[Execution Copy]
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ASSET PURCHASE AGREEMENT
AMONG
ALM, INC.,
THE SHAREHOLDERS OF ALM, INC.,
PSS ALM, INC.
AND
PHYSICIAN SUPPORT SYSTEMS, INC.
DATED: MAY 17, 1996
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TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF ASSETS
Page
1.1. Purchase and Sale............................................................................. 1
1.2. Purchaser Not Successor to the Seller; Excluded Liabilities................................... 2
1.3. Purchase Price................................................................................ 3
1.4. Closing....................................................................................... 4
1.5. Purchase Price Adjustment..................................................................... 4
1.6. Instruments of Conveyance and Transfer........................................................ 5
1.7. Post-Closing Assurances....................................................................... 5
1.8. Assignment of Contracts, Rights............................................................... 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties by Seller and Shareholders..................................... 6
(a) Organization, Standing and Power..................................................... 6
(b) Authority; Binding Agreements........................................................ 6
(c) Capitalization; Equity Interests..................................................... 7
(d) Conflicts; Consents.................................................................. 7
(e) Financial Information................................................................ 7
(f) Absence of Changes................................................................... 8
(g) Assets, Property and Related Matters; Real Property................................... 9
(h) Patents, Trademarks and Similar Rights............................................... 10
(i) Insurance............................................................................ 10
(j) Agreements, Etc...................................................................... 11
(k) Litigation, Etc...................................................................... 11
(l) Compliance; Governmental Authorizations.............................................. 11
(m) Labor Relations; Employees........................................................... 12
(n) Accounts Receivable.................................................................. 13
(o) Customers............................................................................ 13
(p) Accounts Payable..................................................................... 14
(q) Related Party Transactions........................................................... 14
(r) Billing and Collection Practices..................................................... 14
(s) Taxes................................................................................ 15
(t) Disclosure........................................................................... 15
(u) Brokers.............................................................................. 15
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Page
2.2. Representations and Warranties by Purchaser and PSS........................................... 15
(a) Organization, Standing and Power..................................................... 15
(b) Authority; Binding Agreements........................................................ 16
(c) Conflicts; Consents.................................................................. 16
(d) Capitalization of PSS................................................................ 16
(e) PSS Commission Reports............................................................... 17
(f) Brokers.............................................................................. 17
ARTICLE III
ADDITIONAL AGREEMENTS
3.1. Expenses; Sales Taxes......................................................................... 17
3.2. Conduct of Business........................................................................... 17
3.3. Further Assurances............................................................................ 18
3.4. No Shopping................................................................................... 18
3.5. Access and Information........................................................................ 18
3.6. Bulk Sales.................................................................................... 19
3.7. Non-Disclosure................................................................................ 19
3.8. Confidentiality; Non-Competition.............................................................. 19
3.9. Use of Name................................................................................... 20
3.10. Maintenance of Vacation Policy................................................................ 20
3.11. Employee Bonus Policy......................................................................... 20
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions of Obligations of the Purchaser and PSS............................................ 21
(a) Authorization........................................................................ 21
(b) Representations and Warranties....................................................... 21
(c) Consents, Amendments and Terminations................................................ 21
(d) Bill of Sale; Assignment............................................................. 21
(e) Financial Results.................................................................... 21
(f) Customers; Customer Contracts........................................................ 21
(g) Certificates......................................................................... 22
(h) Opinion of Counsel................................................................... 22
(i) Financial Statements................................................................. 22
(j) Due Diligence........................................................................ 22
(k) Financing............................................................................ 22
(l) Employment Agreements................................................................ 22
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Page
(m) Investment Letter.................................................................... 22
(n) Lease................................................................................ 22
(o) St. Joseph Customer Contract......................................................... 22
(p) Other Documents...................................................................... 23
4.2. Conditions of Obligations of the Seller and Shareholders...................................... 23
(a) Authorization........................................................................ 23
(b) Representations and Warranties....................................................... 23
(c) Assignment........................................................................... 23
(d) Employment Agreements................................................................ 23
(e) Certificate.......................................................................... 23
(f) Opinion of Counsel................................................................... 23
(g) Purchase Price, Noncompete Payment and Transferred Common
Stock.............................................................................. 23
(h) Lease................................................................................ 23
(i) St. Joseph Customer Contract......................................................... 23
(j) Other Documents...................................................................... 24
ARTICLE V
INDEMNITY
5.1. Indemnification............................................................................... 24
5.2. Limitations................................................................................... 25
5.3. No Election................................................................................... 26
ARTICLE VI
MISCELLANEOUS
6.1. Entire Agreement.............................................................................. 26
6.2. Termination................................................................................... 26
6.3. Descriptive Headings; Certain Interpretations................................................. 26
6.4. Notices....................................................................................... 27
6.5. Counterparts.................................................................................. 28
6.6. Survival...................................................................................... 28
6.7. Benefits of Agreement......................................................................... 28
6.8. Amendments and Waivers........................................................................ 28
6.9. Assignment.................................................................................... 28
6.10. Enforceability................................................................................ 29
6.11. GOVERNING LAW................................................................................. 29
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Schedules
1.1(a)(i) Intellectual Property
1.1(a)(iv) Computers, Equipment, etc.
1.1(a)(ix) Acquired Agreements
1.2(a) Assumed Liabilities
1.3(b) Acquired Assets Allocation
1.2(b) Unassumed Liabilities
2.1(c) Capitalization
2.1(d)(ii) Waivers and Consents
2.1(e) Financial Statements
2.1(e)(ii) Unlisted Liabilities
2.1(f) Absence of Changes
2.1(g)(ii) Leased Property
2.1(i) Insurance
2.1(j) Agreements
2.1(k) Litigation
2.1(l) Licenses and Permits
2.1(m)(ii) Employee Plans
2.1(n) Accounts and Notes Receivable
2.1(o) Customers
2.1(p) Accounts Payable
2.1(q) Related Party Transactions
Exhibits
A Form of Employment Agreement
B Form of Investment Letter
C Form of Lease
D Form of St. Joseph Customer Contract
E Form of Bill of Sale
F Form of Assignment
G Form of Officer's and Shareholders' Certificates
H Form of Opinion of Counsel of the Seller and the Shareholders
I Form of Opinion of Counsel of the Purchaser and PSS
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ASSET PURCHASE AGREEMENT, dated May 17, 1996, among ALM, Inc.,
a Kansas corporation (the "Seller"), James Mallow, M.D. ("Mallow"), Devona J.
Slater ("Slater" and together with Mallow, collectively referred to herein as
the "Shareholders"), Physician Support Systems, Inc., a Delaware corporation
("PSS"), and PSS ALM, Inc., a Delaware corporation and wholly-owned subsidiary
of PSS (the "Purchaser").
Introduction
The Seller is engaged in providing billing, accounts
receivable management, practice management and other services to physicians and
physician groups (the "Business") and the Seller owns certain assets that relate
to the Business. Subject to the terms and conditions of this Agreement, the
Seller desires to sell to the Purchaser, and the Purchaser desires to purchase
from the Seller, substantially all of the assets, tangible and intangible,
associated with the Business.
A portion of the consideration for the assets of the Seller
shall be paid in the form of shares of common stock, par value $.001 share (the
"Common Stock"), of PSS. As a condition to the transfer of such Common Stock,
the Seller and the Shareholders will execute an investment letter, agreeing to
certain representations, warranties and covenants with respect to the Common
Stock.
As a condition to the Purchaser's acquisition of the assets of
the Seller, each of the Shareholders, who together own all of the issued and
outstanding capital stock of the Seller, will enter into an employment agreement
with the Purchaser.
In consideration of the mutual benefits to be derived from
this Agreement and of the representations, warranties, conditions, agreements
and promises contained herein and other good and valuable consideration, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1. Purchase and Sale. (a) The Seller shall sell, convey,
transfer and assign to the Purchaser, and the Purchaser shall purchase from the
Seller, on the Closing Date (as defined in Section 1.4), the Acquired Assets.
