EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 30, 1996
AMONG
PHYSICIAN SUPPORT SYSTEMS, INC.,
PSS EE&C FINANCIAL SERVICES, INC.
AND
EE&C FINANCIAL SERVICES, INC.
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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.....................................1
SECTION 1.4. Effects of the Merger..............................2
SECTION 1.5. Articles of Incorporation and By-Laws..............2
SECTION 1.6. Directors..........................................2
SECTION 1.7. Officers...........................................2
SECTION 1.8. Parent Directors...................................2
SECTION 1.9. Tax-Free Reorganization............................2
SECTION 1.10. Accounting Treatment..............................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES..................3
SECTION 2.1. Effect on Capital Stock............................3
(a) Capital Stock of Merger Subsidiary..................3
(b) Cancellation of Treasury Stock and Parent-Owned
Stock...............................................3
(c) Conversion of Company Common Stock..................3
(d) Adjustment of Exchange Ratio........................3
SECTION 2.2. Exchange of Certificates...........................3
(a) Parent To Provide Merger Consideration..............3
(b) Exchange Procedure..................................3
(c) Distributions with Respect to Unexchanged Shares....4
(d) No Further Ownership Rights in Common Stock.........4
(e) No Liability........................................4
(f) No Fractional Shares................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES............................... 5
SECTION 3.1. Representations and Warranties of the Company... 5
(a) Organization, Standing and Power................. 5
(b) Authority; Binding Agreements.................... 5
(c) Capitalization; Equity Interests................. 5
(d) Conflicts; Consents.............................. 6
(e) Financial Information............................ 7
(f) Absence of Changes............................... 7
(g) Assets, Property and Related Matters; Real
Property......................................... 8
(h) Patents, Trademarks and Similar Rights........... 9
(i) Insurance........................................10
(j) Agreements, Etc..................................10
(k) Litigation, Etc..................................10
(l) Compliance; Governmental Authorizations..........10
(m) Labor Relations; Employees.......................11
(n) Accounts Receivable..............................12
(o) Customers........................................12
(p) Accounts Payable.................................13
(q) Related Party Transactions.......................13
(r) Billing and Collection Practices.................13
(s) Tax Matters......................................14
(t) Disclosure.......................................14
(u) Bank Accounts; Powers-of-Attorney................15
(v) Accounting Matters...............................15
(w) Brokers..........................................15
(x) Accredited Investor..............................15
SECTION 3.2. Representations and Warranties by Merger
Subsidiary and Parent...........................15
(a) Organization, Standing and Power.................15
(b) Authority; Binding Agreements....................16
(c) Conflicts; Consents..............................16
(d) Capitalization...................................16
(e) SEC Documents; Financial Statements; No
Undisclosed Liabilities..........................17
(f) Absence of Certain Changes or Events.............17
(g) Litigation, Etc..................................17
(h) Compliance; Governmental Authorizations..........17
(i) Accounting Matters...............................18
(j) Brokers..........................................18
(k) Billing and Collection Practices.................18
ii
(l) Insurance........................................18
(m) Labor Relations..................................19
ARTICLE IV
ADDITIONAL AGREEMENTS........................................19
SECTION 4.1. Expenses........................................19
SECTION 4.2. Affiliates......................................19
SECTION 4.3. Agreements of Parent Affiliates.................19
SECTION 4.4. Nasdaq..........................................19
SECTION 4.5. Pooling.........................................19
SECTION 4.6. Public Announcements............................19
SECTION 4.7. Confidentiality.................................20
SECTION 4.8. Parent Agreement................................20
ARTICLE V
DOCUMENTS TO BE DELIVERED AT CLOSING.........................20
SECTION 5.1. Documents to be Delivered at Closing............20
(a) Representations and Warranties...............21
(b) Performance of Obligations of the Company....21
(c) Consents, Amendments and Terminations........21
(d) Opinion of Counsel...........................21
(e) Indemnification Agreement....................21
(f) Employment Agreements........................21
(g) Non-Competition Agreement....................21
(h) Investment and Affiliate Letter; Affiliate
Agreement....................................21
(i) Resignation Letters..........................21
(j) Representations and Warranties...............21
(k) Registration Rights Agreement................22
(l) Opinion......................................22
(m) Other Documents..............................22
ARTICLE VI
MISCELLANEOUS.................................................22
SECTION 6.1. Entire Agreement.................................22
SECTION 6.2. Descriptive Headings; Certain Interpretations....22
SECTION 6.3. Notices..........................................22
SECTION 6.4. Counterparts.....................................23
SECTION 6.5. Survival.........................................23
iii
SECTION 6.6. Benefits of Agreement............................23
SECTION 6.7. Amendments and Waivers...........................24
SECTION 6.8. Assignment.......................................24
SECTION 6.9. Enforceability...................................24
SECTION 6.10. GOVERNING LAW...................................24
EXHIBITS
A Form of Letter of Transmittal
B Form of Indemnification Agreement
C Form of Opinion of Counsel of the Company and the Shareholders
D Form of Employment Agreement
E Form of Non-Competition Agreement
F Form of Investment and Affiliate Letter
G Form of Affiliate Agreement
H Form of Registration Rights Agreement
I Form of Opinion of Counsel of Parent and Merger Subsidiary
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Agreement And Plan Of Merger (the "Agreement"), dated as of August 30,
1996, among Physician Support Systems, Inc., a Delaware corporation
("Parent"), PSS EE&C Financial Services, Inc., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Subsidiary"), and
EE&C Financial Services, Inc., a New York corporation (the "Company").
INTRODUCTION
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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
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set forth in this Agreement, and in accordance with the New York Business
Corporation Law ("New York Law") and the Delaware General Corporation Law
("Delaware Law"), Merger Subsidiary shall be merged with and into the Company at
the Effective Time of the Merger (defined below in Section 1.3). Following the
Merger, the separate corporate existence of Merger Subsidiary shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Merger Subsidiary in accordance with New York Law and Delaware Law.
SECTION 1.2. Closing. The closing of the Merger (the "Closing") will
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take place at 10:00 a.m. on August 30, 1996 at the offices of Howard, Darby &
Levin, 1330 Avenue of the Americas, New York, New York 10019, unless another
date or place is agreed to in writing by the parties hereto (such date upon
which the Closing occurs, the "Closing Date").
SECTION 1.3. Effective Time. As soon as practicable, the parties
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shall file a copy of a certificate of merger or other appropriate documents in
the office of the New York Secretary of State (the "New York Certificate of
Merger") executed in accordance with the relevant provisions of New York Law and
a certificate of merger or other appropriate documents in the office of the
Delaware Secretary of State (the "Delaware Certificate of Merger") executed in
accordance with the relevant provisions of Delaware Law, and shall make all
other filings or recordings required under New York Law or Delaware Law. The
Merger shall become effective at such time as a copy of the New York Certificate
of Merger is duly filed with the New York
Secretary of State and the Delaware Certificate of Merger is duly filed with the
Delaware Secretary of State (the time the Merger becomes effective, the
"Effective Time of the Merger").
SECTION 1.4. Effects of the Merger. The Merger shall have the effects
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set forth in the New York Law and the Delaware Law.
SECTION 1.5. Articles of Incorporation and By-Laws. (a) The Articles
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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,
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the directors of the Surviving Corporation shall be Peter D. Cooper, Hamilton F.
Potter III, Peter W. Gilson and David S. Geller, until the earlier of their
resignation or removal or until their successors are duly elected and qualified.
As long as Peter D. Cooper is an employee of the Surviving Corporation, Parent
shall take such action as shall be necessary so that Peter D. Cooper is elected
to the Board of Directors of the Surviving Corporation.
SECTION 1.7. Officers. The officers of the Company at the Effective
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Time of the Merger shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their successors are duly
elected and qualified.
SECTION 1.8. Parent Directors. Parent shall take such action as shall
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be necessary so that, promptly after the Effective Time of the Merger, Peter D.
