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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) June 28, 1996
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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
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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 June 28, 1996, Physician Support Systems, Inc., a Delaware
corporation (the "Company"), acquired the capital stock outstanding of
Synergistic Systems, Inc., a California corporation ("SSI"), through a merger of
a wholly owned subsidiary of the Company into SSI (the "Merger"). SSI provides
accounts receivable management and other services to hospital-based physicians.
Each share of capital stock of SSI issued and outstanding immediately
before the Merger was converted at the time of the Merger into the right to
receive 1.575 shares of common stock, par value $.001 per share (the "Common
Stock"), of the Company, for an aggregate of 945,000 shares of Common Stock. The
Merger will be accounted for by the Company as a "pooling of interests."
In connection with the transaction, the Company granted the SSI
stockholders the right to include their shares of Common Stock acquired in the
Merger 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 commencing
on or after November 30, 1996, May 15, 1998 and May 15, 1999.
The President and Chief Executive Officer of SSI entered into an
employment agreement with SSI in connection with the Merger, pursuant to which
she agreed to be employed by SSI for a period of five years after the Merger.
Under such employment agreement, the President and Chief Executive Officer of
SSI is entitled to receive a salary plus incentive compensation based on the
level of SSI's earnings before interest and taxes.
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
SSI. 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 Synergistic Systems, Inc. and
Synergistic Systems, Inc., dated as of June 28, 1996 (omitting
schedules and exhibits thereto, which will be furnished
supplementally to the Commission upon request).
(10) Material Contracts.
Exhibit 10.1 - Registration Rights Agreement, dated as of June 28,
1996, among Physician Support Systems, Inc., each of the
shareholders of Synergistic Systems, Inc., and Jean M. Campbell,
as representative of the shareholders.
Exhibit 10.2 - Employment Agreement, dated as of June 28, 1996,
between Synergistic Systems, Inc. and Jean M. Campbell.
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(99) Additional Exhibits.
Exhibit 99 - Copy of press release issued by the Company July 1,
1996.
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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.
Date July 8, 1996. By /s/ David S. Geller
___________________________
David S. Geller
Senior Vice President
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EXHIBIT INDEX
Exhibit 2
Agreement and Plan of Merger among Physician Support Systems,
Inc., PSS Synergistic Systems, Inc. and Synergistic Systems,
Inc., dated as of June 28, 1996 (omitting schedules and exhibits
thereto, which will be furnished supplementally to the
Commission upon request).
Exhibit 10.1
Registration Rights Agreement, dated as of June 28, 1996, among
Physician Support Systems, Inc., the shareholders of Synergistic
Systems, Inc. and Jean M. Campbell, as representative of the
shareholders
Exhibit 10.2
Employment Agreement, dated as of June 28, 1996, between
Synergistic Systems, Inc. and Jean M. Campbell.
Exhibit 99
Copy of press release issued by the Company July 1, 1996.
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 28, 1996
AMONG
PHYSICIAN SUPPORT SYSTEMS, INC.,
PSS SYNERGISTIC SYSTEMS, INC.,
AND
SYNERGISTIC SYSTEMS, INC.
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TABLE OF CONTENTS
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INTRODUCTION...................................................................1
ARTICLE I
THE MERGER....................................................................1
SECTION 1.1. The Merger...............................................1
SECTION 1.2. Closing..................................................1
SECTION 1.3. Effective Time...........................................2
SECTION 1.4. Effects of the Merger....................................2
SECTION 1.5. Articles of Incorporation and By-Laws....................2
SECTION 1.6. Directors................................................2
SECTION 1.7. Officers.................................................2
SECTION 1.8. Tax-Free Reorganization..................................2
SECTION 1.9. Accounting Treatment.....................................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES......................................................2
SECTION 2.1. Effect on Capital Stock..................................2
(a) Capital Stock of Merger Subsidiary.......................3
(b) Cancellation of Treasury Stock and Parent-Owned Stock....3
(c) Conversion of Company Common Stock.......................3
(d) Adjustment of Exchange Ratio and Collar..................3
SECTION 2.2. Exchange of Certificates.................................3
(a) Parent To Provide Merger Consideration...................3
(b) Exchange Procedure.......................................3
(c) Distributions with Respect to Unexchanged Shares.........4
(d) No Further Ownership Rights in Common Stock..............4
(e) No Liability.............................................4
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(f) No Fractional Shares.....................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES.................................................5
SECTION 3.1. Representations and Warranties of the Company............5
(a) Organization, Standing and Power.........................5
(b) Authority; Binding Agreements............................5
(c) Capitalization; Equity Interests.........................5
(d) Conflicts; Consents......................................6
(e) Financial Information....................................7
(f) Absence of Changes.......................................7
(g) Assets, Property and Related Matters; Real Property......8
(h) Patents, Trademarks and Similar Rights...................9
(i) Insurance...............................................10
(j) Agreements, Etc.........................................10
(k) Litigation, Etc.........................................10
(l) Compliance; Governmental Authorizations.................11
(m) Labor Relations; Employees..............................11
(n) Accounts Receivable.....................................12
(o) Customers...............................................13
(p) Accounts Payable........................................13
(q) Related Party Transactions..............................13
(r) Billing and Collection Practices........................13
(s) Tax Matters.............................................14
(t) Disclosure..............................................15
(u) Bank Accounts; Powers-of-Attorney.......................15
(v) Accounting Matters......................................15
(w) Brokers.................................................15
(x) Accredited Investor.....................................15
SECTION 3.2. Representations and Warranties by Merger Subsidiary and
Parent...........................................................16
(a) Organization, Standing and Power........................16
(b) Authority; Binding Agreements...........................16
(c) Conflicts; Consents.....................................16
(d) Capitalization..........................................16
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(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities.............................................17
(f) Absence of Certain Changes or Events....................18
(g) Litigation, Etc.........................................18
(h) Compliance; Governmental Authorizations.................18
(i) Accounting Matters......................................18
(j) Brokers.................................................18
(k) Billing and Collection Practices........................18
(l) Insurance...............................................19
(m) Labor Relations.........................................19
ARTICLE IV
SECTION 4.1. Expenses................................................19
SECTION 4.2. Conduct of Business.....................................19
SECTION 4.3. Affiliates..............................................19
SECTION 4.4. Agreements of Parent Affiliates.........................20
SECTION 4.5. Nasdaq..................................................20
SECTION 4.6. Pooling.................................................20
SECTION 4.7. Further Assurances......................................20
SECTION 4.8. No Shopping.............................................20
SECTION 4.9. Access and Information..................................20
SECTION 4.10. Non-Disclosure.........................................21
SECTION 4.11. Confidentiality........................................21
SECTION 4.12. Release of Personal Guarantees.........................21
SECTION 4.13. Press Release..........................................22
SECTION 4.14. Directors' and Officers' Insurance.....................22
ARTICLE V
CONDITIONS PRECEDENT..........................................................22
SECTION 5.1. Conditions to Each Party's Obligation To Effect the
Merger.........................................................22
(a) No Injunctions or Restraints............................22
(b) Pooling.................................................22
(c) Indemnification Agreement...............................22
SECTION 5.2. Conditions to Obligations of Parent and Merger
Subsidiary......................................................22
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(a) Representations and Warranties..........................22
(b) Performance of Obligations of the Company...............23
(c) Consents, Amendments and Terminations...................23
(d) Opinion of Counsel.....................................23
(e) Due Diligence..........................................23
(f) Employment Agreements...................................23
(g) [Intentionally omitted]................................23
(h) Affiliates..............................................23
(i) Investment Letter.......................................23
(j) Resignation Letters.....................................23
(k) Other Documents........................................23
SECTION 5.3 Conditions to Obligation of the Company.................23
(a) Representations and Warranties..........................23
(b) Performance of Obligations of the Parent and Merger
Subsidiary..............................................24
(c) Registration Rights Agreement...........................24
(d) Opinion.................................................24
(e) Other Documents........................................24
ARTICLE VI
MISCELLANEOUS.................................................................24
SECTION 6.1. Entire Agreement........................................24
SECTION 6.2. Termination.............................................24
SECTION 6.3. Descriptive Headings; Certain Interpretations...........24
SECTION 6.4. Notices.................................................25
SECTION 6.5. Counterparts............................................26
SECTION 6.6. Survival................................................26
SECTION 6.7. Benefits of Agreement...................................26
SECTION 6.8. Amendments and Waivers..................................26
SECTION 6.9. Assignment..............................................26
SECTION 6.10. Enforceability.........................................26
SECTION 6.11. GOVERNING LAW..........................................26
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Exhibits
A Form of Indemnification Agreement
B Form of Opinion of Counsel of the Company and the Shareholders
C Form of Employment Agreement
D [Intentionally omitted]
E Form of Investment and Affiliate Agreement
F Form of Letter of Transmittal
G Form of Registration Rights Agreement
H Form of Opinion of Counsel of Parent and Merger Subsidiary
I Form of Agreement of Merger
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AGREEMENT AND PLAN OF MERGER DATED AS OF JUNE 28, 1996 AMONG
PHYSICIAN SUPPORT SYSTEMS, INC., A DELAWARE CORPORATION
("PARENT"), PSS SYNERGISTIC SYSTEMS, INC., A DELAWARE
CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("MERGER
SUBSIDIARY"), AND SYNERGISTIC SYSTEMS, INC., A CALIFORNIA
CORPORATION (THE "COMPANY").
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INTRODUCTION
The Board of Directors of each of Parent, Merger Subsidiary and the
Company, and the stockholders of the Company, each have unanimously approved the
merger of Merger Subsidiary into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement. As a result of the
Merger, each issued and outstanding share of the Common Stock, no par value per
share (the "Company Common Stock"), of the Company not owned directly or
indirectly by Parent or the Company will be converted into the right to receive
the consideration provided in this Agreement.
The parties to this Agreement intend that the Merger qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
Parent, Merger Subsidiary and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
The parties agree as follows:
ARTICLE I
THE MERGER
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SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the California General
Corporation Law ("California Law") and the Delaware General Corporation Law
("Delaware Law"), Merger Subsidiary shall be merged with and into the Company at
the Effective Time of the Merger (defined below in Section 1.3). Following the
Merger, the separate corporate existence of Merger Subsidiary shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Merger Subsidiary in accordance with California Law and Delaware Law.
SECTION 1.2. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which (subject to
satisfaction or waiver of the conditions set forth in Sections 5.2 and 5.3)
shall be no later than the second business day after satisfaction or waiver of
the conditions set forth in Section 5.1, at the offices of Ginsburg, Stephan,
Oringher & Richman, 10100 Santa Monica Boulevard, Suite 800, Los Angeles,
California 90067, unless another date or place is agreed to in writing by the
parties hereto (such date upon which the Closing occurs, the "Closing Date").
The parties anticipate that the Closing Date will be June 25, 1996.
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SECTION 1.3. Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article V, the parties
shall file a copy of the Agreement of Merger attached hereto as Exhibit I (the
"Agreement of Merger") in the office of the California Secretary of State or
other appropriate documents and a certificate of merger or other appropriate
documents in the office of the Delaware Secretary of State (the "Certificate of
Merger") executed in accordance with the relevant provisions of California Law
and Delaware Law, respectively, and shall make all other filings or recordings
required under California Law and Delaware Law. The Merger shall become
effective at such time as a copy of this Agreement is duly filed with the
California Secretary of State and the Certificate of Merger is duly filed with
the Delaware Secretary of State (the time the Merger becomes effective, the
"Effective Time of the Merger").
SECTION 1.4. Effects of the Merger. The Merger shall have the effects set
forth in the California Law and the Delaware Law.
SECTION 1.5. Articles of Incorporation and By-Laws. (a) The Articles of
Incorporation of the Company as in effect at the Effective Time of the Merger
shall be the Articles of Incorporation of the Surviving Corporation, until
changed or amended.
(b) The By-Laws of the Company as in effect at the Effective Time of the
Merger shall be the By-Laws of the Surviving Corporation, until changed or
amended.
SECTION 1.6. Directors. Following the Effective Time of the Merger, the
directors of the Surviving Corporation shall be Jean M. Campbell, 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.