"Acquired Assets" means all properties, assets (tangible or intangible), and
rights of the Seller used or held in connection with the Business (which for the
purposes of this Section 1.1 shall include any other business undertaken or
contemplated by the Seller), including the following:
(i) all tradenames, trademarks, service marks, patents and
copyrights listed on Schedule l.1(a)(i), and all licenses, franchises,
formula, know-how and other intangible assets used in connection with
the Business and all registrations and applications for any of the
foregoing and all goodwill associated with any of the foregoing;
(ii) all technologies, methods, formulations, software
(including documentation and object and source code listings), trade
and business secrets, know-how, inventions, package designs and other
processes or proprietary information used or under development for use
in the Business;
(iii) all information, customer lists, price lists,
identification of suppliers, correspondence, data, drawings, recorded
knowledge, customer files, account histories, sales
literature and commercial materials relating to the Business; all sales
data and other information relating to selling and providing the
services relating to the Business; all accounting information
pertaining to the Business;
(iv) all computers, equipment, tools, machinery, furniture,
furnishings, leasehold improvements, automobiles, trucks, other
vehicles and similar tangible property used or held in connection with
the Business, subject to such additions and subtractions thereto as are
necessary to reflect acquisitions and dispositions, as appropriate,
from the date hereof through the Closing Date in accordance with the
terms of this Agreement, and as listed on Schedule 1.1(a)(iv);
(v) all books, records, production data, publications,
computer files, databases, data, manuals and other materials relating
to the Business;
(vi) all leasehold interests in real property used in
connection with the Business;
(vii) all supplies and inventories used or held in connection
with the Business;
(viii) all accounts and other receivables and indebtedness
owed to the Seller in connection with the Business, cash and cash
equivalents on hand and in banks (in an amount not less than that
sufficient to operate the Business for one month), and investment and
other securities on hand and in accounts, pre-paid expenses, security
deposits and any other current assets;
(ix) all written or oral contracts, agreements or other
arrangements relating to the Business, as listed on Schedule
1.1(a)(ix);
(x) all rights and claims, including refunds, with respect to
all Assumed Liabilities (as defined in Section 1.2(a) below);
(xi) all transferable governmental licenses, permits,
approvals, registrations, certificates of occupancy and license and
permit applications relating to the Business;
(xii) all goodwill relating to the Business;
(xiii) all other assets reflected on the balance sheet
included in the Closing Date Financial Statement (as defined in Section
4.1(i)) for the Seller.
1.2. Purchaser Not Successor to the Seller; Excluded
Liabilities. (a) The Seller shall sell, convey, transfer and assign to the
Purchaser, and the Purchaser shall assume from the Seller, on the Closing Date,
the Assumed Liabilities. "Assumed Liabilities" means those obligations of the
Seller identified as such on Schedule 1.2(a). Except for the Assumed
Liabilities, the Purchaser shall not be the successor to the Seller and the
Purchaser does not assume and shall not become liable to pay, perform or
discharge any obligation or liability whatsoever of the Seller or relating to
any of the Acquired Assets (all such obligations and liabilities being,
collectively, the "Unassumed Liabilities").
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(b) The term "Unassumed Liabilities" includes, and the
Purchaser expressly is not assuming any of, the following liabilities, whether
accrued or fixed, absolute or contingent, known or unknown, determined or
determinable and whenever arising:
(i) any liabilities and obligations of the Seller for Federal,
state, local and foreign taxes (including franchise, income, single
business, sales, use, payroll, occupation, property, excise,
withholding and other taxes);
(ii) any claims, demands, liabilities or obligations of any
nature whatsoever (including claims, demands, liabilities or
obligations in respect of Federal, state, local and foreign taxes,
advances or loans, environmental matters, occupational safety, workers'
or workmen's compensation, grievance proceedings or actual or
threatened litigation, suits, claims, demands or governmental
proceedings) which arose or were incurred on or before the Closing (as
defined in Section 1.4), or which are based on events occurring or
conditions existing on or before the Closing, or which are based on
products sold or services performed by the Seller on or before the
Closing;
(iii) any liabilities and obligations of the Seller under this
Agreement, any bill of sale or related instrument issued in connection
with this Agreement or otherwise in connection with the transactions
contemplated by this Agreement;
(iv) any liabilities of the Seller not associated with the
Business or the Acquired Assets;
(v) any liabilities of the Seller to present or former
employees (or their beneficiaries), consultants or agents for any
compensation, pension contribution or other benefits accrued or
otherwise payable, and any liabilities or obligations to present or
former shareholders; and
(vi) any liabilities and obligations of the Seller identified
on Schedule 1.2(b) as "Unassumed Liabilities", and all liabilities
under any contract or agreement not listed on Schedule 2.1(j) other
than operating contracts of the Business entered into in the ordinary
course of business and not required to be listed on Schedule 2.1(j).
1.3. Purchase Price. (a) Subject to adjustment as set forth in
Section 1.5, the purchase price (the "Purchase Price") for the Acquired Assets
and the agreement not to compete of the Seller set forth in Section 3.8 shall be
(i) cash in the amount of $1,510,000, of which $1,500,000 is payable as
consideration for the Acquired Assets and $10,000 is payable to the Seller as
consideration for its agreement not to compete and (ii) 11,628 shares of Common
Stock (the "Transferred Common Stock"). The Shareholders shall be compensated
for their agreement not to compete as set forth in Section 3.8. The Purchaser
shall pay at Closing $1,310,000 of the Purchase Price and transfer to the Seller
share certificates issued by PSS representing all of the Transferred Common
Stock. The balance (the "Balance") of the Purchase Price shall, subject to the
terms set forth in Section 1.5, be paid by the Purchaser in one installment of
$200,000 in connection with the second anniversary of the Closing Date. All such
payments shall be made by certified or bank check or checks, or, at the option
of the Seller, by wire transfer to an account of the Seller designated to
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the Purchaser. The Seller shall provide the Purchaser with notice of the
exercise of such option and the designation of such account, such notice to be
delivered not less than three business days before the Closing.
(b) The Seller and the Purchaser agree that the allocation
among the Acquired Assets of the Purchase Price will be as set forth in Schedule
1.3(b), which is in accordance with the guidelines of the Internal Revenue
Service (the "IRS"). The parties agree to be bound by such allocation for all
purposes, including for purposes of all Federal, state, local and foreign tax
returns filed by them subsequent to the Closing Date, the determination by the
Seller of taxable gain or loss on the sale of the Acquired Assets and the
determination by the Purchaser of its tax basis in the Acquired Assets.
1.4. Closing. The closing (the "Closing") for the consummation
of the transactions contemplated by this Agreement shall take place at the
offices of Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New
York 10019, or such other place as the Seller and the Purchaser shall agree, at
10:00 a.m. (Eastern time zone) on the later of May 17, 1996 and the date on
which all conditions set forth in Article IV shall have been satisfied or
waived, or such other date and time agreed to by the Seller and the Purchaser
(such date of the Closing being hereinafter called the "Closing Date").
1.5. Purchase Price Adjustment. (a) The payment of the Balance
in connection with the second anniversary of the Closing Date is subject to
retention of the clients of the Business reflected on the Closing Date Customer
List (as defined in Section 4.1(f)) (the "Existing Clients") through the date of
the second anniversary of the Closing Date. If, on the second anniversary of the
Closing Date, an Existing Client no longer uses the Business to provide services
on the same terms (including the rate paid by such Existing Client) as in effect
on the Closing Date or has given notice of its intention to no longer do so (in
either case, a "Loss"), then the Balance shall be reduced (but not below zero)
by an amount equal to the product of (x) the reduction in the earnings
contribution of such Existing Client attributable to such Loss and (y) five;
provided, however, that no reduction to the Balance shall occur unless the sum
of all such reductions and offsetting additions pursuant to Section 1.5(b)
equals or exceeds $25,000. For purposes of this Section 1.5(a), the "earnings
contribution" of an Existing Client shall mean an amount equal to 35% of the
amount of the Business revenues (as defined under the Business' revenue
recognition policy consistent with generally accepted accounting principles
("GAAP")) with respect to such client for the 12 calendar months immediately
preceding the date of such Loss. There shall be no reduction in the Balance due
to the routine elimination and replacement in physicians practicing medicine
within a particular client group.
