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EXHIBIT 2.3
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ENVOY CORPORATION,
ENVOY ACQUISITION SUBSIDIARY, INC.
AND
AUTOMATED REVENUE MANAGEMENT, INC.
AND THE SHAREHOLDERS THEREOF
DATED AS OF FEBRUARY 23, 1998
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TABLE OF CONTENTS
ARTICLE 1.
THE MERGER...............................................................................................1
1.1 The Merger......................................................................................1
1.2 The Closing.....................................................................................1
1.3 Effective Time..................................................................................2
ARTICLE 2.
ARTICLES OF INCORPORATION AND CODE OF REGULATIONS AND OFFICERS AND DIRECTORS OF THE
SURVIVING CORPORATION....................................................................................2
2.1 Articles of Incorporation.......................................................................2
2.2 Code of Regulations.............................................................................2
2.3 Directors.......................................................................................2
2.4 Officers........................................................................................2
ARTICLE 3.
CONVERSION OF ARM SHARES.................................................................................2
3.1 Conversion of Shares............................................................................2
3.2 Fractional Shares...............................................................................2
3.3 Exchange of Certificates........................................................................3
3.4 Stock Splits, Etc. of ENVOY Common Stock........................................................3
3.5 Consent to Mergers; Waiver of Dissenter's Rights................................................3
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF ARM AND THE SHAREHOLDERS...............................................3
4.1 Existence; Good Standing; Authority; Compliance With Law........................................3
4.2 Authorization, Validity and Effect of Agreements................................................4
4.3 Capitalization..................................................................................4
4.4 Prior Sales of Securities.......................................................................5
4.5 Subsidiaries....................................................................................5
4.6 No Violation....................................................................................5
4.7 Financial Statements............................................................................5
4.8 Liabilities and Obligations.....................................................................6
4.9 No Material Adverse Changes.....................................................................6
4.10 Tax Matters.....................................................................................6
4.11 Employees and Fringe Benefit Plans..............................................................8
4.12 Real Property..................................................................................10
4.13 Personal Property..............................................................................12
4.14 Intellectual Property..........................................................................13
4.15 No Litigation..................................................................................14
4.16 Company Records................................................................................15
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4.17 Environmental Matters..........................................................................15
4.18 Labor Matters..................................................................................17
4.19. Insurance......................................................................................18
4.20. Product and Service Warranties.................................................................18
4.21. Contracts and Commitments......................................................................18
4.22. Accounts Receivable............................................................................19
4.23 Inventory......................................................................................19
4.24. Orders, Commitments and Returns................................................................20
4.25. Customers and Suppliers........................................................................20
4.26 Government Contracts...........................................................................20
4.27 Certain Payments...............................................................................21
4.28. No Breach......................................................................................21
4.29. Investment Intent..............................................................................21
4.30. Consents and Approvals.........................................................................22
4.31 Pooling of Interests...........................................................................22
4.32 No Brokers.....................................................................................22
4.33 Notes Receivable from Shareholders; Guarantees of Shareholders.................................22
4.34 ENVOY Stock Ownership..........................................................................22
4.35 Full Disclosure................................................................................22
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF ENVOY AND MERGER SUB..................................................23
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law.............................23
5.2 Authorization, Validity and Effect of Agreements...............................................23
5.3 Capitalization.................................................................................23
5.4 Merger Sub.....................................................................................24
5.5 No Violation...................................................................................24
5.6 SEC Documents..................................................................................24
5.7 Litigation.....................................................................................25
5.8 Absence of Certain Changes.....................................................................25
5.9 No Brokers.....................................................................................25
5.10 ARM Capital Stock Ownership....................................................................25
5.11 ENVOY Common Stock.............................................................................25
5.12 Pooling of Interests...........................................................................25
5.13. Consents and Approvals.........................................................................26
ARTICLE 6.
COVENANTS...............................................................................................26
6.1 Covenants of ENVOY, ARM and Shareholders. ....................................................26
6.2 Covenants of the Shareholders and ARM..........................................................26
6.3 Covenants of ENVOY.............................................................................29
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ARTICLE 7.
CONDITIONS..............................................................................................30
7.1 Conditions to Each Party's Obligation to Effect the Merger.....................................30
7.2 Conditions to Obligation of ARM and the Shareholders to Effect the Merger......................31
7.3 Conditions to Obligation of ENVOY and Merger Sub to Effect the Merger..........................31
ARTICLE 8.
INDEMNIFICATION.........................................................................................32
8.1 General Indemnification by the Shareholders....................................................32
8.2 Expiration and Limitation......................................................................33
8.3 Indemnification Procedures.....................................................................34
8.4 Survival of Representations, Warranties and Covenants..........................................36
8.5 Remedies Cumulative............................................................................36
ARTICLE 9.
NONCOMPETITION..........................................................................................36
9.1 Prohibited Activities..........................................................................36
9.2 Confidentiality................................................................................37
9.3 Damages........................................................................................37
9.4 Reasonable Restraint...........................................................................37
9.5 Severability; Reformation......................................................................38
9.6 Independent Covenant...........................................................................38
9.7 Materiality....................................................................................38
ARTICLE 10.
TERMINATION.............................................................................................38
10.1 Termination by Mutual Consent..................................................................38
10.2 Termination by Either ENVOY or ARM. ..........................................................39
10.3 Termination by ARM and Shareholders. .........................................................39
10.4 Termination by ENVOY...........................................................................39
10.5 Effect of Termination and Abandonment..........................................................39
10.6 Extension; Waiver..............................................................................40
ARTICLE 11.
GENERAL PROVISIONS......................................................................................40
11.1 Notices........................................................................................40
11.2 Assignment, Binding Effect; Benefit............................................................41
11.3 Entire Agreement...............................................................................41
11.4 Amendment......................................................................................41
11.5 Governing Law..................................................................................41
11.6 Counterparts...................................................................................41
11.7 Headings.......................................................................................41
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11.8 Interpretation.................................................................................41
11.9 Waivers........................................................................................41
11.10 Incorporation of Exhibits......................................................................42
11.11 Severability...................................................................................42
11.12 Enforcement of Agreement.......................................................................42
11.13 Expenses.......................................................................................42
11.14 Press Releases.................................................................................42
11.15 Knowledge......................................................................................42
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), is executed as of
the 23rd day of February, 1998, by and among ENVOY Corporation, a Tennessee
corporation ("ENVOY"), Envoy Acquisition Subsidiary, Inc., a Tennessee
corporation and a wholly owned subsidiary of ENVOY ("Merger Sub"), Automated
Revenue Management, Inc., an Ohio corporation ("ARM"), and each of the
shareholders of ARM, whose names are set forth on Schedule I hereto (the
"Shareholders").
