the independent public accountants
of any Company or in the accounting methods or accounting practices
followed by any Company or any change in depreciation or amortization
policies or rates;
(xiv) any agreement or action not otherwise referred to
in items (i) through (xiii) above entered into or taken that is
material to any Company; or
(xv) any agreement, whether in writing or otherwise, to
take any of the actions specified in the foregoing items (i) through
(xiv).
(g) Assets, Property and Related Matters; Real Property. (i)
Except as set forth in Section 3.1(g) of the Disclosure Schedule, (i) one of the
Companies has good title to, or a valid leasehold interest in, as applicable,
all of the assets reflected on the combined financial statements contained in
Section 3.1(e) of the Disclosure Schedule, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind. Such assets (A) are in good
operating condition and repair, subject to ordinary wear and tear and (B)
constitute all of the material properties, interests, assets and rights held for
use or used in connection with the business and operations of the Companies and
constitute all those necessary to continue to operate the business of the
Companies consistent with current and historical practice. All items of personal
property owned by the Companies as of June 30, 1996 with an original cost or
book value in excess of $5,000 are listed in Section 3.1(g)(i) of the Disclosure
Schedule.
(ii) Section 3.1(g)(ii) of the Disclosure Schedule
sets forth a list of all real property and of all personal property owned or
leased by the Companies. The Companies do not own any real property. With
respect to property leased by any Company (I) such Company is the owner and
holder of all the leasehold interests and estates purported to be granted by
such leases,
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(II) all leases to which such Company is a party are in full force and effect
and constitute valid and binding obligations of such Company and, to the
knowledge of the Companies, of the other parties thereto, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equitable principles,
and (III) such Company has made available rent true and complete copies of all
written leases referred to in Section 3.1(g)(ii) of the Disclosure Schedule.
There exists no default, or any event which upon notice or the passage of time,
or both, would give rise to any default, in the performance by any Company or
by any lessor under any lease. Except as set forth in Section 3.1(g) of the
Disclosure Schedule, no Company has, and to the knowledge of the Companies, no
other person has, granted any oral or written right to anyone other than the
Companies to lease, sublease or otherwise occupy any of the properties
described in Section 3.1(g)(ii) of the Disclosure Schedule through the end of
the applicable lease periods.
(iii) The real estate listed in Section 3.1(g)(ii) of
the Disclosure Schedule and all appurtenances and improvements, as used,
constructed or maintained by the Companies at any time, to the knowledge of the
Companies, conform to applicable Federal, state, local and foreign laws and
regulations, except for any non-conformities that are immaterial to the
Companies or any of the Companies' properties or assets. To the knowledge of
the Companies, the use of the buildings and structures located on such real
property or any appurtenances or equipment does not violate any restrictive
covenants or encroach on any property owned by others. No condemnation
proceeding is pending or, to the knowledge of the Companies, threatened which
would preclude or impair the use of any such property by the Companies for the
uses for which they are intended.
(h) Patents, Trademarks and Similar Rights. Each Company owns
or licenses all patents, trademarks, service marks, trade names and copyrights,
in each case registered or unregistered, inventions, software (including
documentation and object and source code listings), know-how, trade secrets and
other intellectual property rights (collectively, the "Intellectual Property")
used in its business as presently conducted. Section 3.1(h) of the Disclosure
Schedule contains a list of all Intellectual Property owned and used by any
Company and any Intellectual Property which is licensed for use by others. No
Intellectual Property infringes any rights owned or held by any other person.
There is no pending or, to the knowledge of the Companies, threatened claim or
litigation against any Company contesting its right exclusively to use any
Intellectual Property. To the knowledge of the Companies, no person is
infringing the rights of any Company in any Intellectual Property. No product or
service sold by any Company violates or infringes any intellectual property
right owned or held by any other person. To the knowledge of the Companies, in
the case of commercially available "shrink-wrap" software programs (such as
Lotus 1-2-3), neither the Companies nor any of their respective employees has
made or is using any unauthorized copies of any such software programs at any
Company location.
(i) Insurance. Section 3.1(i) of the Disclosure Schedule
contains a true and complete list of all policies of casualty, liability, theft,
fidelity, life and other forms of insurance held by the Companies. True and
complete copies of such policies have been delivered or made available for
inspection and copy by Parent. All insurance policies are in the name of one of
the Companies, outstanding and in full force and effect, all premiums with
respect to such policies are currently paid and such policies will not be
affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement. No Company has received notice of cancellation or termination
of any such policy, nor has it been denied or had revoked or rescinded any
policy of insurance, nor borrowed against any such policies. No claim under any
such policy is pending.
(j) Agreements, Etc. Section 3.1(j) of the Disclosure Schedule
contains a true and complete list of all written or oral contracts, agreements
and other instruments to which any
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Company is a party (i) relating to indebtedness for money borrowed or capital
leases, (ii) of duration of six months or more from the date hereof and not
cancelable without penalty on 30 days or less notice, (iii) relating to
commitments in excess of $10,000, (iv) relating to the employment or
compensation of any director, officer, employee, consultant or other agent of
such Company, (v) relating to the sale or other disposition of any assets,
properties or rights, (vi) relating to the lease or similar arrangement of any
machinery, equipment, motor vehicles, furniture, fixture or similar property,
(vii) between such Company and any shareholder or member of such Company or
affiliates of any shareholder or member of such Company, (viii) that restricts
the operation of such Company anywhere in the world or (ix) that is otherwise
material to such Company or entered into other than in the ordinary course of
business. No Company is in default under any such agreement or instrument
where such default could, singly or in the aggregate with defaults under other
agreements or instruments, have a material adverse effect on the Company's
condition (financial or otherwise), assets, liabilities, operations, customer
contracts or other customer arrangements, management personnel, billings,
revenues, earnings or business (a "Company Adverse Effect") and, to the
knowledge of the Companies, all such agreements or instruments are in full
force and effect. The Companies have furnished to, or made available for
inspection and copy by, Parent true and complete copies of all documents
described in Section 3.1(j) of the Disclosure Schedule.
(k) Litigation, Etc. Except as set forth in Section 3.1(k) of
the Disclosure Schedule, there have not been for the past two years, nor are
there, any suits, actions, claims, investigations or legal or administrative or
arbitration proceedings in respect of any Company, pending or, to the knowledge
of the Companies, threatened, whether at law or in equity, or before or by any
Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Except as set forth in
Section 3.1(k) of the Disclosure Schedule, there are no judgments, decrees,
injunctions or orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against any Company or any of its assets or
properties.
(l) Compliance; Governmental Authorizations. (i) Each Company
has complied and is in compliance with all Federal, state, local and foreign
laws, ordinances, regulations, interpretations and orders (including those
relating to disposal of materials, environmental protection and occupational
safety and health) applicable to such Company, except where the failure, singly
or in the aggregate, to be so in compliance would not have a Company Adverse
Effect. Each Company has all Federal, state, local and foreign governmental
licenses and permits necessary to conduct its business as presently being
conducted, which licenses and permits (and any exceptions thereto) are set forth
in Section 3.1(l) of the Disclosure Schedule. Such licenses and permits are in
full force and effect, no violations are or have been recorded in respect of any
thereof, no proceeding is pending or, to the knowledge of the Companies,
threatened, to revoke or limit any thereof, and the Companies do not know of any
basis for any such proceeding.
(ii) There are no conditions relating to the Companies
or relating to the Companies' ownership, use or maintenance of any real
property previously owned or operated by any Company or any of its affiliates,
and the Companies do not know or have reason to know of any such condition in
respect of such real property not related to the ownership, use or maintenance,
that could lead to any liability for violation of any Federal, state, county
or local laws, regulations, orders or judgments relating to pollution or
protection of the environment or any other applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations or requirements. The
Companies have received, handled, used, stored, treated, shipped and disposed
of all hazardous or toxic materials, substances and wastes (whether or not on
its properties or properties owned or operated by others) in compliance with
all applicable environmental, health or safety statutes, ordinances, orders,
rules, regulations or requirements,
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except where the failure, singly or in the aggregate, to be so in compliance
would not have a Company Adverse Effect.
(m) Labor Relations; Employees. (i) Within the last five
years, no Company has experienced any labor disputes with, or any work stoppages
by, a group of employees due to labor disagreements and, to the knowledge of the
Companies, there is no such dispute or work stoppage threatened against any
Company. No employee of any Company is represented by any union or collective
bargaining agent and, to the knowledge of the Companies, there has been no union
organizational effort in respect of any employees of any Company within the past
five years.
(ii) Section 3.1(m)(ii) of the Disclosure Schedule
contains a list of each pension, retirement, savings, deferred compensation,
and profit-sharing plan and each stock option, stock appreciation, stock
purchase, performance share, bonus or other incentive plan, severance plan,
health, group insurance or other welfare plan, or other similar plan and any
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), under which any
Company has any current or future obligation or liability or under which any
employee or former employee (or beneficiary of any employee or former employee)
of any Company has or may have any current or future right to benefits (the
term "plan" shall include any contract, agreement, policy or understanding,
each such plan being hereinafter referred to individually as a "Plan"). The
Companies have delivered to Parent true and complete copies of (A) each Plan,
(B) the summary plan description for each Plan and (C) the latest annual
report, if any, which has been filed with the IRS for each Plan. Each Plan
intended to be tax qualified under Sections 401(a) and 501(a) of the Internal
Revenue Code of 1986 (the "Code") has been determined by the IRS to be tax
qualified under Sections 401(a) and 501(a) of the Code and, since such
determination, no amendment to or failure to amend any such Plan adversely
affects its tax qualified status. There has been no prohibited transaction
within the meaning of Section 4975 of the Code and Section 406 of Title I of
ERISA with respect to any Plan.
(iii) No Plan is subject to the provisions of Section
412 of the Code or Part 3 of Subtitle B of Title I of ERISA. No Plan is subject
to Title IV of ERISA. During the past five years, no Company nor any business
or entity then controlling, controlled by, or under common control with any
Company contributed to or was obliged to contribute to an employee pension
plan that was subject to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or
arbitrations (other than routine claims for benefits) pending, or, to the
knowledge of the Companies, threatened, with respect to any Plan or the assets
of any Plan, and no Company has knowledge of any facts which could give rise
to any such actions, claims, lawsuits or arbitrations (other than routine
claims for benefits). The Companies have satisfied all funding, compliance and
reporting requirements for all Plans. With respect to each Plan, the Companies
have paid all contributions (including employee salary reduction contributions)
and all insurance premiums that have become due and any such expense accrued
but not yet due has been properly reflected in the financial information in
Section 3.1(e) of the Disclosure Schedule.
(v) Except as described in Section 3.1(m)(ii) of the
Disclosure Schedule, no Plan provides or is required to provide, now or in the
future, health, medical, dental, accident, disability, death or survivor
benefits to or in respect of any person beyond termination of employment,
except to the extent required under any state insurance law or under Part 6 of
Subtitle B of Title I of ERISA and under Section 4980(B) of the Code. No Plan
covers any individual other than an employee of the Companies, other than
dependents of employees under health and child care policies listed in Section
3.1(m)(ii) of the Disclosure Schedule and delivered to Parent.
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(vi) Except as described in Section 3.1(m)(ii) of the
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any employee of any Company to severance pay or
termination benefits for which Parent or any of its affiliates may become
liable, (B) accelerate the time of payment or vesting, or increase the amount
of compensation due to any such employee or former employee for which Parent or
any of its affiliates may become liable or (C) obligate Parent or any of its
affiliates to pay or otherwise be liable for any compensation, vacation days,
pension contribution or other benefits to any employee, consultant or agent of
any Company for periods before the Closing Date or for personnel whom Parent
does not actually employ.
(vii) No Company has made any representations or
warranties (whether written or oral, express or implied) contractually or
otherwise to any client or customer of any Company that any Company's employees
rendering services to such client or customer are not "leased employees"
(within the meaning of Section 414(n) of the Code) or that such employees would
not be required to participate under any pension benefit plan (within the
meaning of Section 3(2) of ERISA) (a "Pension Benefit Plan") of such client or
customer relating either to (A) providing benefits to employees of any Company
under a Pension Benefit Plan of any Company or (B) making contributions to or
reimbursing such client or customer for any contributions made to a Pension
Benefit Plan of such client or customer on behalf of employees of any Company.
