<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 3, 1996
-------------------------------
Physician Support Systems, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 33-80731 13-3624081
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Route 230 and Eby-Chiques Road, Mt. Joy, PA 17552
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 653-5340
-----------------------------
not applicable
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On September 3, 1996, Physician Support Systems, Inc., a Delaware
corporation (the "Company") acquired the respective capital stock and membership
interests outstanding of EE&C Health Services, Inc., a Delaware corporation
("HSI"), Med-Data Interface Systems, LLC, a Texas limited liability company
("MDI") and Medical Intercept Systems, LLC, a Texas limited liability company
("MIS" and, together with HSI and MDI, the "MIS Affiliates") through mergers of
wholly owned subsidiaries of the Company with each of the MIS Affiliates (the
"Mergers"). The MIS Affiliates provide accounts receivable management and other
services to physicians.
All of the capital stock of HSI and respective membership interests of
MDI and MIS outstanding immediately before the Mergers were converted at the
time of the Mergers into the right to receive, in the aggregate, 286,000 shares
of common stock, par value $.001 per share (the "Common Stock") of the Company
and $3,697,500 in cash. In connection with the Mergers, the Company also paid
approximately $3.5 million in cash to retire certain debt of HSI, MDI and MIS.
The Mergers will be accounted for as purchases.
In connection with the transaction, the Company granted the MIS
Affiliates stockholders/members the right to include their shares of Common
Stock acquired in the Mergers in certain registrations of Common Stock and to
demand, under certain circumstances and subject to certain limitations, that
their shares of Common Stock be registered in underwritten public offerings at
various times.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
(b) Pro Forma Financial Information
As of the date of this Report, it is impracticable to provide the
required financial statements and pro forma financial information relating to
the MIS Affiliates. Such statements and information will be filed as soon as
they become available, and in any event not later than 60 days after the date
this Report is filed with the Securities and Exchange Commission.
(c) Exhibits.
(2) Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or
Succession. Exhibit 2 - Agreement and Plan of Merger 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, dated as of August 30, 1996 (omitting schedules
and exhibits thereto, which will be furnished supplementally to the
Commission upon request).
(10) Material Contracts. Exhibit 10 - Registration Rights Agreement, dated as
of August 30, 1996, among Physician Support Systems, Inc., each of the
stockholders of EE&C Health Services, Inc. and the members of Med-Data
Interface Systems, LLC and of Medical Intercept Systems, LLC, and Peter
D. Cooper, as representative of the stockholders and members.
(99) Additional Exhibits. Exhibit 99 - Copy of press release issued by the
Company September 3, 1996.
2
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
PHYSICIAN SUPPORT SYSTEMS, INC.
By /s/ David S. Geller
----------------------------
David S. Geller
Senior Vice President
Date September 16, 1996
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EXHIBIT INDEX
Exhibit 2
Agreement and Plan of Merger 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, dated as of August 30, 1996 (omitting
schedules and exhibits thereto, which will be furnished supplementally to the
Commission upon request).
Exhibit 10
Registration Rights Agreement, dated as of August 30, 1996, among Physician
Support Systems, Inc., each of the stockholders of EE&C Health Services, Inc.
and the members of Med-Data Interface Systems, LLC and of Medical Intercept
Systems, LLC, and Peter D. Cooper, as representative of the stockholders and
members.
Exhibit 99
Copy of press release issued by the Company September 3, 1996.
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EXHIBIT 2
================================================================================
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
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<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
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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
ii
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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
iv
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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 ("Med-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.
<PAGE>
The parties agree as follows:
ARTICLE I
THE MERGERS
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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.
3
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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
4
<PAGE>
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,
5
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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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(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 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 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
14
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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,
15
<PAGE>
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.
16
<PAGE>
(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).
17
<PAGE>
(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
18
<PAGE>
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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<PAGE>
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
20
<PAGE>
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
21
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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.
22
<PAGE>
(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
23
<PAGE>
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 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
24
<PAGE>
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 M. Gilson
- --------------------------- -------------------------------
Name: David S. Geller Name: Peter M. Gilson
Title: Secretary Title: President
Attest PSS EE&C HEALTH SERVICES, INC.
By: /s/ David S. Geller By: /s/ Peter M. Gilson
- --------------------------- -------------------------------
Name: David S. Geller Name: Peter M. Gilson
Title: Secretary Title: President
Attest PSS MED-DATA INTERFACE SYSTEMS, LLC
By: /s/ David S. Geller By: /s/ Peter M. Gilson
- --------------------------- -------------------------------
Name: David S. Geller Name: Peter M. Gilson
Title: Secretary Title: President
Attest PSS MEDICAL INTERCEPT SYSTEMS, LLC
By: /s/ David S. Geller By: /s/ Peter M. Gilson
- --------------------------- -------------------------------
Name: David S. Geller Name: Peter M. Gilson
Title: Secretary Title: President
30
<PAGE>
Attest EE&C HEALTH SERVICES, INC.