RECITALS
A. The Board of Directors of ENVOY and the Board of Directors of ARM
each have determined that a business combination between ENVOY and ARM is in the
best interests of their respective companies and shareholders and presents an
opportunity for their respective companies to enhance the service provided to
customers and achieve long-term strategic and financial benefits, and
accordingly have agreed to effect the Merger provided for herein upon the terms
and subject to the conditions set forth herein.
B. For federal income tax purposes, it is intended that the Merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), and for financial accounting purposes shall be accounted for as a
"pooling of interests."
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1.
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into ARM, in accordance with this Agreement (the "Merger"). The
separate corporate existence of Merger Sub shall thereupon cease. ARM shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall be a wholly owned subsidiary of ENVOY.
The Merger shall have the effects specified in Section 1701.82 of the Ohio
General Corporation Law ("OGCL") and Section ▇▇-▇▇-▇▇▇ of the Tennessee Business
Corporation Act ("TBCA").
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, at
9:00 a.m., local time, on the sooner of February 27, 1998 or the first business
day immediately following the day on which the last to be fulfilled or waived of
the conditions set forth in Article 7 shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as ENVOY and ARM may agree.
The date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
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1.3 Effective Time. If all the conditions to the Merger set forth in
Article 7 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 10, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
1701.81 of the OGCL and Articles of Merger meeting the requirements of Section
▇▇-▇▇-▇▇▇ of the TBCA to be properly executed and filed in accordance with such
laws on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger and the Articles of Merger or at such later
time that the parties hereto shall have agreed upon and designated in such
filing as the effective time of the Merger (the "Effective Time"), and the
Surviving Corporation's name shall be Automated Revenue Management, Inc.
ARTICLE 2.
ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
AND OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of ARM in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
2.2 Code of Regulations. The Code of Regulations of ARM in effect
immediately prior to the Effective Time shall be the Code of Regulations of the
Surviving Corporation, until duly amended in accordance with applicable law.
2.3 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
2.4 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
ARTICLE 3.
CONVERSION OF ARM SHARES
3.1 Conversion of Shares. At the Effective Time, all ARM Shares (as
defined below) shall be converted into 4,000 shares of ENVOY common stock, no
par value per share ("Common Stock") (the "Merger Consideration"). "ARM Shares"
shall mean all of the issued and outstanding shares of Common Stock of ARM
immediately prior to the Effective Time (including any shares which may have
been issued upon exercise of currently outstanding options or warrants, if any).
3.2 Fractional Shares. In lieu of the issuance of fractional shares of
ENVOY Common Stock, the Shareholders shall be entitled to receive a cash payment
(without interest) equal to the fair market value of any fraction of a share of
ENVOY Common Stock to which such holder would be entitled but for this
provision. For purposes of calculating such payment, the fair market value of a
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fraction of a share of ENVOY Common Stock shall be such fraction multiplied by
the closing sale price as reported on the Nasdaq National Market on the date
hereof.
3.3 Exchange of Certificates. After the Effective Time, the
Shareholders, upon surrender of a certificate or certificates theretofore
representing ARM Shares to Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC, as exchange agent for ENVOY,
shall be entitled to receive in exchange therefor any payment due in lieu of
fractional shares and a certificate or certificates representing the number of
whole shares of ENVOY Common Stock into which such holders' ARM Shares were
converted, as set forth on Schedule I hereto.
3.4 Stock Splits, Etc. of ENVOY Common Stock. In the event ENVOY
changes the number of shares of ENVOY Common Stock issued and outstanding prior
to the Effective Time as a result of a stock split, stock dividend,
recapitalization, reorganization or any other transaction in which any security
of ENVOY or any other entity or cash is issued or paid in respect of the
outstanding shares of ENVOY Common Stock and the record date therefor is after
the date of this Agreement and prior to the Effective Time, the conversion ratio
shall be proportionately adjusted.
3.5 Consent to Mergers; Waiver of Dissenter's Rights. By execution of
this Agreement, each of the Shareholders (a) consents to the terms of the Merger
and to the taking of action to approve the Merger without a meeting, (b)
acknowledges that he is aware of his rights, if any, to dissent to the Merger
and demand payment for his ARM Shares in accordance with the OGCL and the Code
of Regulations of ARM, and (c) waives any such rights to dissent and demand
payment.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF ARM
AND THE SHAREHOLDERS
Except as set forth in the disclosure letter delivered prior to the
execution hereof to ENVOY (the "ARM Disclosure Letter"), ARM and Shareholders
jointly and severally represent and warrant to ENVOY as of the date of this
Agreement and as of the Closing Date as follows:
4.1 Existence; Good Standing; Authority; Compliance With Law. ARM is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio. ARM is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other state of
the United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a "ARM Material Adverse Effect" (hereinafter defined). ARM has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted. ARM is not in violation of any order
of any court, governmental authority or arbitration board or tribunal, or any
law, ordinance, governmental rule or regulation to which it is subject, except
where the violation would not have an XpiData Material Adverse Effect. ARM has
all licenses, permits and other authorizations, including licenses to act as a
consumer collection agency in the states set forth in the ARM Disclosure Letter
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(the "Permits") and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
except where the failure to obtain any such item or to take any such action
would not have an ARM Material Adverse Effect. The Permits are valid, and ARM
has not received any notice that any governmental authority intends to modify,
cancel, terminate or fail to renew any Permit. No present or former officer,
manager, member or employee of ARM or any affiliate thereof, or any other
person, firm, corporation or other entity, owns or has any proprietary,
financial or other interest (direct or indirect) in any Permits. ARM has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the Permits and other applicable
orders, statutes, approvals, judgments, decrees, plans, variances, rules and
regulations of federal, state, county, municipal authorities, agencies or boards
(collectively, "Laws") and is not in violation of any of the foregoing except
where such failure would not have an ARM Material Adverse Effect. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to ARM, by any Permit. For purposes of this Agreement, an ARM Material
Adverse Effect shall mean any event, occurrence, act or omission that would have
a material adverse effect on the business, results of operations or financial
condition, assets or liabilities of ARM.
4.2 Authorization, Validity and Effect of Agreements. Each of ARM and
the Shareholders has the requisite power and authority to execute and deliver
this Agreement and all agreements and documents contemplated hereby (to which
any of ARM or the Shareholders is a party). The consummation by each of ARM and
the Shareholders of the transactions contemplated hereby has been duly
authorized by all requisite action by ARM and the Shareholders. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of each of ARM and the Shareholders enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
4.3 Capitalization. The authorized capital stock of ARM and the issued
and outstanding capital stock of ARM (and the owners thereof) are as set forth
in the ARM Disclosure Letter. ARM has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the Shareholders of ARM on any matter. All issued and outstanding ARM Shares are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. There are no options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate ARM to issue, transfer or sell any shares of capital stock of ARM. ARM
has no obligation (contingent or otherwise) to purchase, redeem, or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. As a result of the Merger,
ENVOY will be the record and beneficial owner of all outstanding capital stock
of ARM.