Cooper shall be appointed to the Board of Directors of Parent with a term in
office expiring at Parent's next annual meeting of its stockholders. As long as
Peter D. Cooper and the holders of record of shares of Company Common Stock
immediately prior to the Effective Time of the Merger together shall
beneficially own, in the aggregate, at least 10% of the issued and outstanding
shares of Parent Common Stock (as hereinafter defined), Parent's Board of
Directors shall (i) include Peter D. Cooper in the slate of nominees recommended
by Parent's Board of Directors to stockholders for election as directors at each
annual meeting of stockholders of Parent, commencing with the annual meeting of
stockholders next following the date hereof (unless Mr. Cooper dies, becomes
incapacitated or no longer wishes to serve as a director, in which case, in the
event of his death or incapacity, Mr. Cooper's heirs or representatives shall
have the right to designate a nominee in Mr. Cooper's stead), and (ii) use its
best efforts to cause the shares for which Parent's management or Board of
Directors holds proxies or is otherwise entitled to vote to be voted in favor of
the election of Mr. Cooper or such other nominee. In the event that the Board
of Directors of Parent is expanded to include fourteen or more directorships,
the provisions of the preceding sentence shall apply to two directorships, one
to be held by a person designated by Mr. Cooper or such heirs or representatives
and approved by a majority of Parent's Board of Directors, such approval not to
be unreasonably withheld.
SECTION 1.9. Tax-Free Reorganization. The Merger is intended to be a
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reorganization within the meaning of Section 368 of the Code, and this Agreement
is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368 of the Code.
SECTION 1.10. Accounting Treatment. The business combination to be
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effected by the Merger is intended to be treated for accounting purposes as a
"pooling of interests."
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
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SECTION 2.1. Effect on Capital Stock. As of the Effective Time
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of the Merger, by virtue of the Merger and without any action on the part of the
holder of any shares of Company Common Stock or any shares of capital stock of
Merger Subsidiary:
(a) Capital Stock of Merger Subsidiary. Each issued and
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outstanding share of the capital stock of Merger Subsidiary shall be converted
into and become one fully paid and nonassessable share of Common Stock, no par
value per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each
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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
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2.2(f), each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted into
the right to receive (the "Merger Consideration") 14,212.48 fully paid and
nonassessable shares of Common Stock, par value $.001 per share (the "Parent
Common Stock"), of Parent (rounded to the nearest ten-thousandth of a share)
(the "Exchange Ratio"). As of the Effective Time of the Merger, all such shares
of Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued in exchange therefor upon surrender of such certificate in
accordance with Section 2.2(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(c), in each case, without
interest.
(d) Adjustment of Exchange Ratio. If after the date hereof and
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prior to the Effective Time of the Merger, Parent shall have declared a stock
split (including a reverse split) of Parent Common Stock or a dividend payable
in Parent Common Stock, or any other distribution of securities or extraordinary
dividend (in cash or otherwise) to holders of Parent Common Stock with respect
to their Parent Common Stock (including such a distribution or dividend made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction), then the Exchange Ratio referred to in
Section 2.1(c) shall be appropriately adjusted to reflect such stock split or
dividend or other distribution of securities.
SECTION 2.2. Exchange of Certificates. (a) Parent To Provide
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Merger Consideration. Parent shall take all necessary steps to have available
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promptly after the Effective Time of the Merger the certificates representing
the shares of Parent Common Stock issuable in exchange for the outstanding
shares of Company Common Stock pursuant to Section 2.1 and, from time to time,
cash for payment in lieu of fractional shares pursuant to Section 2.2(f).
(b) Exchange Procedure. At or prior to the Effective Time of the
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Merger, Parent shall make available to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1, (i) a Letter of Transmittal in the form
3
set forth as Exhibit A to this Agreement and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to Parent or to
such agent or agents as may be appointed by the Parent, together with such
Letter of Transmittal, duly executed, and such other documents as may reasonably
be required by Parent or such agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration into which the
shares of Company Common Stock shall have been converted pursuant to Section
2.1, cash in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(f) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(c), and
the Certificate so surrendered shall be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. At any time after the Effective
Time of the Merger, each Certificate shall be deemed to represent only the right
to receive upon surrender the Merger Consideration into which the shares of
Company Common Stock shall have been converted pursuant to Section 2.1, cash in
lieu of any fractional shares of Parent Common Stock as contemplated by Section
2.2(f) and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), in each case, without interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
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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
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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
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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
4
(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
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fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Parent Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Parent Common Stock multiplied by $21.75.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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SECTION 3.1. Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and Merger Subsidiary as
follows:
(a) Organization, Standing and Power. The Company (i) is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of New York and (ii) has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction set forth in Section 3.1(a) of the Disclosure Schedule.
Section 3.1(a) of the Disclosure Schedule also sets forth each other
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by it or because of the nature of its business as now
being conducted. The Company has delivered to Parent complete and correct copies
of its Articles of Incorporation and By-Laws and all amendments thereto to the
date hereof and has made available to Parent its minute books and stock records.
Section 3.1(a) of the disclosure schedule delivered by the Company to Parent and
Merger Subsidiary simultaneously with the execution of this Agreement (the
"Disclosure Schedule") contains (i) a true and correct list of the jurisdictions
in which the Company is qualified to do business as a foreign corporation and
(ii) a true and correct list of the directors and officers of the Company as of
the date of this Agreement and at all times since the last action of the board
of directors and the shareholders of the Company.
(b) Authority; Binding Agreements. The execution and delivery of this
-----------------------------
Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action of the Company. The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the Merger and the
other transactions contemplated hereby and the Company has duly executed and
delivered this Agreement. The stockholders of the Company have approved this
Agreement, the Merger and the other transactions contemplated hereby in
accordance with the requirements of New York Law and the Articles of
Incorporation and By-Laws of the Company. This Agreement is the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(c) Capitalization; Equity Interests. The authorized capital stock of
--------------------------------
the Company consists of 1,000 shares of Company Common Stock. At the time of
execution of this
5
Agreement, 72.25 shares of Company Common Stock were issued and outstanding.
Section 3.1(c) of the Disclosure Schedule contains a true and correct list of
all of the owners (of record and beneficial) of the issued and outstanding
shares of Company Common Stock specifying the number of such shares owned by,
and the address of, each such person. Except as set forth above, at the time of
execution of this Agreement, no shares of capital stock or other voting
securities of the Company are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are not any bonds, debentures, notes or other indebtedness or securities of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of the
Company may vote. Except as set forth in Section 3.1(c) of the Disclosure
Schedule, there are not any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which the Company is bound obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or obligating
the Company to issue, grant, extend or enter into any such security, option,
warrant, call right, commitment, agreement, arrangement or undertaking. Except
as set forth in Section 3.1(c) of the Disclosure Schedule, there are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating the Company to repurchase, redeem or otherwise acquire any
shares of capital stock or other voting securities of the Company or any
securities of the type described in the two immediately preceding sentences.
Except as set forth in Section 3.1(c) of the Disclosure Schedule, the Company
does not have any subsidiaries and does not own or hold any equity or other
security interests in any other entity. For purposes of this Agreement, a
"subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which ) is owned directly or indirectly by such first
person; and a "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity
(governmental or private).
(d) Conflicts; Consents. The execution and delivery of this Agreement,
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the consummation of the Merger and the other transactions contemplated hereby
and the compliance by the Company with the provisions hereof do not and will not
(i) conflict with or result in a breach of the charter, by-laws or other
constitutive documents of the Company, (ii) conflict with or result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the provisions of any note, bond, lease, mortgage, indenture, or any
material license, franchise, permit, agreement or other instrument or obligation
to which the Company is a party, or by which the Company or any of the Company's
properties or assets, may be bound or affected, except for such conflicts,
breaches or defaults as are set forth in Section 3.1(d) of the Disclosure
Schedule, which disclosure also shall set forth what, if any, waivers or
consents to such conflicts, breaches or defaults shall have been obtained on or
before the Closing), (iii) violate any law, statute, rule or regulation or
order, writ, injunction or decree applicable to the Company or any of the
Company's properties or assets, except for any such violations that are
immaterial to the Company or any of the Company's properties or assets or (iv)
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets used or held by the Company. Except as
set forth in Section 3.1(d) of the Disclosure Schedule, no consent or approval
by, or any notification of or filing with, any person is required in connection
with the execution, delivery and performance by the Company of this Agreement or
the consummation of the Merger and the other transactions expressly contemplated
hereby except for (i) the filing with the Securities and Exchange Commission
(the "SEC") such reports under Sections 13 and 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the Merger and the other transactions contemplated hereby,
(ii) such filings as may be required under state securities or "blue sky" laws
in connection with the issuance of the Parent Common Stock in connection with
6
the Merger, (iii) the filing of a copy of the New York Certificate of Merger
with the New York Secretary of State and the Delaware Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (iv) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as are set forth in Section 3.1(d) of the Disclosure
Schedule.