SECTION 1.7. Officers. The officers of the Company at the Effective Time of
the Merger shall be the officers of the Surviving Corporation, until the earlier
of their resignation or removal or until their successors are duly elected and
qualified.
SECTION 1.8. Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368 of the Code, and this Agreement
is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368 of the Code.
SECTION 1.9. Accounting Treatment. The business combination to be effected
by the Merger is intended to be treated for accounting purposes as a "pooling of
interests."
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
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SECTION 2.1. Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of Merger
Subsidiary:
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(a) Capital Stock of Merger Subsidiary. Each issued and outstanding share
of the capital stock of Merger Subsidiary shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any subsidiary (defined
in Section 3.1(c)) of the Company and each share of Company Common Stock that is
owned by Parent, Merger Subsidiary or any other subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2(f), each
issued and outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.1(b)) shall be converted into the right to
receive (the "Merger Consideration") 1.575 fully paid and nonassessable shares
of Common Stock, par value $.001 per share (the "Parent Common Stock"), of
Parent (rounded to the nearest ten-thousandth of a share) (the "Exchange
Ratio"). As of the Effective Time of the Merger, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued in exchange therefor upon surrender of such certificate in
accordance with Section 2.2(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(c), in each case, without
interest.
(d) Adjustment of Exchange Ratio and Collar. If after the date hereof and
prior to the Effective Time of the Merger, Parent shall have declared a stock
split (including a reverse split) of Parent Common Stock or a dividend payable
in Parent Common Stock, or any other distribution of securities or extraordinary
dividend (in cash or otherwise) to holders of Parent Common Stock with respect
to their Parent Common Stock (including such a distribution or dividend made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction), then the Exchange Ratio referred to in
Section 2.1(c) shall be appropriately adjusted to reflect such stock split or
dividend or other distribution of securities.
SECTION 2.2 Echange of Certificates. (a) Parent To Provide Merger
Consideration. Parent shall take all necessary steps to have available promptly
after the Effective Time of the Merger the certificates representing the shares
of Parent Common Stock issuable in exchange for the outstanding shares of
Company Common Stock pursuant to Section 2.1 and, from time to time, cash for
payment in lieu of fractional shares pursuant to Section 2.2(h).
(b) Exchange Procedure. At or prior to the Effective Time of the Merger,
Parent shall make available to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1, (i) a Letter of Transmittal in the form set forth as
Exhibit F to this Agreement and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to Parent or to such agent or agents
as may be appointed by the Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by Parent
or such agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration into which the shares of Company
Common Stock shall have been converted pursuant to Section 2.1, cash in lieu of
fractional shares of Parent Common Stock to
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which such holder is entitled pursuant to Section 2.2(f) and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.2(c),
and the Certificate so surrendered shall be canceled. In the event of a transfer
of ownership of Company Common Stock which is not registered in the transfer
records of the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. At any time after the Effective
Time of the Merger, each Certificate shall be deemed to represent only the right
to receive upon surrender the Merger Consideration into which the shares of
Company Common Stock shall have been converted pursuant to Section 2.1, cash in
lieu of any fractional shares of Parent Common Stock as contemplated by Section
2.2(f) and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), in each case, without interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time of the Merger shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.2(f), in each case until the surrender of such Certificate in
accordance with this Article II. Subject to the effect of applicable escheat
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(f)
and the amount of dividends or other distributions with a record date after the
Effective Time of the Merger theretofore paid with respect to such whole shares
of Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time of
the Merger but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Common Stock. All Merger Consideration
paid upon the surrender of Certificates in accordance with the terms of this
Article II (including any cash paid pursuant to Section 2.2(f)) shall be deemed
to have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock represented by such Certificates, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article II.
(e) No Liability. If any Certificates shall not have been surrendered
prior to six months after the Effective Time of the Merger, the Merger
Consideration (and any cash payable pursuant to Section 2.2(c) or 2.2(f))
payable in respect of such Certificates shall be held by Parent, after which
time any holders of such Certificates shall look only to Parent for such Merger
Consideration (and such cash) in respect of such Certificates. None of Parent,
Merger Subsidiary or the Company shall be liable to any person in respect of any
Merger Consideration (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
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of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. Notwithstanding any
other provision of this Agreement, each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Parent Common Stock multiplied by $21.75.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 3.1. Representations and Warranties of the Company The Company
represents and warrants to Parent and Merger Subsidiary as follows:
(a) Organization, Standing and Power. The Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and (ii) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which such qualification is necessary because of the
property owned, leased or operated by it or because of the nature of its
business as now being conducted. The Company has delivered to Parent complete
and correct copies of its Articles of Incorporation and By-Laws and all
amendments thereto to the date hereof and has made available to Parent its
minute books and stock records. Section 3.1(a) of the disclosure schedule
delivered by the Company to Parent and Merger Subsidiary simultaneously with the
execution of this Agreement (the "Disclosure Schedule"), which forms a part of
this Agreement, contains (i) a true and correct list of the jurisdictions in
which the Company is qualified to do business as a foreign corporation and (ii)
a true and correct list of the directors and officers of the Company as of the
date of this Agreement and at all times since the last annual meeting of the
board of directors and the shareholders of the Company held on June 20, 1996.
(b) Authority; Binding Agreements. The execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action of the Company. The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the Merger and the
other transactions contemplated hereby and the Company has duly executed and
delivered this Agreement. The stockholders of the Company have approved this
Agreement, the Merger and the other transactions contemplated hereby in
accordance with the requirements of the California Law and the Articles of
Incorporation and By-Laws of the Company. This Agreement is the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(c) Capitalization; Equity Interests. The authorized capital stock of the
Company consists of 2,000,000 shares of Company Common Stock. At the time of
execution of this Agreement, 600,000 shares of Company Common Stock were issued
and outstanding. Section 3.1(c) of the Disclosure Schedule contains a true and
correct list of all of the owners of record of the issued and outstanding shares
of Company Common Stock specifying the number
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of such shares owned by, and the address of, each such person. Except as set
forth above, at the time of execution of this Agreement, no shares of capital
stock or other voting securities of the Company are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are not any bonds, debentures, notes or
other indebtedness or securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of the Company may vote. Except as set forth
in Section 3.1(c) of the Disclosure Schedule, there are not any securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party or by which the Company
is bound obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or obligating the Company to issue, grant, extend or
enter into any such security, option, warrant, call right, commitment,
agreement, arrangement or undertaking. There are no outstanding rights,
commitments, agreements, arrangements or undertakings of any kind obligating the
Company to repurchase, redeem or otherwise acquire any shares of capital stock
or other voting securities of the Company or any securities of the type
described in the two immediately preceding sentences. The Company does not have
any subsidiaries and, except as set forth in Section 3.1(c) of the Disclosure
Schedule, does not own or hold any equity or other security interests in any
other entity. For purposes of this Agreement, a "subsidiary" of any person means
another person, an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which ) is owned
directly or indirectly by such first person; and a "person" means an individual,
corporation, partnership, joint venture, association, trust, unincorporated
organization or other entity (governmental or private).
(d) Conflicts; Consents. The execution and delivery of this Agreement, the
consummation of the Merger and the other transactions contemplated hereby and
the compliance by the Company with the provisions hereof do not and will not (i)
conflict with or result in a breach of the charter, by-laws or other
constitutive documents of the Company, (ii) except as set forth in Section
3.1(d) of the Disclosure Schedule, conflict with or result in a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
provisions of any note, bond, lease, mortgage, indenture, or any material
license, franchise, permit, agreement or other instrument or obligation to which
the Company is a party, or by which the Company or any of the Company's
properties or assets, may be bound or affected, except for such 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 3.1(d) of the
Disclosure Schedule), (iii) violate any law, statute, rule or regulation or
order, writ, injunction or decree applicable to the Company or any of the
Company's properties or assets, except for any such violations that are
immaterial to the Company or any of the Company's properties or assets or (iv)
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets used or held by the Company. No consent
or approval by, or any notification of or filing with, any person is required in
connection with the execution, delivery and performance by the Company of this
Agreement or the consummation of the Merger and the other transactions expressly
contemplated hereby except for (i) the filing with the Securities and Exchange
Commission (the "SEC") such reports under Sections 13 and 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the Merger and the other transactions
contemplated hereby, (ii) such filings as may be required under state securities
or "blue sky" laws in connection with the issuance of the Parent Common Stock in
connection with the Merger, (iii) the filing of a copy of the Agreement of
Merger with the
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California Secretary of State and the Certificate of Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as are set forth in Section 3.1(d) of the Disclosure Schedule.
(e) Financial Information. (i) The following financial statements are
contained in Section 3.1(e) of the Disclosure Schedule:
(a) the consolidated balance sheets of the Company at December 31, 1993,
1994 and 1995 and the related statements of operations for the three years
ended December 31, 1995, audited by Nanas, Stern, Biers, Neinstein and Co.
L.L.P., the Company's independent auditors;
(b) the monthly balance sheets of the Company as of the end of each month
commencing January 1, 1995 through the month end prior to the date of this
Agreement and the related statement of operations for each such month; and
(c) a statement of non-continuing extraordinary expenses commencing January
1, 1995 through April 30, 1996.
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") applied on a basis consistent
with prior periods and fairly present the financial condition, results of
operations and cash flows of the Company. The balance sheets of the Company as
at the dates set forth present fairly the financial position of the Company as
at the dates thereof, and the related statements of operations of the Company
for each of the respective specified periods then ended present fairly the
results of operations of the Company for each of the respective periods then
ended. For the purposes of this Agreement, all financial statements referred to
in this paragraph shall include any notes and schedules to such financial
statements.
(ii) There were no liabilities or obligations (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) in respect of the
Company which were required to be, in accordance with GAAP, and were not shown
or provided for on the balance sheets of the Company to which such liabilities
or obligations related. All reserves established by the Company are reflected on
the balance sheets of the Company or in the footnotes to the financial
statements of the Company and are adequate and there are no loss contingencies
that are required to be accrued by Statement of Financial Accounting Standard
No. 5 of the Financial Accounting Standards Board which are not provided for on
such balance sheet.
(f) Absence of Changes. Except as set forth in Section 3.1(f) of the
Disclosure Schedule, since December 31, 1995, the Company has been operated in
the ordinary course consistent with past practice and there has not been:
(i) any material adverse change in its condition (financial or otherwise),
assets, liabilities, operations, customer contracts or other customer
arrangements, management personnel, billings, revenues, earnings, business or
prospects;
(ii) any obligation or liability (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) incurred by the Company, other
than obligations under customer contracts, current obligations and liabilities
incurred in the
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ordinary course of business and consistent with past practice;
(iii) any payment, discharge or satisfaction of any claim or obligation of
the Company, except in the ordinary course of business and consistent with
past practice;
(iv) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
direct or indirect redemption, purchase or other acquisition of any such
shares;
(v) any issuance or sale, or any contract entered into for the issuance or
sale, of any shares of capital stock or securities convertible into or
exercisable for shares of capital stock of the Company;
(vi) any sale, assignment, pledge, encumbrance, transfer or other
disposition of any tangible asset of the Company, except as contemplated by
this Agreement, or any sale, assignment, transfer or other disposition of any
patents, trademarks, service marks, trade names, copyrights, licenses,
franchises, know-how or any other intangible assets;
(vii) any creation of any claim or other encumbrance on any property of the
Company;
(viii) any write-down of the value of any asset or inventory of the Company
or any write-off as uncollectible of any accounts or notes receivable or any
portion thereof;
(ix) any cancellation of any debts or claims or any amendment, termination
or waiver of any rights of value to the Company;
(x) any capital expenditure or commitment or addition to property, plant or
equipment of the Company;
(xi) any general increase in the compensation of employees of the Company
(including any increase pursuant to any bonus, pension, profit-sharing or
other benefit or compensation plan, policy or arrangement or commitment), or
any increase in any such compensation or bonus payable to any officer,
shareholder, director, consultant or agent of the Company having an annual
salary or remuneration in excess of $40,000;
(xii) any material damage, destruction or loss (whether or not covered by
insurance) affecting any asset or property of the Company;
(xiii) any change in the independent public accountants of the Company or
in the accounting methods or accounting practices followed by the Company or
any change in depreciation or amortization policies or rates;
(xiv) any agreement or action not otherwise referred to in items (i)
through (xiii) above entered into or taken that is material to the Company; or
(xv) any agreement, whether in writing or otherwise, to take any of the
actions specified in the foregoing items (i) through (xiv).