Each of the Shareholders represents and warrants that (i) such
Shareholder is the record and beneficial owner of the number of ARM Shares set
forth in the ARM Disclosure Letter, free and clear of all liens, claims,
charges, restrictions, security interests, equities, proxies, pledges
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or encumbrances of any kind; (ii) the Shareholder has the full right, power,
authority and capacity to vote, dispose of, sell and transfer all the ARM Shares
owned by such Shareholder; (iii) and has full title to such shares, free and
clear of all liens, claims, charges, restrictions, security interests, equities,
proxies, pledges or encumbrances of any kind.
4.4 Prior Sales of Securities. All offers and sales of ARM Shares
outstanding prior to the date hereof were at all relevant times exempt from the
registration requirements of the Securities Act of 1933, as amended, and were
duly registered or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws, or civil
liability therefor has been eliminated by an offer to rescind.
4.5 Subsidiaries. ARM does not own directly or indirectly any
subsidiary or any interest or investment in any corporation, partnership, joint
venture, business, trust or other entity except as set forth in the ARM
Disclosure Letter.
4.6 No Violation. Except as set forth in the ARM Disclosure Letter,
neither the execution and delivery by ARM of this Agreement, nor the
consummation by ARM of the transactions contemplated hereby in accordance with
the terms hereof, will: (i) conflict with or result in a breach of any
provisions of the articles of incorporation or code of regulations of ARM, true
and correct copies of which have been delivered to ENVOY; (ii) conflict with,
result in a breach of any provision of or the modification or termination of,
constitute a default under, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the assets of ARM pursuant
to any material commitment, lease, contract, or other material agreement or
instrument to which ARM is a party; (iii) violate any order, arbitration award,
judgment, writ, injunction, decree, statute, rule or regulation applicable to
ARM; or (iv) result in any termination or impairment of any Permit, contractual
right or other authorization of ARM.
4.7 Financial Statements. ARM has delivered to ENVOY its unaudited
financial statements for the three years ended December 31, 1997 and unaudited
interim financial statements for each full month and quarter subsequent thereto.
Each of the balance sheets provided to ENVOY (including any related notes and
schedules) fairly presents the financial position of ARM as of its date and each
of the statements of income, retained earnings and cash flows provided to ENVOY
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows of ARM for the periods set forth
therein (subject, in the case of unaudited statements, to the omission of
footnotes and to normal year-end audit adjustments which would not be material
in amount or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. Such financial statements have been prepared from the
books and records of ARM which accurately and fairly reflect the transactions
and dispositions of the assets of ARM. As of December 31, 1997 or any subsequent
date for which a balance sheet is provided, ARM had no material liabilities,
contingent or otherwise, whether due or to become due, known or unknown, other
than as indicated on the balance sheet of such date. ARM has adequately accrued
employee benefit costs, and such accruals
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(to the date thereof) are reflected in the balance sheet of such date. Since the
date of the unaudited financial statements for the fiscal year ended December
31, 1997, there have been no material changes in ARM's accounting policies.
4.8 Liabilities and Obligations.
(a) ARM has delivered to ENVOY, in the case of those
liabilities that are not set forth on the ARM balance sheet as of December 31,
1997 and which may exceed $10,000, a reasonable estimate of the maximum amount
that may be payable.
(b) The ARM Disclosure Letter includes a summary description
of all plans or projects involving the opening of new operations, expansion of
any existing operations or the acquisition of any real property or existing
business, to which management of ARM has made any expenditure in excess of
$10,000 in the two-year period prior to the date of this Agreement, which if
pursued by the Surviving Corporation would require additional material
expenditures of capital.
(c) For purposes of this Section, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmature or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured.
4.9 No Material Adverse Changes. Except as set forth in the ARM
Disclosure Letter, since December 31, 1997, there has not been (i) any material
adverse change in the financial condition, results of operations, business,
prospects, assets or liabilities (contingent or otherwise, whether due or to
become due, known or unknown), of ARM, except for changes in the ordinary course
of business consistent with historical experience resulting from the seasonal
nature (if any) of ARM's business; (ii) any extraordinary dividend declared or
paid or distribution made on the capital stock of ARM or any capital stock
thereof redeemed or repurchased; (iii) any salary, bonus or compensation
increases to any officers, employees or agents of ARM, other than customary
increases; (iv) any pending or, to the Knowledge of the Principals (defined
hereinafter in Section 11.15), threatened labor disputes or other labor problems
against or potentially affecting ARM, or (v) any other material transaction
entered into by ARM, except in the ordinary course of business and consistent
with past practice.
4.10 Tax Matters.
(a) ARM has duly filed all Tax (hereinafter defined) reports
and returns required to be filed by it when due and has duly paid all Taxes when
due whether or not shown on any Tax return and other charges due or claimed to
be due from it by federal, state or local taxing authorities (including without
limitation, those due in respect of its properties, income, franchises,
licenses, sales and payrolls); and true and correct copies of all Tax reports
and returns related to such taxes and other charges for the period since January
1, 1992 have been delivered to ENVOY. The provisions
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for Taxes shown on the ARM financial statements for the year ended December 31,
1997 are adequate to cover the liability of ARM for all Taxes (including
employer income tax withholding, social security and unemployment taxes, but not
including taxes payable by the Shareholders with respect to income of ARM prior
to Closing), to the date thereof.
(b) Since December 31, 1997, ARM has not incurred any Tax
liabilities other than in the ordinary course of business; there are no Tax
liens (other than liens for current Taxes not yet due) upon any properties or
assets of ARM (whether real, personal or mixed, tangible or intangible), and
except as reflected in the ARM Disclosure Letter, there are no pending or, to
the Knowledge of the Principals, threatened questions or examinations relating
to, or claims asserted for, Taxes or assessments against ARM. No claim has ever
been made by an authority in a jurisdiction where ARM does not file Tax returns
that it is or may be subject to taxation by that jurisdiction. ARM has not
granted or been requested to grant any extension of the limitation period
applicable to any claim for Taxes or assessments with respect to Taxes. ARM has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party. ARM is not a party to any Tax
allocation or sharing agreement.
(c) ARM (and any predecessor of ARM) has been a validly
electing S corporation within the meaning of Sections 1361 and 1362 of the Code
at all times during its existence and ARM will be an S corporation up to the
Effective Time. ARM and the Shareholders will not take or allow any action
(other than the transactions contemplated by this Agreement) that would result
in the termination of ARM's status prior to the Closing as a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code. Except as
set forth on the ARM Disclosure Letter, ARM would not be liable for any Tax
under Section 1374 of the Code if its assets were sold for their fair market
value as of the Closing Date. Except as set forth on the ARM Disclosure Letter,
ARM has not, in the past ten years, acquired assets from another corporation in
a transaction in which ARM's Tax basis for the acquired assets was determined,
in whole or in part, by reference to the Tax basis of the acquired assets (or
any other property) in the hands of the transferor.