(e) Financial Information. (i) The following financial statements are
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contained in Section 3.1(e) of the Disclosure Schedule:
(A) the audited balance sheet of the Company at December 31, 1995 and
the related statement of operations for the year ended December 31, 1995;
(B) the unaudited, internally prepared quarterly balance sheets of the
Company as of the end of each quarter commencing January 1, 1995 through the
quarter end prior to the date of this Agreement and the related statement of
operations for each such quarter; and
Except as indicated in Section 3.1(e) of the Disclosure Schedule, all such
financial statements have been prepared in conformity with United States
generally accepted accounting principles ("GAAP") and, except that the quarterly
financial statements referred to in subsection (B) above do not contain foot
notes and except as set forth in Section 3.1(e) of the Disclosure Schedule,
applied on a basis consistent with prior periods and fairly present the
financial condition, results of operations and cash flows of the Company. The
balance sheets of the Company as at the dates set forth present fairly the
financial position of the Company as at the dates thereof, and the related
statements of operations of the Company for each of the respective specified
periods then ended present fairly the results of operations of the Company for
each of the respective periods then ended. For the purposes of this Agreement,
all financial statements referred to in this paragraph shall include any notes
and schedules to such financial statements.
(ii) There were no liabilities or obligations (whether absolute,
accrued, contingent or otherwise, and whether due or to become due) in respect
of the Company which were required to be, in accordance with GAAP, and were not
shown or provided for on the balance sheets of the Company to which such
liabilities or obligations related. All reserves established by the Company are
reflected on the balance sheets of the Company or in the footnotes to the
financial statements of the Company and are adequate and there are no loss
contingencies that are required to be accrued by Statement of Financial
Accounting Standard No. 5 of the Financial Accounting Standards Board which are
not provided for on such balance sheets.
(f) Absence of Changes. Except as set forth in Section 3.1(f) of the
------------------
Disclosure Schedule, since December 31, 1995, the Company has been operated in
the ordinary course consistent with past practice and there has not been:
(i) any material adverse change in its condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, billings, revenues, earnings or
business;
(ii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Company, other than obligati ons under customer contracts, current
obligations and liabilities incurred in the ordinary course of business and
consistent with past practice;
7
(iii) any payment, discharge or satisfaction of any claim or
obligation of the Company, except in the ordinary course of business and
consistent with past practice;
(iv) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company or any direct or indirect redemption, purchase or other acquisition
of any such shares;
(v) any issuance or sale, or any contract entered into for the
issuance or sale, of any shares of capital stock or securities convertible
into or exercisable for shares of capital stock of the Company;
(vi) any sale, assignment, pledge, encumbrance, transfer or
other disposition of any tangible asset of the Company, except as
contemplated by this Agreement, or any sale, assignment, transfer or other
disposition of any patents, trademarks, service marks, trade names,
copyrights, licenses, franchises, know-how or any other intangible assets;
(vii) any creation of any material claim or other encumbrance on
any property of the Company;
(viii) any material write-down of the value of any asset or
inventory of the Company or any material write-off as uncollectible of any
accounts or notes receivable or any portion thereof;
(ix) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company;
(x) any capital expenditure or commitment or addition to
property, plant or equipment of the Company, individually or in the
aggregate, in excess of $25,000 ;
(xi) any general increase in the compensation of employees of
the Company (including any increase pursuant to any bonus, pension, profit-
sharing or other benefit or compensation plan, policy or arrangement or
commitment), or any increase in any such compensation or bonus payable to
any officer, shareholder, director, consultant or agent of the Company
having an annual salary or remuneration in excess of $40,000;
(xii) any material damage, destruction or loss (whether or not
covered by insurance) affecting any asset or property of the Company;
(xiii) any change in the independent public accountants of the
Company or in the accounting methods or accounting practices followed by
the Company or any change in depreciation or amortization policies or
rates;
(xiv) any agreement or action not otherwise referred to in items
(i) through (xiii) above entered into or taken that is material to the
Company; or
(xv) any agreement, whether in writing or otherwise, to take
any of the actions specified in the foregoing items (i) through (xiv).
(g) Assets, Property and Related Matters; Real Property.
---------------------------------------------------
Except as set forth in Section 3.1(g) of the Disclosure Schedule, (i) the
Company has good title to, or a valid leasehold interest in, as applicable, all
of the assets reflected on the financial statements contained in Section 3.1(e)
of the Disclosure Schedule, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind. Such assets (A) are in good operating
condition and repair, subject
8
to ordinary wear and tear and (B) constitute all of the material properties,
interests, assets and rights held for use or used in connection with the
business and operations of the Company and constitute all those necessary to
continue to operate the business of the Company consistent with current and
historical practice. All items of personal property owned by the Company as of
June 30, 1996 with an original cost or book value in excess of $5,000 are listed
in Section 3.1(g)(i) of the Disclosure Schedule.
(ii) Section 3.1(g)(ii) of the Disclosure Schedule sets forth a
list of all real property and of all personal property owned or leased by the
Company. The Company does not own any real property. With respect to property
leased by the Company (I) the Company is the owner and holder of all the
leasehold interests and estates purported to be granted by such leases, (II) all
leases to which the Company is a party are in full force and effect and
constitute valid and binding obligations of the Company and, to the knowledge of
the Company, of the other parties thereto, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles, and (III) the Company has
made available to Parent true and complete copies of all written leases referred
to in Section 3.1(g)(ii) of the Disclosure Schedule. There exists no default, or
any event which upon notice or the passage of time, or both, would give rise to
any default, in the performance by the Company or by any lessor under any lease.
Except as set forth in Section 3.1(g) of the Disclosure Schedule, the Company
has not, and to the knowledge of the Company, no other person has, granted any
oral or written right to anyone other than the Company to lease, sublease or
otherwise occupy any of the properties described in Section 3.1(g)(ii) of the
Disclosure Schedule through the end of the applicable lease periods.
(iii) The real estate listed in Section 3.1(g)(ii) of the
Disclosure Schedule and all appurtenances and improvements, as used, constructed
or maintained by the Company at any time, to the knowledge of the Company,
conform to applicable Federal, state, local and foreign laws and regulations,
except for any non-conformities that are immaterial to the Company or any of the
Company's properties or assets. To the knowledge of the Company, the use of the
buildings and structures located on such real property or any appurtenances or
equipment does not violate any restrictive covenants or encroach on any property
owned by others. No condemnation proceeding is pending or, to the knowledge of
the Company, threatened which would preclude or impair the use of any such
property by the Company for the uses for which they are intended.
(h) Patents, Trademarks and Similar Rights. The Company owns or licenses
--------------------------------------
all patents, trademarks, service marks, trade names and copyrights, in each case
registered or unregistered, inventions, software (including documentation and
object and source code listings), know-how, trade secrets and other intellectual
property rights (collectively, the "Intellectual Property") used in its business
as presently conducted. Section 3.1(h) of the Disclosure Schedule contains a
list of all Intellectual Property owned and used by the Company and any
Intellectual Property which is licensed for use by others. No Intellectual
Property which is material to the business of the Company infringes any rights
owned or held by any other person. There is no pending or, to the knowledge of
the Company, threatened claim or litigation against the Company contesting its
right exclusively to use any Intellectual Property. To the knowledge of the
Company, no person is infringing the rights of the Company in any Intellectual
Property. No product or service sold by the Company violates or infringes any
intellectual property right owned or held by any other person. To the knowledge
of the Company, in the case of commercially available "shrink-wrap" software
programs (such as Lotus 1-2-3), neither the Company nor any of its employees has
made or is using any unauthorized copies of any such software programs at any
Company location.