(b) If (i) any of the Shareholders, after the Closing Date,
introduces to the Purchaser a potential new client for the Business, and
provides the Purchaser with reasonable assistance in such potential new client
becoming a customer of the Purchaser, and (ii) such potential client becomes
contractually committed as a customer of the Business (the date of such contract
being the "Start Date") and the Business begins servicing such new customer (a
"New Client") no later than the date of Loss of an Existing Client, the amount
of any reduction otherwise called for by Section 1.5(a) with respect to the Loss
of such Existing Client shall be offset by an amount equal to one-half of the
product of (x) the One-Year Earnings Contribution attributable to such New
Client
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and (y) five. If an Existing Client becomes contractually committed to paying a
higher rate to the Purchaser than the rate such Existing Client paid to the
Business on the Closing Date for substantially the same service provided on the
Closing Date and such Existing Client begins paying such higher rate no later
than the date of Loss of another Existing Client, such Existing Client paying
such higher rate shall be deemed to be a "New Client" and the amount of any
reduction otherwise called for by Section 1.5(a) with respect to the Loss of
such other Existing Client shall be offset by an amount equal to one-half of the
product of (x) the One-Year Earnings Contribution attributable to such deemed
New Client, (y) five and (z) (1) the quotient of (A) the higher rate being paid
by such deemed New Client on the date of Loss of such Existing Client divided by
(B) the rate paid by such deemed New Client to the Business on the Closing Date
minus (2) one. For purposes of this Agreement, (i) "One-Year Earnings
Contributions" attributable to a New Client shall mean an amount equal to 35% of
the Business revenues (as defined under the Purchaser's revenue recognition
policy consistent with GAAP) with respect to such New Client beginning with (and
including) the second full calendar month after the Start Date with respect to
such client and ending with (and including) the thirteenth full calendar month
after such Start Date and (ii) the Start Date for a deemed New Client shall be
the date on which such deemed New Client begins paying such higher rate.
(c) The Purchaser shall present a statement of its calculation
of any reduction required by Section 1.5(a), after giving effect to any
applicable One-Year Earnings Contributions, to the Seller within 45 days after
the second anniversary of the Closing Date; provided that if One- Year Earnings
Contributions cannot be calculated at such time, such statement shall be
delivered within 45 days after the end of the thirteenth full calendar month
after the Start Date of the applicable New Client. The Purchaser shall make the
books and records relating to such calculation available to the Seller and its
representatives for the purpose of reviewing the calculation. The Seller shall
have the right to dispute any amounts shown on the statement by giving written
notice to the Purchaser within 10 days after receipt of such statement, which
notice shall specify in reasonable detail the nature and extent of such
disagreement. If the Seller and the Purchaser have not resolved the dispute
within 20 business days of such notice, the dispute shall be promptly submitted
to an independent accountant of national standing reasonably acceptable to the
Seller and the Purchaser, whose decision shall be binding on the parties hereto.
The Purchaser and the Seller shall share equally the cost of such accountant.
The Purchaser will pay to the Seller the Balance (as reduced in accordance with
this Section 1.5) promptly, and in any event within 5 days, after the expiration
of the 10-day period referred to in this paragraph (c) or, if the Seller shall
have given notice in accordance with this paragraph (c) of its dispute of the
calculation, within 10 days of the resolution of such dispute.
1.6. Instruments of Conveyance and Transfer. At the Closing,
the Seller shall deliver to the Purchaser such bills of sale, endorsements,
assignments and other instruments of transfer, conveyance and assignment (in a
form satisfactory to the Seller and the Purchaser) as shall be necessary in the
reasonable judgment of the Purchaser to transfer, convey and assign the Acquired
Assets to the Purchaser.
1.7. Post-Closing Assurances. The Seller and the Shareholders
shall pay to the Purchaser any amounts which shall be received by the Seller or
any Shareholder after the Closing Date which constitute Acquired Assets. The
Seller and the Shareholders shall, at any time and from time to time after the
Closing Date, upon the request of the Purchaser, do, execute, acknowledge,
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deliver and file, or cause to be done, executed, acknowledged, delivered or
filed, all such further acts, deeds, transfers, conveyances, assignments or
assurances as may be reasonably required for the better transferring, conveying,
assigning and assuring to the Purchaser, or for the aiding and assisting in the
reducing to possession by the Purchaser of, any of the Acquired Assets. In
connection with the foregoing, from and after the Closing Date, the Purchaser
shall have the right and authority to endorse, without recourse, the name of the
Seller on any check or similar negotiable instrument received by the Purchaser
constituting Acquired Assets transferred, conveyed and assigned to the Purchaser
hereunder.
1.8. Assignment of Contracts, Rights. Notwithstanding anything
to the contrary contained in this Agreement, this Agreement shall not constitute
an agreement or attempt to transfer, sublease or assign any contract, license,
lease, sales order, purchase order or other agreement or any claim or right of
any benefit arising thereunder or resulting therefrom or any governmental
permit, license, approval, registration or certificate of occupancy if an
attempted transfer, sublease or assignment thereof, without the consent of any
other party thereto, would constitute a breach thereof or in any way adversely
affect the Purchaser's rights to receive the benefits thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties by Seller and
Shareholders. The Seller and the Shareholders jointly and severally represent
and warrant to the Purchaser and PSS as follows:
(a) Organization, Standing and Power. The Seller (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Kansas 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 Seller 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.
(b) Authority; Binding Agreements. (i) Each of the
Shareholders has the legal power and capacity to enter into this Agreement, an
employment agreement with the Purchaser in the form of Exhibit A (the
"Employment Agreements"), the Investment Letter substantially in the form of
Exhibit B (the "Investment Letter"), the St. Joseph Anesthesia Services P.C.
Contract substantially in the form of Exhibit D (the "St. Joseph Customer
Contract") and all other agreements to which such Shareholder is a party as
contemplated by this Agreement. This Agreement, the Employment Agreements, the
Investment Letter, the St. Joseph Customer Contract and such other agreements
are, or upon execution and delivery thereof will be, the valid and binding
obligations of the Shareholders, enforceable against the Shareholders in
accordance with their respective terms.
(ii) The execution and delivery of this Agreement, the Bill of
Sale (the "Bill of Sale") substantially in the form of Exhibit E, the Assignment
and Assumption (the "Assignment") substantially in the form of Exhibit F, the
Investment Letter and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action of the Seller. The Seller has all requisite corporate power and authority
to enter into this Agreement, the Bill of Sale, the Assignment and the
Investment Letter and to consummate
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the transactions contemplated hereby and thereby and the Seller has duly
executed and delivered this Agreement. This Agreement is, and upon execution and
delivery, the Bill of Sale, the Assignment and the Investment Letter will be,
the valid and binding obligations of the Seller enforceable in accordance with
their respective terms.
(c) Capitalization; Equity Interests. Schedule 2.1(c) sets
forth a true and complete description of the authorized and issued capital
stock, and holder of record of such stock, of the Seller. The Shareholders own
of record and beneficially all of the issued and outstanding capital stock and
other securities of the Seller as set forth on Schedule 2.1(c). The Seller does
not have any subsidiaries nor owns or holds any equity or other security
interests in any other entity.
(d) Conflicts; Consents. Neither the execution and delivery of
this Agreement, the Employment Agreements, the Bill of Sale, the Assignment, the
Investment Letter, the St. Joseph Customer Contract, the consummation of the
transactions contemplated hereby or thereby nor compliance by the Seller or the
Shareholders with any of the provisions hereof or thereof will (i) conflict with
or result in a breach of the charter, by-laws or other constitutive documents of
the Seller, (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 the Seller or any Shareholder is a
party, or by which the Seller or any Shareholder or the Seller's or any
Shareholder's properties or assets, may be bound or affected, except for such
conflict, breach or default as to which requisite waivers or consents shall be
obtained before the Closing (which waivers or consents are set forth in Schedule
2.1(d)(ii)), (iii) violate any law, statute, rule or regulation or order, writ,
injunction or decree applicable to the Seller or any Shareholder or the Seller's
or any Shareholder'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 in connection with the Business. No consent or approval
by, or any notification of or filing with, any person, firm, corporation,
partnership, joint venture, association or entity (governmental or private)
(each, a "person" and collectively, "persons") is required in connection with
the execution, delivery and performance by the Seller or any Shareholder, as
applicable, of this Agreement, the Employment Agreements, the Bill of Sale, the
Assignment, the Investment Letter, the St. Joseph Customer Contract or the
consummation of the transactions contemplated hereby or thereby.
(e) Financial Information. (i) The following financial
statements are attached hereto as Schedule 2.1(e):
(A) the consolidated balance sheets of the Seller at December
31, 1991 to 1995 and the related statements of operations for the five
years ended December 31, 1995;
(B) the monthly balance sheets of the Seller as of the end of
each month commencing January 1, 1995 through the month end prior to
the date of this Agreement and the related statement of operations for
each such month, certified by the chief executive officer and the chief
financial officer of the Seller, and
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(C) a monthly schedule of expenses by category of
non-continuing extraordinary expenses commencing January 1, 1995
through the month end prior to the date of this Agreement.
Except as indicated on Schedule 2.1(e), all such financial statements have been
prepared according to cash basis accounting on a basis consistent with prior
periods and are true, accurate and complete. The balance sheets of the Seller as
at the dates set forth present fairly the financial position of the Seller as at
the dates thereof, and the related statements of operations of the Seller for
each of the respective specified periods then ended present fairly the results
of operations of the Seller 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 Business or the Acquired Assets which were required to be, in
accordance with GAAP, and were not shown or provided for on the balance sheets
of the Seller to which such liabilities or obligations related. All reserves
established by the Seller for the Business are reflected on the balance sheets
of the Seller and are adequate and there are no loss contingencies that are
required to be accrued by Statement of Financial Accounting Standard No. 5 of
the Financial Accounting Standards Board which are not provided for on such
balance sheet.