(n) Accounts Receivable. Section 3.1(n) of the Disclosure
Schedule contains a true aged list of unpaid accounts and notes receivable owing
to the Companies as of July 31, 1996 (which is the most recent date for which
such information is available), all of which, to the Companies' knowledge and
except as set forth in Section 3.1(n) of the Disclosure Schedule, are
collectible in the ordinary course of business.
(o) Customers. Section 3.1(o) of the Disclosure Schedule
contains (i) a true and complete list of the customers of each Company for each
of the years ended December 31, 1994 and 1995 and the period beginning January
1, 1996 and ended June 30, 1996 and, as of the date hereof, any additions or
deletions of customers from June 30, 1996 to the date of this Agreement, (ii) a
description of the revenues for each of the years ended December 31, 1993, 1994
and 1995 and each month commencing January 1, 1996 and ended June 30, 1996 under
contracts with each of the customers of the Companies listed on Section 3.1(o)
of the Disclosure Schedule, (iii) a true and complete list of all contracts as
of June 30, 1996 pursuant to which any Company provides goods or services to its
customers (the "Client Contracts") and (iv) a true and correct description of
(A) the terms and conditions of each oral Client Contract, (B) to the knowledge
of the Companies, any and all disputes or defaults arising under or with respect
to the Client Contracts in connection with which a client has threatened, or is
expected to, terminate its contract with any Company or claim for damages, and
(C) all loans or advances made by any Company to or on behalf of its customers,
which description includes the date of such loan or advance and the principal
balance outstanding as of the date of this Agreement under each such loan or
advance. The Client Contracts are valid and enforceable in accordance with their
respective terms with respect to the Companies, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles. To the Companies' knowledge and except as set forth in
Section 3.1(o) of the Disclosure Schedule, no customer of any Company has
threatened to terminate, fail to renew or adversely modify any relationship with
such Company.
(p) Accounts Payable. Section 3.1(p) of the Disclosure
Schedule contains a true and complete list of all accounts payable of each
Company as of July 31, 1996 (which is the most recent date for which such
information is available).
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(q) Related Party Transactions. Except as set forth in
Section 3.1(q) of the Disclosure Schedule, no current or former partner,
director, officer, employee, shareholder, member or manager of any Company or
any associate or affiliate (as defined in the rules promulgated under the
Exchange Act) thereof, or any relative with a relationship of not more remote
than first cousin of any of the foregoing, is presently, or during the 12-month
period ending on the date hereof has been, (i) a party to any transaction with
any Company (including, but not limited to, any contract, agreement or other
arrangement providing for the furnishing of services by, or rental of real or
personal property from, or otherwise requiring payments to, any such director,
officer, employee or shareholder or such associate) or (ii) to the knowledge of
the Companies, the direct or indirect owner of an interest in any corporation,
firm, association or business organization which is a present (or potential)
competitor, supplier or customer of any Company, nor does any such person
receive income from any source other than the Companies which relates to the
Companies' business or should properly accrue to the Companies.
(r) Billing and Collection Practices. (i) The current
practices and procedures of each Company with respect to (A) billing on behalf
of customers, (B) receiving and processing Medicare and Medicaid payments due to
customers, (C) holding and transfer of such payments and (D) the method of
determining and collecting the fees received by such Company for services
provided by providers and physicians participating in the Medicare or Medicaid
programs are not in violation of the restriction on assignment as set forth in
42 U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C. Section
1396a(a)(32), and the regulations promulgated thereunder or similar provisions
of any state Medicaid program, except where such violations, singly or in the
aggregate, would not have a Company Adverse Effect.
(ii) No Company is engaged in any activity, whether
alone or in concert with one or more of its clients, which would constitute a
violation of any Federal laws or the laws of any state (including, without
limitation, (A) Federal antifraud and abuse or similar laws pertaining to
Medicare, Medicaid, or any other Federal health or insurance program, (B)
state laws pertaining to Medicaid or any other state health or insurance
program, (C) state or Federal laws pertaining to billings to insurance
companies, health maintenance organizations, and other managed care plans or
to insurance fraud, and (D) Federal and state laws relating to collection
agencies and the performance of collection services) prohibiting fraudulent,
abusive or unlawful practices connected in any way with the provision of
health care services, the determination of eligibility for health care
services, the billing for such services provided to a beneficiary of any state,
Federal or private health or insurance program or credit collection services,
except where such violations, singly or in the aggregate, would not have a
Company Adverse Effect. Without limiting the generality of the foregoing, no
Company has, directly or indirectly, paid, offered to pay or agreed to pay, or
solicited or received, any fee, commission, sum of money, property or other
remuneration to or from any person which such Company knows or has reason to
believe to have been illegal under 42 U.S.C. Section 1320a-7b(b) or any similar
state law.
(iii) Except as set forth in Section 3.1(r) of the
Disclosure Schedule, no Company currently uses, or has in the past established
or used, trust accounts in connection with its business.
(s) Tax Matters. EE&C Health is a "small business corporation"
and has maintained a valid election to be an "S" corporation under Subchapter S
of the Code, and the equivalent provisions of all applicable state income tax
statutes since December, 1993. Med-Data and Medical Intercept each is a
"partnership" for Federal income tax purposes and has never been treated as a
corporation for such purposes. Except as set forth in Section 3.1(s) of the
Disclosure Schedule, all Federal, state, local and foreign tax returns and tax
reports for periods ending on or prior to the Closing Date by each Company have
been or will be filed, or a valid request for extension has been or will be
filed with respect thereto, on a timely basis (including any extensions) with
the appropriate governmental agencies in all jurisdictions in which such
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returns and reports are required to be filed. All such returns and reports are
and will be true, correct and complete. Except as set forth in Section 3.1(s)
of the Disclosure Schedule, all Federal, state, local and foreign income,
profits, franchise, sales, use, occupation, property, excise, employment and
other taxes (including interest, penalties and withholdings of tax) due from
and payable by any Company on or prior to the Closing Date have been fully paid
on a timely basis. Except as set forth in Section 3.1(s) of the Disclosure
Schedule, no Company is currently the beneficiary of any extension of time
within which to file any tax return. To the Companies' knowledge, no claim has
ever been made by an authority in a jurisdiction where any Company does not
file tax returns that it is or may be subject to taxation by that jurisdiction,
and no Company has received any notice, or request for information from any
such authority. Except as set forth in Section 3.1(s) of the Disclosure
Schedule, no issues have been raised with any Company by the Internal Revenue
Service (the "IRS") or any other taxing authority in connection with any tax
return or report filed by such Company and there are no issues which, either
individually or in the aggregate, could result in any liability for tax
obligations of any Company relating to periods ending on or before December 31,
1995 in excess of the accrued liability for taxes shown on the combined
financial statements contained in Section 3.1(e)(i) of the Disclosure Schedule.
No waivers of statutes of limitations have been given or requested with
respect to any Company. Except as set forth in Section 3.1(s) of the Disclosure
Schedule, no differences exist between the amounts of the book basis and the
tax basis of assets that are not accounted for by an accrual on the books of
any Company for Federal income tax purposes. Except as set forth in Section
3.1(s) of the Disclosure Schedule, no Company is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by such Company, and the IRS has proposed
no adjustment or change in accounting method. No Company is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code. All transactions or methods of accounting that
could give rise to an understatement of Federal income tax (within the meaning
of Section 6661 of the Code for tax returns filed on or before December 31,
1990, and within the meaning of Section 6662 of the Code for tax returns filed
after December 31, 1990) have been adequately disclosed on the tax returns in
accordance with Section 6661(b)(2)(B) of the Code for tax returns filed on or
prior to December 31, 1990, and in accordance with Section 6662(d)(2)(B) of
the Code for tax returns filed after December 31, 1990. No Company is or has
been a United States real property holding company (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code. Each Company has complied (and until the Closing
will comply) with all applicable laws relating to the payment and withholding
of taxes (including withholding and reporting requirements under Section 1441
through 1464, 3401 through 3406, 6041 and 6049 of the Code and similar
provisions under any other laws) and, within the time and in the manner
prescribed by law, has withheld from wages, fees and other payments and paid
over to the proper governmental or regulatory authorities all amounts required.
(t) Disclosure. To the Companies' knowledge, there have been
no events, transactions or information relating to any Company which, singly or
in the aggregate, could reasonably be expected to have Company Adverse Effect,
other than general events prevailing throughout the medical billing and accounts
receivable management services industry which affect firms that directly compete
in such industry. No representation or warranty of the Companies contained in
this Agreement, as modified by the Disclosure Schedule, and no statement
contained in any certificate, schedule, annex, list or other writing furnished
to Parent, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained herein or therein, in
light of the circumstances under which they were made, not misleading.
(u) Bank Accounts; Powers-of-Attorney. (i) Section 3.1(u) of
the Disclosure Schedule contains a true and complete list of (A) all bank
accounts and safe deposit boxes of
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each Company and all persons who are signatories thereunder or who have access
thereto and (B) the names of all persons holding general or special
powers-of-attorney from any Company and a summary of the terms thereof.
(ii) Except as set forth in Section 3.1(u) of the Disclosure
Schedule, no Company does or has maintained any escrow or custody accounts with
respect to customer funds.
(v) Brokers. No agent, broker, investment banker, person or
firm acting on behalf of any Company or under the authority of any Company is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with any of the transactions contemplated hereby.
(w) Accredited Investor. Each stockholder or member, as the
case may be, of each Company (i) is an "accredited investor" as such term is
defined in Rule 501 under the Securities Act or (ii) has appointed Frank
Treadaway as his or her purchaser representative in connection with the Mergers.
SECTION 3.2. Representations and Warranties by Merger
Subsidiaries and Parent. Each Merger Subsidiaries and Parent jointly and
severally represent and warrant to the Companies as follows:
(a) Organization, Standing and Power. Each of Parent and each
Merger Subsidiary (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and (ii) has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each of Parent, its subsidiaries
and Merger Subsidiaries is duly qualified to do business and is in good standing
in each jurisdiction in which such qualification is necessary because of the
property owned, leased or operated by it or because of the nature of its
business as now being conducted, except where the failure, singly or in the
aggregate, to be so qualified or in good standing could not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, billings, revenues, earnings or
business of Parent and its subsidiaries taken as a whole (a "Parent Adverse
Effect"). Parent has provided the Companies with complete and correct copies of
its and each Merger Subsidiary's Certificate of Incorporation and By-Laws.
(b) Authority; Binding Agreements. The execution and delivery
of this Agreement and the consummation of the Mergers and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action (including any action by the shareholders thereof) on the part
of Parent and each Merger Subsidiary. Each of Parent and each Merger Subsidiary
has all requisite corporate power and authority to enter into this Agreement and
to consummate the Mergers and the other transactions contemplated hereby and
each of Parent and each Merger Subsidiary has duly executed and delivered this
Agreement. This Agreement constitutes a valid and binding obligation of each of
Parent and each Merger Subsidiary enforceable against such party in accordance
with its terms.
(c) Conflicts; Consents. The execution and delivery of this
Agreement, the consummation of the Mergers and the other transactions
contemplated hereby and compliance by Parent and each Merger Subsidiary with the
other provisions hereof do not and will not (i) conflict with or result in a
breach of the charter, by-laws or other constitutive documents of Parent or any
Merger Subsidiary, (ii) conflict with or result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
provisions of any note, bond, lease, mortgage, indenture, license, franchise,
permit, agreement or other instrument or obligation to
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which Parent or any Merger Subsidiary is a party, or by which Parent or any
Merger Subsidiary or Parent's or any Merger Subsidiary's properties or assets,
may be bound or affected, except for such conflict, breach or default as to
which requisite waivers or consents shall be obtained before the Closing, or
(iii) violate any law, statute, rule or regulation or order, writ, injunction
or decree applicable to Parent or any Merger Subsidiary or Parent's or any
Merger Subsidiary's properties or assets. No consent or approval by, or any
notification of or filing with, any person is required in connection with the
execution, delivery and performance by Parent or any Merger Subsidiary of this
Agreement or the consummation of the Mergers and the other transactions
expressly contemplated hereby, except for (i) the filing with the SEC such
reports under Sections 13 and 16 of the Exchange Act, as may be required in
connection with this Agreement, the Mergers and the other transactions
contemplated hereby, (ii) such filings as may be required under state
securities or "blue sky" laws in connection with the issuance of the Parent
Common Stock in connection with the Mergers, and (iii) the filing of a copy of
the EE&C Delaware Certificate of Merger, the Med-Data Delaware Certificate of
Merger and the MIS Delaware Certificate of Merger with the Delaware Secretary
of State and the Med-Data Texas Articles of Merger and the MIS Texas Articles
of Merger with the Texas Secretary of State and appropriate documents with the
relevant authorities of other states in which any Company is qualified to do
business.