(d) If ARM has ever been a member of an affiliated group,
within the meaning of Section 1504 of the Code, filing a consolidated federal
income tax return (an "Affiliated Group"), each such Affiliated Group has filed
all Tax returns that it was required to file for each taxable period during
which ARM was a member of the Affiliated Group, and has paid all taxes owed by
the Affiliated Group (whether or not shown on the Tax return) for each taxable
period during which ARM was a member of the Affiliated Group. ARM has no
liability for the taxes of any Affiliated Group under Treasury Regulation
1.1502-6 (or any similar provision of state, local or foreign law).
(e) For purposes of this Agreement, "Tax" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs
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duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto whether disputed or not.
4.11 Employees and Fringe Benefit Plans.
(a) The ARM Disclosure Letter sets forth the names and titles
of the directors, officers and employees of ARM and the annual rate of
compensation (including bonuses) being paid to each such officer and
employee as of the most recent practicable date.
(b) The ARM Disclosure Letter lists each employment, bonus,
deferred compensation, pension, stock option, stock appreciation right,
profit-sharing or retirement plan, arrangement or practice, each
medical, vacation, retiree medical, severance pay plan, and each other
agreement or fringe benefit plan, arrangement or practice, of ARM,
whether formal or informal, which affects one or more of its employees,
including all "employee benefit plans" as defined by Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, the "Plans"). All Plans which are subject to
Title IV of ERISA or the minimum funding standards of Section 412 of
the Code shall be referred to as the "Pension Plans."
(c) Copies of each such Plan have heretofore been delivered to
ENVOY. For each Plan which is an "employee benefit plan" under Section
3(3) of ERISA, ARM has delivered to ENVOY correct and complete copies
of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report (including all applicable
schedules), and all related trust agreements, insurance contracts and
funding agreements which implement each such Plan.
(d) ARM does not have any commitment, whether formal or
informal, (i) to create any additional such Plan; (ii) to modify or
change any such Plan; or (iii) to maintain for any period of time any
such Plan. The ARM Disclosure Letter contains an accurate and complete
description of the funding policies (and commitments, if any) of ARM
with respect to each such existing Plan.
(e) ARM has no unfunded past service liability in respect of
any of its Plans; the actuarially computed value of vested benefits
under any Pension Plan of ARM (determined in accordance with methods
and assumptions utilized by the Pension Benefit Guaranty Corporation
("PBGC") applicable to a plan terminating on the date of determination)
does not exceed the fair market value of the fund assets relating to
such Pension Plan; neither ARM nor any Plan nor any trustee,
administrator, fiduciary or sponsor of any Plan has engaged in any
prohibited transactions as defined in Section 406 of ERISA or Section
4975 of the Code for which there is no statutory exemption in Section
408 of ERISA or Section 4975 of the
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Code; all filings, reports and descriptions as to such Plans (including
Form 5500 Annual Reports, Summary Plan Descriptions, PBCG-1's and
Summary Annual Reports) required to have been made or distributed to
participants, the Internal Revenue Service, the United States
Department of Labor and other governmental agencies have been made in a
timely manner or will be made on or prior to the Closing Date; there is
no material litigation, disputed claim, governmental proceeding or
investigation pending or threatened with respect to any of such Plans,
the related trusts, or any fiduciary, trustee, administrator or sponsor
of such Plans; such Plans have been established, maintained and
administered in all material respects in accordance with their
governing documents and applicable provisions of ERISA and the Code and
Treasury Regulations promulgated thereunder; there has been no
"Reportable Event" as defined in Section 4043 of ERISA with respect to
any Pension Plan that has not been waived by the Pension Benefit
Guaranty Corporation; and each Pension Plan and each Plan which is
intended to be a qualified plan under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue
Service.
(f) ARM has complied in all material respects with all
applicable federal, state and local laws, rules and regulations
relating to employees' employment and/or employment relationships,
including, without limitation, wage related laws, anti-discrimination
laws, employee safety laws and COBRA (defined herein to mean the
requirements of Code Section 4980B, Proposed Treasury Regulation
Section 1.162-26 and Part 6 of Subtitle B of Title I of ERISA).
(g) The consummation of the transactions on the part of ARM
and the Shareholders contemplated by this Agreement will not (i) result
in the payment or series of payments by ARM to any employee or other
person of an "excess parachute payment" within the meaning of Section
280G of the Code, (ii) entitle any employee or former employee of ARM
to severance pay, unemployment compensation or any other payment, and
(iii) accelerate the time of payment or vesting of any stock option,
stock appreciation right, deferred compensation or other employee
benefits under any Plan (including vacation and sick pay).
(h) None of the Plans which are "welfare benefit plans,"
within the meaning of Section 3(1) of ERISA, provide for continuing
benefits or coverage after termination or retirement from employment,
except for COBRA rights under a "group health plan" as defined in Code
Section 4980B(g) and ERISA Section 607.
(i) Neither ARM nor any of its "affiliates" (as defined in
ERISA) has ever participated in or withdrawn from a multi-employer plan
as defined in Section 4001(a)(3) of Title IV of ERISA, and ARM has not
incurred and does not presently owe any liability as a result of any
partial or complete withdrawal by any employer from such a
multi-employer plan as described under Sections 4201, 4203, or 4205 of
ERISA.
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(j) No Pension Plan has been completely or partially
terminated, nor to the Knowledge of the Principals has any proceeding
been instituted by the PBGC to terminate any such Pension Plan; ARM has
not incurred, and does not presently owe, any liability to the PBGC or
the Internal Revenue Service with respect to any Pension Plan
including, but not by way of limitation, any liability for PBGC
premiums or excise taxes under Code Section 4971.
4.12 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by ARM, together with any additions thereto or replacements
thereof.
(b) The ARM Disclosure Letter contains (i) a complete and
accurate description of all Real Property (including street address, owner, and
Company's use thereof) and (ii) a complete list, to the Knowledge of the
Principals, of any claims, liabilities, security interests, mortgages, liens,
pledges, conditions, charges, covenants, easements, restrictions, encroachments,
leases, or encumbrances of any nature thereon created by ARM ("Encumbrances").
The ARM Disclosure Letter indicates whether the Real Property is owned or
leased. The Real Property listed on the ARM Disclosure Letter includes all
interests in real property necessary to conduct the business and operations of
ARM.
(c) Except as set forth in the ARM Disclosure Letter:
(i) ARM does not own, in fee simple or otherwise, any
Real Property. ARM Leases (as hereinafter defined) the Real Property described
in the ARM Disclosure Letter.
(ii) To the Knowledge of the Principals, all
structures, facilities and improvements to the Real Property ("Structures") are
located within the boundary lines of the Real Property and no structures,
facilities or other improvements on any parcel adjacent to the Real Property
encroach onto any portion of the Real Property. To the Knowledge of the
Principals, the Structures do not encroach on any easement which burdens any
portion of the Real Property, and none of the Real Property serves any adjacent
parcel for any purpose inconsistent with the use of the Real Property.