(f) Absence of Changes. Except as set forth in Schedule
2.1(f), since December 31, 1995, the Business has been operated in the ordinary
course consistent with past practice and there has not been:
(i) any material adverse change in its condition (financial or
otherwise), assets, liabilities, operations, customer contracts or
other customer arrangements, management personnel, billings, revenues,
earnings, business or prospects;
(ii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred in
respect of the Business, other than obligations under customer
contracts, current obligations and liabilities incurred in the ordinary
course of business and consistent with past practice;
(iii) any payment, discharge or satisfaction of any claim or
obligation, 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 Seller 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
Seller;
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(vi) any sale, assignment, pledge, encumbrance, transfer or
other disposition of any tangible asset used in the Business, except as
contemplated by this Agreement, or any sale, assignment, transfer or
other disposition of any patents, trademarks, service marks, trade
names, copyrights, licenses, franchises, know-how or any other
intangible assets;
(vii) any creation of any claim or other encumbrance on any
property of the Seller;
(viii) any write-down of the value of any asset or inventory
of the Seller or any write-off as uncollectible of any accounts or
notes receivable or any portion thereof;
(ix) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Seller;
(x) any capital expenditure or commitment or addition to
property, plant or equipment used in the Business;
(xi) any general increase in the compensation of employees of
the Seller (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 Seller 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 held or used in
connection with the Business;
(xiii) any change in the independent accountants of the Seller
or in the accounting methods or accounting practices followed by the
Seller 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 Business; or
(xv) any agreement, whether in writing or otherwise, to take
any of the actions specified in the foregoing items (i) through (xiv).
(g) Assets, Property and Related Matters; Real Property. (i)
The Seller has good title to, or a valid leasehold interest in, as applicable,
all of the Acquired Assets, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind. The tangible property included in the
Acquired Assets is in good operating condition and repair, subject to ordinary
wear and tear. The Acquired Assets constitute all of the properties, interests,
assets and rights held for use or used in connection with the Business and
constitute all those necessary to continue to operate the Business consistent
with current and historical practice.
(ii) Schedule 2.1(g)(ii) sets forth a list and brief
description of all real property and of all personal property held for use or
used in connection with the Business, together with a brief description of (A)
all buildings and other structures and material improvements located on such
real
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property, (B) the use to which such property is being employed or, if not in
use, for which it was intended, (C) the name of the lessor and requirement of
consent of the lessor to assignment and (D) the termination date or notice
requirement with respect to termination, annual rental and renewal or purchase
options under such leases. The Seller does not own any real property in
connection with the Business. With respect to property leased by the Seller in
connection with the Business, (I) the Seller 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 Seller is a party are in full force and effect and
constitute valid and binding obligations of the Seller and, to the knowledge of
the Seller and the Shareholders, of the other parties thereto, enforceable in
accordance with their terms and (III) the Seller has made available to the
Purchaser true and complete copies of all leases referred to in Schedule
2.1(g)(ii). 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 Seller or by any lessor under any lease. The Seller has not, and to the
knowledge of the Seller and the Shareholders, no other person has, granted any
oral or written right to anyone other than the Seller to lease, sublease or
otherwise occupy any of the properties described in Schedule 2.1(g)(ii) through
the end of the applicable lease periods.
(iii) The real estate listed on Schedule 2.1(g)(ii) and all
appurtenances and improvements, as used, constructed or maintained by the Seller
at any time, conform to applicable Federal, state, local and foreign laws and
regulations. To the knowledge of the Seller and the Shareholders, 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 Seller or either Shareholder, threatened which would preclude or impair the
use of any such property by the Seller for the uses for which they are intended.
(h) Patents, Trademarks and Similar Rights. The Seller 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 the Business as presently conducted. Schedule 1.1(a)(i) contains a list
of all Intellectual Property owned and used by the Seller in the Business and
any Intellectual Property which is licensed for use by others. No Intellectual
Property infringes any rights owned or held by any other person. There is no
pending or, to the knowledge of the Seller and the Shareholders, threatened
claim or litigation against the Seller contesting its right exclusively to use
any Intellectual Property. To the knowledge of the Seller and the Shareholders,
no person is infringing the rights of the Seller in any Intellectual Property.
To the knowledge of the Seller and the Shareholders, no product or service sold
by the Seller violates or infringes any intellectual property right owned or
held by any other person. To the knowledge of the Seller, in the case of
commercially available "shrink-wrap" software programs (such as Lotus 1-2-3),
neither the Seller nor any of its employees has made or is using any
unauthorized copies of any such software programs at any location of the
Business.
(i) Insurance. Schedule 2.1(i) contains a true and complete
list of all policies of casualty, liability, theft, fidelity, life and other
forms of insurance held in connection with the Business. All insurance policies
are in the name of the Seller, outstanding and in full force and effect, all
premiums with respect to such policies are currently paid and such policies will
not be
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affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement. The Seller 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. Schedule 2.1(j) contains a true and
complete list and brief description of all written or oral contracts, agreements
and other instruments to which a Seller is a party in connection with the
Business (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 Seller, (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 Seller
and any Shareholder or affiliates of any Shareholder, (viii) that restricts the
operation of any part of the Business anywhere in the world or (ix) that is
otherwise material to the Business or entered into other than in the ordinary
course of business. The Seller is not in default under any such agreement or
instrument where such default could, singly or in the aggregate with defaults
under other agreements or instruments, have a material adverse effect on the
business, operations or condition of the Business, and, to the knowledge of the
Seller and the Shareholders, all such agreements or instruments are in full
force and effect. The Seller has furnished to the Purchaser true and complete
copies of all documents described in Schedule 2.1(j) other than customer
contracts that are being provided pursuant to Section 4.1(f).
(k) Litigation, Etc. Except as set forth in Schedule 2.1(k),
there have not been for the past five years, nor are there, any suits, actions,
claims, investigations or legal or administrative or arbitration proceedings in
respect of the Business, the Acquired Assets, the Seller or any Shareholder,
pending or 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. There have not been for the past five years,
nor are there, any judgments, decrees, injunctions or orders of any court,
governmental department, commission, agency, instrumentality or arbitrator or
against the Seller or any Shareholder, or any of their assets, relating to or
affecting the Business or the Acquired Assets.
(l) Compliance; Governmental Authorizations. (i) The Seller 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 Business. The Seller has all Federal, state, local and
foreign governmental licenses and permits necessary to conduct the Business as
presently being conducted, which licenses and permits are set forth in Schedule
2.1(l). Such licenses and permits are in full force and effect, no violations
are or have been recorded in respect of any thereof, no proceeding is pending,
or, to the knowledge of the Seller or any Shareholder, threatened, to revoke or
limit any thereof, and neither the Seller nor any Shareholder knows of any basis
for any such proceeding.
(ii) There are no conditions relating to the Seller or the
Business or relating to the Seller's ownership, use or maintenance of any real
property previously owned or operated by the
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Seller or any of its present or past affiliates in connection with the Business,
and neither the Seller nor any Shareholder knows or has 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 Seller 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
connection with the Business in compliance with all applicable environmental,
health or safety statutes, ordinances, orders, rules, regulations or
requirements.
(m) Labor Relations; Employees. (i) Within the last five
years, the Seller 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 Seller and the Shareholders, there is no such dispute or work
stoppage threatened against the Seller. No employee of the Seller in respect of
the Business is represented by any union or collective bargaining agent and, to
the knowledge of the Seller and the Shareholders, there has been no union
organizational effort in respect of any employees of the Seller within the past
five years.
(ii) Schedule 2.1(m)(ii) contains a list and a brief, general
description of each pension, retirement, savings, deferred compensation, and
profit-sharing plan and each stock option, stock appreciation, stock purchase,
performance share, bonus or other incentive plan, severance plan, health, group
insurance or other welfare plan, or other similar plan and any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), under which the Seller has any current or future
obligation or liability in respect of the Business or under which any employee
or former employee (or beneficiary of any employee or former employee) of the
Seller in respect of the Business 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 Seller has delivered to the Purchaser 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 Seller nor any
business or entity controlling, controlled by, or under common control with the
Seller 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
Seller or any Shareholder, threatened, with respect to any Plan or the assets of
any Plan, and neither the Seller nor any Shareholder has knowledge of
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any facts which could give rise to any such actions, claims, lawsuits or
arbitrations (other than routine claims for benefits). The Seller has satisfied
all funding, compliance and reporting requirements for all Plans. With respect
to each Plan the Seller has paid all contributions (including employee salary
reduction contributions) and all insurance premiums that have become due and any
such expense accrued but not yet due has been properly reflected in the
financial information in Schedule 2.1(f).