(g) Assets,Property and Related Matters; Real Property. (i) Except as set
forth
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in Sections 3.1(g)(i) or (g)(ii) of the Disclosure Schedule, the Company has
good title to, or a valid leasehold interest in, as applicable, all of the
assets reflected on the financial statements contained in Section 3.1(e) of the
Disclosure Schedule, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind. Such assets (A) are in good operating condition and
repair, subject to ordinary wear and tear and (B) constitute all of the material
properties, interests, assets and rights held for use or used in connection with
the business and operations of the Company and constitute all those necessary to
continue to operate the business of the Company consistent with current and
historical practice. All items of personal property owned by the Company 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 and
brief description of all real property and of all personal property owned or
leased by the Company together with a brief description of (A) all buildings and
other structures and material improvements located on such real property, (B)
the use to which such property is being employed or, if not in use, for which it
was intended, (C) the name of the lessor and requirement of consent of the
lessor to assignment and (D) the termination date or notice requirement with
respect to termination, annual rental and renewal or purchase options under such
leases. The Company does not own any real property. With respect to property
leased by the Company, except as set forth in Section 3.1(g)(ii) of the
Disclosure Schedule, (I) the Company is the owner and holder of all the
leasehold interests and estates purported to be granted by such leases, (II) all
leases to which the Company is a party are in full force and effect and
constitute valid and binding obligations of the Company and, to the knowledge of
the Company, of the other parties thereto, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles, and (III) the Company has
made available to Parent true and complete copies of all written leases referred
to in Section 3.1(g)(ii) of the Disclosure Schedule. Except as set forth in
Section 3.1(g)(ii) of the Disclosure Schedule, there exists no default, or any
event which upon notice or the passage of time, or both, would give rise to any
default, in the performance by the Company or by any lessor under any lease. The
Company has not, and to the knowledge of the Company, no other person has,
granted any oral or written right to anyone other than the Company to lease,
sublease or otherwise occupy any of the properties described in Section
3.1(g)(ii) of the Disclosure Schedule through the end of the applicable lease
periods, except as noted in Section 3.1(g)(ii) of the Disclosure Schedule.
(iii) The real estate listed in Section 3.1(g)(ii) of the Disclosure
Schedule and all appurtenances and improvements, as used, constructed or
maintained by the Company at any time, conform to applicable Federal, state,
local and foreign laws and regulations, except for any non-conformities that are
immaterial to the Company or any of the Company's properties or assets. To the
knowledge of the Company, the use of the buildings and structures located on
such real property or any appurtenances or equipment does not violate any
restrictive covenants or encroach on any property owned by others. No
condemnation proceeding is pending or, to the knowledge of the Company,
threatened which would preclude or impair the use of any such property by the
Company for the uses for which they are intended.
(h) Patents, Trademarks and Similar Rights. The Company owns or licenses
all patents, trademarks, service marks, trade names and copyrights, in each case
registered or unregistered, inventions, software (including documentation and
object and source code listings), know-how, trade secrets and other intellectual
property rights (collectively, the "Intellectual Property") used in its business
as presently conducted. Section 3.1(h) of the Disclosure Schedule contains a
list of all Intellectual Property owned and used by the Company and any
Intellectual
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Property which is licensed for use by others. No Intellectual Property infringes
any rights owned or held by any other person, except for any such infringements
that are immaterial to the Company or any of the Company's properties or assets.
There is no pending or, to the knowledge of the Company, threatened claim or
litigation against the Company contesting its right exclusively to use any
Intellectual Property. To the knowledge of the Company, no person is infringing
the rights of the Company in any Intellectual Property. To the knowledge of the
Company, no product or service sold by the Company violates or infringes any
intellectual property right owned or held by any other person. To the knowledge
of the Company, in the case of commercially available "shrink-wrap" software
programs (such as Lotus 1-2-3), neither the Company nor any of its employees has
made or is using any unauthorized copies of any such software programs at any
Company location.
(i) Insurance. Section 3.1(i) of the Disclosure Schedule contains a true
and complete list of all policies of casualty, liability, theft, fidelity, life
and other forms of insurance held by the Company. True and complete copies of
such policies have been delivered or made available for inspection and copy by
Parent. All insurance policies are in the name of the Company, outstanding and
in full force and effect, all premiums with respect to such policies are
currently paid and such policies will not be affected by, or terminated or lapse
by reason of, the transactions contemplated by this Agreement. The Company has
not received notice of cancellation or termination of any such policy, nor has
it been denied or had revoked or rescinded any policy of insurance, nor borrowed
against any such policies. No claim under any such policy is pending.
(j) Agreements, Etc. Section 3.1(j) of the Disclosure Schedule contains a
true and complete list and brief description of all written or oral contracts,
agreements and other instruments to which the Company is a party (i) relating to
indebtedness for money borrowed or capital leases, (ii) of duration of six
months or more from the date hereof and not cancelable without penalty on 30
days or less notice, (iii) relating to commitments in excess of $10,000, (iv)
relating to the employment or compensation of any director, officer, employee,
consultant or other agent of the Company, (v) relating to the sale or other
disposition of any assets, properties or rights, (vi) relating to the lease or
similar arrangement of any machinery, equipment, motor vehicles, furniture,
fixture or similar property, (vii) between the Company and any shareholder of
the Company or affiliates of any shareholder of the Company, (viii) that
restricts the operation of the Company anywhere in the world or (ix) that is
otherwise material to the Company or entered into other than in the ordinary
course of business. The Company is not in default under any such agreement or
instrument where such default could, singly or in the aggregate with defaults
under other agreements or instruments, have a material adverse effect on the
business, operations or condition of the Company, and, to the knowledge of the
Company, except as set forth in Section 3.1(j) of the Disclosure Schedule, all
such agreements or instruments are in full force and effect. The Company has
furnished to, or made available for inspection and copy by, Parent true and
complete copies of all documents described in Section 3.1(j) of the Disclosure
Schedule.
(k) Litigation, Etc. Except as set forth in Section 3.1(k) of the
Disclosure Schedule, there have not been for the past five years, nor are there,
any suits, actions, claims, investigations or legal or administrative or
arbitration proceedings in respect of the Company, pending or, to the knowledge
of the Company, threatened, whether at law or in equity, or before or by any
Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Except as set forth in
Section 3.1(k) of the Disclosure Schedule, there have not been for the past five
years, nor are there, any judgments, decrees, injunctions or orders of any
court, governmental department, commission, agency, instrumentality or
arbitrator or against the Company or any of its assets or properties.
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(l) Compliance; Governmental Authorizations. (i) The Company has complied
and is in compliance with all Federal, state, local and foreign laws,
ordinances, regulations, interpretations and orders (including those relating to
disposal of materials, environmental protection and occupational safety and
health) applicable to the Company. The Company has all Federal, state, local and
foreign governmental licenses and permits necessary to conduct its business as
presently being conducted, which licenses and permits (and any exceptions
thereto) are set forth in Section 3.1(l) of the Disclosure Schedule. Except as
set forth in Section 3.1(l) of the Disclosure Schedule, such licenses and
permits are in full force and effect, no violations are or have been recorded in
respect of any thereof, no proceeding is pending or, to the knowledge of the
Company, threatened, to revoke or limit any thereof, and the Company does not
know of any basis for any such proceeding.
(ii) There are no conditions relating to the Company or relating to the
Company's ownership, use or maintenance of any real property previously owned or
operated by the Company or any of its present or past affiliates, and the
Company does not know or have reason to know of any such condition in respect of
such real property not related to the ownership, use or maintenance, that could
lead to any liability for violation of any Federal, state, county or local laws,
regulations, orders or judgments relating to pollution or protection of the
environment or any other applicable environmental, health or safety statutes,
ordinances, orders, rules, regulations or requirements. The Company has
received, handled, used, stored, treated, shipped and disposed of all hazardous
or toxic materials, substances and wastes (whether or not on its properties or
properties owned or operated by others) in compliance with all applicable
environmental, health or safety statutes, ordinances, orders, rules, regulations
or requirements.
(m) Labor Relations; Employees. (i) Within the last five years, the
Company has not experienced any labor disputes with, or any work stoppages by, a
group of employees due to labor disagreements and, to the knowledge of the
Company, there is no such dispute or work stoppage threatened against the
Company. No employee of the Company is represented by any union or collective
bargaining agent and, to the knowledge of the Company, there has been no union
organizational effort in respect of any employees of the Company within the past
five years.
(ii) Section 3.1(m)(ii) of the Disclosure Schedule contains a list and a
brief, general description 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 ("ERISA"), under which the Company has
any current or future obligation or liability or under which any employee or
former employee (or beneficiary of any employee or former employee) of the
Company has or may have any current or future right to benefits (the term "plan"
shall include any contract, agreement, policy or understanding, each such plan
being hereinafter referred to individually as a "Plan"). The Company has
delivered to Parent true and complete copies of (A) each Plan, (B) the summary
plan description for each Plan and (C) the latest annual report, if any, which
has been filed with the IRS for each Plan. Each Plan intended to be tax
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986
(the "Code") has been determined by the IRS to be tax qualified under Sections
401(a) and 501(a) of the Code and, since such determination, no amendment to or
failure to amend any such Plan adversely affects its tax qualified status. There
has been no prohibited transaction within the meaning of Section 4975 of the
Code and Section 406 of Title I of ERISA with respect to any Plan.
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(iii) No Plan is subject to the provisions of Section 412 of the Code or
Part 3 of Subtitle B of Title I of ERISA. No Plan is subject to Title IV of
ERISA. During the past five years, neither the Company nor any business or
entity controlling, controlled by, or under common control with the Company
contributed to or was obliged to contribute to an employee pension plan that was
subject to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or arbitrations (other than
routine claims for benefits) pending, or, to the knowledge of the Company,
threatened, with respect to any Plan or the assets of any Plan, and the Company
has no knowledge of any facts which could give rise to any such actions, claims,
lawsuits or arbitrations (other than routine claims for benefits). The Company
has satisfied all funding, compliance and reporting requirements for all Plans.
With respect to each Plan, the Company has paid all contributions (including
employee salary reduction contributions) and all insurance premiums that have
become due and any such expense accrued but not yet due has been properly
reflected in the financial information in Section 3.1(e) of the Disclosure
Schedule.
(v) Except as described in Section 3.1(m)(ii) of the Disclosure Schedule,
no Plan provides or is required to provide, now or in the future, health,
medical, dental, accident, disability, death or survivor benefits to or in
respect of any person beyond termination of employment, except to the extent
required under any state insurance law or under Part 6 of Subtitle B of Title I
of ERISA and under Section 4980(B) of the Code. No Plan covers any individual
other than an employee of the Company, other than dependents of employees under
health and child care policies listed in Section 3.1(m)(ii) of the Disclosure
Schedule and delivered to Parent.
(vi) Except as described in Section 3.1(m)(ii) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (A) entitle any employee of the Company to severance pay or termination
benefits for which Parent or any of its affiliates may become liable, (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee for which Parent or any
of its affiliates may become liable or (C) obligate Parent or any of its
affiliates to pay or otherwise be liable for any compensation, vacation days,
pension contribution or other benefits to any employee, consultant or agent of
the Company for periods before the Closing Date or for personnel whom Parent
does not actually employ.
(vii) The Company has made no representations or warranties (whether
written or oral, express or implied) contractually or otherwise to any client or
customer of the Company that Company's employees rendering services to such
client or customer are not "leased employees" (within the meaning of Section
414(n) of the Code) or that such employees would not be required to participate
under any pension benefit plan (within the meaning of Section 3(2) of ERISA) (a
"Pension Benefit Plan") of such client or customer of the Company relating
either to (A) providing benefits to employees of the Company under a Pension
Benefit Plan of the Company or (B) making contributions to or reimbursing such
client or customer for any contributions made to a Pension Benefit Plan of such
client or customer on behalf of employees of the Company.