(iii) ARM has good and valid rights of ingress and
egress to and from all Real Property from and to the public street systems for
all usual street, road and utility purposes.
(iv) To the Knowledge of the Principals, all
structures and all structural, mechanical and other physical systems thereof
that constitute part of the Real Property, including but not limited to the
walls, roofs and structural elements thereof and the heating, ventilation, air
conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water,
paving and parking
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equipment, systems and facility included therein, and other material items at
the Real Property (collectively, the "Tangible Assets"), are free of defects and
in good operating condition and repair. For purposes of this Section, a defect
shall mean a condition relating to the structures or any structural, mechanical
or physical system which requires an expenditure of more than $1,000 to correct.
To the Knowledge of the Principals, no maintenance or repair to the Real
Property, Structures or any Tangible Asset has been unreasonably deferred. To
the Knowledge of the Principals, there is no water, chemical or gaseous seepage,
diffusion or other intrusion into said buildings, including any subterranean
portions, that would impair beneficial use of the Real Property, Structures or
any Tangible Asset.
(v) To the Knowledge of the Principals, all water,
sewer, gas, electric, telephone and drainage facilities, and all other utilities
required by any applicable law or by the use and operation of the Real Property
in the conduct of the business of ARM's business are installed to the property
lines of the Real Property, are connected pursuant to valid permits to municipal
or public utility services or proper drainage facilities, are fully operable and
are adequate to service the Real Property in the operation of ARM's business and
to permit full compliance with the requirements of all laws in the operation of
such business. To the Knowledge of the Principals, no fact or condition exists
which could result in the termination or material reduction of the current
access from the Real Property to existing roads or to sewer or other utility
services presently serving the Real Property.
(vi) The Real Property and all present uses and
operations of the Real Property comply in all material respects with all
applicable Laws of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped),
covenants, conditions, restrictions, easements, disposition agreements and
similar matters affecting the Real Property. ARM has obtained all material
approvals of governmental authorities (including certificates of use and
occupancy, licenses and permits) required in connection with the use, occupation
and operation of the Real Property.
(vii) There are no pending or, to the Knowledge of
the Principals, threatened condemnation, fire, health, safety, building, zoning
or other land use regulatory proceedings, lawsuits or administrative actions
relating to any portion of the Real Property or any other matters which do or
may adversely affect in any material respect the current use, occupancy or value
thereof, nor has ARM or the Shareholders received notice of any pending or
threatened special assessment proceedings affecting any portion of the Real
Property.
(viii) No portion of the Real Property or the
Structures has suffered any damage by fire or other casualty which has not
heretofore been completely repaired and restored to its original condition.
(ix) Except as set forth in the ARM Disclosure
Letter, there are no parties other than ARM in possession of any of the Real
Property or any portion thereof, and there are no
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leases, subleases, licenses, concessions or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any portion of
the Real Property or any portion thereof.
(x) There are no outstanding options or rights of
first refusal to purchase the Real Property, or any portion thereof or interest
therein. ARM has not transferred any air rights or development rights relating
to the Real Property.
(xi) To the Knowledge of the Principals, no portion
of the Real Property is located in a wetlands area, as defined by Laws, or in a
designated or recognized flood plain, flood plain district, flood hazard area or
area of similar characterization. To the Knowledge of the Principals, no
commercial use of any portion of the Real Property will violate any requirement
of the United States Corps of Engineers or Laws relating to wetlands areas.
(xii) All real property taxes and assessments that
are due and payable by ARM with respect to the Real Property have been paid or
will be paid at or prior to Closing.
(xiii) All oral or written leases, subleases,
licenses, concession agreements or other use or occupancy agreements pursuant to
which ARM leases from any other party any real property, including all
amendments, renewals, extensions, modifications or supplements to any of the
foregoing or substitutions for any of the foregoing (collectively, the "Leases")
are valid and binding agreements of ARM, and ARM is not in breach of such
Leases. ARM has provided ENVOY with true and complete copies of all of the
Leases, all amendments, renewals, extensions, modifications or supplements
thereto, and all material correspondence related thereto, including all
correspondence pursuant to which any party to any of the Leases declared a
default thereunder or provided notice of the exercise of any operation granted
to such party under such Lease. The Leases and ARM's interests thereunder are
free of all Encumbrances, except for Encumbrances reflected in the ARM financial
statements and liens for taxes not yet due and payable.
(xiv) None of the Leases requires the consent or
approval of any party thereto in connection with the consummation of the
transactions contemplated hereby.
4.13 Personal Property.
(a) The ARM Disclosure Letter sets forth a complete and
accurate list of (i) all personal property included on the balance sheet as of
December 31, 1997 and (ii) all other personal property owned or leased by ARM,
with a current book value in excess of $10,000, including in each case true,
complete and correct copies of leases for material equipment and an indication
as to which assets are currently owned, or were formerly owned, by the
Shareholders or business or personal affiliates of the Shareholders or of ARM.
(b) ARM currently owns or leases all personal property
necessary to conduct the business and operations of ARM as they are currently
being conducted.
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(c) All of the machinery, equipment and vehicles of ARM,
including those listed on the ARM Disclosure Letter, are in good working order
and condition, ordinary wear and tear excepted. All leases set forth on the ARM
Disclosure Letter are in full force and effect and constitute valid and binding
agreements of ARM, and ARM is not in material breach of any of their terms. All
fixed assets used by ARM that are material to the operation of its business are
either owned by ARM or leased under an agreement listed on the ARM Disclosure
Letter.
4.14 Intellectual Property.
(a) ARM is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks (as defined below) listed on the ARM Disclosure Letter. The
ARM Disclosure Letter lists (i) all of the Marks registered in the United States
Patent and Trademark Office ("PTO") or the equivalent thereof in any state of
the United States or in any foreign country, and (ii) all of the unregistered
Marks, that ARM now owns or uses in connection with its business. Except with
respect to those Marks shown as licensed on the ARM Disclosure Letter, ARM owns
all of the registered and unregistered trademarks, service marks, and trade
names that it uses. The Marks listed on the ARM Disclosure Letter will not cease
to be valid rights of ARM by reason of the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
For purposes of this Section, the term "▇▇▇▇" shall mean all right, title and
interest in and to any United States or foreign trademarks, service marks and
trade names now held by ARM, including any registration or application for
registration of any trademarks and services marks in the PTO or the equivalent
thereof in any state of the United States or in any foreign country, as well as
any unregistered marks used by ARM, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by ARM in the United States or any foreign country.