(v) Except as described in the Plans delivered to the
Purchaser, 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 Seller, other than dependents of employees under
health and child care policies listed in Schedule 2.1(m)(ii) and delivered to
the Purchaser.
(vi) The consummation of the transactions contemplated by this
Agreement will not (A) entitle any employee of the Seller to severance pay or
termination benefits for which the Purchaser 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 the Purchaser
or any of its affiliates may become liable or (C) except for the Assumed
Liabilities, obligate the Purchaser 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 Seller for periods before
the Closing Date or for personnel whom the Purchaser does not actually employ.
(vii) The Seller has made no representations or warranties
(whether written or oral, express or implied) contractually or otherwise to any
client or customer of the Seller that Seller'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 Seller
relating either to (A) providing benefits to employees of the Seller under a
Pension Benefit Plan of the Seller 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 Seller.
(viii) Schedule 2.1(m)(viii) sets forth the Seller's current
policy regarding paid days off for its employees (the "ALM Vacation Days
Policy").
(n) Accounts Receivable. Schedule 2.1(n) contains a true aged
list of unpaid accounts and notes receivable relating to the Business as of the
month end prior to the date of this Agreement, all of which, to the Seller's
knowledge, are collectible in the ordinary course of business.
(o) Customers. Schedule 2.1(o) contains (i) a true and
complete list of the customers of the Business for each of the years ended
December 31, 1993, 1994 and 1995 and the period beginning January 1, 1996 and
ended the month end prior to the date of this Agreement, (ii)
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a true and correct description of the effective date and expiration date and
history of renewals for and commission revenue generated under contracts with
each of the customers of the Business listed on Schedule 2.1(o), (iii) a true
and complete list of all contracts pursuant to which the Seller 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 verbal Client
Contract, (B) any and all disputes or defaults arising under or with respect to
the Client Contracts which could reasonably be expected to result in a client's
termination of its contract with the Seller or claim for damages, and (C) all
loans or advances made by the Seller to or on behalf of its customers, which
description includes the date of such loan or advance and the principal balance
outstanding as of the date of this Agreement under each such loan or advance.
The Client Contracts are valid and enforceable in accordance with their
respective terms with respect to the Seller, and are valid and enforceable in
accordance with their respective terms with respect to any other party thereto.
To the Seller's knowledge, no customer of the Business intends to terminate,
fail to renew or adversely modify any relationship with the Seller.
(p) Accounts Payable. Schedule 2.1(p) contains a true and
complete list of all accounts payable relating to the Business as of the date
hereof.
(q) Related Party Transactions. Except as set forth in
Schedule 2.1(q), no current or former partner, director, officer or shareholder
of the Seller or any associate or affiliate (as defined in the rules promulgated
under the Securities Exchange Act of 1934) 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 Business (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 or shareholder or such associate) or
(ii) to the knowledge of the Seller or any Shareholder, 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 Business, nor does any such person receive income from any source other
than the Seller which relates to the Business or should properly accrue to the
Seller in connection with the Business.
(r) Billing and Collection Practices. (i) The current
practices and procedures of the Seller 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 Seller 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.
ss. 1395g(c), 42 U.S.C. ss. 1395u(b)(6) and 42 U.S.C. ss. 1396(a)(32), and the
regulations promulgated thereunder or similar provisions of any state Medicaid
program.
(ii) The Seller is not engaged in any activity, whether alone
or in concert with one or more of its clients, which would constitute a
violation of any federal laws or the laws of any state (including (A) federal
antifraud and abuse or similar laws pertaining to Medicare, Medicaid, or any
other federal health or insurance program, (B) state laws pertaining to Medicaid
or any other state health or insurance program, (C) state or federal laws
pertaining to billings to insurance companies, health maintenance organizations,
and other managed care plans or to insurance fraud,
-14-
and (D) federal and state laws relating to collection agencies and the
performance of collection services) prohibiting fraudulent, abusive or unlawful
practices connected in any way with the provision of health care services, the
billing for such services provided to a beneficiary of any state, federal or
private health or insurance program or credit collection services. Without
limiting the generality of the foregoing, the Seller 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 Seller or any Shareholder knows or has reason to believe to
have been illegal under 42 U.S.C. ss.
1320a-7b(b) or any similar state law.
(iii) The Seller does not currently use, and has not in the
past established or used, trust accounts in connection with the Business.
(s) Taxes. The Seller has timely filed with the appropriate
governmental bodies all tax returns which are required to be filed, and has duly
paid to the appropriate governmental bodies all taxes which are required to be
paid, including, without limitation, all taxes withheld from employees' wages
and all other taxes due or claimed to be due by an governmental body. Such tax
returns properly reflect the taxes payable for the periods covered thereby. All
such taxes due for all taxable periods ending on or prior to the Closing Date
have been, or will be, timely paid by the Seller. The Seller has not waived the
statute of limitations on the right of any governmental body to assess any
additional taxes or to contest the items reported on any such tax returns. The
Seller shall make available to the Purchaser's tax accountants true and complete
copies of all tax returns filed by or on behalf of the Seller for each of the
past three taxable years.
(t)Disclosure. There have been no events, transactions or
information relating to the Business which have come to the attention of the
Seller or any Shareholder which could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), assets, liabilities,
operations, customer contracts or other customer arrangements, management
personnel, billings, revenues, earnings, business or prospects of the Business.
No representation or warranty of the Seller or any Shareholder contained in this
Agreement, and no statement contained in any certificate, schedule, annex, list
or other writing furnished to the Purchaser, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statement
contained herein or therein not misleading.
(u) Brokers. No agent, broker, investment banker, person or
firm acting on behalf of the Seller or any Shareholder or under the authority of
the Seller or any Shareholder 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.
2.2. Representations and Warranties by Purchaser and PSS. The
Purchaser and PSS jointly and severally represent and warrant to the Seller and
the Shareholders as follows:
(a) Organization, Standing and Power. Each of the Purchaser
and PSS (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. The Purchaser is duly qualified to
-15-
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.
(b) Authority; Binding Agreements. (i) The execution and
delivery of this Agreement, the Employment Agreements, the St. Joseph Customer
Contract and the Assignment, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action of the Purchaser. The Purchaser has all requisite
corporate power and authority to enter into this Agreement, the Employment
Agreements, the St. Joseph Customer Contract and the Assignment and to
consummate the transactions contemplated hereby and thereby and the Purchaser
has duly executed and delivered this Agreement. This Agreement is, and upon
execution and delivery, the Employment Agreements, the St. Joseph Customer
Contract and the Assignment will be, the valid and binding obligations of the
Purchaser enforceable in accordance with their respective terms.
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action of PSS. PSS has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby and PSS has duly executed and delivered this
Agreement. This Agreement is the valid and binding obligation of PSS enforceable
in accordance with its terms.
(c) Conflicts; Consents. Neither the execution and delivery of
this Agreement, the Employment Agreements, the St. Joseph Customer Contract or
the Assignment, the consummation of the transactions contemplated hereby or
thereby nor compliance by the Purchaser or PSS with any of the provisions hereof
or thereof will (i) conflict with or result in a breach of the charter, by-laws
or other constitutive documents of the Purchaser or PSS, (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 the Purchaser or PSS is a party, or by which the Purchaser
or PSS or the Purchaser's or PSS'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 the Purchaser or PSS or the Purchaser's or PSS's properties or assets. No
consent or approval by, or any notification of or filing with, any person
(governmental or private) is required in connection with the execution, delivery
and performance by the Purchaser or PSS of this Agreement, the Employment
Agreements, the St. Joseph Customer Contract or the Assignment, or the
consummation of the transactions contemplated hereby or thereby, except for such
consents, approvals, notices and filings as may be required under state
securities or "blue sky" laws in connection with the issuance and sale of the
Transferred Common Stock.
(d) Capitalization of PSS. The authorized capital stock of PSS
consists of 100,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock. At April 30, 1996, there were 6,265,000 shares of Common Stock
issued and outstanding. All outstanding shares of Common Stock are, and the
Transferred Common Stock will be, when issued, duly authorized, validly issued,
fully paid, and nonassessable and free of preemptive rights.