(d) Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock. At the close of business on August 29, 1996, (i) 7,221,628
shares of Parent Common Stock were issued and outstanding, (ii) no shares of
Parent Common Stock were held by Parent in its treasury, (iii) 195,000 shares of
Parent Common Stock were reserved for issuance upon exercise of outstanding
employee stock options to purchase shares of Parent Common Stock and (iv)
774,750 shares of Parent Common Stock were reserved for issuance upon exercise
of employee stock options that are not outstanding but may be issued in the
future under Parent's 1996 Stock Option Plan. Except as set forth above, at the
time of execution of this Agreement, no shares of capital stock or other voting
securities of Parent are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Parent are, and all shares which may be
issued pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness or securities of Parent
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of Parent may
vote. Except as set forth above, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Parent or any of
its subsidiaries is a party or by which any of them is bound obligating Parent
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Parent or of any of its subsidiaries or obligating Parent or any of its
subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding commitments, agreements, arrangements or undertakings of any
kind obligating Parent or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or other voting securities of
Parent or any of its subsidiaries. As of the date of this Agreement, the
authorized capital stock of each Merger Subsidiary consists of 1,000 shares of
common stock, par value $.01 per share, all of which have been validly issued,
are fully paid and nonassessable and are owned by Parent free and clear of any
liens.
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities. Parent has filed all required reports, forms and other documents
with the SEC since the filing of Parent's Registration Statement on Form S-1 for
the initial public offering of Parent Common Stock on December 21, 1995 (the
"Parent SEC Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the
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rules and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be state therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Parent included in the Parent SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved and fairly present the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal and recurring year-end audit adjustments not material in scope or
amount). Except as set forth in the Parent Filed SEC Documents (defined in
Section 3.2(f)), neither Parent nor any of its subsidiaries has any material
liabilities or obligations required by generally accepted accounting principles
to be recognized or disclosed on a consolidated balance sheet of Parent and its
consolidated subsidiaries or in the notes thereto and which, singly or in the
aggregate, could reasonably be expected to have a Parent Adverse Effect.
(f) Absence of Certain Changes or Events. Except as disclosed
in the Parent SEC Documents filed and publicly available prior to the date of
this Agreement (the "Parent Filed SEC Documents"), since the date of the most
recent financial statements contained in the Parent Filed SEC Documents, there
has not been any material adverse change in the condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, billings, revenues, earnings or
business of Parent and its subsidiaries taken as a whole.
(g) Litigation, Etc. Except as disclosed in the Parent Filed
SEC Documents, there are no suits, actions, claims, investigations or legal or
administrative or arbitration proceedings in respect of Parent or any of its
subsidiaries, pending or, to the knowledge of Parent, threatened, whether at law
or in equity, or before or by any Federal, foreign, state or municipal or other
governmental department, commission, board, bureau, agency or instrumentality
that, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Parent and its subsidiaries taken as a whole.
(h) Compliance; Governmental Authorizations. Except as
disclosed in the Parent Filed SEC Documents, Parent and its subsidiaries have
complied and are in compliance with all Federal, state, local and foreign laws,
ordinances, regulations, interpretations and order (including those relating to
disposal of materials, environmental protection and occupational safety and
health) applicable to Parent and its subsidiaries, except where the failure,
singly or in the aggregate, to be so in compliance would not have a Parent
Adverse Effect. Parent and its subsidiaries have all Federal, state, local and
foreign governmental licenses and permits necessary to conduct their businesses
as presently being conducted. Such licenses and permits are in full force and
effect, no violations are or have been recorded in respect of any thereof, no
proceeding is pending, or, to the knowledge of Parent, threatened, to revoke or
limit any thereof, and Parent does not know of any basis for any such
proceeding.
(i) Brokers. Except for Williams Financial, no agent, broker,
investment banker, person or firm acting on behalf of Parent or any Merger
Subsidiary or under the authority of Parent or Merger Subsidiary is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby.
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(j) Billing and Collection Practices. (i) The current
practices and procedures of Parent and its subsidiaries with respect to (A)
billing on behalf of customers, (B) receiving and processing Medicare and
Medicaid payments due to customers, (C) holding and transfer of such payments
and (D) the method of determining and collecting the fees received by Parent and
its subsidiaries for services provided by providers and physicians participating
in the Medicare or Medicaid programs are not in violation of the restriction on
assignment as set forth in 42 U.S.C. Section 1395g(c), 42 U.S.C. Section
1395u(b)(6) and 42 U.S.C. Section 1396a(a)(32), and the regulations promulgated
thereunder or similar provisions of any state Medicaid program, except where
such violations, singly or in the aggregate, would not have a Parent Adverse
Effect.
(ii) Parent and its subsidiaries are not engaged in
any activity, whether alone or in concert with one or more of its clients,
which would constitute a violation of any Federal laws or the laws of any
state (including, without limitation, (A) Federal antifraud and abuse or
similar laws pertaining to Medicare, Medicaid, or any other Federal health or
insurance program, (B) state laws pertaining to Medicaid or any other state
health or insurance program, (C) state or Federal laws pertaining to billings
to insurance companies, health maintenance organizations, and other managed
care plans or to insurance fraud, and (D) Federal and state laws relating to
collection agencies and the performance of collection services) prohibiting
fraudulent, abusive or unlawful practices connected in any way with the
provision of health care services, the determination of eligibility for health
care services, the billing for such services provided to a beneficiary of any
state, Federal or private health or insurance program or credit collection
services, except where such violations, singly or in the aggregate, would not
have a Parent Adverse Effect. Without limiting the generality of the foregoing,
Parent and its subsidiaries have not, directly or indirectly, paid, offered to
pay or agreed to pay, or solicited or received, any fee, commission, sum of
money, property or other remuneration to or from any person which the Company
knows or has reason to believe to have been illegal under 42 U.S.C. Section
1320a-7b(b) or any similar state law.
(k) Insurance. Parent and its subsidiaries maintain casualty,
liability, theft, fidelity, life and other forms of insurance which are
customary for businesses in Parent's industry. All insurance policies are in the
name of the Parent, outstanding and in full force and effect, all premiums with
respect to such policies are currently paid and such policies will not be
affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement. The Parent has not received notice of cancellation or
termination of any such policy, nor has it been denied or had revoked or
rescinded any policy of insurance, nor borrowed against any such policies. No
claim under any such policy is pending.
(l) Labor Relations. Within the last five years, Parent and
its subsidiaries have not experienced any labor disputes with, or any work
stoppages by, a group of employees due to labor disagreements and, to the
knowledge of Parent, there is no such dispute or work stoppage threatened
against Parent or its subsidiaries. No employee of Parent or its subsidiaries is
represented by any union or collective bargaining agent and, to the knowledge of
Parent, there has been no union organizational effort in respect of any
employees of Parent or its subsidiaries within the past five years.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1. Expenses. Each of Parent and each Merger
Subsidiary shall pay its own fees, costs and expenses incurred in connection
with this Agreement and the Mergers and the other transactions contemplated by
this Agreement, including, without limitation, the fees, costs and expenses of
its financial advisors, accountants and counsel. The Companies' fees, costs and
expenses incurred in connection with this Agreement and the Mergers and the
other
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transactions contemplated by this Agreement, including, without limitation,
the reasonable fees, costs and expenses of its financial advisors, accountants
and counsel, up to a maximum of $175,000 in the aggregate, shall be paid by
the Companies. Parent shall be indemnified by the Companies' stockholders and
members under the Indemnification Agreement attached hereto as Exhibit B for
any such fees, costs and expenses of the Companies which exceed the maximum
amount set forth in the preceding sentence. Notwithstanding the foregoing,
Parent shall pay any fees and expenses due Williams Financial as a result of
the consummation of the Merger.
SECTION 4.2. Nasdaq. Parent shall use its reasonable best
efforts to have the Parent Common Stock to be issued in the Mergers approved for
listing on the National Association of Securities Dealers, Inc. Automated
Quotations System (the "Nasdaq National Market"), subject to official notice of
issuance.
SECTION 4.3. Public Announcements. Parent and Merger
Subsidiaries, on the one hand, and the Companies, on the other hand, will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the
Mergers, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange or the Nasdaq National Market.
SECTION 4.4. Confidentiality. (a) Parent, Merger Subsidiaries
and the Companies each agree that all financial or other information about
Parent, any Merger Subsidiary or any Company, or other information of a
confidential or proprietary nature, disclosed to the other at any time in
connection with the proposed transaction shall be kept confidential by the party
receiving such information and shall not be disclosed to any person or used by
the receiving party (other than to its agents or employees or in connection with
the transactions contemplated by this Agreement) except: (i) with the prior
written consent of the disclosing party; (ii) as may be required by applicable
law, regulation, court process or by obligations pursuant to any listing
agreement with any national securities exchange (including the Nasdaq National
Market); (iii) such information which may have been acquired or obtained by such
party (other than through disclosure by the other party in connection with the
transaction contemplated by this Agreement); or (iv) such information which is
or becomes generally available to the public other than as a result of a
violation of this provision.
(b) In the event of a breach or threatened breach by any party
of the provisions of this Section, the non-breaching party shall be entitled to
an injunction restraining such party from such breach. Nothing contained in this
paragraph (b) or elsewhere in this Agreement shall be construed as prohibiting
the non-breaching party from pursuing any other remedies available at law or
equity for such breach or threatened breach of this Agreement nor limiting the
amount of damages recoverable in the event of a breach or threatened breach by
any party of the provisions of this Section.
SECTION 4.5. Parent Agreement. (a) Parent agrees to
indemnify and hold harmless any and all guarantors listed in Section 4.5(a) of
the Disclosure Schedule from and against any and all liabilities, judgments,
claims, settlements, losses, damages, fees, liens, taxes, penalties,
obligations, costs and expenses incurred or suffered (directly or indirectly)
by any such person (including, without limitation, reasonable costs of
investigation and reasonable attorney's fees and expenses) arising from, by
reason of or in connection with any failure by the EE&C Surviving Corporation,
Med-Data Surviving Company or MIS Surviving Company to pay, discharge or
otherwise satisfy, as and when due, any debt, note or other obligation of EE&C,
Med-Data or Medical Intercept outstanding at the Effective Date and listed in
Section 4.5(a) of the Disclosure Schedule. Any claim under this indemnity
shall be made in accordance with the provisions of
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Section 2(c) of the Indemnification Agreement in substantially the form of
Exhibit B, with such guarantor being deemed a "Stockholder Indemnified Party"
for such purpose; provided that such indemnification shall not be subject to
or count toward the PSS Basket Amount set forth in Section 2(d)(v) of the
Indemnification Agreement.
(b) Parent agrees to pay, or cause to be paid on the
Closing Date the obligations of the Company listed in Section 4.5(b) of the
Disclosure Schedule; provided that any indemnification obligation arising out
of a breach by PSS of its obligations set forth in this Section 4.5(b) shall
not be subject to or count toward the PSS Basket Amount set forth in Section
2(d)(v) of the Indemnification Agreement.
ARTICLE V
DOCUMENTS TO BE DELIVERED AT CLOSING
SECTION 5.1. Documents to be Delivered at Closing. The
obligations of Parent, each Merger Subsidiary and each Company to effect the
Mergers are subject to the delivery by each party thereto of the following
documents:
(a) Representations and Warranties. Parent shall have received
a certificate signed on behalf of each Company by the chief executive officer
and the chief financial officer of such Company to the effect that the
representations and warranties of the Companies set forth in the Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of the Companies set forth in this Agreement that
are not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date.