(b) ARM owns no, and is not licensed or otherwise in
possession of legally enforceable rights to use any Patents, and does not use
any Patents in connection with its business. ARM is the true and lawful owner
of, or is licensed or otherwise possesses legally enforceable rights to use, all
rights in the Copyright (defined below) registrations listed on the ARM
Disclosure Letter, which constitute all of the Copyrights that ARM now owns or
is licensed to use. ARM uses no other copyright registrations in connection with
its business. For purposes of this Section, the term "Patent" shall mean any
United States or foreign patent as well as any application for a United States
or foreign patent made by ARM; the term "Copyright" shall mean any United States
or foreign copyright owned by ARM as of the date of this Agreement, including
any registration of copyrights, in the United States Copyright Office or the
equivalent thereof in any foreign county, as well as any application for a
United States or foreign copyright registration made by ARM.
(c) ARM is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the
franchises or similar rights (collectively, "Other Rights") listed on the ARM
Disclosure Letter. Those Other Rights constitute all of the Other Rights that
ARM now owns or is licensed to use. ARM owns or is licensed to practice under
all trade secrets, franchises or similar rights that it owns, uses or practices
under.
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(d) The Marks, Copyrights, and Other Rights listed on the ARM
Disclosure Letter are referred to collectively herein as the "Intellectual
Property." The Intellectual Property owned by ARM is referred to herein
collectively as the "ARM Intellectual Property." All other Intellectual Property
is referred to herein collectively as the "Third Party Intellectual Property."
Except as indicated on the ARM Disclosure Letter, ARM has no obligation to
compensate any person for the use of any Intellectual Property nor has ARM
granted to any person any license, option or other rights to use in any manner
any Intellectual Property, whether requiring the payment of royalties or not.
(e) ARM is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations hereunder,
in violation of any Third Party Intellectual Property license, sublicense or
agreement described in the ARM Disclosure Letter. No claims with respect to ARM
Intellectual Property or Third Party Intellectual Property are currently pending
or, to the Knowledge of the Principals, are threatened by any person, nor, to
the Knowledge of the Principals, do any grounds for any claims exist: (i) to the
effect that the manufacture, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by ARM infringes on any
copyright, patent, trademark, service ▇▇▇▇ or trade secret; (ii) against the use
by ARM of any trademarks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications used in
ARM's business as currently conducted by ARM; (iii) challenging the ownership,
validity or effectiveness of any of ARM Intellectual Property or other trade
secret material to ARM; or (iv) challenging ARM's license or legally enforceable
right to use of the Third Party Intellectual Property. To the Knowledge of the
Principals, there is no unauthorized use, infringement or misappropriation of
any of ARM Intellectual Property by any third party. ARM has not been sued or
charged in writing as a defendant in any claim, suit, action or proceeding which
involves a claim or infringement of trade secrets, any patents, trademarks,
service marks, or copyrights and which has not been finally terminated or been
informed or notified by any third party that ARM may be engaged in such
infringement, and to the Knowledge of the Principals, there is no infringement
liability with respect to, or infringement by, ARM of any trade secret, patent,
trademark, service ▇▇▇▇, or copyright of another.
4.15 No Litigation. Except as set forth in the ARM Disclosure Letter,
there are no actions, suits or proceedings pending or, to the Knowledge of the
Principals, overtly threatened in writing against ARM, at law or in equity, or
before or by any federal or state commission or board, bureau or agency or
instrumentality. ARM is not subject to any currently existing order, writ,
injunction or decree relating to its operations. There are no judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against ARM or against any of its
properties or business. No Shareholder has, at any time: (i) committed any
criminal act (except for minor traffic violations); (ii) engaged in acts of
fraud, dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection. No
Shareholder has any claims against ARM other than claims for reimbursement of
business expenses or employment compensation in the ordinary course of business.
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4.16 Company Records. True and correct copies of the ARM articles of
incorporation and code of regulations have been delivered to ENVOY. The minute
books of ARM submitted to ENVOY for review correctly reflect all action taken at
all the meetings (or by written consent in lieu thereof) of their respective
directors (including committees) and shareholders, and correctly record all
resolutions thereof. ARM has delivered to ENVOY true and complete copies of each
agreement, contract, commitment or other document (or summaries thereof) that is
referred to in the ARM Disclosure Letter or that has been requested by ENVOY.
4.17 Environmental Matters.
For purposes of this Agreement, the following terms shall have the
following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ▇▇.▇▇. 9601 et seq.;
"ARM Property" shall mean (i) any real property and improvements
presently owned, leased, licensed to, operated or occupied by ARM, and (ii) any
other real property and improvements at any previous time owned, leased,
licensed to, operated or occupied by ARM;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any Environmental Law (for purposes of (i) and(ii) below, "Claims") or any
Environmental Permit (as defined below), including without limitation;
(i) any and all Claims by governmental or regulatory
authorities for investigation, oversight, enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law; and
(ii) any and all Claims by any third party seeking damages,
response costs, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or
the environment;
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, binding policy or binding rule of common law
now in effect and as amended, and any binding judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the environment, health, or safety of hazardous,
toxic or dangerous materials, substances or wastes, including without limitation
CERCLA; the Toxic Substances Control Act, as amended, 15 U.S.C. ▇▇.▇▇. 2601 et
seq.; the Clean Air Act, as amended, 42 U.S.C. ▇▇.▇▇. 7401 et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. ▇▇.▇▇. 1251 et seq.; the
Federal Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. ▇▇.▇▇.
136, et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
▇▇.▇▇. 1801 et seq.; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ▇▇.▇▇. 6901 et seq.; the Safe Drinking
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Water Act, 42 U.S.C. ▇▇.▇▇. 300f et seq.; the Emergency Planning and Community
Right-to-Know Law, 42 U.S.C. ▇▇.▇▇. 11001 et seq.; and any similar state or
local law;
"Hazardous Materials" shall mean those materials listed in Section
101(14) of CERCLA, as hereinafter defined, and any other substance, material or
waste defined, limited, prohibited or otherwise regulated as toxic or hazardous
under any Environmental Law, including, but not limited to any petroleum,
petroleum hydrocarbons, or petroleum by-products, flammable explosives,
radioactive materials, asbestos, asbestos products, urea formaldehyde foam
insulation, polychlorinated biphenyls, including transformers or other equipment
that contain dielectric fluid containing detectible levels of polychlorinated
biphenyls, waste oil, used oil and any constituent thereof, and radon gas;
"Release" means disposing, depositing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing and the like, into or upon any land or water or air, or otherwise
entering into the environment.