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(e) PSS Commission Reports. PSS has made available to the
Seller and the Shareholders the Registration Statement on Form S-1 for the
Common Stock, declared effective by the United States Securities and Exchange
Commission (the "Commission") on February 9, 1996, including all amendments and
exhibits thereto and items incorporated by reference (the "Registration
Statement") and its Report on Form 10-K for the year ended December 31, 1995,
filed with the Commission on April 25, 1996 (the "10-K"). As of February 9, 1996
and April 25, 1996, the Registration Statement and the 10-K, respectively, did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since February 9, 1996, PSS has filed all forms, reports and
documents with the Commission required to be filed by it pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulation promulgated thereunder, each of which complied as to form, at the
time such form, document or report was filed, in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the
applicable rules and regulations promulgated thereunder.
(f) Brokers. No agent, broker, investment banker, person or
firm acting on behalf of the Purchaser or PSS or under the authority of the
Purchaser or PSS 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 except for
Williams Financial.
ARTICLE III
ADDITIONAL AGREEMENTS
3.1. Expenses; Sales Taxes. (a) Except as provided in this
Section each party hereto shall bear its own costs and expenses incurred in
connection with the transactions contemplated hereby. The Seller shall pay the
cost of all income, single business, sales, transfer, use, gross receipts,
registration and similar taxes arising out of or in connection with the
transactions contemplated by this Agreement. The Purchaser shall pay any fee due
to Williams Financial.
(b) To the extent permitted by applicable law, the prevailing
party or parties in any action or proceeding involving a dispute arising out of
or relating to this Agreement or the transactions contemplated hereby shall be
entitled to recover from the other party or parties to such action or proceeding
the actual expenses incurred by such prevailing party or parties in connection
with such action or proceeding (including, without limitation, counsel fees and
expenses).
3.2. Conduct of Business. (a) From the date hereof until the
Closing Date, except as otherwise consented to by the Purchaser in writing, the
Seller shall operate the Business only in the ordinary course of business
consistent with past practice.
(b) Without limiting the generality of the foregoing, neither
the Seller nor any Shareholder shall, without the prior written consent of the
Purchaser, directly or indirectly, cause or permit any state of affairs, action
or omission described in clauses (i) through (xv) of Section 2.1(f); provided
that, subject to the conditions set forth in Sections 4.1(e) and (i), the Seller
may make normal distributions of earnings to the Shareholders in the ordinary
course of business.
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3.3. Further Assurances. Each of the parties hereto agrees to
use all commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable and to ensure that the conditions set forth in Article IV hereof are
satisfied, insofar as such matters are within the control of any of them. In
case at any time after the Closing Date, any further action is necessary or
desirable to carry out the purposes of this Agreement or to ensure the proper
assignment and delivery of the Acquired Assets to the Purchaser, each of the
parties to this Agreement shall take or cause to be taken all such necessary
action, including, the execution and delivery of such further instruments and
documents, as may be reasonably requested by any party for such purposes or
otherwise to complete or perfect the transactions contemplated hereby. The
Seller shall promptly pay or cause to be paid to the Purchaser any amounts
received by the Seller or any affiliate after the Closing which constitute
Acquired Assets.
3.4. No Shopping. From the date hereof until the earlier of
(i) the Closing Date and (ii) the date this Agreement is terminated in
accordance with Section 6.2, neither the Seller nor any partner, director,
officer or shareholder of the Seller will, directly or indirectly, solicit or
initiate, enter into or conduct, discussions concerning, or exchange information
(including by way of furnishing information concerning the Business) or enter
into any negotiations concerning, or respond to any inquiries or solicit,
receive, entertain or agree to any proposals for, the acquisition of the assets
of, or any substantial part thereof, or a merger involving, the Seller or the
transfer of all or a substantial part of the capital stock or partnership
interest of the Seller to any person other than the Purchaser. In addition,
during such time period, neither the Seller nor any Shareholder shall authorize,
direct or knowingly permit any employee or agent to do any of the foregoing and
the Seller and the Shareholders shall notify the Purchaser of the identity of
any person who approaches the Seller or any Shareholder with respect to any of
the foregoing.
3.5. Access and Information. From the date hereof until the
first to occur of the Closing Date and the termination of this Agreement, the
Seller shall permit the Purchaser and its representatives to make such
investigation of the business, operations and properties of the Seller relating
to the Business as the Purchaser deems necessary or desirable in connection with
the transactions contemplated hereby. Such investigation shall include, without
limitation, access to the respective directors, officers, employees, agents and
representatives (including legal counsel and independent accountants) of the
Seller relating to the Business and the properties, books, records and
commitments of the Seller relating to the Business. The Purchaser, the Seller
and the Shareholders agree to use reasonable efforts wherever possible in
conducting such investigation to keep confidential the existence of this
Agreement and the proposed transactions. The Seller shall furnish the Purchaser
and its representatives with such financial, operating and other data and
information, and copies of documents with respect to the Business or any of the
transactions contemplated hereby, as the Purchaser shall from time to time
request. Such access and investigation shall be made upon reasonable notice and
at reasonable places and times. Such access and information shall not in any way
affect or diminish any of the representations or warranties hereunder. Without
limiting the foregoing, during such period, the Seller shall keep the Purchaser
informed as to the business and operations of the Business and shall consult
with the Purchaser with respect thereto as appropriate.
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3.6. Bulk Sales. Subject to Section 5.1(a)(vi), the Purchaser
and the Seller waive compliance with all bulk sales laws applicable to the
transactions contemplated by this Agreement.
3.7. Non-Disclosure. The parties hereto agree that they will
advise and confer with each other prior to the issuance of any reports,
statements or releases pertaining to this Agreement or the transactions
contemplated hereby. Except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national securities
exchange (including the Nasdaq National Market), each of the parties agrees not
to disclose publicly the existence of this Agreement or the proposed
transactions without the written consent of the other party or parties, which
consent will not be unreasonably withheld. Notwithstanding the foregoing, the
Purchaser may disclose the existence and terms of this Agreement and the
proposed transactions to existing or prospective lenders or other parties
providing financing to the Purchaser or any of its affiliates.
3.8. Confidentiality; Non-Competition. (a) Until Closing, the
Purchaser, PSS, the Seller and the Shareholders each agree that all financial or
other information about the Purchaser, PSS, or the Seller, 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, 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. The Seller and the Shareholders shall be bound by the terms of this
paragraph (a) for a period of five years after Closing.
(b) The Seller and the Shareholders hereby acknowledge and
recognize such parties' possession of confidential or proprietary information
and the highly competitive nature of the Business and accordingly agree that, in
consideration of the Purchaser and PSS entering into this Agreement and the
other transactions contemplated hereby and the premises contained herein, and
except as provided in the respective Employment Agreements, such parties will
not, from and after the date of the Closing for a period of five years after the
date of the Closing, for any reason whatsoever, (i) directly or indirectly
engage in the United States in any competitive business, whether such engagement
shall be as an employer, officer, director, owner, employee, partner or other
agent or participant, (ii) assist others in engaging in any competitive business
in the manner described in the foregoing clause (i), (iii) solicit, attempt to
solicit or do business with any prior or then current customers of the Business
or (iv) induce employees of the Business, PSS or any affiliate of PSS to
terminate their employment with the Purchaser, PSS or such affiliate, as the
case may be, or hire any employees of the Purchaser, PSS or any other affiliate
of PSS to work with the Seller or any Shareholder or any company or business
affiliated with the Seller or any Shareholder. The covenant of the Shareholders
set forth in this paragraph (b) is in further consideration of the payment by
the Purchaser of $45,000 to Mallow and $45,000 to Slater, such payments to be
made on the Closing Date by certified or bank check or checks or, at the option
of the Shareholders, by wire transfer to an account or accounts of the
Shareholders designated to the Purchaser. The Shareholders shall
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provide the Purchaser with notice of the exercise of such option and the
designation of such account, such notice to be delivered not less than three
days before the Closing.
(c) In the event of the termination of this Agreement, from
and after the date of termination for a period of five years after the date of
termination, (i) neither the Seller nor any Shareholder will, for any reason
whatsoever, solicit, attempt to solicit or do business with any customers of the
business of the Purchaser, PSS or any of its affiliates or induce employees of
the Purchaser, PSS or any of its affiliates to terminate their employment with
the Purchaser, PSS or any of its affiliates or hire any employees to work with
the Seller or any Shareholder or any company or business affiliated with the
Seller or any Shareholder and (ii) neither the Purchaser nor PSS will, for any
reason whatsoever, solicit, attempt to solicit or do business with any customers
of the Business located and doing business exclusively in the State of Kansas or
induce employees of the Seller to terminate their employment with the Seller or
hire any employees to work with the Purchaser or PSS or any company or business
affiliated with the Purchaser or PSS.