(n) Accounts Receivable. Section 3.1(n) of the Disclosure Schedule contains
a true aged list of unpaid accounts and notes receivable owing to the Company as
of May 31, 1996 (which is the most recent date for which such information is
available), all of which, to the Company's knowledge, are collectible in the
ordinary course of business.
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(o) Customers. Section 3.1(o) of the Disclosure Schedule contains (i) a
true and complete list of the customers of the Company for each of the years
ended December 31, 1993, 1994 and 1995 and the period beginning January 1, 1996
and ended the month end prior to the date of this Agreement and, as of the date
hereof, any additions or deletions of customers from the month end prior to the
date of this Agreement, (ii) a description (based on the best available
information as of the date of this Agreement) of the effective date, expiration
date and renewal history for, and revenues, service fees and costs chargeable
under, contracts with each of the customers of the Company listed on Section
3.1(o) of the Disclosure Schedule, (iii) a true and complete list of all
contracts pursuant to which the Company provides goods or services to its
customers (the "Client Contracts") and (iv) a true and correct description of
(A) the terms and conditions of each material oral Client Contract, (B) any and
all disputes or defaults arising under or with respect to the Client Contracts
which could reasonably be expected to result in a client's termination of its
contract with the Company or claim for damages, and (C) all loans or advances
made by the Company to or on behalf of its customers, which description includes
the date of such loan or advance and the principal balance outstanding as of the
date of this Agreement under each such loan or advance. The Client Contracts are
valid and enforceable in accordance with their respective terms with respect to
the Company, and are valid and enforceable in accordance with their respective
terms with respect to any other party thereto, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles. To the Company's knowledge and except as described in
Section 3.1(o) of the Disclosure Schedule, no customer of the Company intends to
terminate, fail to renew or adversely modify any relationship with the Company.
(p) Accounts Payable. Section 3.1(p) of the Disclosure Schedule contains a
true and complete list of all accounts payable of the Company as of June 21,
1996.
(q) Related Party Transactions. Except as set forth in Section 3.1(q) of
the Disclosure Schedule, no current or former partner, director, officer,
employee or shareholder of the Company or any associate or affiliate (as defined
in the rules promulgated under the Exchange Act) thereof, or any relative with a
relationship of not more remote than first cousin of any of the foregoing, is
presently, or during the 12-month period ending on the date hereof has been, (i)
a party to any transaction with the Company (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
payments to, any such director, officer, employee or shareholder or such
associate) or (ii) to the knowledge of the Company, the direct or indirect owner
of an interest in any corporation, firm, association or business organization
which is a present (or potential) competitor, supplier or customer of the
Company, nor does any such person receive income from any source other than the
Company which relates to the Company's business or should properly accrue to the
Company.
(r) Billing and Collection Practices. (i) The current practices and
procedures of the Company with respect to (A) billing on behalf of customers,
(B) receiving and processing Medicare and Medicaid payments due to customers,
(C) holding and transfer of such payments and (D) the method of determining and
collecting the fees received by the Company for services provided by providers
and physicians participating in the Medicare or Medicaid programs are not in
violation of the restriction on assignment as set forth in 42 U.S.C. Section
1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C. Section 1396(a)(32), and
the regulations promulgated thereunder or similar provisions of any state
Medicaid program.
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(ii) The Company is not engaged in any activity, whether alone or in
concert with one or more of its clients, which would constitute a violation of
any Federal laws or the laws of any state (including (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 billing for such services provided to
a beneficiary of any state, Federal or private health or insurance program or
credit collection services. Without limiting the generality of the foregoing,
the Company has not, directly or indirectly, paid, offered to pay or agreed to
pay, or solicited or received, any fee, commission, sum of money, property or
other remuneration to or from any person which the Company knows or has reason
to believe to have been illegal under 42 U.S.C. Section 1320a-7b(b) or any
similar state law.
(iii) The Company does not currently use, and has not in the past
established or used, trust accounts in connection with its business.
(s) Tax Matters. All Federal, state, local and foreign tax returns and tax
reports for periods ending on or prior to the Closing Date by the Company have
been or will be filed, or a valid request for extension has been or will be
filed with respect thereto, on a timely basis (including any extensions) with
the appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are and will
be true, correct and complete. All Federal, state, local and foreign income,
profits, franchise, sales, use, occupation, property, excise, employment and
other taxes (including interest, penalties and withholdings of tax) due from and
payable by the Company on or prior to the Closing Date have been fully paid on a
timely basis. The books and records maintained by the Company fully reflect
accrued liabilities for all taxes which have accrued but are not yet payable.
The Company is not currently the beneficiary of any extension of time within
which to file any tax return. To the Company's knowledge, no claim has ever been
made by an authority in a jurisdiction where the Company does not file tax
returns that it is or may be subject to taxation by that jurisdiction, and the
Company has not received any notice, or request for information from any such
authority. No issues have been raised with the Company by the Internal Revenue
Service (the "IRS") or any other taxing authority in connection with any tax
return or report filed by the Company and there are no issues which, either
individually or in the aggregate, could result in any liability for tax
obligations of the Company relating to periods ending on or before December 31,
1995 in excess of the accrued liability for taxes shown on the financial
statements contained in Section 3.1(e)(i) of the Disclosure Schedule. No waivers
of statutes of limitations have been given or requested with respect to the
Company. No differences exist between the amounts of the book basis and the tax
basis of assets that are not accounted for by an accrual on the books of the
Company for Federal income tax purposes. The Company is not required to include
in income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Company, and the IRS has
proposed no adjustment or change in accounting method. The Company is not a
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. All transactions or methods of accounting
that could give rise to an understatement of Federal income tax (within the
meaning of Section 6661 of the Code for tax returns filed on or before December
31, 1990, and within the meaning of Section 6662 of the Code for tax returns
filed after December 31, 1990) have been adequately disclosed on the tax returns
in accordance with Section
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6661(b)(2)(B) of the Code for tax returns filed on or prior to December 31,
1990, and in accordance with Section 6662(d)(2)(B) of the Code for tax returns
filed after December 31, 1990. The Company is not and has not been a United
States real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(ii) of the
Code. The Company has complied (and until the Closing will comply) with all
applicable laws relating to the payment and withholding of taxes (including
withholding and reporting requirements under Section 1441 through 1464, 3401
through 3406, 6041 and 6049 of the Code and similar provisions under any other
laws) and, within the time and in the manner prescribed by law, has withheld
from wages, fees and other payments and paid over to the proper governmental or
regulatory authorities all amounts required. No indebtedness of the Company is
"corporate acquisition indebtedness" within the meaning of Section 279(b) of the
Code. The Company has not at any time consented to have the provisions of
Section 341(f)(2) of the Code apply to it.
(t) Disclosure. There have been no events, transactions or information
relating to the Company which have come to the attention of the Company which
could 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,
business or prospects of the Company, other than events prevailing throughout
the medical billing and accounts receivable management services industry which
affect firms that directly compete in such industry. No representation or
warranty of the Company contained in this Agreement, as modified by the
Disclosure Schedule, and no statement contained in any certificate, schedule,
annex, list or other writing furnished to Parent, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statement contained herein or therein not misleading.
(u) Bank Accounts; Powers-of-Attorney. (i) Section 3.1(u) of the Disclosure
Schedule contains a true and complete list of (A) all bank accounts and safe
deposit boxes of the Company and all persons who are signatories thereunder or
who have access thereto and (B) the names of all persons holding general or
special powers-of-attorney from the Company and a summary of the terms thereof.
(ii) Except as set forth in Section 3.1(u) of the Disclosure Schedule, the
Company does not and has not maintained any escrow or custody accounts with
respect to customer funds.
(v) Accounting Matters. To the knowledge of the Company, neither the
Company nor any of its affiliates has taken or agreed to take any action that,
without giving effect to any action taken or agreed to be taken by Parent or any
of its affiliates, would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests." The
Company has received a letter from Nanas, Stern, Biers, Neinstein and Co.
L.L.P., its independent auditors, a copy of which has been provided to Parent,
confirming the foregoing representation.
(w) Brokers. Except as set forth in Section 3.1(w) of the Disclosure
Schedule, no agent, broker, investment banker, person or firm acting on behalf
of the Company or under the authority of the Company is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
(x) Accredited Investor. Each stockholder of the Company (i) is an
"accredited
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investor" as such term is defined in Rule 501 under the Securities Act or (ii)
has appointed Melinda McIntyre as his or her purchaser representative in
connection with the Merger.
SECTION 3.2. Representations and Warranties by Merger Subsidiary and
Parent. Merger Subsidiary and Parent jointly and severally represent and warrant
to the Company as follows:
(a) Organization, Standing and Power. Each of Merger Subsidiary and Parent
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of Parent and Merger Subsidiary is duly qualified
to do business and is in good standing in each jurisdiction in which such
qualification is necessary because of the property owned, leased or operated by
it or because of the nature of its business as now being conducted. Parent has
provided the Company with complete and correct copies of its and 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 Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent and Merger Subsidiary. Each of Parent and
Merger Subsidiary has all requisite corporate power and authority to enter into
this Agreement and to consummate the Merger and the other transactions
contemplated hereby and each of Parent and Merger Subsidiary has duly executed
and delivered this Agreement. This Agreement constitutes a valid and binding
obligation of each of Parent and Merger Subsidiary enforceable against such
party in accordance with its terms.
(c) Conflicts; Consents. The execution and delivery of this Agreement, the
consummation of the Merger and the other transactions contemplated hereby and
compliance by Parent and Merger Subsidiary with the other provisions hereof do
not and will not (i) conflict with or result in a breach of the charter, by-laws
or other constitutive documents of Parent or Merger Subsidiary, (ii) conflict
with or result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the provisions of any note, bond,
lease, mortgage, indenture, license, franchise, permit, agreement or other
instrument or obligation to which Parent or Merger Subsidiary is a party, or by
which Parent or Merger Subsidiary or Parent's or Merger Subsidiary's properties
or assets, may be bound or affected, except for such conflict, breach or default
as to which requisite waivers or consents shall be obtained before the Closing,
or (iii) violate any law, statute, rule or regulation or order, writ, injunction
or decree applicable to Parent or Merger Subsidiary or Parent's or Merger
Subsidiary's properties or assets. No consent or approval by, or any
notification of or filing with, any person is required in connection with the
execution, delivery and performance by Parent or Merger Subsidiary of this
Agreement or the consummation of the Merger and the other transactions expressly
contemplated hereby, except for (i) the filing with the SEC such reports under
Sections 13 and 16 of the Exchange Act, as may be required in connection with
this Agreement, the Merger and the other transactions contemplated hereby, (ii)
such filings as may be required under state securities or "blue sky" laws in
connection with the issuance of the Parent Common Stock in connection with the
Merger, (iii) the filing of a copy of this Agreement with the California
Secretary of State and the Certificate of Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, and (iv) the consent of Volpe,
Welty & Company, which consent has been obtained as of the date hereof.
(d) Capitalization. The authorized capital stock of Parent consists of
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100,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock. At the close of business on June 23, 1996, (i) 6,276,628 shares of Parent
Common Stock were issued and outstanding, (ii) no shares of Parent Common Stock
were held by Parent in its treasury, (iii) 165,000 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 Merger Subsidiary consists of 1,000 shares of common
stock, par value $.01 per share, all of which have been validly issued, are
fully paid and nonassessable and are owned by Parent free and clear of any
liens.
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities.
Parent has filed all required reports, forms and other documents with the SEC
since the filing of Parent's Registration Statement on Form S-1 for the initial
public offering of Parent Common Stock on December 21, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
state therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments not material in scope or amount). Except as
set forth in the Parent Filed SEC Documents (defined in Section 3.2(f)), neither
Parent nor any of its subsidiaries has any material liabilities or obligations
required by generally accepted accounting principles to be recognized or
disclosed on a consolidated balance sheet of Parent and its consolidated
subsidiaries or in the
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notes thereto and which, individually or in the aggregate, could reasonably
be expected to have a material adverse effect on Parent and its subsidiaries
taken as a whole.