(b) Performance of Obligations of the Company. Parent shall
have received a certificate signed on behalf of each Company by the chief
executive officer and the chief financial officer of such Company to the effect
that such Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date.
(c) Consents, Amendments and Terminations. Parent shall have
received duly executed and delivered copies of all requisite approvals under
Delaware Law or Texas Law to the Mergers by the holders of EE&C Common Stock,
Med-Data Membership Interests or MIS Membership Interests, as the case may be,
and such other waivers, consents, terminations and approvals contemplated by
Section 3.1(d) and Section 3.1(d) of the Disclosure Schedule, all in form and
substance reasonably satisfactory to Parent. Parent acknowledges that as of the
Closing Date it may not have received all of the waivers, consents, terminations
or approvals contemplated by Section 3.1(d) of the Disclosure Schedule.
(d) Indemnification Agreement. The Indemnification Agreement,
in the form of Exhibit B, shall have been duly executed and delivered by the
parties thereto.
(e) Opinion of Counsel. Parent shall have received the opinion
dated the Closing Date of Tashlik, Kreutzer & Goldwyn P.C., counsel to the
Companies and the Companies' shareholders and members, in the form of Exhibit C,
and Jackson & Walker LLP, special Texas counsel to Med-Data and Medical
Intercept, in form reasonably acceptable to Parent.
(f) Employment Agreements. James Robertson and EE&C
Surviving Corporation shall have executed and delivered to Parent an
Employment Agreement, in the form of Exhibit D.
25
<PAGE>
(g) Non-Competition Agreement. Each of the stockholders or
members, as the case may be, of each Company (other than James Robertson, whose
Employment Agreement contains a non-competition covenant) shall have executed
and delivered to Parent a Non-Competition Agreement, in the form of Exhibit E.
(h) Investment and Affiliate Letter; Affiliate Agreement. Each
person who is a stockholder or member, as the case may be, of any Company shall
have executed and delivered to Parent an Investment and Affiliate Letter, in the
form of Exhibit F. Each person who is listed as an affiliate of any Company in
Section 4.3 of the Disclosure Schedule who is not also a stockholder or member
of any Company shall have executed and delivered to Parent an Affiliate
Agreement, in the form of Exhibit G.
(i) Resignation Letters. Each of the directors of EE&C Health
(other than Peter D. Cooper) shall have tendered to Parent their respective
resignations from such positions, effective immediately following the Closing
Date.
(j) Representations and Warranties. The Companies shall have
received a certificate signed on behalf of each of Parent and each Merger
Subsidiary by the chief executive officer and the chief financial officer of
such entity to the effect that the representations and warranties of such entity
set forth in this Agreement that are qualified as to materiality shall be true
and correct, and the representations and warranties of such entity set forth in
this Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date, as though made on and as of the Closing Date.
(k) Performance of Obligations of the Parent and Each Merger
Subsidiary. The Companies shall have received a certificate signed on behalf of
each of Parent and each Merger Subsidiary by the chief executive officer and the
chief financial officer of such entity to the effect that such entity shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(l) Registration Rights Agreement. Parent shall have entered
into the Registration Rights Agreement with the stockholders or members, as
the case may be, of each Company, in the form of Exhibit I.
(m) Opinion. The Companies shall have received an opinion
dated the Closing Date from Howard, Darby & Levin, counsel to Parent, in the
form of Exhibit J.
(n) Other Documents. The Companies shall have received such
other documents, certificates or instruments as it may reasonably request.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement. This Agreement and the
schedules and exhibits hereto contain the entire agreement among the parties
with respect to the transactions contemplated by this Agreement and supersede
all prior agreements or understandings among the parties.
SECTION 6.2. Descriptive Headings; Certain Interpretations.
(a) Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
26
<PAGE>
(b) Whenever any party makes any representation, warranty or
other statement to such party's knowledge, such party will be deemed to have
made due inquiry into the subject matter of such representation, warranty or
other statement.
(c) Except as otherwise expressly provided in this Agreement,
the following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
SECTION 6.3. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient if
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Parent or Merger Subsidiary, to:
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
P.O. Box 36
Mt. Joy, Pennsylvania 17552
Telecopy: 717-653-0567
Attention: Peter W. Gilson
Hamilton F. Potter III
David S. Geller
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Telecopy: 212-841-1010
Attention: Scott F. Smith, Esq.
If to the Companies to:
EE&C Health Services, Inc.
Med-Data Interface Systems, LLC
Medical Intercept Systems, LLC
c/o EE&C Financial Services, Inc.
60 Park Place
Newark, New Jersey 07102
Telecopy: 201-624-8240
Attention: Peter D. Cooper
27
<PAGE>
with a copy to:
Tashlik, Kreutzer & Goldwyn P.C.
833 Northern Boulevard
Great Neck, New York 11021
Telecopy: 516-829-6509
Attention: Martin M. Goldwyn, Esq.
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
SECTION 6.4. Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one agreement.
SECTION 6.5. Survival. All representations and warranties,
agreements and covenants contained herein or in any document delivered pursuant
hereto or in connection herewith (unless otherwise expressly provided herein or
therein) shall survive the Closing and shall remain in full force and effect
until the first anniversary of the Closing Date (the "Expiration Date"), except
the agreement contained in Section 4.5 shall survive until the satisfaction by
EE&C Surviving Corporation, Med-Data Surviving Company or MIS Surviving Company
or Parent of all obligations of EE&C, Med-Data and Medical Intercept referred to
therein.
SECTION 6.6. Benefits of Agreement. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
is for the sole benefit of the parties hereto and not for the benefit of any
third party, except for the provisions of Article II and Section 4.5.
SECTION 6.7. Amendments and Waivers. This Agreement may be
amended by the parties at any time before or after any required approval of the
transactions contemplated by this Agreement by the shareholders or members, as
the case may be, of any Company; provided, however, that, after any such
approval, there shall not be made any amendment that by law requires further
approval by such shareholders without the further approval of such shareholders
or members. This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
SECTION 6.8. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
hereto without the prior written consent of the other parties hereto. Any
instrument purporting to make such assignment shall be void.
SECTION 6.9. Enforceability. It is the desire and intent of
the parties hereto that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
28
<PAGE>
SECTION 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
29
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
Attest PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ David S. Geller By: /s/ Peter W. Gilson
-------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest PSS EE&C HEALTH SERVICES, INC.
By: /s/ David S. Geller By: /s/ Peter W. Gilson
-------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest PSS MED-DATA INTERFACE SYSTEMS, LLC
By: /s/ David S. Geller By: /s/ Peter W. Gilson
-------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest PSS MEDICAL INTERCEPT SYSTEMS, LLC
By: /s/ David S. Geller By: /s/ Peter W. Gilson
-------------------------- ----------------------------------
Name: Name:
Title: Title:
30
<PAGE>
Attest EE&C HEALTH SERVICES, INC.
By: /s/ William Hecht By: /s/ Peter D. Cooper
-------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest MED-DATA INTERFACE SYSTEMS LLC
By: /s/ William Hecht By: /s/ Peter D. Cooper
-------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest MEDICAL INTERCEPT SYSTEMS, LLC
By: /s/ William Hecht By: /s/ Peter D. Cooper
-------------------------- ----------------------------------
Name: Name:
Title: Title:
13622\6
31
<PAGE>
Annex 1
EE&C Merger Consideration
<TABLE>
<CAPTION>
Number of Shares
EE&C Stockholder Parent Com Cash ($)*
mon Stock
<S> <C> <C>
Peter D. Cooper 77,453 $2,259,107.29
William Joe Davis 5,235 341,583.75
James Robertson 64,987 241,664.21
Marijane McElroy 64,683 248,276.25
Dale Williams 32,538 124,888.50
Frank Treadaway 22,720 164,734.50
Vicki White 7,717 55,962.75
Robert Flanakin 3,330 72,427.50
Katherine Ann Reynolds 4,995 36,213.75
M.C. Perry, M.D. 2,340 152,685.00
</TABLE>
- --------
* Cash amounts listed below include all cash to be paid to such EE&C
stockholders in connection with the MIS Merger and the Med-Data Merger as well
as the EE&C Merger.
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of August 30, 1996,
among PHYSICIAN SUPPORT SYSTEMS, INC., a Delaware corporation (the "Company"),
Eltman Eltman & Cooper, P.C. ("Cooper, P.C."), each of the shareholders of EE&C
Financial Services, Inc., a New York corporation ("EEC"), listed on the
signature pages hereof (together with Cooper, P.C., collectively, the
"Stockholders"), and PETER D. COOPER, as representative of the Stockholders (the
"Representative").
Introduction
Pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1996 (the "Merger Agreement"), among the Company, PSS EE&C Financial
Services, Inc., a Delaware corporation ("Merger Subsidiary") and a wholly owned
subsidiary of the Company, and EEC, certain Stockholders have the right to
receive shares of common stock, par value $.001 per share (the "Common Stock"),
of the Company upon the effective time of the merger (the "Merger") of Merger
Subsidiary with and into EEC.
Pursuant to letter agreements between each of Elaine Scialo
("Scialo") and Cooper P.C. and the Company (the "Letter Agreements"), each of
Scialo and Cooper P.C. are surrendering certain notes in exchange for shares of
Common Stock.
As a condition to the Merger and the execution of the Letter
Agreements, the Company must enter into this Agreement.
The parties hereto agree as follows:
1. Definitions. As used herein, the following terms have the
following respective meanings:
Commission means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
Distribution Period means, (a) in the case of a distribution
of Registrable Shares in a firm commitment underwritten public offering, the
period of time as each underwriter has completed the distribution of all
securities purchased by it, but in any case not more than 30 days, and (b) in
the case of any other registration of Registrable Shares, the period ending on
the earlier of (i) the sale of all Registrable Shares covered by such
registration and (ii) 21 days or, in the case of a registration pursuant to
Section 3(b), 45 days following the effective date of the registration statement
utilized in connection with such registration under the Securities Act; provided
that, for the purpose of calculating the minimum number of days that the
registration statement must remain effective pursuant to clause (ii) above, any
day that a Stockholder is prohibited pursuant to Section 4(e) from selling
Registrable Shares shall not be counted.
Effective Time means the time at which the Merger becomes
effective as set forth in the Merger Agreement.
Pooling Period means the period beginning at the Effective
Time of the Merger and continuing until such time as financial results covering
at least 30 days of combined operations of
<PAGE>
the Company and EEC shall have been published by the Company within the meaning
of Section 201.01 of the Commission's Codification of Financial Reporting
Policies.
Registrable Shares means the shares of Common Stock issued to
certain Stockholders pursuant to the Merger Agreement and to Scialo and Cooper
P.C. pursuant to the Letter Agreements (including any additional shares issued
as a stock dividend thereon or any shares issued as the result of a stock split
(including reverse stock split), recapitalization, reorganization, stock
exchange or other combination), which bear the legend set forth in Section 10.
Representative means Peter D. Cooper, or such other person
notified in writing to the Company by holders of a majority of the Registrable
Shares, in such person's capacity as representative of the Stockholders.
Securities Act means the Securities Act of 1933, as amended.
2. Incidental Registration. (a) If at any time after the
Pooling Period, the Company proposes to register any Common Stock under the
Securities Act (other than on Forms S-4, S-8 or any other form which does not
permit registration of securities by selling stockholders for sale to the public
for cash) in connection with the proposed offer and sale for cash either for its
own account or on behalf of any holder of Common Stock it will give written
notice to the Stockholders of its intention to do so. Upon a Stockholder's
written request to the Company, given within 10 business days after receipt of
any such notice, to register any of such Stockholder's Registrable Shares, the
Company will use its reasonable best efforts to cause the Registrable Shares as
to which registration shall have been so requested to be included in the shares
of Common Stock to be covered by the registration statement proposed to be filed
by the Company; provided that nothing set forth in this Agreement shall prevent
the Company from, at any time, withdrawing, abandoning or delaying any
registration of such Common Stock.