(d) 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 (d) 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. Without limiting the generality of
the foregoing, the Seller and the Shareholders acknowledge that, in the event of
a breach or threatened breach by any of them of any of the provisions of
paragraph (b) of this Section, the Purchaser's damages may exceed the amount
paid to the Seller and the Shareholders (singly or in the aggregate) in
consideration of their covenants set forth in such paragraph (b).
3.9. Use of Name. In consideration of the Purchaser's entering
into this Agreement and the consummation of the transactions contemplated
hereby, the Seller hereby consents to the Purchaser's use, from and after the
Closing Date, of the names "ALM" and "Anesthesia Management Services" or any
combination or derivation thereof. The Seller shall, as soon as practicable
after the Closing Date, change its name so that its name does not include any
combination or derivation of "ALM" and file such name change certificates or
notices as and when required by applicable law.
3.10. Maintenance of Vacation Policy. After the Closing,
without the prior consent of Slater, such consent not to be unreasonably
withheld or delayed, the Purchaser agrees not to modify the ALM Vacation Days
Policy.
3.11. Employee Bonus Policy. Consistent with the intent and
past practice of the Seller's Profit Sharing Plan, the Purchaser agrees to
institute a policy of awarding certain of its full-time employees an annual cash
bonus based on the Purchaser's annual earnings and other factors. The Board of
Directors of the Purchaser shall annually determine the amount of such bonus, if
any, based upon the recommendation of the senior management of the Purchaser.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions of Obligations of the Purchaser and PSS. The
obligations of the Purchaser and PSS to perform this Agreement are subject to
the satisfaction of the following conditions unless waived by the Purchaser and
PSS:
(a) Authorization. All actions necessary to authorize the
execution, delivery and performance of this Agreement, the Employment
Agreements, the Bill of Sale, the Assignment, the St. Joseph Customer Contract
and the Investment Letter and the consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken by the Seller and the
Shareholders, as the case may be, and the Seller and the Shareholders shall have
full power and authority to enter into and deliver such agreements and to
consummate the transactions contemplated hereby and thereby.
(b) Representations and Warranties. The representations and
warranties of the Seller and the Shareholders contained herein shall be true and
correct in all material respects as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date, and the Seller and the
Shareholders shall have performed and complied with all covenants and agreements
required to be performed or complied with on or prior to the Closing Date. As of
the Closing Date, there shall have been no material adverse change in the
condition (financial or otherwise), assets, liabilities, operations, customer
contracts or other customer arrangements, management personnel, billings,
revenues, earnings, business or prospects of the Business.
(c) Consents, Amendments and Terminations. The Purchaser shall
have received duly executed and delivered copies of all waivers, consents,
terminations and approvals contemplated by Section 2.1(d) and Schedules 2.1(d)
and 2.1(j), all in form and substance reasonably satisfactory to the Purchaser.
(d) Bill of Sale; Assignment. The Seller shall have delivered
to the Purchaser the Bill of Sale conveying the personal property included in
the Acquired Assets, in substantially the form of Exhibit E, and the Assignment,
in substantially the form of Exhibit F.
(e) Financial Results. The Seller shall have earnings before
interest and taxes ("EBIT") for the fiscal year ended December 31, 1995 and for
the 12 months ended immediately before the Closing Date, of not less than
$426,529, respectively. EBIT shall be calculated using cash basis accounting
consistent with the past accounting practices of the Seller with respect to the
Business.
(f) Customers; Customer Contracts. At Closing, the Purchaser
shall have received a certificate of the chief executive officer of the Seller,
identifying (i) any customers listed on Schedule 2.1(o) as customers of the
Business as of the month end prior to the date of this Agreement (the "Month
End") who are not customers of the Business as of the Closing Date and (ii) any
customers of the Business as of the Closing Date not listed on Schedule 2.1(o)
as customers of the Business as of the Month End. The list of customers as of
the Month End as set forth in Schedule
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2.1(o), as modified by the certificate delivered pursuant to this Section, shall
be referred to herein as the "Closing Date Customer List". The Purchaser shall
have received (y) at least 15 days prior to the Closing Date a true and complete
copy of each contract between each customer of the Business and the Seller,
certified as true and complete by the chief executive officer of such Seller,
and (z) at Closing a certificate of the chief executive officer of the Seller
updating the certificate delivered pursuant to clause (y).
(g) Certificates. The Purchaser shall have received a
certificate of the chief executive officer and the chief financial officer of
the Seller and a certificate of each Shareholder, each in substantially the form
of Exhibit G.
(h) Opinion of Counsel. The Purchaser shall have received the
opinion dated the Closing Date of Shughart Thomson & Kilroy, counsel to the
Seller and the Shareholders, in substantially the form of Exhibit H.
(i) Financial Statements. The Purchaser shall have received a
balance sheet of the Seller as of the Closing Date and a related statement of
operations for the 12-month period ending at the most recent month end prior to
the Closing Date (the "Closing Date Financial Statement") certified by the chief
executive officer and chief financial officer of the Seller. At the Closing
Date, the assets of the Business, by account, shall not be less than the assets
set forth in the December 31, 1995 balance sheet included in Schedule 2.1(e)
(provided that cash and cash equivalents need only be in an amount sufficient to
operate the Business for one month) and the liabilities of the Business, by
account, shall not be greater than the liabilities set forth in such balance
sheet.
(j) Due Diligence. The Purchaser and its representatives shall
have completed a due diligence review of the condition (financial or otherwise),
assets, liabilities, operations, customer contracts or other customer
arrangements, billings, revenues, earnings, business and prospects of, and any
other matters relating to, the Seller and the Shareholders, and the results of
such due diligence shall be satisfactory to the Purchaser in its sole
discretion.
(k) Financing. The Purchaser shall have obtained financing
sufficient to satisfy all of the Purchaser's obligations under this Agreement,
satisfactory to the Purchaser in its sole discretion.
(l) Employment Agreements. The Shareholders each shall have
delivered to the Purchaser an Employment Agreement, in substantially the form of
Exhibit A.
(m) Investment Letter. Each of the Seller and the Shareholders
shall have delivered to the Purchaser the Investment Letter, in substantially
the form of Exhibit B.
(n) Lease. Linda M. Mallow shall have delivered to the
Purchaser the Lease, in substantially the form of Exhibit C.
(o) St. Joseph Customer Contract. St. Joseph Anesthesia
Services P.C. shall have delivered to the Purchaser the St. Joseph Customer
Contract, substantially the form of Exhibit D.
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(p) Other Documents. The Purchaser and PSS shall have received
such other documents, certificates or instruments as they may reasonably
request.
4.2. Conditions of Obligations of the Seller and Shareholders.
The obligations of the Seller and the Shareholders to perform this Agreement are
subject to the satisfaction of the following conditions unless waived by the
Seller and the Shareholders:
(a) Authorization. All actions necessary to authorize the
execution, delivery and performance of this Agreement, the Assignment and the
Employment Agreements and the consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken by the Purchaser and
PSS, as the case may be, and the Purchaser and PSS shall have full power and
authority to enter into and deliver such agreements and to consummate
transactions contemplated hereby and thereby, as applicable.
(b) Representations and Warranties. The representations and
warranties of the Purchaser and PSS contained herein shall be true and correct
in all material respects as of the date hereof and as of the Closing Date as if
made on and as of the Closing Date, and the Purchaser and PSS shall have
performed and complied with all covenants and agreements required to be
performed or complied with on or prior to the Closing Date.
(c) Assignment. The Purchaser shall have delivered to the
Seller the Assignment, duly executed by the Purchaser, in substantially the form
of Exhibit D.
(d) Employment Agreements. The Purchaser shall have entered
into an Employment Agreement with each Shareholder, in substantially the form of
Exhibit A.
(e) Certificate. The Seller shall have received a certificate
of the President or a Vice President of the Purchaser and PSS confirming the
matters set forth in Section 4.2(b) in form and substance reasonably
satisfactory to the Seller.
(f) Opinion of Counsel. The Seller shall have received the
opinion dated the Closing Date of Howard, Darby & Levin, counsel to the
Purchaser and PSS, in substantially the form of Exhibit I.
(g) Purchase Price, Noncompete Payment and Transferred Common
Stock. The Seller shall have received, pursuant to Section 1.3, the first
installment of the Purchase Price and stock certificates representing the
Transferred Common Stock and each of the Shareholders shall have received such
Shareholder's noncompete payment pursuant to Section 3.8(b).