Except as listed on the ARM Disclosure Letter, ARM represents and
warrants that:
(a) Hazardous Materials have not been generated, used, treated
or stored on, or transported to or from, any ARM Property by ARM, or to
the Knowledge of the Principals, by any other person, whether an entity
or individual, except in compliance with applicable Environmental Laws;
(b) To the Knowledge of the Principals, no asbestos-containing
materials or other Hazardous Materials have been installed in or
affixed to structures on any ARM Property;
(c) Hazardous Materials have not been disposed of or otherwise
Released on any ARM Property during the time or, to the Knowledge of
the Principals, before the time, of ARM's ownership, leasing,
licensing, operation or occupancy of any ARM Property;
(d) ARM has all permits, approvals, registrations,
identification numbers and licenses required pursuant to any
Environmental Law ("Environmental Permits") to conduct the ARM business
as it is currently being conducted, all such Environmental Permits are
current and in full force and effect, a complete list of each of ARM's
Environmental Permits is provided on the ARM Disclosure Letter, and ARM
has provided Buyer with copies of all Environmental Permits;
(e) ARM is currently, and has at all times in the past been,
in material compliance with all applicable Environmental Laws and the
requirements of any Environmental Permits issued under such
Environmental Laws with respect to any ARM Property;
(f) There are no past, pending or to the Knowledge of the
Principals, threatened Environmental Claims against ARM or any ARM
Property;
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(g) There are no facts or circumstances, conditions or
occurrences on any ARM Property or otherwise that could reasonably be
anticipated by ARM:
(i) to form the basis of an Environmental Claim
against ARM or any ARM Property; or
(ii) to cause such ARM Property to be subject to any
restrictions on the ownership, occupancy, use or
transferability of such ARM Property under any Environmental
Law;
(h) There are not now, nor, to the Knowledge of the
Principals, have there been at any time, any aboveground or
underground storage tanks located on any ARM Property;
(i) There is no present, to the Knowledge of the Principals,
any past action, activity, event, condition or circumstance that could
be reasonably expected to require ARM to incur costs of removal,
remediation, response, investigation or corrective action pursuant to
any Environmental Law with respect to any Hazardous Materials;
(j) A list of any and all environmental site assessments
and/or audits prepared for any ARM Property and in ARM's possession or
control, or otherwise available to ARM, is attached hereto as the ARM
Disclosure Letter, and copies of each have been provided to ENVOY; and
(k) ARM has provided ENVOY with copies of all notices of
violations, notices of non-compliance and similar documents issued to
ARM under any Environmental Laws, all of which also are listed on the
ARM Disclosure Letter; and
(l) ARM has submitted all reports, notifications, and other
documents ("Reports") required by any Environmental Law and all such
reports were accurate as submitted and provided to all persons and
governmental authorities as required under any Environmental Law.
4.18 Labor Matters. There are no collective bargaining agreements in
effect between ARM and labor unions or organizations representing any of ARM's
employees. During the past seven years, there has been no request for collective
bargaining or for an employee election from any employee, union or the National
Labor Relations Board. Except as and to the extent set forth in the ARM
Disclosure Letter, (i) ARM is in compliance with all federal, state and local
Laws (including, but not limited to all rules and regulations promulgated under
the Occupational Safety and Health Act) respecting employment and employment
practices, terms and conditions of employment and wages and hours (except where
the failure of such compliance would not result in an ARM Material Adverse
Effect), and is not engaged in any unfair labor practice; (ii) there is no
unfair labor practice complaint against ARM pending or, to the Knowledge of the
Principals, threatened before the National Labor Relations Board or the United
States Department of Labor;
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(iii) there is no labor strike, dispute, slowdown or stoppage in progress or
threatened against or involving ARM; (iv) no question concerning union
representation has been raised or is threatened respecting the employees of ARM;
(v) no grievance or arbitration proceeding is pending and, to the Knowledge of
the Principals, no claim therefor exists; (vi) no private agreement restricts
ARM from relocating, closing or terminating any of its operations or facilities;
and (vii) ARM has not in the past five years experienced any labor strike,
slowdown, stoppage or other material dispute.
4.19. Insurance. The ARM Disclosure Letter hereto sets forth a complete
and accurate list (including policy numbers, deductibles, carriers and effective
and termination dates) of all policies of fire, liability, workmen's
compensation, health, title and other forms of insurance presently in effect
with respect to ARM. All such policies are valid, outstanding and enforceable
policies; and will remain in full force and effect at least through the
respective dates set forth in the ARM Disclosure Letter without the payment of
additional premiums; and will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. ARM has not
been refused any insurance, nor has its coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last five years. The ARM Disclosure Letter contains a
description of any provision contained in the policies identified on the ARM
Disclosure Letter which provides for retrospective premium adjustment. The ARM
Disclosure Letter identifies all risks that ARM has designated as being
self-insured and the amount of reserve set aside by ARM to cover such risk.
4.20. Product and Service Warranties. Except as described on the ARM
Disclosure Letter, ARM has not given or made any warranties to third parties
with respect to any products supplied or services performed by it which may
still be in effect at any time after the date hereof, except for warranties
imposed by law. Except as described on the ARM Disclosure Letter, there have
been no claims or investigations made with respect to any product or service
warranties which have not been fully settled and resolved or any unresolved
warranty claims which have not been adequately reserved against on the Financial
Statements. ARM and the Shareholders do not know or have any reason to know of
any basis for any other claim or investigation.
4.21. Contracts and Commitments. Except as set forth in the ARM
Disclosure Letter hereto:
(a) ARM does not have any contracts, commitments, arrangements
or understandings which may involve the expenditure by ARM after the
Closing of more than $10,000 for any individual contract, commitment,
arrangement or understanding, or which was not entered into in the
ordinary course of business. The legal enforceability after the Closing
of the rights of ARM under any of its contracts will not be affected in
any manner by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
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(b) ARM has no sales or purchase commitments which are in
excess of the normal, ordinary and usual capacity or requirements of
its business or which are not terminable on 30 days' notice.
(c) ARM is not a party to or bound by (i) any outstanding
contracts with officers, employees, agents, consultants, advisors,
salesmen, sales representatives, distributors or dealers that are not
cancelable by ARM on notice of not longer than 30 days and without
liability, penalty or premium, (ii) any agreement or arrangement
providing for the payment of any bonus or commission based on sales or
earnings, or (iii) any agreements that contain any severance or
termination pay, liabilities or obligations.
(d) ARM is not a party to any licensing agreement, either as
licensor or licensee, except as set forth in the ARM Disclosure Letter.
(e) ARM is not restricted or purported to be restricted by
agreement or otherwise from carrying on its business anywhere in the
world.
4.22. Accounts Receivable. ARM has delivered to ENVOY a complete and
accurate list, as of a date not more than five (5) business days prior to the
date hereof, of the accounts and notes receivable of ARM (including without
limitation receivables from and advances to employees and the Shareholders),
which includes an aging of all accounts and notes receivable showing amounts due
in 30-day aging categories (collectively, the "Accounts Receivable"). All
Accounts Receivable represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. The Accounts
Receivable are current and collectible net of any respective reserves shown on
ARM's books and records (which reserves are adequate and calculated consistent
with past practice). To the Knowledge of the Principals, there is no contest,
claim, or right of set-off, other than rebates and returns in the ordinary
course of business, under any contract with any obligor of an Account Receivable
relating to the amount or validity of such Account Receivable.