(b) The Company shall have the sole right to select the
managing underwriter or underwriters. The managing underwriter for such offering
shall have the authority, in its sole discretion, to reduce the number of
Registrable Shares to be included in such registration if and to the extent that
it determines that inclusion of such Registrable Shares would adversely effect
the marketing of the other Common Stock to be sold thereunder. Any such
reduction in the shares included in any such offering shall be effected (i)
first, by excluding shares ("Piggyback Shares") of Common Stock that otherwise
would be included by virtue of incidental or piggyback registration rights (but
not demand registration rights) granted to stockholders (including the
Stockholders), which exclusion shall be effected on a pro rata basis based upon
the number of shares of Common Stock so requested to be registered in such
offering by all such stockholders proposing to sell Piggyback Shares and (ii)
second, only to the extent necessary and after the exclusion of all Piggyback
Shares, by excluding shares of Common Stock included in such registration by the
Company and any stockholder of the Company who shall have exercised a demand
registration right in connection with such offering, which exclusion shall be
effected on a pro rata basis based upon the number of shares of Common Stock
proposed to be registered on behalf of the Company and on behalf of any such
holder of demand registration rights.
(c) (i) If at any time after the Pooling Period any of the
following persons: (A) Peter W. Gilson ("PG"), (B) Hamilton F. Potter III
("HP"), (C) any member of PG's or HP's immediate family, (D) any partnership,
trust or other entity whose beneficiaries or beneficial owners are comprised of
PG, HP and/or their immediate family members, and/or (E) any affiliate of PG or
HP (other than PSS) (collectively, the "Affiliated Persons"), causes PSS to
register any shares of Common Stock under the Securities Act (other than on
Forms S-4, S-8 or any other form which does not permit registration of
securities by selling stockholders for sale to the public for cash) in
connection with the proposed offer and sale for cash for such person's own
account, the Company
2
<PAGE>
will give written notice to the Stockholders of such intended registration. Upon
a Stockholder's written request to the Company to register up to the Pro Rata
Portion (defined below) of any of such Stockholder's Registrable Shares, given
within 10 business days after receipt of any such notice, the Company will use
its reasonable best efforts to cause the Registrable Shares as to which
registration shall have been so requested to be included in the shares of Common
Stock to be covered by such registration statement; provided that nothing shall
prevent the Company from, at any time, withdrawing, abandoning or delaying any
such registration, so long as the registration of the Affiliate Persons' shares
of Common Stock is similarly affected.
(ii) For the purposes of this Agreement, the term "Pro Rata
Portion" shall mean that portion of a Stockholder's Registrable Shares which
shall be equal to the product of (A) the total number of such Stockholder's
Registrable Shares and (B) the greatest of the individual quotients obtained in
each case by dividing (x) the number of shares of Common Stock proposed to be
registered by each Affiliate Person by (y) the total number of shares of Common
Stock held by such Affiliated Person.
(iii) In the event of an underwritten offering of shares
referred to in this Section 2(c), the managing underwriter for such offering
shall have the authority to reduce the number of shares of Common Stock to be
included in such registration if and to the extent that it determines that
inclusion of all of such shares would adversely affect the marketing of the
shares to be sold thereunder; provided, that any such reduction in the shares of
Common Stock included in any such offering shall be effected on a pro rata basis
based upon the aggregate number of shares of Common Stock to be registered in
such offering by all such stockholders (including the Affiliated Persons and the
Stockholders) proposing to sell shares of Common Stock.
(d) If any registration pursuant to this Section 2 shall be
underwritten, in whole or in part, the Company or the managing underwriter or
underwriters may require that the Registrable Shares requested for inclusion
pursuant to this Section 2 be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters.
3. Demand Registration. (a) At any time after the Pooling
Period, the Representative may request that the Company register any or all of
the Registrable Shares under the Securities Act for public sale (the "Demand
Rights"); provided that (i) the greater of at least 65% or 153,000 of the
Registrable Shares are included in such registration, (ii) not more than 15% of
the Registrable Shares may be registered pursuant to an underwritten public
offering before August 31, 1997, (iii) not more than three Demand Rights may be
requested in the aggregate and (iv) not more than one Demand Right may be
exercised in any 9-month period. To request a Demand Right, Stockholders wishing
to include in a Demand Right a number of Registrable Shares at least equal to
the minimum number of Registrable Shares required to be included therein shall
notify the Representative of their desire to so request a Demand Right. The
Representative shall then request a Demand Right by giving the Company written
notice thereof. Prior to giving such notice to the Company, the Representative
shall provide reasonable notice to the other Stockholders of his intention to so
request a Demand Right and provide each such Stockholder with a reasonable
opportunity to sell Registrable Shares in connection with such registration.
(b) The Stockholders exercising their Demand Rights shall have
the right, in their sole discretion, to register such Registrable Shares
pursuant to an underwritten offering or a non-underwritten offering. If such a
registration is to be pursuant to an underwritten offering, the Company shall
have the right, in its sole discretion and to the exclusion of any holder of
Registrable Shares, to select a managing underwriter or underwriters in
connection with such registration statement filed pursuant to this Section 3 and
shall have the right to include any additional shares of Common Stock in a
registration statement filed pursuant to this Section 3. The managing
underwriter for such offering shall have the authority, in its sole discretion,
to reduce the number of
3
<PAGE>
shares of Common Stock to be included in a registration pursuant to this Section
3 if and to the extent that it determines that inclusion of all of such shares
of Common Stock would adversely effect the marketing of the other shares of
Common Stock to be sold thereunder. Any such reduction in the shares included in
any such offering shall be effected (i) first, by excluding Piggyback Shares,
which exclusion shall be effected on a pro rata basis based upon the number of
shares of Common Stock so requested to be registered in such offering by all
such stockholders proposing to sell Piggyback Shares, (ii) second, only to the
extent necessary and after the exclusion of all Piggyback Shares, by excluding
shares of Common Stock included in such registration by the Company and (iii)
third, only to the extent necessary and after the exclusion of all Piggyback
Shares and shares of Common Stock to be included in the Offering, by excluding
shares of Common Stock of any Stockholder who shall have exercised a Demand
Right in connection with such offering, which exclusion shall be effected on a
pro rata basis based upon the number of shares of Common Stock proposed to be
registered on behalf of any such Stockholder.
(c) Notwithstanding anything to the contrary set forth in this
Section 3, the Stockholders may on one occasion rescind a request for a Demand
Right and such rescinded request shall not be considered a request for a Demand
Right for purposes of Section 3(a), provided that: (i) a written rescission
notice signed by all of the Stockholders that had requested that Registrable
Shares be included in such Demand Right (a "Rescission Notice") shall be
received by the Company prior to the Company's filing a registration statement
relating to such Demand Right, (ii) the Company shall not have incurred
documented out-of-pocket expenses in excess of $100,000 in connection with
fulfilling its obligations hereunder relating to such Demand Right and (iii) the
Stockholders may not request another Demand Right within three months after
rescinding a Demand Right pursuant to this Section 3(c).
4. Preparation and Filing. If and whenever the Company is
under an obligation pursuant to the provisions of Section 2 or 3 to effect
the registration of any Registrable Shares, the Company shall, as
expeditiously as practicable:
(a) prepare and diligently pursue the filing with the
Commission of a registration statement with respect to such securities and use
its reasonable efforts to cause such registration statement to become and remain
effective for the Distribution Period, but no longer;
(b) prepare and file with the Commission such amendments and
supplements to such registration statements and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the Distribution Period, but no longer;
(c) furnish to the holders of Registrable Shares included in
such registration statement such number of copies of a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such holders of
Registrable Shares may reasonably request in order to facilitate the public sale
or other disposition of such Registrable Shares;
(d) use its reasonable efforts to register or qualify the
Registrable Shares covered by such registration statement under the securities
or "blue sky" laws of such states as each holder of such Registrable Shares
shall reasonably request (provided, that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
necessary or advisable to enable such seller to consummate the public sale or
other disposition in such jurisdictions of such securities;
(e) notify each Stockholder selling Registrable Shares covered
by such registration statement, at any time during the Distribution Period when
a prospectus relating thereto covered by such registration statement is required
to be delivered under the Securities Act, of the happening of
4
<PAGE>
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and at the request of such Stockholder, prepare and furnish to
such Stockholder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing; and
(f) use its reasonable efforts to furnish, at the request of
any Stockholder requesting registration of Registrable Shares pursuant to
Section 2 or 3 on the date that such Registrable Shares are delivered to the
underwriters for sale in connection with a registration pursuant to Section 2 or
3, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, stating that such registration statement has
become effective under the Securities Act and that (A) to the best of such
counsel's knowledge, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are pending
or contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement thereof, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except no opinion
or statement is required regarding financial statements and other financial and
statistical data) and (C) to such other effects as may reasonably be requested
by counsel for the underwriters, if any, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included or incorporated by reference in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters with
respect to the registration in respect of which such letter is being given as
such underwriters, if any, may reasonably request.
(g) Notwithstanding anything to the contrary contained herein,
the Company shall have the right to deregister any Registrable Shares that
remain unsold at the conclusion of any Distribution Period.
5. Stockholders' Lock-Up; Cooperation. If any Registrable
Shares of a Stockholder are included in an underwritten registration pursuant to
Section 2 or 3 each Stockholder, as a condition to receiving the rights granted
hereunder, may be required to, and if required such Stockholder shall, enter
into an agreement (a "Lock-up Agreement"), pursuant to which such Stockholder
shall refrain from selling any Registrable Shares not included in such
registration during the period of distribution of Common Stock by such
underwriters and for a period of up to 180 days following the effective date of
such registration. In connection with each registration pursuant to Section 2 or
3 hereof, the Stockholders selling Registrable Shares shall furnish in writing
to the Company and any underwriter participating in such offering such
information with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with Federal and
applicable state securities laws.
6. Underwriting Agreement. In connection with each
registration pursuant to Section 2 or 3 covering an underwritten public
offering, the Company and the Stockholders agree to enter into a written
agreement with the managing underwriter or underwriters in such form and
containing such provisions as are usual and customary in the securities business
for such an
5
<PAGE>
arrangement between reputable underwriters and companies of the Company's size
and investment stature; provided, that such agreement shall not contain any such
provision applicable to the Company or the Stockholders which is inconsistent
with the provisions of this Agreement; and provided, further, that the time and
place of the closing under said underwriting agreement shall be as mutually
agreed upon between the Company and such managing underwriter.
7. Expenses. All expenses incurred by the Company in complying
with this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of complying with securities and "blue sky" laws,
printing expenses and fees and disbursements of counsel, and of the independent
certified public accountants shall be paid by the Company; provided, that
counsel to the securityholders and all underwriting discounts and selling
commissions applicable to the Registrable Shares covered by registrations
effected hereunder shall not be borne by the Company but shall be borne by the
seller or sellers.
8. Indemnification. (a) In the event of any registration of
any Registrable Shares under the Securities Act pursuant to this Agreement or
registration or qualification of any Registrable Shares under state securities
or "blue sky" laws pursuant to this Agreement, the Company shall indemnify and
hold harmless the Stockholder owning such Registrable Shares and each other
person, if any, who controls such holder, within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which any of the foregoing persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document prepared or
furnished by the Company incident to the registration or qualification of any
Registrable Shares pursuant to this Agreement, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or "blue sky"
laws applicable to the Company and relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such Stockholder or other
person acting on behalf of such Stockholder and each such controlling person for
any legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, that the Company shall not be liable (i) in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the registration statement, the preliminary prospectus
or prospectus or the amendment or supplement or any document incident to the
registration or qualification of any Registrable Shares pursuant to this
Agreement in reliance upon and in conformity with written information furnished
to the Company by such Stockholder or such underwriter specifically for use in
the preparation thereof and (ii) to any broker or other person acting on behalf
of such Stockholder to the extent that any such loss, claim, damage or liability
arises out of or is based upon any representation or other statement of such
broker or other person that is not in conformity with the preliminary prospectus
or prospectus.