9
(i) Insurance. Section 3.1(i) of the Disclosure Schedule contains a
---------
true and complete list of all policies of casualty, liability, theft, fidelity,
life and other forms of insurance held by the Company. True and complete copies
of such policies have been delivered or made available for inspection and copy
by Parent. All insurance policies are in the name of the Company, outstanding
and in full force and effect, all premiums with respect to such policies are
currently paid and such policies will not be affected by, or terminated or lapse
by reason of, the transactions contemplated by this Agreement. The Company has
not received notice of cancellation or termination of any such policy, nor has
it been denied or had revoked or rescinded any policy of insurance, nor borrowed
against any such policies. No claim under any such policy is pending.
(j) Agreements, Etc. Section 3.1(j) of the Disclosure Schedule contains
---------------
a true and complete list of all written or oral contracts, agreements and other
instruments to which the Company is a party (i) relating to indebtedness for
money borrowed or capital leases, (ii) of duration of six months or more from
the date hereof and not cancelable without penalty on 30 days or less notice,
(iii) relating to commitments in excess of $10,000, (iv) relating to the
employment or compensation of any director, officer, employee, consultant or
other agent of the Company, (v) relating to the sale or other disposition of any
assets, properties or rights, (vi) relating to the lease or similar arrangement
of any machinery, equipment, motor vehicles, furniture, fixture or similar
property, (vii) between the Company and any shareholder of the Company or
affiliates of any shareholder of the Company, (viii) that restricts the
operation of the Company anywhere in the world or (ix) that is otherwise
material to the Company or entered into other than in the ordinary course of
business. The Company is not in default under any such agreement or instrument
where such default could, singly or in the aggregate with defaults under other
agreements or instruments, have a material adverse effect on the Company's
condition (financial or otherwise), assets, liabilities, operations, customer
contracts or other customer arrangements, management personnel, billings,
revenues, earnings or business (a "Company Adverse Effect"), and, to the
knowledge of the Company, all such agreements or instruments are in full force
and effect. The Company has furnished to, or made available for inspection and
copy by, Parent true and complete copies of all documents described in Section
3.1(j) of the Disclosure Schedule.
(k) Litigation, Etc. Except as set forth in Section 3.1(k) of the
---------------
Disclosure Schedule, there have not been for the past two years, nor are there,
any suits, actions, claims, investigations or legal or administrative or
arbitration proceedings in respect of the Company, pending or, to the knowledge
of the Company, threatened, whether at law or in equity, or before or by any
Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Except as set forth in
Section 3.1(k) of the Disclosure Schedule, there are no judgments, decrees,
injunctions or orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against the Company or any of its assets or
properties.
(l) Compliance; Governmental Authorizations. (i) The Company has
---------------------------------------
complied and is in compliance with all Federal, state, local and foreign laws,
ordinances, regulations, interpretations and orders (including those relating to
disposal of materials, environmental protection and occupational safety and
health) applicable to the Company, except where the failure, singly or in the
aggregate, to so be in compliance would not have a Company Adverse Effect. The
Company has all Federal, state, local and foreign governmental licenses and
permits necessary to conduct its business as presently being conducted, which
licenses and permits (and any exceptions thereto) are set forth in Section
3.1(l) of the Disclosure Schedule. Such licenses and permits are in full force
and effect, no violations are or have been recorded in respect of any thereof,
no proceeding is pending or, to the knowledge of the Company, threatened, to
revoke or limit any thereof, and the Company does not know of any basis for any
such proceeding.
10
(ii) There are no conditions relating to the Company or relating to
the Company's ownership, use or maintenance of any real property previously
owned or operated by the Company or any of its affiliates, and the Company does
not know or have reason to know of any such condition in respect of such real
property not related to the ownership, use or maintenance, that could lead to
any liability for violation of any Federal, state, county or local laws,
regulations, orders or judgments relating to pollution or protection of the
environment or any other applicable environmental, health or safety statutes,
ordinances, orders, rules, regulations or requirements. The Company has
received, handled, used, stored, treated, shipped and disposed of all hazardous
or toxic materials, substances and wastes (whether or not on its properties or
properties owned or operated by others) in material compliance with all
applicable environmental, health or safety statutes, ordinances, orders, rules,
regulations or requirements, except where the failure, singly or in the
aggregate, to be so in compliance would not have a Company Adverse Effect.
(m) Labor Relations; Employees. (i) Within the last five years, the
--------------------------
Company has not experienced any labor disputes with, or any work stoppages by, a
group of employees due to labor disagreements and, to the knowledge of the
Company, there is no such dispute or work stoppage threatened against the
Company. No employee of the Company is represented by any union or collective
bargaining agent and, to the knowledge of the Company, there has been no union
organizational effort in respect of any employees of the Company within the past
five years.
(ii) Section 3.1(m)(ii) of the Disclosure Schedule contains a list
of each pension, retirement, savings, deferred compensation, and profit-sharing
plan and each stock option, stock appreciation, stock purchase, performance
share, bonus or other incentive plan, severance plan, health, group insurance or
other welfare plan, or other similar plan and any "employee benefit plan" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), under which the Company has any current or future
obligation or liability or under which any employee or former employee (or
beneficiary of any employee or former employee) of the Company has or may have
any current or future right to benefits (the term "plan" shall include any
contract, agreement, policy or understanding, each such plan being hereinafter
referred to individually as a "Plan"). The Company has delivered to Parent true
and complete copies of (A) each Plan, (B) the summary plan description for each
Plan and (C) the latest annual report, if any, which has been filed with the IRS
for each Plan. Each Plan intended to be tax qualified under Sections 401(a) and
501(a) of the Internal Revenue Code of 1986 (the "Code") has been determined by
the IRS to be tax qualified under Sections 401(a) and 501(a) of the Code and,
since such determination, no amendment to or failure to amend any such Plan
adversely affects its tax qualified status. There has been no prohibited
transaction within the meaning of Section 4975 of the Code and Section 406 of
Title I of ERISA with respect to any Plan.
(iii) No Plan is subject to the provisions of Section 412 of the
Code or Part 3 of Subtitle B of Title I of ERISA. No Plan is subject to Title IV
of ERISA. During the past five years, neither the Company nor any business or
entity then controlling, controlled by, or under common control with the Company
contributed to or was obliged to contribute to an employee pension plan that was
subject to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or arbitrations (other
than routine claims for benefits) pending, or, to the knowledge of the Company,
threatened, with respect to any Plan or the assets of any Plan, and the Company
has no knowledge of any facts which could give rise to any such actions, claims,
lawsuits or arbitrations (other than routine claims for benefits). The Company
has satisfied all funding, compliance and reporting requirements for all Plans.
With respect to each Plan, the Company has paid all contributions (including
employee salary reduction contributions) and all insurance premiums that have
11
become due and any such expense accrued but not yet due has been properly
reflected in the financial information in Section 3.1(e) of the Disclosure
Schedule.
(v) Except as described in Section 3.1(m)(ii) of the Disclosure
Schedule, no Plan provides or is required to provide, now or in the future,
health, medical, dental, accident, disability, death or survivor benefits to or
in respect of any person beyond termination of employment, except to the extent
required under any state insurance law or under Part 6 of Subtitle B of Title I
of ERISA and under Section 4980(B) of the Code. No Plan covers any individual
other than an employee of the Company, other than dependents of employees under
health and child care policies listed in Section 3.1(m)(ii) of the Disclosure
Schedule and delivered to Parent.
(vi) Except as described in Section 3.1(m)(ii) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (A) entitle any employee of the Company to severance pay or termination
benefits for which Parent or any of its affiliates may become liable, (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee for which Parent or any
of its affiliates may become liable or (C) obligate Parent or any of its
affiliates to pay or otherwise be liable for any compensation, vacation days,
pension contribution or other benefits to any employee, consultant or agent of
the Company for periods before the Closing Date or for personnel whom Parent
does not actually employ.