(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 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 has complied and is 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. Parent has
all Federal, state, local and foreign governmental licenses and permits
necessary to conduct its business 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 the Seller, threatened, to revoke or limit any thereof, and the
Seller does not know of any basis for any such proceeding.
(i) Accounting Matters. To the knowledge of Parent, neither Parent nor any
of its affiliates has taken or agreed to take any action that, without giving
effect to any action taken or agreed to be taken by the Company or any of its
affiliates, would prevent Parent from accounting for the business combination to
be effected by the Merger as a "pooling of interests."
(j) Brokers. No agent, broker, investment banker, person or firm acting on
behalf of Parent or Merger Subsidiary or under the authority of Parent or Merger
Subsidiary is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from any of the parties hereto
in connection with any of the transactions contemplated hereby.
(k) Billing and Collection Practices. (i) The current practices and
procedures of Parent 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 for services provided by providers and
physicians participating in the Medicare or Medicaid programs are not in
material 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
1396(a)(32), and the regulations promulgated thereunder or similar provisions of
any state Medicaid program.
(ii) Parent is not engaged in any activity, whether alone or in concert
with one or more of its clients, which would constitute a material violation of
any Federal laws or the laws of any state (including (A) Federal antifraud and
abuse or similar laws pertaining to Medicare, Medicaid, or any other Federal
health or insurance program, (B) state laws pertaining
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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 billing for
such services provided to a beneficiary of any state, Federal or private health
or insurance program or credit collection services. Without limiting the
generality of the foregoing, Parent has not, directly or indirectly, paid,
offered to pay or agreed to pay, or solicited or received, any fee, commission,
sum of money, property or other remuneration to or from any person which the
Company knows or has reason to believe to have been illegal under 42 U.S.C.
Section 1320a-7b(b) or any similar state law.
(l) Insurance. Parent maintains casualty, liability, theft, fidelity, life
and other forms of insurance which are customary for businesses in Parent's
industry.
(m) Labor Relations. Within the last five years, Parent has not experienced
any labor disputes with, or any work stoppages by, a group of employees due to
labor disagreements and, to the knowledge of Parent, there is no such dispute or
work stoppage threatened against Parent. No employee of Parent 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
within the past five years.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
SECTION 4.1. Expenses. Each of Parent and Merger Subsidiary shall pay its
own fees, costs and expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, the fees, costs and expenses of its financial advisors,
accountants and counsel. Parent shall pay the first $610,000 of the Company's
fees, costs and expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, the reasonable fees, costs and expenses of its financial
advisors, accountants and counsel. To the extent that The Company's fees, costs
and expenses exceed $610,000, Parent shall be indemnified under the
Indemnification Agreement attached hereto as Exhibit A to the extent of any such
excess.
SECTION 4.2. Conduct of Business. (a) From the date hereof until the
Effective Time of the Merger, except as otherwise consented to by Parent in
writing, the Company shall operate its business only in the ordinary course of
business consistent with past practice.
(b) Without limiting the generality of the foregoing, the Company shall
not, without the prior written consent of Parent, directly or indirectly, cause
or permit any state of affairs, action or omission described in clauses (i)
through (xv) of Section 3.1(f).
SECTION 4.3. Affiliates. The Company shall list in Section 4.3 of the Disclosure
Schedule all persons who are "affiliates" of the Company for purposes of the
SEC's Accounting Series Releases concerning "pooling of interests" treatment for
business combinations, which list shall include all of the Company's directors,
executive officers and
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stockholders.
SECTION 4.4. Agreements of Parent Affiliates. Prior to the Effective Time
of the Merger, Parent will use its reasonable efforts to obtain the execution of
agreements with respect to the sale of Parent Common Stock with each person who
is an "affiliate" of Parent for purposes of compliance with pooling
restrictions.
SECTION 4.5. Nasdaq. Prior to the Effective Time of the Merger, Parent
shall use all reasonable efforts to have the Parent Common Stock to be issued in
the Merger approved for listing on the National Association of Securities
Dealers, Inc. Automated Quotations System (the "Nasdaq National Market"),
subject to official notice of issuance.
SECTION 4.6. Pooling. The Company shall not take or cause to be taken any
action, whether before or after the Effective Time of the Merger, which would
disqualify the Merger as a "pooling of interests" for accounting purposes.
SECTION 4.7. Further Assurances. Each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as practicable and
to ensure that the conditions set forth in Article V hereof are satisfied,
insofar as such matters are within the control of any of them. In case at any
time after the Closing Date, any further action is necessary or desirable to
carry out the purposes of this Agreement, each of the parties to this Agreement
shall take or cause to be taken all such necessary action, including, the
execution and delivery of such further instruments and documents, as may be
reasonably requested by any party for such purposes.
SECTION 4.8. No Shopping. From the date hereof until the earlier of (i) the
Closing Date and (ii) the date this Agreement is terminated in accordance with
Section 6.2, neither the Company nor any partner, director, officer or
shareholder of the Company will, directly or indirectly, solicit or initiate,
enter into or conduct, discussions concerning, or exchange information
(including by way of furnishing information concerning the business of the
Company) or enter into any negotiations concerning, or respond to any inquiries
or solicit, receive, entertain or agree to any proposals for, the acquisition of
the assets of, or any substantial part thereof, or a merger involving, the
Company or the transfer of all or a substantial part of the capital stock or
partnership interest of the Company to any person other than Parent. In
addition, during such time period, the Company shall not authorize, direct or
knowingly permit any employee or agent to do any of the foregoing and the
Company shall notify Parent of the identity of any person who approaches the
Company with respect to any of the foregoing.
SECTION 4.9. Access and Information. From the date hereof until the first
to occur of the Closing Date and the termination of this Agreement, the Company
shall permit Parent and its representatives to make such investigation of the
business, operations and properties of the Company as Parent deems necessary or
desirable in connection with the transactions contemplated hereby. Such
investigation shall include, without limitation, access to the respective
directors, officers, employees, agents and representatives (including legal
counsel and independent accountants) of and the properties, books, records and
commitments of the Company. Parent and the Company agree to use reasonable
efforts wherever possible in conducting such investigation to keep confidential
the existence of this Agreement and the proposed transactions. The Company shall
furnish Parent and its representatives with such financial, operating and other
data and information, and copies of documents with respect to its
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business or any of the transactions contemplated hereby, as Parent shall from
time to time request. Such access and investigation shall be made upon
reasonable notice and at reasonable places and times. Such access and
information shall not in any way affect or diminish any of the representations
or warranties hereunder. Without limiting the foregoing, during such period, the
Company shall keep Parent informed as to the business and operations of the
Company and shall consult with Parent with respect thereto as appropriate.
SECTION 4.10. Non-Disclosure. The parties hereto agree that they will
advise and confer with each other prior to the issuance of any reports,
statements or releases pertaining to this Agreement or the transactions
contemplated hereby. Except 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), each of the
parties agrees not to disclose publicly the existence of this Agreement or the
proposed transactions without the written consent of the other party or parties,
which consent will not be unreasonably withheld. Notwithstanding the foregoing,
Parent may disclose the existence and terms of this Agreement and the proposed
transactions to existing or prospective lenders or other parties providing
financing to Parent or any of its affiliates.
SECTION 4.11. Confidentiality. (a) Until Closing, Parent, Merger Subsidiary
and the Company each agree that all financial or other information about Parent,
Merger Subsidiary or the Company, or other information of a confidential or
proprietary nature, disclosed to the other at any time in connection with the
proposed transaction shall be kept confidential by the party receiving such
information and shall not be disclosed to any person or used by the receiving
party (other than to its agents or employees or in connection with the
transactions contemplated by this Agreement) except: (i) with the prior written
consent of the disclosing party; (ii) as may be required by applicable law,
regulation, court process or by obligations pursuant to any listing agreement
with any national securities exchange (including the Nasdaq National Market);
(iii) such information which may have been acquired or obtained by such party
(other than through disclosure by the other party in connection with the
transaction contemplated by this Agreement); or (iv) such information which is
or becomes generally available to the public other than as a result of a
violation of this provision.
(b) In the event of the termination of this Agreement, from and after the
date of termination for a period of five years after the date of termination,
(i) the Company will not, for any reason whatsoever, solicit, attempt to solicit
or induce employees of Parent or any of its affiliates to terminate their
employment with Parent or any of its affiliates or hire any such employees to
work with the Company or any company or business affiliated with the Company and
(ii) Parent will not, for any reason whatsoever, solicit, attempt to solicit or
induce employees of the Company to terminate their employment with the Company
or hire any such employees to work with Parent or any company or business
affiliated with Parent.
(c) 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 (c) 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 4.12. Release of Personal Guarantees. The Company and Parent will
use their respective reasonable best efforts to obtain releases of personal
guarantees executed by
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Jean M. Campbell and Robert S. Campbell with respect to indebtedness of the
Company to NationsBank Leasing Corporation and First Professional Bank N.A.
SECTION 4.13. Press Release. The Company and Parent will use their
respective reasonable best efforts to cooperate in issuing a press release
announcing the consummation of the Merger.
SECTION 4.14. Directors' and Officers' Insurance. The Company and Parent
covenant and agree to use their respective reasonable best efforts to Purchase
continuing coverage (upon the same terms and subject to the same conditions as
are currently in effect) for the directors of the Company who were directors
immediately prior to the consummation of the Merger under the Company's
directors' and officers' liability insurance policy, the cost of which shall not
exceed the Company's historical cost for such coverage.
ARTICLE V
CONDITIONS PRECEDENT
--------------------
SECTION 5.1. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; no proceeding or lawsuit shall
have been commenced by any governmental or regulatory agency for the purpose of
obtaining any such injunction, writ or preliminary restraining order and no
written notice shall have been received from any such agency indicating an
intent to restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement.
(b) Pooling. Parent and the Company shall have received opinions, dated the
Effective Date of the Merger, from Deloitte & Touche LLP, Parent's independent
auditors, and Nanas, Stern, Biers, Neinstein and Co., LLP, the Company's
independent auditors, to the effect that the Merger will qualify as a "pooling
of interests" transaction under the relevant Accounting Principles Board
guidelines.
(c) Indemnification Agreement. The Indemnification Agreement, in the form
of Exhibit A, shall have been duly executed and delivered by the parties
thereto.
SECTION 5.2. Conditions to Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to effect the Merger are further
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in the Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date, as though made on and as of the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
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(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) Consents, Amendments and Terminations. Parent shall have received duly
executed and delivered copies of all waivers, consents, terminations and
approvals contemplated by Section 3.1(d) and Sections 3.1(d) and 3.1(j) of the
Disclosure Schedule, all in form and substance reasonably satisfactory to
Parent.
(d) Opinion of Counsel. Parent shall have received the opinion dated the
Closing Date of Ginsburg, Stephan, Oringher & Richman, counsel to the Company
and the Company's shareholders, in the form of Exhibit B.
(e) Due Diligence. Parent and its representatives shall have completed a
due diligence review of the condition (financial or otherwise), assets,
liabilities, operations, customer contracts or other customer arrangements,
billings, revenues, earnings, business and prospects of, and any other matters
relating to, the Company, and the results of such due diligence shall be
satisfactory to Parent in its sole discretion.
(f) Employment Agreements. Jean M. Campbell shall have executed and
delivered to Parent an Employment Agreement, in the form of Exhibit C.
(g) [Intentionally omitted].
(h) Affiliates. Each person who is listed as an affiliate of the Company in
Section 4.3 of the Disclosure Schedule shall have executed and delivered to
Parent an Affiliates Agreement, in the form of Exhibit E.
(i) Investment Letter. Each of the stockholders of the Company shall have
executed and delivered to Parent an Investment Letter, in the form of Exhibit F.
(j) Resignation Letters. Each of the directors of the Company (other than
Jean M. Campbell) shall have tendered to Parent their respective resignations
from such positions, effective immediately following the Closing Date.
(k) Other Documents. Parent and Merger Subsidiary shall have received such
other documents, certificates or instruments as they may reasonably request.
SECTION 5.3. Conditions to Obligation of the Company. The obligations of
the Company to effect the Merger are further subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Subsidiary set forth in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and warranties
of Parent and Merger Subsidiary set forth in this Agreement that are not so
qualified shall be true and correct in all 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, and the Company shall have received a certificate signed on
behalf of each of Parent and Merger Subsidiary by the chief executive officer
and the chief financial officer of such entity to
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such effect.