(b) Each Stockholder hereby indemnifies and holds harmless the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Securities Act, and before Registrable Shares held by such
Stockholder shall be included in any registration pursuant to this Agreement,
any underwriter acting on such Stockholder's behalf shall agree to indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall sign such registration statement and any person who controls
the Company within the meaning of the
6
<PAGE>
Securities Act (in each case in the same manner and to the same extent as set
forth in (a) above) with respect to any untrue statement or omission from such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, if such untrue statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Stockholder or such underwriter, as the case
may be, specifically for use in the preparation of such registration statement,
preliminary prospectus, final prospectus or amendment or supplement; provided
that, the maximum amount of liability in respect of such indemnification shall
be limited, in the case of each Stockholder who, at any time during the
registration or the year preceding the registration, was not an officer or
director of the Company or any of its subsidiaries, to an amount paid for such
Registrable Shares upon the sale thereof pursuant to such registration.
(c) Each party entitled to indemnification hereunder (the
"indemnified party") shall give notice to the party required to provide
indemnification (the "indemnifying party") promptly after such indemnified party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom; provided, that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the indemnified party, and the indemnified
party may participate in such defense, but only at such indemnified party's
expense; and provided, further, that the omission by any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 8 except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such indemnifying
party is damaged as a result of the failure to give notice. It is understood
that the indemnifying party shall not, in connection with any action or related
actions in the same jurisdiction, be liable for the fees and disbursements of
more than one separate firm qualified in such jurisdiction to act as counsel for
the indemnified party; it being further understood that the Stockholders
collectively will be considered one indemnified party for purposes of this
sentence. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. Notwithstanding anything to the contrary herein, the Representative
shall act on behalf of the Stockholders in connection with any proceeding
brought or claim made under this Section 8, including conducting the defense of
any such claim if the Stockholders are the indemnifying party, and all notices
and consents referred to in this Section 8(c) shall be sufficient if given to or
by the Representative.
9. Rule 144 Matters. For so long as any Stockholder holds
Registrable Shares that may not be sold, without restriction, under Rule 144
under the Securities Act or any successor rule, the Company shall (a) make and
keep public information generally available, as those terms are defined in Rule
144 under the Securities Act and (b) file with the Commission in a timely manner
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act of 1934, as amended.
10. Stock Legend. Each certificate representing
Registrable Shares shall be stamped or otherwise imprinted with a legend
substantially as follows:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH IS NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE
STATE SECURITIES OR
7
<PAGE>
BLUE SKY LAWS AND, IN THE CASE OF A TRANSACTION NOT SUBJECT TO SUCH
REGISTRATION REQUIREMENTS, UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION UNDER THE ACT."
11. Representations and Warranties. (a) The Company
hereby represents and warrants to each other party that:
(i) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. The
Company has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby and has duly
executed and delivered this Agreement. This Agreement constitutes the valid and
binding obligation of the Company, enforceable against it in accordance with its
respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (A) conflict with or result in a
breach of the charter, by-laws or other constitutive documents of the Company,
(B) conflict with or result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the provisions of any
note, bond, lease, mortgage, indenture, license, franchise, permit, agreement or
other instrument or obligation to which the Company is a party, or by which the
Company or the Company's properties or assets, may be bound or affected, except
for such conflict, breach or default as to which requisite waivers or consents
shall be obtained before the Closing, or (C) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to the Company or the
Company's properties or assets or (D) result in the creation or imposition of
any security interest, lien or other encumbrance upon any of the Company's
properties or assets of such Stockholder. No consent or approval by, or any
notification of or filing with, any person, firm, corporation, partnership,
joint venture, association or entity (governmental or private) (each, a "person"
and collectively, "persons") is required in connection with the execution,
delivery and performance by the Company of this Agreement or the consummation of
the transactions contemplated hereby, except as set forth in the Merger
Agreement.
(b) Representations and Warranties of the Stockholders.
Each of the Stockholders represents and warrants to each other party that:
(i) Such Stockholder has all requisite power, capacity and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and has duly executed and delivered this Agreement. This
Agreement constitutes the valid and binding obligation of such Stockholder,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles.
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby nor compliance by such
Stockholder with any of the provisions hereto will (A) conflict with or result
in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which such Stockholder is a party, or by which such Stockholder or
such Stockholder's properties or assets may be bound or affected, except for
such conflict, breach or default as to which requisite waivers or consents shall
be obtained before the Closing (which waivers or consents are set forth in
Section 2.1(d) of the Disclosure Schedule (defined in the Merger Agreement), (B)
violate any law, statute,
8
<PAGE>
rule or regulation or order, writ, injunction or decree applicable to such
Stockholder or such Stockholder's properties or assets or (C) result in the
creation or imposition of any security interest, lien or other encumbrance upon
any property or assets of such Stockholder. No consent or approval by, or any
notification of or filing with, any person is required in connection with the
execution, delivery and performance by such Stockholder of this Agreement or the
consummation of the transactions contemplated hereby except as set forth in the
Merger Agreement.
(c) Representations and Warranties of the Representative.
The Representative represents and warrants to each other party that:
(i) The Representative has all requisite power, capacity and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and has duly executed and delivered this Agreement. This
Agreement constitutes the valid and binding obligation of the Representative,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles.
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby nor compliance by the
Representative with any of the provisions hereto will (A) conflict with or
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which the Representative is a party, or by which the
Representative or the Representative's properties or assets may be bound or
affected, (B) violate any law, statute, rule or regulation or order, writ,
injunction or decree applicable to the Representative or the Representative's
properties or assets or (C) result in the creation or imposition of any security
interest, lien or other encumbrance upon any property or assets of the
Representative. No consent or approval by, or any notification of or filing
with, any person is required in connection with the execution, delivery and
performance by the Representative of this Agreement or the consummation of the
transactions contemplated hereby except as set forth in the Merger Agreement.
12. Representative. Each of the Stockholders agrees to
indemnify and hold harmless the Representative by reason of his acting or
failing to act in connection with any of the transactions contemplated hereby
and against any loss, liability or expense the Representative may sustain or
incur as a result of serving as the Representative hereunder, except such
losses, liabilities and expenses which are determined in a final judgment of a
court to have resulted primarily from the gross negligence or willful misconduct
of the Representative. Each of the Stockholders hereby agrees to reimburse the
Representative upon his request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Representative in the
performance of his duties under this Agreement. If the Representative dies or
becomes incapacitated, the executor, guardian or other representative of the
Representative's estate shall have the authority hereunder to act as
Representative hereunder or to appoint a successor to act as Representative
hereunder, provided any such successor Representative is reasonably acceptable
to the Company.
13. Termination of Registration Rights. No Stockholder shall
be entitled to execute any registration right provided for in this Agreement at
any time during which all the Registrable Shares held by such Stockholder may be
sold without restriction of any kind under Rule 144.
14. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes
the entire agreement between the Company and the Stockholders with respect to
the transactions contemplated hereby
9
<PAGE>
and thereby and supersede all prior agreements or understandings among the
parties with respect thereto.
(b) Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(c) Notices. All notices or other communications
provided for in this Agreement shall be in writing and shall be sent by
confirmed telecopy (with an undertaking to provide a hard copy) or delivered by
hand or sent by overnight courier service prepaid to the address specified
below.
If to the Company:
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
P.O. Box 36
Mt. Joy, Pennsylvania 117552
Telecopy: (717) 653-0567
Attention: Peter W. Gilson
Hamilton F. Potter III
David S. Geller
If to the Representative:
Peter D. Cooper
c/o EE&C Financial Services, Inc.
60 Park Place
Newark, New Jersey 07102
Telecopy: (201) 624-8240
If to a Stockholder, to the address or telecopy number for such Stockholder set
forth on Annex A attached hereto or to such other address as the party to whom
notice is to be given may have furnished to the other party in writing in
accordance herewith.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(e) Amendments. This Agreement shall not be altered or
otherwise amended except pursuant to an instrument in writing signed by each of
(i) the Company and (ii) the holders of two-thirds of the number of Registrable
Shares then outstanding. Each Stockholder acknowledges that by operation of this
subsection, the holders of two-thirds of the then outstanding Registrable Shares
will have the right and power to diminish or eliminate certain rights of the
Stockholders under this Agreement.
(f) Transferability. The registration and other rights granted
to the Stockholders hereunder are non-transferable and cannot be assigned or
transferred in any manner to any third party without the prior written consent
of the Company. Notwithstanding the foregoing, any Stockholder may assign the
registration rights granted to such Stockholder herein to such Stockholder's
spouse or children or trusts, partnerships or corporations for the sole benefit
of such persons and, upon such Stockholder's death to such Stockholder's estate
or to no more than two: (i) private or public foundations exempt from federal
income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, to which Registrable Shares have been transferred in
transactions that do not result in the recognition of taxable income or capital
gain for federal income tax purposes; and/or (ii) revocable or irrevocable inter
vivos trusts, partnerships or other entities to which Registrable Shares have
been transferred in transactions that do not result in the recognition of
taxable income or capital gain for federal income tax purposes.
(g) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the date first above written.
PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ Peter W. Gilson
-------------------------------
Name:
Title:
REPRESENTATIVE:
/s/ Peter D. Cooper
-----------------------------------
Peter D. Cooper
STOCKHOLDERS:
/s/ Elaine Scialo
----------------------------------
Elaine Scialo
/s/ Christopher Becker
----------------------------------
Christopher Becker
/s/ Robert Schwartz
----------------------------------
Robert Schwartz
/s/ William Hecht
----------------------------------
William Hecht
/s/ Randy Cooper
----------------------------------
Randy Cooper
ELTMAN ELTMAN & COOPER, P.C.
/s/ Peter D. Cooper
By: --------------------------------
Name: Peter D. Cooper
Title:
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of August 30, 1996,
among PHYSICIAN SUPPORT SYSTEMS, INC., a Delaware corporation (the "Company"),
each of the STOCKHOLDERS of EE&C Health Services, Inc., a Delaware corporation
("EE&C Health"), and the MEMBERS (the "Members" and, together with the EE&C
Health Stockholders, the "Stockholders") of Med-Data Interface Systems, LLC, a
Texas limited liability company ("Med-Data"), and of Medical Intercept Systems,
LLC, a Texas limited liability company ("Medical Intercept" and, together with
EE&C Health and Med-Data, the "Acquired Companies") listed on the signature
pages hereof, and PETER D. COOPER, as representative of the Stockholders (the
"Representative").
Introduction
Pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1996 (the "Merger Agreement"), among the Company, PSS EE&C Health
Services, Inc., a Delaware corporation (EE&C Merger Subsidiary") and a wholly
owned subsidiary of the Company, PSS Med-Data Interface Systems, Inc., a
Delaware corporation ("Med-Data Merger Subsidiary") and a wholly owned
subsidiary of the Company, and PSS Medical Intercept Systems, Inc., a Delaware
corporation ("MIS Merger Subsidiary") and a wholly owned subsidiary of the
Company, and each of the Acquired Companies, the Stockholders have the right to
receive shares of common stock, par value $.001 per share (the "Common Stock"),
of the Company upon the effective time of the merger (the "Mergers") of EE&C
Merger Subsidiary and EE&C Health, Med-Data Merger Subsidiary and Med-Data and
MIS Merger Subsidiary and Medical Intercept.
As a condition to the Mergers, the Company must enter into
this Agreement.
The parties hereto agree as follows:
1. Definitions. As used herein, the following terms have the
following respective meanings:
Commission means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
Distribution Period means, (a) in the case of a distribution
of Registrable Shares in a firm commitment underwritten public offering, the
period of time as each underwriter has completed the distribution of all
securities purchased by it, but in any case not more than 30 days, and (b) in
the case of any other registration of Registrable Shares, the period ending on
the earlier of (i) the sale of all Registrable Shares covered by such
registration and (ii) 21 days following the effective date of the registration
statement utilized in connection with such registration under the Securities
Act.
Effective Time means the time at which the Mergers becomes
effective as set forth in the Merger Agreement.
Pooling Period means the period beginning at the Effective
Time of the Mergers and continuing until such time as financial results covering
at least 30 days of combined operations of the Company and the Acquired
Companies shall have been published by the Company within the meaning of Section
201.01 of the Commission's Codification of Financial Reporting Policies.