(vii) The Company has made no representations or warranties
(whether written or oral, express or implied) contractually or otherwise to any
client or customer of the Company that the Company's employees rendering
services to such client or customer are not "leased employees" (within the
meaning of Section 414(n) of the Code) or that such employees would not be
required to participate under any pension benefit plan (within the meaning of
Section 3(2) of ERISA) (a "Pension Benefit Plan") of such client or customer of
the Company relating either to (A) providing benefits to employees of the
Company under a Pension Benefit Plan of the Company or (B) making contributions
to or reimbursing such client or customer for any contributions made to a
Pension Benefit Plan of such client or customer on behalf of employees of the
Company.
(n) Accounts Receivable. Section 3.1(n) of the Disclosure Schedule
-------------------
contains a true aged list of unpaid accounts and notes receivable owing to the
Company as of July 31, 1996 (which is the most recent date for which such
information is available), all of which, to the Company's knowledge and except
as set forth in Section 3.1(n) of the Disclosure Schedule, are collectible in
the ordinary course of business.
(o) Customers. Section 3.1(o) of the Disclosure Schedule contains (i) a
---------
true and complete list of the customers of the Company for each of the years
ended December 31, 1993, 1994 and 1995 and the period beginning January 1, 1996
and ended June 30, 1996 and, as of the date hereof, any additions or deletions
of customers from June 30, 1996 to the date of this Agreement, (ii) a
description of the revenues for each of the years ended December 31, 1993, 1994
and 1995 and each month commencing January 1, 1996 and ended June 30, 1996 under
contracts with each of the customers of the Company listed on Section 3.1(o) of
the Disclosure Schedule, (iii) a true and complete list of all contracts as of
June 30, 1996 pursuant to which the Company provides goods or services to its
customers (the "Client Contracts") and (iv) a true and correct description of
(A) the terms and conditions of each oral Client Contract, (B) to the knowledge
of the Company, any and all disputes or defaults arising under or with respect
to the Client Contracts in connection with which a client has threatened, or is
expected to, terminate its contract with the Company or claim for damages, and
(C) all loans or advances made by the Company to or on behalf of its customers,
which description includes the date of such loan or advance and the principal
balance outstanding as of the date of this Agreement under each such
12
loan or advance. The Client Contracts are valid and enforceable in accordance
with their respective terms with respect to the Company, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles. To the Company's knowledge and except as set forth in
Section 3.1(o) of the Disclosure Schedule, no customer of the Company has
threatened to terminate, fail to renew or adversely modify any relationship with
the Company.
(p) Accounts Payable. Section 3.1(p) of the Disclosure Schedule
----------------
contains a true and complete list of all accounts payable of the Company as of
July 31, 1996 (which is the most recent date for which such information is
available).
(q) Related Party Transactions. Except as set forth in Section 3.1(q)
--------------------------
of the Disclosure Schedule, no current or former partner, director, officer,
employee or shareholder of the Company or any associate or affiliate (as defined
in the rules promulgated under the Exchange Act) thereof, or any relative with a
relationship of not more remote than first cousin of any of the foregoing, is
presently, or during the 12-month period ending on the date hereof has been, (i)
a party to any transaction with the Company (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
payments to, any such director, officer, employee or shareholder or such
associate) or (ii) to the knowledge of the Company, the direct or indirect owner
of an interest in any corporation, firm, association or business organization
which is a present (or potential) competitor, supplier or customer of the
Company, nor does any such person receive income from any source other than the
Company which relates to the Company's business or should properly accrue to the
Company.
(r) Billing and Collection Practices. (i) The current practices and
--------------------------------
procedures of the Company with respect to (A) billing on behalf of customers,
(B) receiving and processing Medicare and Medicaid payments due to customers,
(C) holding and transfer of such payments and (D) the method of determining and
collecting the fees received by the Company for services provided by providers
and physicians participating in the Medicare or Medicaid programs are not in
violation of the restriction on assignment as set forth in 42 U.S.C. Section
1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C. Section 1396a(a)(32), and
the regulations promulgated thereunder or similar provisions of any state
Medicaid program, except where such violations, singly or in the aggregate,
would not have a Company Adverse Effect.
(ii) The Company is not engaged in any activity, whether alone or in
concert with one or more of its clients, which would constitute a violation of
any Federal laws or the laws of any state (including, without limitation, (A)
Federal antifraud and abuse or similar laws pertaining to Medicare, Medicaid, or
any other Federal health or insurance program, (B) state laws pertaining to
Medicaid or any other state health or insurance program, (C) state or Federal
laws pertaining to billings to insurance companies, health maintenance
organizations, and other managed care plans or to insurance fraud, and (D)
Federal and state laws relating to collection agencies and the performance of
collection services) prohibiting fraudulent, abusive or unlawful practices
connected in any way with the provision of health care services, the
determination of eligibility for health care services, the billing for such
services provided to a beneficiary of any state, Federal or private health or
insurance program or credit collection services, except where such violations,
singly or in the aggregate, would not have a Company Adverse Effect.. Without
limiting the generality of the foregoing, the Company has not, directly or
indirectly, paid, offered to pay or agreed to pay, or solicited or received, any
fee, commission, sum of money, property or other remuneration to or from any
person which the Company knows or has reason to believe to have been illegal
under 42 U.S.C. Section 1320a-7b(b) or any similar state law.
13
(iii) Except as set forth in Section 3.1(r) of the Disclosure Schedule,
the Company does not currently use, and has not in the past established or used,
trust accounts in connection with its business.
(s) Tax Matters. The Company is a "small business corporation" and has
-----------
maintained a valid election to be an "S" corporation under Subchapter S of the
Code, and the equivalent provisions of all applicable state income tax statutes
since January 1, 1991. Except as set forth in Section 3.1(s) of the Disclosure
Schedule, all Federal, state, local and foreign tax returns and tax reports for
periods ending on or prior to the Closing Date by the Company have been or will
be filed, or a valid request for extension has been or will be filed with
respect thereto, on a timely basis (including any extensions) with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed. All such returns and reports are and will be
true, correct and complete. Except as set forth in Section 3.1(s) of the
Disclosure Schedule, all Federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise, employment and other taxes
(including interest, penalties and withholdings of tax) due from and payable by
the Company on or prior to the Closing Date have been fully paid on a timely
basis. Except as set forth in Section 3.1(s) of the Disclosure Schedule, the
Company is not currently the beneficiary of any extension of time within which
to file any tax return. To the Company's knowledge, no claim has ever been made
by an authority in a jurisdiction where the Company does not file tax returns
that it is or may be subject to taxation by that jurisdiction, and the Company
has not received any notice, or request for information from any such authority.
Except as set forth in Section 3.1(s) of the Disclosure Schedule, no issues have
been raised with the Company by the Internal Revenue Service (the "IRS") or any
other taxing authority in connection with any tax return or report filed by the
Company and there are no issues which, either individually or in the aggregate,
could result in any liability for tax obligations of the Company relating to
periods ending on or before December 31, 1995 in excess of the accrued liability
for taxes shown on the financial statements contained in Section 3.1(e)(i) of
the Disclosure Schedule. No waivers of statutes of limitations have been given
or requested with respect to the Company. Except as set forth in Section 3.1(s)
of the Disclosure Schedule, no differences exist between the amounts of the book
basis and the tax basis of assets that are not accounted for by an accrual on
the books of the Company for Federal income tax purposes. Except as set forth in
Section 3.1(s) of the Disclosure Schedule, the Company is not required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company, and
the IRS has proposed no adjustment or change in accounting method. The Company
is not a party to any agreement, contract or arrangement that would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. All transactions or
methods of accounting that could give rise to an understatement of Federal
income tax (within the meaning of Section 6661 of the Code for tax returns filed
on or before December 31, 1990, and within the meaning of Section 6662 of the
Code for tax returns filed after December 31, 1990) have been adequately
disclosed on the tax returns in accordance with Section 6661(b)(2)(B) of the
Code for tax returns filed on or prior to December 31, 1990, and in accordance
with Section 6662(d)(2)(B) of the Code for tax returns filed after December 31,
1990. The Company is not and has not been a United States real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(ii) of the Code. The Company has complied
(and until the Closing will comply) with all applicable laws relating to the
payment and withholding of taxes (including withholding and reporting
requirements under Section 1441 through 1464, 3401 through 3406, 6041 and 6049
of the Code and similar provisions under any other laws) and, within the time
and in the manner prescribed by law, has withheld from wages, fees and other
payments and paid over to the proper governmental or regulatory authorities all
amounts required.