(h) Lease. The Purchaser shall have delivered to Linda M.
Mallow the Lease, in substantially the form of Exhibit C.
(i)St. Joseph Customer Contract. The Purchaser shall have
delivered to St. Joseph Anesthesia Services P.C. the St. Joseph Customer
Contract, in substantially the form of Exhibit D.
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(j) Other Documents. The Seller shall have received such other
documents, certificates or instruments as it may reasonably request.
ARTICLE V
INDEMNITY
5.1. Indemnification. (a) The Seller and the Shareholders
jointly and severally indemnify and hold harmless the Purchaser and PSS, and
their respective affiliates, directors, officers, employees and other agents and
representatives from and against any and all liabilities, judgments, claims,
settlements, losses, damages, fees, liens, taxes, penalties, obligations and
expenses incurred or suffered by any such person arising from, by reason of or
in connection with:
(i) any misrepresentation or breach of any representation,
warranty or agreement of the Seller or any Shareholder contained in
this Agreement or any certificate or other document delivered by the
Seller or any Shareholder hereunder;
(ii) the non-fulfillment by the Seller or any Shareholder of
any agreement made by such party in this Agreement;
(iii) any and 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) of any kind related to the Business for any and
all periods ending on or prior to the Closing Date;
(iv) the conduct of the business or other operations of the
Business before or on the Closing Date or any condition existing
relating to product or environmental liability prior to the Closing
Date;
(v) except for the Assumed Liabilities, any and all
liabilities or obligations of the Seller, including any and all
Unassumed Liabilities;
(vi) the failure of the Seller or the Purchaser to comply with
any bulk sales laws or any state or local tax laws applicable to the
transactions contemplated by this agreement;
(vii) claims under checks issued by the Seller prior to the
Closing Date that remain uncashed or have expired as of the Closing
Date; and
(viii) any and all actions, suits, proceedings, demands,
judgments, costs and legal and other expenses incident to any of the
matters referred to in clauses (i) through (vii) of this Section
5.1(a).
The Seller and the Shareholders shall be limited in their liability under this
Section 5.1(a) to an amount not to exceed the greater of (x) $1,850,000 or (y)
the full amount of insurance proceeds available to the Seller and the
Shareholders.
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(b) The Purchaser and PSS jointly and severally indemnify and
hold harmless the Seller and the Shareholders, and their respective partners,
directors, officers, employees and other agents and representatives, from and
against any and all liabilities, judgments, claims, settlements, losses,
damages, fees, liens, taxes, penalties, obligations and expenses incurred or
suffered by any such person arising from, by reason of or in connection with:
(i) any misrepresentation or breach of any representation,
warranty or agreement of the Purchaser or PSS contained in this
Agreement or any certificate or other document delivered by the
Purchaser or PSS hereunder;
(ii) the non-fulfillment by the Purchaser or PSS of any
agreement made by it in this Agreement;
(iii) the conduct of the business or other operations of the
Business after the Closing Date and any and all Assumed Liabilities;
and
(iv) any and all actions, suits, proceedings, demands,
judgments, costs and legal and other expenses incident to any of the
matters referred to in clauses (i), (ii) and (iii) of this Section
5.1(b).
(c) In case any claim or litigation which might give rise to
any obligation of a party under the indemnity and reimbursement provisions of
this Agreement (each an "Indemnifying Party") shall come to the attention of the
party seeking indemnification hereunder (the "Indemnified Party"), the
Indemnified Party shall notify in writing promptly the Indemnifying Party of the
existence and amount thereof. Failure to give such notice shall not prejudice
the rights of the Indemnified Party, except to the extent that the Indemnifying
Party shall have been materially prejudiced by such failure. The Indemnifying
Party shall be entitled to participate in and, if (i) in the judgment of the
Indemnified Party such claim can properly be resolved by money damages alone and
the Indemnifying Party has the financial resources to pay such damages and (ii)
the Indemnifying Party admits that this indemnity fully covers the claim or
litigation, the Indemnifying Party shall be entitled to direct the defense of
any claim at its expense, but such defense shall be conducted by legal counsel
reasonably satisfactory to the Indemnified Party.
(d) The Purchaser may set off against any amounts due to the
Seller, the amount of any indemnity to which the Purchaser or PSS becomes
entitled under this Agreement; provided that the Purchaser may exercise this
right of setoff only following an adjudication as to the liability of the
Seller. The obligations of the Seller under this Section 5.1 for any claim to
indemnity shall be reduced by the amount (if any) that the Purchaser so sets off
for such claim.
5.2. Limitations. The indemnification and reimbursement
obligations (other than for claims relating to or arising out of Section
5.1(a)(i), (iii), (iv), (v), (vi) and (viii)) hereunder shall expire on the
third anniversary of the Closing Date (the "Expiration Date"), except as to any
claims for, or any claims that may result in, any liability, judgment, claim,
settlement, loss, damage, fee, lien, tax, penalty, obligation or expense for
which indemnity may be sought hereunder of which the
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Indemnifying Party has received written notice from the Indemnified Party on or
before the Expiration Date.
5.3. No Election. Nothing contained in this Article V shall be
deemed an election of remedies under this Agreement or limit in any way the
liability of any party under the Employment Agreements or any other agreement to
which such party is a party relating to this Agreement or the transactions
contemplated by this Agreement.
ARTICLE VI
MISCELLANEOUS
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.
6.2. Termination. (a) This Agreement shall terminate on the
earlier to occur of any of the following events:
(i) the mutual written agreement of the Purchaser and the
Seller;
(ii) by written notice of the Purchaser or the Seller to the
other party hereto, if the Closing shall not have occurred prior to
12:00 midnight (Eastern time zone) on May 31, 1996;
(iii) by written notice of the Purchaser to the Seller, if
either the Seller or any Shareholder shall have materially breached any
of its representations, warranties or agreements contained herein; or
(iv) by written notice of the Seller to the Purchaser, if
either the Purchaser or PSS shall have materially breached any of its
representations, warranties or agreements contained herein.
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to the termination hereof. Except
as aforesaid, upon the termination of this Agreement, all rights and obligations
of the parties under this Agreement shall terminate, except their obligations
under Sections 3.1, 3.7 and 3.8(a), (c) and (d) and Article V.
6.3. Descriptive Headings; Certain Interpretations. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(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.
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(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.
6.4. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and sufficient if delivered
personally or sent by telecopy (with confirmation of receipt) or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to the Purchaser or PSS, to:
PSS ALM, Inc.
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
P.O. Box 36
Mt. Joy, Pennsylvania 17552
Telecopy: 717-653-0567
Attention: Peter W. Gilson
Hamilton F. Potter III
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Telecopy: 212-841-1010
Attention: Kelly Vance, Esq.
If to the Seller or the Shareholders to:
ALM, Inc.
Suite D
10308 State Line
Leawood, Kansas 66206-2686
Telecopy: 913-383-9126
Attention: James Mallow, M.D.
Devona J. Slater
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with a copy to:
Shughart, Thomson & Kilroy
12 Wyandotte Plaza
120 West 12th Street
Kansas City, Missouri 64105
Telecopy: 816-374-0509
Attention: Randal L. Schultz, 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.
6.5. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
6.6. Survival. Except as set forth in Section 5.2, 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 Expiration Date; provided that
the representations and warranties in paragraphs (b), (c), (g)(i), (l), (m),
(n), (p), (r) and (t) of Section 2.1 and the agreements in Sections 3.1 and 3.8
shall not expire on the Expiration Date.
6.7. Benefits of Agreement. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement is for the
sole benefit of the parties hereto and not for the benefit of any third party,
except that any party providing financing for the transactions contemplated by
this Agreement may rely on the representations, warranties and agreements of the
Seller and the Shareholders.
6.8. Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
6.9. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferrable by any party hereto without
the prior written consent of the other parties hereto; except that the Purchaser
may assign all or part of its rights and obligations hereunder to any other
affiliate of the Purchaser if upon such assignment to its affiliate, the
Purchaser shall guaranty, in form and substance reasonably acceptable to the
Seller and the Shareholders, the performance by such assignee of its obligations
hereunder. Following any such permitted
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assignment, the term "Purchaser" shall mean such assignee. Any purported
assignment not permitted by this Section shall be void.
6.10. Enforceability. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF KANSAS,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
ALM, INC.
By: /s/ Devona J. Slater
Title: Secretary
/s/ James Mallow, M.D., as Shareholder
/s/ Devona J. Slater, as Shareholder
PSS ALM, INC.
By: /s/ Hamilton F. Potter III
Title: Vice President
PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ Hamilton F. Potter III
Title: Executive Vice President
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