Registrable Shares means the shares of Common Stock issued to
the Stockholders pursuant to the Merger Agreement (including any additional
shares issued as a stock dividend thereon or any shares issued as the result of
a stock split (including reverse stock split),
<PAGE>
recapitalization, reorganization, stock exchange or other combination), which
bear the legend set forth in Section 10.
Representative means Peter D. Cooper, or such other person
notified in writing to the Company by holders of a majority of the Registrable
Shares, in such person's capacity as representative of the Stockholders.
Securities Act means the Securities Act of 1933, as amended.
2. Incidental Registration. (a) If at any time after the
Pooling Period, the Company proposes to register any Common Stock under the
Securities Act (other than on Forms S-4, S-8 or any other form which does not
permit registration of securities by selling stockholders for sale to the public
for cash) in connection with the proposed offer and sale for cash either for its
own account or on behalf of any holder of Common Stock (together with a
registration described in Section 2(c), an "Eligible Registration"), it will
give written notice to the Stockholders of its intention to do so. Upon a
Stockholder's written request to the Company, given within 10 business days
after receipt of any such notice, to register any of such Stockholder's
Registrable Shares, the Company will use its reasonable best efforts to cause
the Registrable Shares as to which registration shall have been so requested to
be included in the shares of Common Stock to be covered by the registration
statement proposed to be filed by the Company; provided that nothing set forth
in this Agreement shall prevent the Company from, at any time, withdrawing,
abandoning or delaying any registration of such Common Stock.
(b) The Company shall have the sole right to select the
managing underwriter or underwriters. The managing underwriter for such offering
shall have the authority, in its sole discretion, to reduce the number of
Registrable Shares to be included in such registration if and to the extent that
it determines that inclusion of such Registrable Shares would adversely effect
the marketing of the other Common Stock to be sold thereunder. Any such
reduction in the shares included in any such offering shall be effected (i)
first, by excluding shares ("Piggyback Shares") of Common Stock that otherwise
would be included by virtue of incidental or piggyback registration rights (but
not demand registration rights) granted to stockholders (including the
Stockholders), which exclusion shall be effected on a pro rata basis based upon
the number of shares of Common Stock so requested to be registered in such
offering by all such stockholders proposing to sell Piggyback Shares and (ii)
second, only to the extent necessary and after the exclusion of all Piggyback
Shares, by excluding shares of Common Stock included in such registration by the
Company and any stockholder of the Company who shall have exercised a demand
registration right in connection with such offering, which exclusion shall be
effected on a pro rata basis based upon the number of shares of Common Stock
proposed to be registered on behalf of the Company and on behalf of any such
holder of demand registration rights.
(c) (i) If at any time after the Pooling Period any of the
following persons: (A) Peter W. Gilson ("PG"), (B) Hamilton F. Potter III
("HP"), (C) any member of PG's or HP's immediate family, (D) any partnership,
trust or other entity whose beneficiaries or beneficial owners are comprised of
PG, HP and/or their immediate family members, and/or (E) any affiliate of PG or
HP (other than PSS) (collectively, the "Affiliated Persons"), causes PSS to
register any shares of Common Stock under the Securities Act (other than on
Forms S-4, S-8 or any other form which does not permit registration of
securities by selling stockholders for sale to the public for cash) in
connection with the proposed offer and sale for cash for such person's own
account, the Company will give written notice to the Stockholders of such
intended registration. Upon a Stockholder's written request to the Company to
register up to the Pro Rata Portion (defined below) of any of such Stockholder's
Registrable Shares, given within 10 business days after receipt of any such
notice, the Company will use its reasonable best efforts to cause the
Registrable Shares as to which registration shall have been so requested to be
included in the shares of Common Stock to be covered by such
2
<PAGE>
registration statement; provided that nothing shall prevent the Company from, at
any time, withdrawing, abandoning or delaying any such registration, so long as
the registration of the Affiliate Persons' shares of Common Stock is similarly
affected.
(ii) For the purposes of this Agreement, the term "Pro Rata
Portion" shall mean that portion of a Stockholder's Registrable Shares which
shall be equal to the product of (A) the total number of such Stockholder's
Registrable Shares and (B) the greatest of the individual quotients obtained in
each case by dividing (x) the number of shares of Common Stock proposed to be
registered by each Affiliate Person by (y) the total number of shares of Common
Stock held by such Affiliated Person.
(iii) In the event of an underwritten offering of shares
referred to in this Section 2(c), the managing underwriter for such offering
shall have the authority to reduce the number of shares of Common Stock to be
included in such registration if and to the extent that it determines that
inclusion of all of such shares would adversely affect the marketing of the
shares to be sold thereunder; provided, that any such reduction in the shares of
Common Stock included in any such offering shall be effected on a pro rata basis
based upon the aggregate number of shares of Common Stock to be registered in
such offering by all such stockholders (including the Affiliated Persons and the
Stockholders) proposing to sell shares of Common Stock.
(d) If any registration pursuant to this Section 2 shall be
underwritten, in whole or in part, the Company or the managing underwriter or
underwriters may require that the Registrable Shares requested for inclusion
pursuant to this Section 2 be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters.
3. Demand Registration. (a) If, on or before November 30,
1996, August 31, 1997 or May 31, 1998 (in each case, a "Trigger Date"), the
Company has not registered any Common Stock under an Eligible Registration in
which the holders of Registrable Shares were entitled to include (whether or not
they elected to include and net of any reduction pursuant to Section 2(b) or
2(c)(iii) in the number of Registrable Shares that may have been included) at
least 25%, 50% and 100%, respectively, of their Registrable Shares initially
held (which percentages shall be determined on a cumulative basis, giving effect
to all prior registrations under Section 2 and all prior registrations under
Section 3), then, at any time after the Pooling Period and the applicable
Trigger Date, the Representative may request that the Company register the
Registrable Shares under the Securities Act for public sale (the "Demand
Rights"); provided that (i) at least 45,000 Registrable Shares must be included
in any Demand Right, (ii) not more than 76,000 Registrable Shares may be
included in any registration statement prepared or filed on or before August 31,
1997, (iii) not more than 97,000 Registrable Shares may be included in any
registration statement prepared or filed pursuant to a Demand Right on or before
May 31, 1998, (iv) not more than 141,000 Registrable Shares may be included in
any registration statement prepared or filed pursuant to a Demand Right after
May 31, 1998, (v) not more than three Demand Rights may be requested in the
aggregate and (vi) not more than one Demand Right may be exercised in any
9-month period. To request a Demand Right, Stockholders wishing to include in a
Demand Right a number of Registrable Shares at least equal to the minimum number
of Registrable Shares required to be included therein shall notify the
Representative of their desire to so request a Demand Right. The Representative
shall then request a Demand Right by giving the Company written notice thereof.
Prior to giving such notice to the Company, the Representative shall provide
reasonable notice to the other Stockholders of his intention to so request a
Demand Right and provide each such Stockholder with a reasonable opportunity to
sell Registrable Shares in connection with such registration.
(b) The Company shall be entitled, in its sole discretion, to
delay undertaking efforts to register Registrable Shares pursuant to this
Section 3 for (i) in the case of the first request for Demand Rights, a period
of up to 60 days, (ii) in the case of the second request for Demand Rights, a
3
<PAGE>
period of up to 90 days and (iii) in any other case, a period of up to 120 days,
in each case from the date of receipt of the request for Demand Rights specified
in Section 3(a).
(c) The registration of Registrable Shares pursuant to this
Section 3 shall, unless the Company otherwise agrees in its sole discretion, be
pursuant to an underwritten offering. The Company shall have the right, in its
sole discretion and to the exclusion of any holder of Registrable Shares, to
select a managing underwriter or underwriters in connection with any
registration statement filed pursuant to this Section 3 and shall have the right
to include any additional shares of Common Stock in a registration statement
filed pursuant to this Section 3. The managing underwriter for such offering
shall have the authority, in its sole discretion, to reduce the number of shares
of Common Stock to be included in a registration pursuant to this Section 3 if
and to the extent that it determines that inclusion of all of such shares of
Common Stock would adversely effect the marketing of the other shares of Common
Stock to be sold thereunder. Any such reduction in the shares included in any
such offering shall be effected (i) first, by excluding Piggyback Shares, which
exclusion shall be effected on a pro rata basis based upon the number of shares
of Common Stock so requested to be registered in such offering by all such
stockholders proposing to sell Piggyback Shares and (ii) second, only to the
extent necessary and after the exclusion of all Piggyback Shares, by excluding
shares of Common Stock included in such registration by the Company and any
Stockholder who shall have exercised a Demand Right in connection with such
offering, which exclusion shall be effected on a pro rata basis based upon the
number of shares of Common Stock proposed to be registered on behalf of the
Company and on behalf of any such Stockholder.
(d) Notwithstanding anything to the contrary set forth in this
Section 3, the Stockholders may on one occasion rescind a request for a Demand
Right and such rescinded request shall not be considered a request for a Demand
Right for purposes of Section 3(a), provided that: (i) a written rescission
notice signed by all of the Stockholders that had requested that Registrable
Shares be included in such Demand Right (a "Rescission Notice") shall be
received by the Company prior to the Company's filing a registration statement
relating to such Demand Right, (ii) the Company shall not have incurred
documented out-of-pocket expenses in excess of $100,000 in connection with
fulfilling its obligations hereunder relating to such Demand Right and (iii) the
Stockholders may not request another Demand Right within three months after
rescinding a Demand Right pursuant to this Section 3(d).
4. Preparation and Filing. If and whenever the Company is
under an obligation pursuant to the provisions of Section 2 or 3 to effect the
registration of any Registrable Shares, the Company shall, as expeditiously
as practicable:
(a) prepare and diligently pursue the filing with the
Commission of a registration statement with respect to such securities and use
its reasonable efforts to cause such registration statement to become and remain
effective for the Distribution Period, but no longer;
(b) prepare and file with the Commission such amendments and
supplements to such registration statements and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the Distribution Period, but no longer;
(c) furnish to the holders of Registrable Shares included in
such registration statement such number of copies of a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such holders of
Registrable Shares may reasonably request in order to facilitate the public sale
or other disposition of such Registrable Shares;
(d) use its reasonable efforts to register or qualify the
Registrable Shares covered by such registration statement under the securities
or "blue sky" laws of such states as each holder of
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<PAGE>
such Registrable Shares shall reasonably request (provided, that the Company
shall not be required to consent to general service of process for all purposes
in any jurisdiction where it is not then qualified) and do any and all other
acts or things which may be necessary or advisable to enable such seller to
consummate the public sale or other disposition in such jurisdictions of such
securities;
(e) notify each Stockholder selling Registrable Shares covered
by such registration statement, at any time during the Distribution Period when
a prospectus relating thereto covered by such registration statement is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and at
the request of such Stockholder, prepare and furnish to such Stockholder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing; and
(f) use its reasonable efforts to furnish, at the request of
any Stockholder requesting registration of Registrable Shares pursuant to
Section 2 or 3 on the date that such Registrable Shares are delivered to the
underwriters for sale in connection with a registration pursuant to Section 2 or
3, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, stating that such registration statement has
become effective under the Securities Act and that (A) to the best of such
counsel's knowledge, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are pending
or contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement thereof, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except no opinion
or statement is required regarding financial statements and other financial and
statistical data) and (C) to such other effects as may reasonably be requested
by counsel for the underwriters, if any, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included or incorporated by reference in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters with
respect to the registration in respect of which such letter is being given as
such underwriters, if any, may reasonably request.
(g) Notwithstanding anything to the contrary contained herein,
the Company shall have the right to deregister any Registrable Shares that
remain unsold at the conclusion of any Distribution Period.
5. Stockholders' Lock-Up; Cooperation. If any Registrable
Shares of a Stockholder are included in an underwritten registration pursuant to
Section 2 or 3 each Stockholder, as a condition to receiving the rights granted
hereunder, may be required to, and if required such Stockholder shall, enter
into an agreement (a "Lock-up Agreement"), pursuant to which such Stockholder
shall refrain from selling any Registrable Shares not included in such
registration during the period of distribution of Common Stock by such
underwriters and for a period of up to 180 days following the effective date of
such registration. In connection with each registration pursuant to Section 2 or
3 hereof, the Stockholders selling Registrable Shares shall furnish in writing
to the
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<PAGE>
Company and any underwriter participating in such offering such information with
respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with Federal and applicable
state securities laws.