(t) Disclosure. To the Company's knowledge, there have been no events,
----------
transactions or information relating to the Company which, singly or in the
aggregate, could
14
reasonably be expected to have a Company Adverse Effect, other than general
events prevailing throughout the medical billing and accounts receivable
management services industry which affect firms that directly compete in such
industry. No representation or warranty of the Company contained in this
Agreement, as modified by the Disclosure Schedule, and no statement contained in
any certificate, schedule, annex, list or other writing furnished to Parent,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statement contained herein or therein, in light of
the circumstances under which they were made, not misleading.
(u) Bank Accounts; Powers-of-Attorney. (i) Section 3.1(u) of the
---------------------------------
Disclosure Schedule contains a true and complete list of (A) all bank accounts
and safe deposit boxes of the Company and all persons who are signatories
thereunder or who have access thereto and (B) the names of all persons holding
general or special powers-of-attorney from the Company and a summary of the
terms thereof.
(ii) Except as set forth in Section 3.1(u) of the Disclosure Schedule,
the Company does not and has not maintained any escrow or custody accounts with
respect to customer funds.
(v) Accounting Matters. To the knowledge of the Company, neither the
------------------
Company nor any of its affiliates has taken or agreed to take any action that,
without giving effect to any action taken or agreed to be taken by Parent or any
of its affiliates, would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests."
(w) Brokers. No agent, broker, investment banker, person or firm acting
-------
on behalf of the Company or under the authority of the Company is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby.
(x) Accredited Investor. Each stockholder of the Company (i) is an
-------------------
"accredited investor" as such term is defined in Rule 501 under the Securities
Act or (ii) has appointed Peter D. Cooper as his or her purchaser representative
in connection with the Merger.
SECTION 3.2. Representations and Warranties by Merger Subsidiary and
-------------------------------------------------------
Parent. Merger Subsidiary and Parent jointly and severally represent and
- ------
warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Merger Subsidiary and
--------------------------------
Parent (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and (ii) has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each of Parent, its subsidiaries
and Merger Subsidiary is duly qualified to do business and is in good standing
in each jurisdiction in which such qualification is necessary because of the
property owned, leased or operated by it or because of the nature of its
business as now being conducted, except where the failure, singly or in the
aggregate, to be so qualified or in good standing could not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, billings, revenues, earnings or
business of Parent and its subsidiaries taken as a whole (a "Parent Adverse
Effect"). Parent has provided the Company with complete and correct copies of
its and Merger Subsidiary's Certificate of Incorporation and By-Laws.
15
(b) Authority; Binding Agreements. The execution and delivery of this
-----------------------------
Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action (including any action by the shareholders thereof) on the part
of Parent and Merger Subsidiary. Each of Parent and Merger Subsidiary has all
requisite corporate power and authority to enter into this Agreement and to
consummate the Merger and the other transactions contemplated hereby and each of
Parent and Merger Subsidiary has duly executed and delivered this Agreement.
This Agreement constitutes a valid and binding obligation of each of Parent and
Merger Subsidiary enforceable against such party in accordance with its terms.
(c) Conflicts; Consents. The execution and delivery of this Agreement,
-------------------
the consummation of the Merger and the other transactions contemplated hereby
and compliance by Parent and Merger Subsidiary with the other provisions hereof
do not and will not (i) conflict with or result in a breach of the charter, by-
laws or other constitutive documents of Parent or Merger Subsidiary, (ii)
conflict with or result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the provisions of any note, bond,
lease, mortgage, indenture, license, franchise, permit, agreement or other
instrument or obligation to which Parent or Merger Subsidiary is a party, or by
which Parent or Merger Subsidiary or Parent's or Merger Subsidiary's properties
or assets, may be bound or affected, except for such conflict, breach or default
as to which requisite waivers or consents shall be obtained before the Closing,
or (iii) violate any law, statute, rule or regulation or order, writ, injunction
or decree applicable to Parent or Merger Subsidiary or Parent's or Merger
Subsidiary's properties or assets. No consent or approval by, or any
notification of or filing with, any person is required in connection with the
execution, delivery and performance by Parent or Merger Subsidiary of this
Agreement or the consummation of the Merger and the other transactions expressly
contemplated hereby, except for (i) the filing with the SEC such reports under
Sections 13 and 16 of the Exchange Act, as may be required in connection with
this Agreement, the Merger and the other transactions contemplated hereby, (ii)
such filings as may be required under state securities or "blue sky" laws in
connection with the issuance of the Parent Common Stock in connection with the
Merger, and (iii) the filing of a copy of the New York Certificate of Merger
with the New York Secretary of State and the Delaware Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business.
(d) Capitalization. The authorized capital stock of Parent consists of
--------------
100,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock. At the close of business on August 29, 1996, (i) 7,221,628 shares of
Parent Common Stock were issued and outstanding, (ii) no shares of Parent Common
Stock were held by Parent in its treasury, (iii) 195,000 shares of Parent Common
Stock were reserved for issuance upon exercise of outstanding employee stock
options to purchase shares of Parent Common Stock and (iv) 774,750 shares of
Parent Common Stock were reserved for issuance upon exercise of employee stock
options that are not outstanding but may be issued in the future under Parent's
1996 Stock Option Plan. Except as set forth above, at the time of execution of
this Agreement, no shares of capital stock or other voting securities of Parent
are issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of Parent are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness or securities of Parent having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of Parent may vote. Except as set
forth above, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Parent or any of its
subsidiaries is a party or by which any of them is bound obligating Parent or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Parent
16
or of any of its subsidiaries or obligating Parent or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding commitments, agreements, arrangements or undertakings of any kind
obligating Parent or any of its subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock or other voting securities of Parent or any
of its subsidiaries. As of the date of this Agreement, the authorized capital
stock of Merger Subsidiary consists of 1,000 shares of common stock, par value
$.01 per share, all of which have been validly issued, are fully paid and
nonassessable and are owned by Parent free and clear of any liens.
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities.
---------------------------------------------------------------
Parent has filed all required reports, forms and other documents with the SEC
since the filing of Parent's Registration Statement on Form S-1 for the initial
public offering of Parent Common Stock on December 21, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
state therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments not material in scope or amount). Except as
set forth in the Parent Filed SEC Documents (defined in Section 3.2(f)), neither
Parent nor any of its subsidiaries has any material liabilities or obligations
required by generally accepted accounting principles to be recognized or
disclosed on a consolidated balance sheet of Parent and its consolidated
subsidiaries or in the notes thereto and which, singly or in the aggregate,
could reasonably be expected to have a Parent Adverse Effect.
(f) Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Parent SEC Documents filed and publicly available prior to the date of this
Agreement (the "Parent Filed SEC Documents"), since the date of the most recent
financial statements contained in the Parent Filed SEC Documents, there has not
been any material adverse change in the condition (financial or otherwise),
assets, liabilities, operations, customer contracts or other customer
arrangements, management personnel, billings, revenues, earnings or business of
Parent and its subsidiaries taken as a whole.
(g) Litigation, Etc. Except as disclosed in the Parent Filed SEC
---------------
Documents, there are no suits, actions, claims, investigations or legal or
administrative or arbitration proceedings in respect of Parent or any of its
subsidiaries, pending or, to the knowledge of Parent, threatened, whether at law
or in equity, or before or by any Federal, foreign, state or municipal or other
governmental department, commission, board, bureau, agency or instrumentality
that, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Parent and its subsidiaries taken as a whole.