(b) Performance of Obligations of the Parent and Merger Subsidiary. Each of
Parent and Merger Subsidiary 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, and the Company shall have received a certificate signed on
behalf of each of Parent and Merger Subsidiary by the chief executive officer
and the chief financial officer of such entity to such effect.
(c) Registration Rights Agreement. Parent shall have entered into the
Registration Rights Agreement with the stockholders of the Company, in the form
of Exhibit G.
(d) Opinion. The Company shall have received an opinion dated the Closing
Date from Howard, Darby & Levin, counsel to Parent, in the form of Exhibit H.
(e) Other Documents. The Company 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. Termination. (a) This Agreement shall terminate on the earlier
to occur of any of the following events:
(i) the mutual written agreement of Parent and the Company;
(ii) by written notice of Parent or the Company to the other party
hereto, if the Closing shall not have occurred prior to 12:00 midnight (Eastern
time zone) on July 25, 1996;
(iii) by written notice of Parent to the Company, if the Company shall
have materially breached any of its representations, warranties or agreements
contained herein; or
(iv) by written notice of the Company to Parent, if either Parent or
Merger Subsidiary shall have materially breached any of its representations,
warranties or agreements contained herein.
(b) Nothing in this Section shall relieve any party of any liability for a
breach of this Agreement prior to the termination hereof. Except as aforesaid,
upon the termination of this Agreement, all rights and obligations of the
parties under this Agreement shall terminate, except their obligations under
Sections 4.1, 4.10 and 4.11.
SECTION 6.3. 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.
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(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 6.4. 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
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Telecopy: 212-841-1010
Attention: Kelly Vance, Esq.
If to the Company to:
Synergistic Systems, Inc.
9131 Oakdale Avenue
Chatsworth, California 91311
Telecopy: 818-709-4750
Attention: Jean M. Campbell
with a copy to:
Ginsburg, Stephan, Oringher & Richman
10100 Santa Monica Boulevard
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Suite 800
Los Angeles, California 90067
Telecopy: 310-551-0283
Attention: Bruce E. Dizenfeld, 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 6.5. 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 6.6. 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").
SECTION 6.7. 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.
SECTION 6.8. Amendments and Waivers. This Agreement may be amended by the
parties at any time before or after any required approval of the transactions
contemplated by this Agreement by the shareholders of the Company; provided,
however, that, after any such approval, there shall not be made any amendment
that by law requires further approval by such shareholders without the further
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
SECTION 6.9. 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 6.10. Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
Attest PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ David S. Geller By: /s/ Peter W. Gilson
______________________________ _____________________________________
Name: David S. Geller Name: Peter W. Gilson
Title: Secretary Title: President,
Chief Executive Officer
Attest PSS SYNERGISTIC SYSTEMS, INC.
By: /s/ David S. Geller By: /s/ Peter W. Gilson
______________________________ _____________________________________
Name: David S. Geller Name: Peter W. Gilson
Title: Secretary Title: President,
Chief Executive Officer
Attest SYNERGISTIC SYSTEMS, INC.
By: /s/ Mindy Prati By: /s/ Jean M. Campbell
______________________________ _____________________________________
Name: Mindy Prati Name: Jean M. Campbell
Title: Secretary Title: President,
Chief Executive Officer
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#9682
REGISTRATION RIGHTS AGREEMENT, dated as of June 28, 1996, among PHYSICIAN
SUPPORT SYSTEMS, INC., a Delaware corporation (the "Company"), each of the
shareholders of Synergistic Systems, Inc., a California corporation ("SSI"),
listed on the signature pages hereof (collectively, the "Stockholders") and JEAN
M. CAMPBELL, as representative of the Stockholders (the "Representative").
Introduction
Pursuant to an Agreement and Plan of Merger, dated as of June 28, 1996 (the
"Merger Agreement"), among the Company, PSS Synergistic Systems, Inc., a
Delaware corporation ("Merger Subsidiary") and a wholly owned subsidiary of PSS,
and SSI, the Stockholders have the right to receive shares of common stock, par
value $.001 per share, of the Company (the "Common Stock") upon the effective
time of the merger (the "Merger") of Merger Subsidiary with and into SSI.
As a condition to the Merger, 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 Merger becomes effective as set
forth in the Merger Agreement.
Pooling Period means the period beginning at the Effective Time and
continuing until such time as financial results covering at least 30 days of
combined operations of the Company and SSI 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, which bear the legend set forth
in Section 10 .
Representative means Jean Campbell, or such other person notified in
writing to the Company by holders of at least two-thirds of the Registrable
Shares, in such person's capacity as representative of the Stockholders.
Securities Act means the Securities Exchange 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
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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 (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 five 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 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) 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) 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 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 150,000
Registrable Shares must be included in any Demand Right, (ii) not more than
250,000 Registrable Shares may be included in any registration statement
prepared or filed on or before August 31, 1997, (iii) not more than 320,000
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
470,000 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
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Company written notice thereof. Prior to giving such notice to the Company, the
Representative shall provide reasonable notice to the other Stockholders of her
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 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 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") be received by the Company
prior to the Company's filing a registration statement relating to such Demand
Right; (ii) the Company has not 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;
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(c) furnish to the holders of Registrable Shares included in such
registration statement such number of copies of a summary prospectus or other
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such holders of
Registrable Shares may reasonably request in order to facilitate the public sale
or other disposition of such Registrable Shares;
(d) use its reasonable efforts to register or qualify the Registrable
Shares covered by such registration statement under the securities or "blue sky"
laws of such states as each holder of such Registrable Shares shall reasonably
request (provided, that the Company shall not be required to consent to general
service of process for all purposes in any jurisdiction where it is not then
qualified) and do any and all other acts or things which may be necessary or
advisable to enable such seller to consummate the public sale or other
disposition in such jurisdictions of such securities;
(e) notify each Stockholder selling Registrable Shares covered by such
registration statement, at any time during the Distribution Period when a
prospectus relating thereto covered by such registration statement is required
to be delivered under the Securities Act, of the happening of 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.
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5. Stockholders' Lock-Up; Cooperation. If any Registrable Shares of a
Stockholder are included in an underwritten registration pursuant to Section 2
or 3, each Stockholder, as a condition to receiving the rights granted
hereunder, may be required to, and if required such Stockholder shall, enter
into an agreement (a "Lock-up Agreement"), pursuant to which such Stockholder
shall refrain from selling any Registrable Shares not included in such
registration during the period of distribution of Common Stock by such
underwriters and for a period of up to 180 days following the effective date of
such registration. In connection with each registration pursuant to Section 2 or
3 hereof, the Stockholders selling Registrable Shares shall furnish in writing
to the Company and any underwriter participating in such offering such
information with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with federal and
applicable state securities laws.
6. Underwriting Agreement. In connection with each registration pursuant to
Section 2 or 3 covering an underwritten public offering, the Company and the
Stockholders agree to enter into a written agreement with the managing
underwriter or underwriters in such form and containing such provisions as are
usual and customary in the securities business for such an 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 pursuant
to Section 1 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 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
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statement or omission or alleged omission made in the registration statement,
the preliminary prospectus or prospectus or the amendment or supplement or any
document incident to the registration or qualification of any Registrable
Shares pursuant to this Agreement in reliance upon and in conformity with
written information furnished to the Company by such Stockholder or such
underwriter specifically for use in the preparation thereof and (ii) to any
broker or other person acting on behalf of such Stockholder to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
representation or other statement of such broker or other person that is not in
conformity with the preliminary prospectus or prospectus.
(b) Each Stockholder hereby indemnifies and holds harmless the Company,
each director of the Company, each officer of the Company who shall sign such
registration statement and any person who controls the Company within the
meaning of the Securities Act, and before Registrable Shares held by such
Stockholder shall be included in any registration pursuant to this Agreement,
any underwriter acting on such Stockholder's behalf shall agree to indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall sign such registration statement and any person who controls
the Company within the meaning of the 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
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may not be sold, without restriction, under Rule 144 under the Securities Act or
any successor rule, the Company shall (a) make and keep public information
generally available, as those terms are defined in Rule 144 under the Securities
Act and (b) file with the Commission in a timely manner reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934, as amended.
10. Stock Legend. Each certificate representing Registrable Shares shall be
stamped or otherwise imprinted with a legend substantially as follows:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH IS NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE
STATE SECURITIES OR 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:
7
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(i) Such Stockholder has all requisite power, capacity and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
and has duly executed and delivered this Agreement. This Agreement constitutes
the valid and binding obligation of such Stockholder, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(ii) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby nor compliance by such
Stockholder with any of the provisions hereto will (A) conflict with or result
in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which such Stockholder is a party, or by which such Stockholder or
such Stockholder's properties or assets may be bound or affected, except for
such conflict, breach or default as to which requisite waivers or consents shall
be obtained before the Closing (which waivers or consents are set forth in
Section 2.1(d) of the Disclosure Schedule (defined in the Merger Agreement), (B)
violate any law, statute, 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 her 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
8
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Representative upon her request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Representative in the
performance of her duties under this Agreement. If the Representative dies or
becomes incapacitated, the executor, guardian or other representative of the
Representative's estate shall have the authority hereunder to act as
Representative hereunder or to appoint a successor to act as Representative
hereunder, provided any such successor Representative is reasonably acceptable
to the Company.
13. Termination of Registration Rights. No Stockholder shall be entitled to
execute any registration right provided for in this Agreement at any time during
which all the Registrable Shares held by such Stockholder may be sold without
restriction of any kind under Rule 144.
14. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Stockholders with respect to the transactions
contemplated hereby 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: David Geller
If to the Representative:
Jean M. Campbell
c/o Syndergistic Systems, Inc.
9131 Oakdale Avenue
Chatsworth, California 91311
Telecopy: (818) 709-4750
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
9
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<PAGE>
counterparts together shall constitute but one agreement.
(e) Amendments. This Agreement shall not be altered or otherwise amended
except pursuant to an instrument in writing signed by each of (i) the Company
and (ii) the holders of two-thirds of the number of Registrable Shares then
outstanding. Each Stockholder acknowledges that by operation of this subsection,
the holders of two-thirds of the then outstanding Registrable Shares will have
the right and power to diminish or eliminate certain rights of the Stockholders
under this Agreement.
(f) Transferability. The registration and other rights granted to the
Stockholders hereunder are non-transferable and cannot be assigned or
transferred in any manner to any third party without the prior written consent
of the Company. Notwithstanding the foregoing, any Stockholder may assign the
registration rights granted to such Stockholder herein to 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) Pooling of Interests. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall preclude
the use of "pooling of interests" accounting treatment in connection with the
Merger, then such provision shall be of no force and effect to the extent, and
solely to the extent, necessary to preserve such accounting treatment for the
Merger, and in that event, the remainder of this Agreement shall not be
affected, and in lieu of such provision there shall be added as part of this
Agreement a provision as similar in terms as may be possible for the Merger to
be treated as a "pooling of interests" for accounting purposes.
(h) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered as of the date first above written.
PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ Peter W. Gilson
_________________________________
Name: Peter W. Gilson
Title: President,
Chief Executive Officer
STOCKHOLDERS:
/s/ Jean M. Campbell
----------------------------------
Jean M. Campbell
----------------------------------
Robert S. Campbell
----------------------------------
Linda McGinnis and Joel P.
McGinnis
----------------------------------
David Alexander
----------------------------------
John F. La Zear and Barabara A.
La Zear
----------------------------------
Robert L. Stichler and Janice L.
Stichler
----------------------------------
Arthur M. Depew, Jr. and
Linda Depew
----------------------------------
Lance Depew
11
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<PAGE>
----------------------------------
Mindy Prati
----------------------------------
Robert Prati
----------------------------------
Jeanne E. Silverman and David
Silverman
----------------------------------
Lisa Accomando
----------------------------------
Kari Anderson
----------------------------------
Frances L. Rogers
----------------------------------
Terry V. Fotre
STILSON FAMILY TRUST DATED
12/13/94
By:_______________________________
Name: Carl B. Stilson, Jr.