6. Underwriting Agreement. In connection with each
registration pursuant to Section 2 or 3 covering an underwritten public
offering, the Company and the Stockholders agree to enter into a written
agreement with the managing underwriter or underwriters in such form and
containing such provisions as are usual and customary in the securities business
for such an arrangement between reputable underwriters and companies of the
Company's size and investment stature; provided, that such agreement shall not
contain any such provision applicable to the Company or the Stockholders which
is inconsistent with the provisions of this Agreement; and provided, further,
that the time and place of the closing under said underwriting agreement shall
be as mutually agreed upon between the Company and such managing underwriter.
7. Expenses. All expenses incurred by the Company in complying
with this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of complying with securities and "blue sky" laws,
printing expenses and fees and disbursements of counsel, and of the independent
certified public accountants shall be paid by the Company; provided, that
counsel to the securityholders and all underwriting discounts and selling
commissions applicable to the Registrable Shares covered by registrations
effected hereunder shall not be borne by the Company but shall be borne by the
seller or sellers.
8. Indemnification. (a) In the event of any registration of
any Registrable Shares under the Securities Act pursuant to this Agreement or
registration or qualification of any Registrable Shares under state securities
or "blue sky" laws pursuant to this Agreement, the Company shall indemnify and
hold harmless the Stockholder owning such Registrable Shares and each other
person, if any, who controls such holder, within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which any of the foregoing persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document prepared or
furnished by the Company incident to the registration or qualification of any
Registrable Shares pursuant to this Agreement, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or "blue sky"
laws applicable to the Company and relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such Stockholder or other
person acting on behalf of such Stockholder and each such controlling person for
any legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, that the Company shall not be liable (i) in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the registration statement, the preliminary prospectus
or prospectus or the amendment or supplement or any document incident to the
registration or qualification of any Registrable Shares pursuant to this
Agreement in reliance upon and in conformity with written information furnished
to the Company by such Stockholder or such underwriter specifically for use in
the preparation thereof and (ii) to any broker or other person acting on behalf
of such Stockholder to the extent that any such loss, claim, damage or liability
arises out of or is based upon any representation or other statement of such
broker or other person that is not in conformity with the preliminary prospectus
or prospectus.
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<PAGE>
(b) Each Stockholder hereby indemnifies and holds harmless the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Securities Act, and before Registrable Shares held by such
Stockholder shall be included in any registration pursuant to this Agreement,
any underwriter acting on such Stockholder's behalf shall agree to indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall sign such registration statement and any person who controls
the Company within the meaning of the Securities Act (in each case in the same
manner and to the same extent as set forth in (a) above) with respect to any
untrue statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, if such untrue statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by such Stockholder
or such underwriter, as the case may be, specifically for use in the preparation
of such registration statement, preliminary prospectus, final prospectus or
amendment or supplement; provided that, the maximum amount of liability in
respect of such indemnification shall be limited, in the case of each
Stockholder who, at any time during the registration or the year preceding the
registration, was not an officer or director of the Company or any of its
subsidiaries, to an amount paid for such Registrable Shares upon the sale
thereof pursuant to such registration.
(c) Each party entitled to indemnification hereunder (the
"indemnified party") shall give notice to the party required to provide
indemnification (the "indemnifying party") promptly after such indemnified party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom; provided, that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the indemnified party, and the indemnified
party may participate in such defense, but only at such indemnified party's
expense; and provided, further, that the omission by any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 8 except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such indemnifying
party is damaged as a result of the failure to give notice. It is understood
that the indemnifying party shall not, in connection with any action or related
actions in the same jurisdiction, be liable for the fees and disbursements of
more than one separate firm qualified in such jurisdiction to act as counsel for
the indemnified party; it being further understood that the Stockholders
collectively will be considered one indemnified party for purposes of this
sentence. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. Notwithstanding anything to the contrary herein, the Representative
shall act on behalf of the Stockholders in connection with any proceeding
brought or claim made under this Section 8, including conducting the defense of
any such claim if the Stockholders are the indemnifying party, and all notices
and consents referred to in this Section 8(c) shall be sufficient if given to or
by the Representative.
9. Rule 144 Matters. For so long as any Stockholder holds
Registrable Shares that may not be sold, without restriction, under Rule 144
under the Securities Act or any successor rule, the Company shall (a) make and
keep public information generally available, as those terms are defined in Rule
144 under the Securities Act and (b) file with the Commission in a timely manner
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act of 1934, as amended.
10. Stock Legend. Each certificate representing Registrable
Shares shall be stamped or otherwise imprinted with a legend substantially as
follows:
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<PAGE>
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH IS NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS AND, IN THE CASE OF A TRANSACTION NOT
SUBJECT TO SUCH REGISTRATION REQUIREMENTS, UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH
TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE ACT."
11. Representations and Warranties. (a) The Company hereby
represents and warrants to each other party that:
(i) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. The
Company has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby and has duly
executed and delivered this Agreement. This Agreement constitutes the valid and
binding obligation of the Company, enforceable against it in accordance with its
respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (A) conflict with or result in a
breach of the charter, by-laws or other constitutive documents of the Company,
(B) conflict with or result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the provisions of any
note, bond, lease, mortgage, indenture, license, franchise, permit, agreement or
other instrument or obligation to which the Company is a party, or by which the
Company or the Company's properties or assets, may be bound or affected, except
for such conflict, breach or default as to which requisite waivers or consents
shall be obtained before the Closing, or (C) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to the Company or the
Company's properties or assets or (D) result in the creation or imposition of
any security interest, lien or other encumbrance upon any of the Company's
properties or assets of such Stockholder. No consent or approval by, or any
notification of or filing with, any person, firm, corporation, partnership,
joint venture, association or entity (governmental or private) (each, a "person"
and collectively, "persons") is required in connection with the execution,
delivery and performance by the Company of this Agreement or the consummation of
the transactions contemplated hereby, except as set forth in the Merger
Agreement.
(b) Representations and Warranties of the Stockholders. Each
of the Stockholders represents and warrants to each other party that:
(i) Such Stockholder has all requisite power, capacity and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and has duly executed and delivered this Agreement. This
Agreement constitutes the valid and binding obligation of such Stockholder,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles.
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(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby nor compliance by such
Stockholder with any of the provisions hereto will (A) conflict with or result
in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which such Stockholder is a party, or by which such Stockholder or
such Stockholder's properties or assets may be bound or affected, except for
such conflict, breach or default as to which requisite waivers or consents shall
be obtained before the Closing (which waivers or consents are set forth in
Section 2.1(d) of the Disclosure Schedule (defined in the Merger Agreement), (B)
violate any law, statute, rule or regulation or order, writ, injunction or
decree applicable to such Stockholder or such Stockholder's properties or assets
or (C) result in the creation or imposition of any security interest, lien or
other encumbrance upon any property or assets of such Stockholder. No consent or
approval by, or any notification of or filing with, any person is required in
connection with the execution, delivery and performance by such Stockholder of
this Agreement or the consummation of the transactions contemplated hereby
except as set forth in the Merger Agreement.
(c) Representations and Warranties of the Representative.
The Representative represents and warrants to each other party that:
(i) The Representative has all requisite power, capacity and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and has duly executed and delivered this Agreement. This
Agreement constitutes the valid and binding obligation of the Representative,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles.
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby nor compliance by the
Representative with any of the provisions hereto will (A) conflict with or
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which the Representative is a party, or by which the
Representative or the Representative's properties or assets may be bound or
affected, (B) violate any law, statute, rule or regulation or order, writ,
injunction or decree applicable to the Representative or the Representative's
properties or assets or (C) result in the creation or imposition of any security
interest, lien or other encumbrance upon any property or assets of the
Representative. No consent or approval by, or any notification of or filing
with, any person is required in connection with the execution, delivery and
performance by the Representative of this Agreement or the consummation of the
transactions contemplated hereby except as set forth in the Merger Agreement.
12. Representative. Each of the Stockholders agrees to
indemnify and hold harmless the Representative by reason of his acting or
failing to act in connection with any of the transactions contemplated hereby
and against any loss, liability or expense the Representative may sustain or
incur as a result of serving as the Representative hereunder, except such
losses, liabilities and expenses which are determined in a final judgment of a
court to have resulted primarily from the gross negligence or willful misconduct
of the Representative. Each of the Stockholders hereby agrees to reimburse the
Representative upon his request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Representative in the
performance of his duties under this Agreement. If the Representative dies or
becomes incapacitated, the executor, guardian or other representative of the
Representative's estate shall have the authority hereunder to act as
Representative hereunder or to appoint a successor to act as Representative
hereunder, provided any such successor Representative is reasonably acceptable
to the Company.
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13. Termination of Registration Rights. No Stockholder shall
be entitled to execute any registration right provided for in this Agreement at
any time during which all the Registrable Shares held by such Stockholder may be
sold without restriction of any kind under Rule 144.
14. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes
the entire agreement between the Company and the Stockholders with respect to
the transactions contemplated hereby and thereby and supersede all prior
agreements or understandings among the parties with respect thereto.
(b) Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
(c) Notices. All notices or other communications
provided for in this Agreement shall be in writing and shall be sent by
confirmed telecopy (with an undertaking to provide a hard copy) or delivered
by hand or sent by overnight courier service prepaid to the address specified
below.
If to the Company:
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
P.O. Box 36
Mt. Joy, Pennsylvania 117552
Telecopy: (717) 653-0567
Attention: Peter W. Gilson
Hamilton F. Potter III
David S. Geller
If to the Representative:
Peter D. Cooper
c/o EE&C Financial Services, Inc.
60 Park Place
Newark, New Jersey 07102
Telecopy: (201) 624-8240
If to a Stockholder, to the address or telecopy number for such Stockholder set
forth on Annex A attached hereto or to such other address as the party to whom
notice is to be given may have furnished to the other party in writing in
accordance herewith.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(e) Amendments. This Agreement shall not be altered or
otherwise amended except pursuant to an instrument in writing signed by each of
(i) the Company and (ii) the holders of two-thirds of the number of Registrable
Shares then outstanding. Each Stockholder acknowledges that by operation of this
subsection, the holders of two-thirds of the then outstanding Registrable Shares
will have the right and power to diminish or eliminate certain rights of the
Stockholders under this Agreement.
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(f) Transferability. The registration and other rights granted
to the Stockholders hereunder are non-transferable and cannot be assigned or
transferred in any manner to any third party without the prior written consent
of the Company. Notwithstanding the foregoing, any Stockholder may assign the
registration rights granted to such Stockholder herein to such Stockholder's
spouse or children or trusts, partnerships or corporations for the sole benefit
of such persons and, upon such Stockholder's death to such Stockholder's estate
or to no more than two: (i) private or public foundations exempt from federal
income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, to which Registrable Shares have been transferred in
transactions that do not result in the recognition of taxable income or capital
gain for federal income tax purposes; and/or (ii) revocable or irrevocable inter
vivos trusts, partnerships or other entities to which Registrable Shares have
been transferred in transactions that do not result in the recognition of
taxable income or capital gain for federal income tax purposes.
(g) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
PHYSICIAN SUPPORT SYSTEMS, INC.
/s/ H.F. Potter III
By:_______________________________
Name:
Title:
REPRESENTATIVE:
/s/ Peter D. Cooper
-----------------------------------
Peter D. Cooper
STOCKHOLDERS:
/s/ Peter D. Cooper
-----------------------------------
Peter D. Cooper
/s/ William Joe Davis
-----------------------------------
William Joe Davis
/s/ James Robertson
-----------------------------------
James Robertson
/s/ Marijane McElroy
-----------------------------------
Marijane McElroy
/s/ Dale Williams
-----------------------------------
Dale Williams
/s/ Frank Treadaway
-----------------------------------
Frank Treadaway
<PAGE>
/s/ Vicki White
-----------------------------------
Vicki White
/s/ Robert Flanakin
-----------------------------------
Robert Flanakin
/s/ Katharine Ann Reynolds
-----------------------------------
Katharine Ann Reynolds
/s/ M.C. Perry
-----------------------------------
M.C. Perry