(h) Compliance; Governmental Authorizations. Except as disclosed in the
---------------------------------------
Parent Filed SEC Documents, Parent and its subsidiaries have complied and are in
material compliance with all Federal, state, local and foreign laws, ordinances,
regulations, interpretations and order (including those relating to disposal of
materials, environmental protection and
17
occupational safety and health) applicable to Parent and its subsidiaries,
except where the failure, singly or in the aggregate, to be so in compliance
would not have a Parent Adverse Effect. Parent and its subsidiaries have all
Federal, state, local and foreign governmental licenses and permits necessary to
conduct their businesses as presently being conducted. Such licenses and permits
are in full force and effect, no violations are or have been recorded in respect
of any thereof, no proceeding is pending, or, to the knowledge of Parent,
threatened, to revoke or limit any thereof, and Parent does not know of any
basis for any such proceeding.
(i) Accounting Matters. To the knowledge of Parent, neither Parent nor
------------------
any of its affiliates has taken or agreed to take any action that, without
giving effect to any action taken or agreed to be taken by the Company or any of
its affiliates, would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests."
(j) Brokers. Except for Williams Financial, no agent, broker,
-------
investment banker, person or firm acting on behalf of Parent or Merger
Subsidiary or under the authority of Parent or Merger Subsidiary is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby.
(k) Billing and Collection Practices. (i) The current practices and
--------------------------------
procedures of Parent and its subsidiaries with respect to (A) billing on behalf
of customers, (B) receiving and processing Medicare and Medicaid payments due to
customers, (C) holding and transfer of such payments and (D) the method of
determining and collecting the fees received by Parent and its subsidiaries for
services provided by providers and physicians participating in the Medicare or
Medicaid programs are not in violation of the restriction on assignment as set
forth in 42 U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C.
Section 1396a(a)(32), and the regulations promulgated thereunder or similar
provisions of any state Medicaid program, except where such violations, singly
or in the aggregate, would not have a Parent Adverse Effect.
(ii) Parent and its subsidiaries are not engaged in any activity,
whether alone or in concert with one or more of its clients, which would
constitute a violation of any Federal laws or the laws of any state (including,
without limitation, (A) Federal antifraud and abuse or similar laws pertaining
to Medicare, Medicaid, or any other Federal health or insurance program, (B)
state laws pertaining to Medicaid or any other state health or insurance
program, (C) state or Federal laws pertaining to billings to insurance
companies, health maintenance organizations, and other managed care plans or to
insurance fraud, and (D) Federal and state laws relating to collection agencies
and the performance of collection services) prohibiting fraudulent, abusive or
unlawful practices connected in any way with the provision of health care
services, the determination of eligibility for health care services, the billing
for such services provided to a beneficiary of any state, Federal or private
health or insurance program or credit collection services, except where such
violations, singly or in the aggregate, would not have a Parent Adverse Effect.
Without limiting the generality of the foregoing, Parent and its subsidiaries
have not, directly or indirectly, paid, offered to pay or agreed to pay, or
solicited or received, any fee, commission, sum of money, property or other
remuneration to or from any person which the Company knows or has reason to
believe to have been illegal under 42 U.S.C. Section 1320a-7b(b) or any similar
state law.
(l) Insurance. Parent and its subsidiaries maintain casualty,
---------
liability, theft, fidelity, life and other forms of insurance which are
customary for businesses in Parent's industry. All insurance policies are in the
name of the Parent, outstanding and in full force and effect, all premiums with
respect to such policies are currently paid and such policies will not be
affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement. The Parent has not received notice of cancellation or
termination of any such policy,
18
nor has it been denied or had revoked or rescinded any policy of insurance, nor
borrowed against any such policies. No claim under any such policy is pending.
(m) Labor Relations. Within the last five years, Parent and its
---------------
subsidiaries have not experienced any labor disputes with, or any work stoppages
by, a group of employees due to labor disagreements and, to the knowledge of
Parent, there is no such dispute or work stoppage threatened against Parent or
its subsidiaries. No employee of Parent or its subsidiaries is represented by
any union or collective bargaining agent and, to the knowledge of Parent, there
has been no union organizational effort in respect of any employees of Parent or
its subsidiaries within the past five years.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
SECTION 4.1. Expenses. Each of Parent and Merger Subsidiary shall pay
--------
its own fees, costs and expenses incurred in connection with this Agreement and
the Merger and the other transactions contemplated by this Agreement, including,
without limitation, the fees, costs and expenses of its financial advisors,
accountants and counsel. The Company's fees, costs and expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated by this Agreement, including, without limitation, the reasonable
fees, costs and expenses of its financial advisors, accountants and counsel, up
to a maximum of $125,000, shall be paid by the Company. Parent shall be
indemnified by the Company's stockholders under the Indemnification Agreement
attached hereto as Exhibit B for any such fees, costs and expenses of the
Company which exceed the maximum amount set forth in the preceding sentence.
Notwithstanding the foregoing, Parent shall pay any fees and expenses due
Williams Financial as a result of the consummation of the Merger.
SECTION 4.2. Affiliates. The Company shall list in Section 4.2 of the
----------
Disclosure Schedule all persons who are "affiliates" of the Company for purposes
of the SEC's Accounting Series Releases concerning "pooling of interests"
treatment for business combinations, which list shall include all of the
Company's directors, executive officers and stockholders.
SECTION 4.3. Agreements of Parent Affiliates. Prior to the Effective
-------------------------------
Time of the Merger, Parent will use its reasonable best efforts to obtain the
execution of agreements with respect to the sale of Parent Common Stock with
each person who is an "affiliate" of Parent for purposes of compliance with
pooling restrictions.
SECTION 4.4. Nasdaq. Parent shall use its reasonable best efforts to
------
have the Parent Common Stock to be issued in the Merger approved for listing on
the National Association of Securities Dealers, Inc. Automated Quotations System
(the "Nasdaq National Market"), subject to official notice of issuance.
SECTION 4.5. Pooling. To the knowledge of any such person, neither
-------
Parent, nor Merger Subsidiary, nor the Company shall take or cause to be taken
any action, whether before or after the Effective Time of the Merger, which
would disqualify the Merger as a "pooling of interests" for accounting purposes.
SECTION 4.6. Public Announcements. Parent and Merger Subsidiary, on
--------------------
the one hand, and the Company, on the other hand, will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to
19
such consultation, except as may be required by applicable law, court process or
by obligations pursuant to any listing agreement with any national securities
exchange or the Nasdaq National Market.
SECTION 4.7. Confidentiality. (a) Parent, Merger Subsidiary and the
---------------
Company each agree that all financial or other information about Parent, Merger
Subsidiary or the Company, or other information of a confidential or proprietary
nature, disclosed to the other at any time in connection with the proposed
transaction shall be kept confidential by the party receiving such information
and shall not be disclosed to any person or used by the receiving party (other
than to its agents or employees or in connection with the transactions
contemplated by this Agreement) except: (i) with the prior written consent of
the disclosing party; (ii) as may be required by applicable law, regulation,
court process or by obligations pursuant to any listing agreement with any
national securities exchange (including the Nasdaq National Market); (iii) such
information which may have been acquired or obtained by such party (other than
through disclosure by the other party in connection with the transaction
contemplated by this Agreement); or (iv) such information which is or becomes
generally available to the public other than as a result of a violation of this
provision.
(b) In the event of a breach or threatened breach by any party of the
provisions of this Section, the non-breaching party shall be entitled to an
injunction restraining such party from such breach. Nothing contained in this
paragraph (b) or elsewhere in this Agreement shall be construed as prohibiting
the non-breaching party from pursuing any other remedies available at law or
equity for such breach or threatened breach of this Agreement nor limiting the
amount of damages recoverable in the event of a breach or threatened breach by
any party of the provisions of this Section.