By: /s/ William Hecht By: /s/ Peter D. Cooper
- --------------------------- -------------------------------
Name: William Hecht Name: Peter D. Cooper
Title: Secretary Title: President
Attest MED-DATA INTERFACE SYSTEMS LLC
By: /s/ William Hecht By: /s/ Peter D. Cooper
- --------------------------- -------------------------------
Name: William Hecht Name: Peter D. Cooper
Title: Secretary Title: President
Attest MEDICAL INTERCEPT SYSTEMS, LLC
By: /s/ William Hecht By: /s/ Peter D. Cooper
- --------------------------- -------------------------------
Name: William Hecht Name: Peter D. Cooper
Title: Secretary Title: President
13622\6
31
<PAGE>
Annex 1
EE&C Merger Consideration
-------------------------
Number of Shares
EE&C Stockholder Parent Com Cash ($)*
- ---------------- ---------- ---------
mon Stock
---------
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
- ----------------------
*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>
EXHIBIT 10
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
4
<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
5
<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.
6
<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:
7
<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.
8
<PAGE>
(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.
9
<PAGE>
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.
11
<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/ Hamilton F. Potter, III
--------------------------------
Name: Hamilton F. Potter, III
Title: Executive Vice President
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
/s/ Vicki White
-----------------------------------
Vicki White
/s/ Robert Flanakin
-----------------------------------
Robert Flanakin
12
<PAGE>
/s/ Katherine Ann Reynolds
-----------------------------------
Katherine Ann Reynolds
/s/ M.C. Perry
-----------------------------------
13950 v3 M.C. Perry
13
<PAGE>
EXHIBIT 99
[Letterhead of Physician Support Systems, Inc.]
FOR IMMEDIATE RELEASE
- ---------------------
Contact:
David S. Geller
Senior Vice President &
Chief Financial Officer
Physician Support Systems, Inc.
(717)653-5340
Noonan/Russo Communications, Inc.
(212) 696-4455
Jessica Livingston (investors) ext. 229
Michele Helm (media) ext. 225
e-mail: [email protected]
PHYSICIAN SUPPORT SYSTEMS SUCCESSFULLY COMPLETES MERGER
WITH EE&C FINANCIAL SERVICES, INC.
Mt. Joy, PA -- September 3, 1996 -- Physician Support Systems, Inc.
(Nasdaq:PHSS) today announced it has acquired through merger EE&C Financial
Services, Inc. ("EE&C"). The transaction will be accounted for as a pooling of
interests. Terms of the transaction were not disclosed.
EE&C, based in Newark, NJ, provides accounts receivable and business management
services to hospitals in New York and New Jersey. During 1995, EE&C had
revenues of approximately $25 million.
Separately, PHSS announced it acquired Medical Intercept Systems LLC and
affiliated companies ("MIS"), a provider of accounts receivable and practice
management services to a broad variety of physician specialties. Based in
Garland, TX, with operations in Trenton, NJ and Chicago, IL, MIS had revenues in
1995 of approximately $5 million. The MIS transaction will be accounted for as
a purchase.
"We are excited about the significant position we have gained in the hospital
market as a result of the EE&C Financial Services transaction," said Peter
Gilson, President and Chief Executive Officer of Physician Support Systems. "We
are equally excited by the entry into the Texas and Chicago physician markets
and our further expansion in the New Jersey market resulting from our purchase
of MIS."
<PAGE>
"This transaction gives us the opportunity to further expand our hospital
business into new markets," said Peter Cooper, President of EE&C Financial
Services. "At the same time, our strong fit with PHSS will enable us to continue
to serve our existing clients in the way in which they are accustomed to being
served. We know that our clients' confidence in us will be affirmed as we move
forward."
Headquartered in Mt. Joy, Pennsylvania, PHSS is a leading provider of business
management services to hospitals and hospital-affiliated physicians, including
accounts receivable, financial, administrative, strategic and information
support services.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. Actual results may differ materially as a result of
risks facing the Company. These risks include the ability of PHSS to grow
internally or by acquisitions, political and regulatory pressures or changes,
the ability of the Company to integrate acquired businesses into the PHSS group
of companies, competitive action by other companies, changing conditions in the
healthcare industry and other risks referred to in the Company's periodic
reports and registration statement filed with the Securities and Exchange
Commission.
###
Editor's Note: This release is available on the Internet over the
World Wide Web: http://www.noonanrusso.com