Barbara E. Stilson
Title: Trustees
SNYDER LIVING TRUST DATED 1/5/88
By: ______________________________
Name: Marc A. Snyder
Mariluisa Betta
Title: Trustees
12
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<PAGE>
JACK AND ANITRA SHEEN TRUST
U/A/D 1/10/90
By: ______________________________
Name: Jack H. Sheen
Anitra P. Sheen
Titles: Trustees
ISI J. AND ELIZABETH RUSS FAMILY
TRUST
By: ______________________________
Name:
Titles:
MARSHALL PROPERTIES, INC.
By: ______________________________
Name:
Title:
ROBERT V. BUEHL FAMILY TRUST
JULY 9, 1993
By: ______________________________
Name:
Title:
SAN FRANCISCO PHYSICIAN
INTERNATIONALE MEDICAL GROUP
INC., MONEY PURCHASE PENSION
PLAN
By: ______________________________
Name:
Title:
MARCUS D. SHOUSE, M.D. MONEY
PURCHASE PENSION PLAN
By: ______________________________
Name:
Title:
13
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<PAGE>
MARCUS D. SHOUSE, M.D. PROFIT
SHARING PLAN
By: ______________________________
Name:
Title:
14
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EMPLOYMENT AGREEMENT, dated as of June 28, 1996, between
SYNERGISTIC SYSTEMS, INC., a California corporation ("SSI" or the "Company"),
and Jean M. Campbell ("Employee").
Physician Support Systems, Inc., a Delaware corporation
("PSS"), is acquiring all of the issued and outstanding capital stock of the
Company in a merger transaction involving PSS, a wholly-owned subsidiary of PSS,
and the Company (the "Merger").
Employee acknowledges and agrees that this Agreement is being
entered into in connection with the sale of all of her shares in the Company and
that the terms and validity of this Agreement, insofar as California law is
concerned, are therefore expressly governed by Section 16601 of the California
Business and Professions Code.
The Company desires to employ Employee, and Employee desires
to be employed by the Company, on the terms and subject to the conditions set
forth herein.
As a material inducement to PSS to consummate the Merger, PSS
and the Company desire that Employee enter into the covenants set forth in
Section 5 hereof, and Employee agrees to enter into such covenants. Employee's
execution of this Agreement is a condition to PSS's obligation to consummate the
Merger.
Based upon the mutual covenants and consideration set forth
herein, the sufficiency of which is hereby acknowledged, the parties agree as
follows:
Section 1. Term. The initial term of employment of Employee by
the Company hereunder shall commence upon the date of this Agreement (the
"Commencement Date") and end on the fifth anniversary of the Commencement Date,
unless extended on terms agreed upon between Employee and the Company (such term
being hereinafter referred to as the "Employment Period"). Notwithstanding the
foregoing, the Employment Period shall automatically be extended for two
succeeding one-year periods unless Employee or the Company gives notice to the
other at least 180 days prior to the expiration of the initial Employment Period
or the first one-year extension, as the case may be, of such party's intention
not to extend the Employment Period. If such notice is given by either party,
the Employment Period shall terminate at the end of the initial Employment
Period or at the end of the first one-year extension, as the case may be. The
Employment Period may be earlier terminated pursuant to the provisions of this
Agreement.
Section 2. Duties.
2.1. Scope. (a) During the Employment Period,
Employee shall perform senior management services requiring substantially the
same time commitment and encompassing substantially the same responsibilities as
Employee has, in good faith and in the ordinary course of business, performed
for the Company prior to the Merger, and shall include such other services as
Employee and the Company may, from time to time, agree (collectively, the
"Services"). During
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<PAGE>
the Employment Periods, the Employee shall hold the office of President and
Chief Executive Officer of Employer.
(b) Employee shall have the right to determine, in
her sole discretion (after consultation with the Company's Board of Directors),
the allocation of up to $60,000 in bonuses for calendar year 1996 to be paid by
SSI to key management employees of SSI in December 1996. Employee shall also
have the right to cause the Company to continue to maintain its group manager
compensation program and its non-management employee, longevity bonus program.
The programs shall be administered and maintained in accordance with the
Company's past practice and in consultation with the Company's Board of
Directors.
(c) In connection with the consummation of the
Merger, Employee shall have the right in her sole discretion (after consultation
with the Company's Board of Directors and consistent with the Company's general
compensation practice) to offer up to 10 key management employees of the Company
written employment agreements that, among other things, provide for an annual
salary of up to 110% of the annual salary received by such employees immediately
prior to the consummation of the Merger.
2.2. (a) Performance. During the Employment Period,
the Employee will render the Services to the Company in conformity with
professional standards and in a prudent manner. Employee agrees to comply with
all of the Company's policies, standards and regulations and to follow the
reasonable instructions and directions of the Board of Directors of the Company
and Employee's superiors within the Company. The Employee shall promote the
interests of the Company in carrying out Employee's duties and shall not
deliberately take any action which could, or fail to take any action which
failure could, reasonably be expected to have a material adverse effect upon the
business of the Company, PSS or their respective affiliates.
(b) The Services shall be rendered at SSI's
principal offices in Chatsworth, and/or such other place or places and at such
reasonable times as Employer shall in good faith require or as its interests,
needs, business and opportunities shall require or make advisable. However,
Employee shall not be required to relocate out of the Southern California area,
nor shall Employee be required to spend more than one-third of her time outside
of the State of California.
(c) Employee shall to the same extent as PSS's
directors and officers be indemnified from any and all liabilities (including
reasonable attorney's fees and costs) incurred by reason of the fact that: (i)
on and after the date hereof, Employee is an employee of SSI and (ii) Employee
is a member of PSS's Board of Directors (to the extent Employee serves as such a
director); provided that such indemnity shall be pursuant to PSS's certificate
of incorporation and bylaws. To the same extent as PSS's directors and officers,
Employee shall as a director of PSS (to the extent Employee serves as such a
director) and as a director and officer of SSI be covered by liability insurance
against liabilities as to which Employee is permitted to be indemnified
hereunder.
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<PAGE>
Section 3. Compensation.
3.1. Salary. As compensation for the Services, the
Company shall pay to the Employee an annual salary of $250,000 for each year of
the Employment Period (the "Salary"), payable in equal installments in
accordance with the Company's normal payroll practices. During the Employment
Period, the Company shall endeavor in good faith to ensure that the Salary is
maintained at a level that is no less than the amount of annual base
compensation paid to similarly situated senior management employees of PSS or
any of PSS's wholly-owned subsidiaries.
3.2. Transitional Services. For services provided in
connection with the transition of ownership and coordination and realignment of
SSI and PSS activities including, but not limited to, employee and customer
relations services, information systems transition services and new customer
marketing programs, the Company shall cause PSS to pay to Employee $100,000 for
these transitional services, payable in four equal monthly installments
beginning on July 1, 1996 and ending on October 1, 1996. Notwithstanding the
foregoing, PSS shall not be obligated to pay any such installment if, at the
time such installment is otherwise due, Employee has ceased to be an employee of
the Company. PSS shall not withhold any amounts from the transitional service
bonus for payment of federal, state and local taxes thereon. To the extent any
such taxes are due, such taxes shall be paid by Employee.
3.3. Incentive Compensation. As additional
compensation for the Services, the Company shall pay Employee deferred incentive
compensation determined as set forth in Annex A (the "Incentive Compensation").
3.4. Employee Stock Options. Employee shall be
entitled to participate in PSS's 1996 Stock Option Plan. Grants to Employee
pursuant to the 1996 Stock Option Plan shall be at the discretion of the
Compensation Committee of PSS's Board of Directors and shall be consistent with
the objectives of the plan and PSS's senior management compensation policies.
The Company shall cause any stock option agreement pursuant to which PSS stock
options are granted to Employee under the 1996 Stock Option Plan to provide that
all unvested stock options granted to Employee thereunder shall automatically
vest in the event the Employment Period is terminated or expires other than
pursuant to Section 6.2.
3.5. Reimbursement; Automobile Allowance. (a)
Pursuant to the Company's standard reimbursement policies, the Company shall
reimburse Employee for all reasonable out-of-pocket expenses incurred by
Employee directly related to the performance by Employee of the services
hereunder. Employee shall account for such expenses in accordance with the
Company's reasonable record-keeping requirements.
(b) Employee shall be entitled to an automobile
allowance in the amount of $500 per month, which shall cover all of Employee's
employment-related automobile expenses, other than per mile costs which shall be
reimbursable in accordance with Internal Revenue Service guidelines.
Section 4. Employee Benefits. During the Employment
Period, Employee shall be eligible for the employee benefits (including, without
limitation, medical coverage) generally provided by PSS to its senior management
employees. The Company reserves the right to expand, restrict, designate or
eliminate the benefits provided to Employee so long as such
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<PAGE>
expansion, restriction, designation or elimination applies generally to all of
PSS's senior management employees.
Section 5. Non-Competition; Non-Disclosure.
5.1. Clients. (a) Employee recognizes and
acknowledges that, after the Commencement Date, all clients and/or accounts
serviced by the Company, Employee or the Company's other employees during
Employee's employment with the Company, including all clients and/or accounts
acquired by Employee due to such Employee's efforts during the term of such
Employee's employment with the Company are the clients and accounts of the
Company (collectively, "Client Accounts").
(b) "Prospective Client Accounts" are businesses or
individuals who (i) provided referrals to Employee or the Company that have
resulted either in a proposal for work or in a service engagement or (ii) are
known to Employee through activities with close business advisors of Client
Accounts. For purposes of this Agreement, "Prospective Client Accounts" are
considered to be "Client Accounts".
5.2. Non-Disclosure. (a) Except as provided in this
Section 5.2, Employee shall not, during or after the Employment Period, disclose
any confidential or proprietary information of the Company or of its affiliates
to any person, firm, corporation, association or other entity (other than the
Company, its affiliates, subsidiaries, officers or employees thereof) for any
reason or purpose whatsoever (other than in the normal course of business on a
need to know basis after Employee has received assurances that the confidential
or proprietary information shall be kept confidential), nor shall Employee make
use of any such confidential or proprietary information for his own purpose or
for the benefit of any person, firm, corporation or other entity, except the
Company. As used herein, the term "confidential or proprietary information"
means all information which is or becomes known to Employee and relates to
matters such as trade secrets, research and development activities, business or
financing plans, acquisition opportunities, computer software, books and
records, customer or potential customer lists (including, without limitation,
any list of Client Accounts or any part thereof), vendor lists, suppliers,
distribution channels, pricing information and private processes as they may
exist from time to time; provided that the term "confidential or proprietary
information" shall not include information that is or becomes generally
available to the public (other than as a result of a disclosure in violation of
this Agreement by Employee or a person who received such information from
Employee).
(b) If Employee is requested or required by law or
judicial order to disclose any confidential or proprietary information, Employee
shall provide the Company with prompt notice of any such request for such
information or requirement so that the Company may seek an appropriate
protective order or waiver of Employee's compliance with the provisions of this
clause. Employee will not oppose action by, and will cooperate with, the Company
to obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the confidential or proprietary
information. During the Employment Period, and for matters arising from events
or circumstances occurring during the Employment Period, the Company will
provide for the defense of matters arising under this provision.
(c) Employee agrees that Employee will promptly and
fully disclose to the Company (i) all inventions, ideas, trade secrets or
know-how (whether patentable or copyrightable or not) made or conceived by
Employee (either solely or jointly with others) during
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<PAGE>
the Employment Period and which shall in any way relate to the business
conducted or contemplated to be conducted by the Company or any of its
affiliates; and (ii) all tangible work product (whether in the nature of
developed ideas, know-how, trade secrets and similar intellectual property) and
inventions (whether patentable or copyrightable or not) made or conceived by
Employee (either solely or jointly with others) during the Employment Period
which relates in any way to the business conducted or contemplated to be
conducted by the Company or any of its affiliates; and all such inventions,
ideas, trade secrets and know-how shall be and remain the sole and exclusive
property of the Company. At the request of the Company, Employee shall, during
the Employment Period, without charge to the Company, but at the expense of the
Company, assist the Company in any reasonable way to vest in it title to all
such inventions, ideas, trade secrets and know-how and to obtain any patents,
trademarks or copyrights thereon in all countries throughout the world. In this
regard, Employee shall execute and deliver any and all documents that the
Company may reasonably request, including applications for patents, copyrights
and assignments thereof.