SECTION 4.8. Parent Agreement. (a) Parent agrees to indemnify and
----------------
hold harmless any and all guarantors listed in Section 4.8(a) of the Disclosure
Schedule from and against any and all liabilities, judgments, claims,
settlements, losses, damages, fees, liens, taxes, penalties, obligations, costs
and expenses incurred or suffered (directly or indirectly) by any such person
(including, without limitation, reasonable costs of investigation and reasonable
attorney's fees and expenses) arising from, by reason of or in connection with
any failure by the Surviving Corporation to pay, discharge or otherwise satisfy,
as and when due, any debt, note or other obligation of the Company outstanding
at the Effective Date and listed in Section 4.8(a) of the Disclosure Schedule.
Any claim under this indemnity shall be made in accordance with the provisions
of Section 2(c) of the Indemnification Agreement in substantially the form of
Exhibit B, with such guarantor being deemed a "Stockholder Indemnified Party"
for such purpose; provided that such indemnification shall not be subject to or
count toward the PSS Basket Amount set forth in Section 2(d)(v) of the
Indemnification Agreement.
(b) Parent agrees to pay, or cause to be paid, on the Closing Date the
obligations of the Company listed in Section 4.8(b) of the Disclosure Schedule;
provided that any indemnification obligation arising out of a breach by PSS of
its obligations set forth in this Section 4.8(b) shall not be subject to or
count toward the PSS Basket Amount set forth in Section 2(d)(v) of the
Indemnification Agreement.
ARTICLE V
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
SECTION 5.1. Documents to be Delivered at Closing. The obligations of
------------------------------------
Parent, Merger Subsidiary and the Company to effect the Merger are subject to
the delivery by each party thereto of the following documents:
20
(a) Representations and Warranties. Parent shall have received a
------------------------------
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to the effect that the
representations and warranties of the Company set forth in the Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of the Company set forth in this Agreement that
are not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date.
(b) Performance of Obligations of the Company. Parent shall have
-----------------------------------------
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to the effect that the
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
(c) Consents, Amendments and Terminations. Parent shall have received
-------------------------------------
duly executed and delivered copies of all requisite approvals under New York Law
to the Merger by the Stockholders of the Company and such other waivers,
consents, terminations and approvals contemplated by Section 3.1(d) and Section
3.1(d) of the Disclosure Schedule, all in form and substance reasonably
satisfactory to Parent. Parent acknowledges that as of the Closing it may not
have received al of the waivers, consents, terminations or approvals
contemplated by Section 3.1(d) of the Disclosure Schedule.
(d) Opinion of Counsel. Parent shall have received the opinion dated
------------------
the Closing Date of Tashlik, Kreutzer & Goldwyn P.C., counsel to the Company and
the Company's shareholders, in the form of Exhibit C.
(e) Indemnification Agreement. The Indemnification Agreement, in the
-------------------------
form of Exhibit B, shall have been duly executed and delivered by the parties
hereto.
(f) Employment Agreement. Peter D. Cooper and the Company shall have
--------------------
executed and delivered to Parent an Employment Agreement, in the form of Exhibit
D.
(g) Non-Competition Agreement. Each of the stockholders of the Company
-------------------------
(other than Peter D. Cooper, whose Employment Agreement contains a non-
competition covenant) shall have executed and delivered to Parent a Non-
Competition Agreement, in the form of Exhibit E.
(h) Investment and Affiliate Letter; Affiliate Agreement. Each person
----------------------------------------------------
who is a stockholder of the Company shall have executed and delivered to Parent
an Investment and Affiliate Letter, in the form of Exhibit F. Each person who is
listed as an affiliate of the Company in Section 4.3 of the Disclosure Schedule
who is not also a stockholder of the Company shall have executed and delivered
to Parent an Affiliate Agreement, in the form of Exhibit G.
(i) Resignation Letters. Each of the directors of the Company (other
-------------------
than Peter D. Cooper) shall have tendered to Parent their respective
resignations from such positions, effective immediately following the Closing
Date.
(j) Representations and Warranties. The Company shall have received a
------------------------------
certificate signed on behalf of each of Parent and Merger Subsidiary by the
chief executive officer and the chief financial officer of such entity to the
effect that the representations and warranties of Parent and Merger Subsidiary
set forth in this Agreement that are qualified as to materiality shall be true
and correct, and the representations and warranties of Parent and Merger
Subsidiary set forth in this Agreement that are not so qualified shall be true
and correct in all
21
material respects, in each case as of the date of this Agreement and as of the
Closing Date, as though made on and as of the Closing Date.
(k) Registration Rights Agreement. Parent shall have entered into the
-----------------------------
Registration Rights Agreement with the stockholders of the Company, in the form
of Exhibit H.
(l) Opinion. The Company shall have received an opinion dated the
-------
Closing Date from Howard, Darby & Levin, counsel to Parent, in the form of
Exhibit I.
(m) Other Documents. Parent, Merger Subsidiary and the Company shall
---------------
have received such other documents, certificates or instruments as they each may
reasonably request.
ARTICLE VI
MISCELLANEOUS
-------------
SECTION 6.1. Entire Agreement. This Agreement and the schedules and
----------------
exhibits hereto contain the entire agreement among the parties with respect to
the transactions contemplated by this Agreement and supersede all prior
agreements or understandings among the parties.
SECTION 6.2. Descriptive Headings; Certain Interpretations. (a)
---------------------------------------------
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or other
statement to such party's knowledge, such party will be deemed to have made due
inquiry into the subject matter of such representation, warranty or other
statement.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
SECTION 6.3. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing and sufficient if delivered
personally or sent by telecopy (with confirmation of receipt) or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to Parent or Merger Subsidiary, to:
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
P.O. Box 36
Mt. Joy, Pennsylvania 17552
Telecopy: 717-653-0567
22
Attention: Peter W. Gilson
Hamilton F. Potter III
David S. Geller
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Telecopy: 212-841-1010
Attention: Scott F. Smith, Esq.
If to the Company to:
EE&C Financial Services, Inc.
60 Park Place
Newark, New Jersey 07102
Telecopy: 201-624-8240
Attention: Peter D. Cooper
with a copy to:
Tashlik, Kreutzer & Goldwyn P.C.
833 Northern Boulevard
Great Neck, New York 11021
Telecopy: 516-829-6509
Attention: Martin M. Goldwyn, Esq.
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
SECTION 6.4. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
SECTION 6.5. Survival. All representations and warranties, agreements
--------
and covenants contained herein or in any document delivered pursuant hereto or
in connection herewith (unless otherwise expressly provided herein or therein)
shall survive the Closing and shall remain in full force and effect until the
first anniversary of the Closing Date (the "Expiration Date"), except the
agreement contained in Section 4.8 shall survive until the satisfaction by the
Surviving Corporation or Parent of all obligations of the Company referred to
therein.
SECTION 6.6. Benefits of Agreement. All of the terms and provisions of
---------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement is for the
sole benefit of the parties hereto and not for the benefit of any third party,
except for the provisions of Article II and Section 4.8.
23
SECTION 6.7. Amendments and Waivers. This Agreement may be amended by
----------------------
the parties at any time before or after any required approval of the
transactions contemplated by this Agreement by the shareholders of the Company;
provided, however, that, after any such approval, there shall not be made any
amendment that by law requires further approval by such shareholders without the
further approval of such shareholders. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto.
SECTION 6.8. Assignment. This Agreement and the rights and
----------
obligations hereunder shall not be assignable or transferable by any party
hereto without the prior written consent of the other parties hereto. Any
instrument purporting to make such assignment shall be void.
SECTION 6.9. Enforceability. It is the desire and intent of the
--------------
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
24
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/ Peter M. Gilson By: /s/ Hamilton F. Potter, III
----------------------------- ------------------------------
Name: Peter M. Gilson Name: Hamilton F. Potter, III
Title: President Title: Executive Vice President
Attest PSS EE&C FINANCIAL SERVICES, INC.
By: /s/ Peter M. Gilson By: /s/ Hamilton F. Potter, III
----------------------------- ------------------------------
Name: Peter M. Gilson Name: Hamilton F. Potter, III
Title: President Title: Executive Vice President
Attest EE&C FINANCIAL SERVICES, INC.
By: /s/ William Hecht By: /s/ Peter D. Cooper
----------------------------- ------------------------------
Name: William Hecht Name: Peter D. Cooper
Title: Secretary Title: President
25