5.3. Restrictive Covenant. Employee hereby
acknowledges and recognizes Employee's possession of confidential or proprietary
information and the highly competitive nature of the business of the Company and
its affiliates and accordingly agrees that, in consideration of PSS causing the
Merger to be consummated, the Company's entering into this Agreement, and the
premises contained herein, Employee will not, from and after the Commencement
Date and for the period ending on the later of (a) five years after the date of
this Agreement and (b) two years after the date of termination of the Employment
Period, either individually or as an officer, director, employee, partner, agent
or principal of another business firm (i) directly or indirectly engage in the
United States, in any competitive business (including seeking or accepting
employment with a Client Account), (ii) assist others in engaging in any
competitive business in the manner described in the foregoing clause (i), (iii)
solicit, professionally contract or provide medical billing, accounts
receivable, accounting, financial or consulting services to any Client Account
or (iv) induce employees of the Company or any of its affiliates to terminate
their employment with the Company or such affiliates or hire any employees of
the Company or any of its affiliates to work with Employee or any business firm
affiliated with Employee. Notwithstanding the foregoing, after the termination
on expiration of the Employment Period, Employee may (i) work or consult for a
governmental agency, (ii) work or consult for not-for-profit healthcare industry
groups, (iii) teach at a public or private college, university or professional
or vocational training school, (iv) consult on formation, management and/or
operations of healthcare entities (other than entities which, as the primary
component of their business, provide medical billing, accounts receivable
management or practice management services to physicians or physicians groups)
and (v) work in a management or administrative capacity in a healthcare business
(other than entities which, as the primary component of their business, provide
medical billing, accounts receivable management or practice management services
to physicians or physicians groups); provided that in no event shall Employee
engage in any activity otherwise prohibited pursuant to clauses (i) or (ii) of
the immediately preceding sentence.
5.4. Remedies. Employee acknowledges that the
Company may elect to specifically enforce Section 5.3 (the "Restrictive
Covenant") by injunctive or other equitable remedies (as provided in Section
8.4) or, in the alternative, seek damages as a result of Employee's breach of
the Restrictive Covenant. Employee recognizes that the right to service each
Client Account is a valuable asset of the Company and that the precise value of
the loss of such asset may be difficult to measure in monetary sums.
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Section 6. Termination.
6.1. Death or Disability. If the Employee should die
during the Employment Period, the Employment Period shall terminate as of the
date of death. If the Employee becomes unable to perform the Services reasonably
satisfactorily for at least 180 consecutive days during the Employment Period
due to a physical or mental disability, the Company may elect to terminate the
Employment Period at any time thereafter, provided the Employee still suffers
from such disability; and the Employment Period shall terminate as of the date
of such election. All disabilities shall be certified by a physician reasonably
acceptable to Employee and to the Company. The Employee's failure to submit to
any physical examination by such physician after such physician has given
reasonable notice of the time and place of such examination shall be conclusive
evidence of the Employee's inability to perform his duties hereunder.
6.2. Cause. The Company, at its option, may
terminate the Employment Period and all of the obligations of the Company
hereunder for Cause. For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder in the event of (i) the
Employee's conviction of, or plea of guilty or nolo contendere to (A) a felony
or (B) a fraudulent or deliberately dishonest act which results in an adverse
effect on the Company, (ii) the Employee's material breach of this Agreement or
(iii) the Employee's gross negligence or bad faith in the performance of the
Services. Notwithstanding the foregoing, the Employment Period may not be deemed
to have been terminated for Cause pursuant to Section 6.2(ii) until 45 days
after Employee receives written notice from the Company that the Company is
terminating the Employment Period pursuant to such Section. During such 45-day
period, Employee has the right, together with Employee's counsel, to meet with
the Company's Board of Directors to discuss such termination by giving written
notice to the Company within 15 days after Employee receives such termination
notice. If such meeting is requested by Employee, such meeting shall take place
at the Company's principal place of business at a date and time to be mutually
agreed upon in good faith by the Company and Employee, which date shall not be
less than 10 days or more than 20 days after the Company's receipt of such
meeting request.
6.3. Payments in the Event of Termination. If the
Employment Period is terminated or expires pursuant to Section 1 or Section 6,
the Company shall pay the Employee any Salary and other monetary obligations
already earned to the date of such termination.
6.4. Termination Obligations. In the event of
termination of the Employment Period in accordance with this Section 6, all
obligations of the Company shall terminate, except as specifically set forth in
Section 6.3. In the event of termination by the Company of the Employment Period
other than pursuant to Section 1 or Section 6, Employee shall be entitled to
receive the full rights and benefits that Employee would otherwise have received
pursuant to Section 3 and Section 4 and Annex A hereto if the Employment Period
had not been so terminated and had continued until the earliest date on which it
could have terminated or expired pursuant to Section 1.
Section 7. Transition. In the event of termination of the
Employment Period, Employee shall use Employee's best efforts to assist the
Company in maintaining the Company's professional relationship with all Client
Accounts. To such end, Employee shall cooperate and assist the Company, at the
Company's direction and instruction, to retain and transition each Client
Account during the transition period between the receipt of notice of the
termination of employment and the final day of employment.
<PAGE>
<PAGE>
Section 8. Miscellaneous.
8.1. Assignment; Benefit. This Agreement is personal
in its nature and the parties shall not, without the prior written consent of
the other, assign or transfer this Agreement or any rights or obligations
hereunder; provided that the provisions hereof shall inure to the benefit of,
and be binding upon, each successor of the Company, whether by merger,
consolidation or transfer of all or substantially all of its assets.
8.2. 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 the Company, at:
Synergistic Systems, Inc.
c/o 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
If to the Employee, at:
Jean M. Campbell
Synergistic Systems, Inc.
9131 Oakdale Avenue
Chatsworth, California 91311
Telecopy: 818-709-4750
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. Each such
notice, request or communication shall be deemed to have been given when
received or, if given by mail, when delivered at the address specified in this
Section 8.2 or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
8.3. Entire Agreement; Amendments and Waivers. This
Agreement represents the entire agreement between the parties with respect to
the subject matter hereof and supersedes all negotiations and prior agreements.
No amendment, alteration, modification, or waiver of any provision of, or
consent required by, this Agreement, nor any consent to any departure herefrom,
shall be effective unless it is in writing and signed by the parties hereto.
Such amendment, alteration, modification, waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
8.4. Specific Performance. In the event of a breach
or threatened breach by Employee of the provisions of Section 5, the Company
shall be entitled to an injunction
<PAGE>
<PAGE>
restraining Employee from such breach. Nothing contained herein shall be
construed as prohibiting the Company 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 Employee of the provisions of Section 5. Without limiting
the generality of the foregoing, Employee acknowledges that, in the event of a
breach or threatened breach by him of any of the provisions of Section 5, the
Company's damages may exceed the value of the consideration received by Employee
in the Merger.
8.5. 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.
8.6. Acknowledgment. Employee acknowledges that
Employee has read this Agreement and has been afforded the opportunity to
discuss and review this Agreement with the Company and/or an attorney of
Employee's choice. Employee understands that execution of this Agreement and
acceptance of its terms are conditions to PSS causing the Merger to be
consummated and to Employee's employment with the Company.
8.7. 1992 Employment Agreement. Effective as of the
date of this Agreement, the Employment Agreement effective as of January 1,
1992, by and between the Company and Employee shall be null and void and of no
further force or effect and the Company and Employee hereby release each other
from any and all liabilities thereunder, except that accrued wages, monies or
other benefits owed to Employee through June 28, 1996 will be paid to Employee.
8.8. Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
8.9. 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.
8.10. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. ANY PROCEEDING
ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT IN LOS ANGELES COUNTY,
CALIFORNIA.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
SYNERGISTIC SYSTEMS, INC.
By: /s/ Robert S. Campbell
-------------------------
Name: Robert S. Campbell
Title: C.F.O.
/s/ Jean M. Campbell
-------------------------
Jean M. Campbell
Doc. #8511/1
<PAGE>
<PAGE>
ANNEX "A"
Incentive Compensation
In addition to the Salary and the other benefits Employee is
entitled to under this Employment Agreement, for each of the calendar years 1997
through 2001 (and any additional full calendar years during the Employment
Period), if the Company's earnings before interest and taxes ("EBIT") in any
such year is 12% or more higher than the highest EBIT of the Company for any
prior year, the Company shall pay Employee as incentive compensation an amount
as set forth in the table below under the heading entitled "Additional
Compensation." For calendar year 1996, Employee shall be paid as incentive
compensation an amount equal to (x) $50,000 if EBIT of the Company for 1996
equals or exceeds $1,876,000 but is less than $1,926,000 or (y) $100,000 if EBIT
of the Company for 1996 equals or exceeds $1,926,000. Payments, if any, for any
year shall be made by the Company to Employee within 120 days of the end of such
year. Calculations shall be based upon the Company's financial statements that
are included in PSS's audited consolidated financial statements and shall be
made in accordance with generally accepted accounting principles (except that
the calculation of EBIT of the Company for purposes of this Annex A shall not
take into consideration the expense or liability for any incentive compensation
payment due under this Annex A and shall not take into consideration any PSS
corporate overhead allocation or allocation of the capitalized cost of PSS
software unless Employee requests such software from PSS at additional cost to
PSS, but shall include any direct costs incurred relating to implementation of
PSS software at SSI and shall exclude any effects on EBIT resulting from
fluctuations in the Company's unbilled accounts receivable). The Company shall
not be obligated to pay incentive compensation for any year unless Employee is
an employee of the Company at the end of such year (except if the Employment
Period is terminated by the Company other than pursuant to Section 1 or Section
6 of this Employment Agreement).
<TABLE>
<CAPTION>
Percentage of EBIT Growth over
Highest EBIT of any Prior Year(1) Additional Compensation
- ---------------------------------- -----------------------
<S> <C>
12% $100,000
16% $150,000
20% $200,000
24% $250,000
</TABLE>
- ----------
(1) Beginning in 1997, "highest EBIT" of any prior year shall be not less than
$1,826,000.
1
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<PAGE>
[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 M. Helm (media), ext. 225
e-mail: [email protected]
PHYSICIAN SUPPORT SYSTEMS SUCCESSFULLY COMPLETES MERGER
WITH SYNERGISTIC SYSTEMS, INC.
Mt. Joy, PA -- July 1, 1996 - Physician Support Systems, Inc. (Nasdaq: PHSS)
today announced it has completed its merger with Synergistic Systems, Inc.
("SSI"). The transaction will be accounted for as a pooling of interests. Terms
of the transaction were not disclosed.
SSI, based in Chatsworth, CA, provides accounts receivable and practice
management services to a broad variety of physician specialties. During 1995,
SSI had revenues of approximately $10 million.
"We are very pleased with the successful completion of our merger with SSI,"
said Peter Gilson, President and Chief Executive Officer of Physician Support
Systems. "We are particularly excited about the addition of Jean Campbell,
President of SSI, and the rest of the SSI management team, and we look forward
to working closely with them to further develop our West Coast business."
Jean Campbell, President and Chief Executive Officer of SSI, stated, "I am proud
and extremely enthusiastic to join PSS and foresee integrating the substantial
resources and growth opportunities this national company will share with SSI."
Headquartered in Mt. Joy, Pennsylvania, Physician Support Systems, Inc. is a
leading provider of business management services to hospital-based physicians,
including accounts receivable, financial, administrative, strategic and
information support systems.
<PAGE>
<PAGE>
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 PSS. These risks include the ability of PSS to grow internally or
by acquisitions, political and regulatory pressures or changes, the ability of
PSS to integrate acquired businesses into the PSS group of companies,
competitive action by other companies, changing conditions in the healthcare
industry and other risks referred to in PSS's periodic reports and registration
statement filed with the Securities and Exchange Commission.
###
Editor's Note: This release is also available on the Internet over the World
Wide Web: http://www.noonanrusso.com