4.23 Inventory. All inventory of ARM, whether reflected in its
financial statements or otherwise, is of good and merchantable quality and is
usable and saleable in the ordinary course of business, except for items of
obsolete materials and materials of below standard quality, all of which have
been written down in the financial statements to realizable market value or for
which adequate reserves have been provided therein. The present quantities of
all inventory of ARM are reasonable in the present circumstances of its
business. ARM is not under any liability or obligation with respect to the
return of inventory or merchandise in the possession of wholesalers, retailers
or other customers.
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4.24. Orders, Commitments and Returns. The aggregate of all accepted
and unfilled orders for the merchandise or services entered into by ARM does not
exceed an amount which can reasonably be expected to be filled in the ordinary
course of business on a schedule which will maintain satisfactory customer
relationships, and the aggregate of all contracts or commitments for the
purchase of products or services by ARM does not exceed an amount which is
reasonable for its anticipated volumes of business (all of which orders,
contracts and commitments were made in the ordinary course of business). Except
as set forth in the ARM Disclosure Letter, as of the date of this Agreement,
there are no asserted, or if unasserted, sustainable, claims to return
merchandise or refund payments for services of ARM by reason of alleged over
shipments, defective merchandise, breach of warranty or otherwise. There is no
merchandise in the hands of customers under any understanding that such
merchandise is returnable other than pursuant to the standard returns policy set
forth in ARM's contracts. ARM and the Shareholders do not know and have not
received any oral or written notice that either the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby will
result in any cancellations or withdrawals of accepted and unfilled orders for
the sale of ARM's services.
4.25. Customers and Suppliers. The ARM Disclosure Letter contains an
accurate and complete list of the names and addresses of the 20 largest
customers to whom ARM has sold or leased products or services during the past
two fiscal years and the 10 largest suppliers from whom ARM has purchased
supplies during the past two fiscal years. Neither the Shareholders nor ARM has
received any indication from any customer or supplier whose name appears on such
list (or otherwise has any reason to believe) that such customer or supplier
will not continue as a customer or supplier of ENVOY after the Closing. Except
as set forth in the ARM Disclosure Letter, no customer accounted for more than
5% of ARM's revenues for the year ended December 31, 1997.
4.26 Government Contracts.
(a) Except as set forth on the ARM Disclosure Letter, ARM is
not a party to any government contracts.
(b) ARM has not been suspended or barred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the Knowledge of the
Principals, has any suspension or debarment action been threatened or commenced.
There is no valid basis for ARM's suspension or debarment from bidding on
contracts or subcontracts for any agency of the United States Government or any
state or local government.
(c) Except as set forth in the ARM Disclosure Letter, ARM has
not been, nor is it now being, audited, or investigated by any government
agency, or the inspector general or auditor general or similar functionary of
any agency or instrumentality, nor, to the Knowledge of the Principals, has such
audit or investigation been threatened.
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(d) ARM has no dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) ARM has not, with respect to any government contract,
received a cure notice advising ARM that it is or was in default or would, if it
failed to take remedial action, be in default under such contract.
(f) ARM has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or
affiliate of ARM is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to ARM's business under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
(h) Each of ARM's government contracts has been issued,
awarded or novated to ARM in ARM's name.
4.27 Certain Payments. Neither ARM nor any director, officer, agent or
employee of ARM or any other person associated with or acting for or on behalf
of ARM, has directly or indirectly at any time used funds for any illegal
purpose or in violation of any Law, including, without limitation, the making of
any improper political contribution, bribe or kickback.
4.28. No Breach. Each arrangement (whether evidenced by a written
document or otherwise and of whatever type) referred to in this Agreement or in
the ARM Disclosure Letter or any Exhibit hereto under which ARM has any right,
interest or obligation is in full force and effect and ARM has in all respects
performed all material obligations to be performed by it thereunder; there have
been no threatened cancellations thereof nor outstanding disputes thereunder,
and ARM has not breached any provision of, nor does there exist any default by
ARM under, or, to the Knowledge of the Principals, any default by other parties
under, or event (including the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby) which is, or with the
giving of notice or the passage of time or both would become, a breach or
default in any material respect under the terms of any such arrangement.
4.29. Investment Intent. Each of the Shareholders has such knowledge
and experience in financial and business matters that he is capable of
evaluating the risks and merits associated with the acquisition of the ENVOY
Common Stock and each Shareholder is acquiring the ENVOY Common Stock for his
own account and not with a present view to any resale or distribution thereof.
Each Shareholder will not sell or otherwise dispose of the ENVOY Common Stock,
or any interest therein in violation of the Securities Act of 1933, as amended
or any state securities laws.
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4.30. Consents and Approvals. The Shareholders and ARM have obtained
all consents, approvals, authorizations or orders of third parties, including
governmental authorities, necessary for the authorization, execution and
performance of this Agreement by the Shareholders and ARM.
4.31 Pooling of Interests. ARM has not taken or failed to take any
action which, to the Knowledge of the Principals, would prevent the accounting
for the Merger as a pooling of interests in accordance with Accounting
Principles Board Opinion No. 16, the interpretative releases issued pursuant
thereto, and the pronouncements of the SEC.
4.32 No Brokers. Except as set forth in the ARM Disclosure Letter, ARM
has not entered into any contract, arrangement or understanding with any person
or firm which may result in the obligation of ARM to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in the ARM Disclosure Letter, ARM is
not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
4.33 Notes Receivable from Shareholders; Guarantees of Shareholders.
There are no receivables due to ARM from the Shareholders. Except as set forth
in the ARM Disclosure Letter, no Shareholder is a guarantor on any ARM
obligations or liabilities or a release of such guarantee has been obtained.
4.34 ENVOY Stock Ownership. ARM does not own any shares of ENVOY Common
Stock or other securities convertible into ENVOY Common Stock.
4.35 Full Disclosure. All of the information provided by ARM, the
Shareholders, and its or his representatives herein or in the ARM Disclosure
Letter or in connection with this Agreement or the transactions contemplated
hereby is true, correct, and complete in all material respects and no
representation, warranty, or statement made by ARM in or in connection with this
Agreement or the transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make such representation, warranty, or statement not
misleading to ENVOY. Neither the Shareholders, nor any of the officers,
employees or agents of ARM has withheld from ENVOY or its representatives
disclosure of any event, condition, or fact that such officer, shareholder,
employee or agent knows could cause or constitute an ARM Material Adverse
Effect.
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
OF ENVOY AND MERGER SUB
Except as set forth in the disclosure letter delivered at or prior to
the execution hereof to ARM and the Shareholders (the "ENVOY Disclosure
Letter"), ENVOY and Merger Sub represent and warrant to ARM and the Shareholders
as of the date of this Agreement as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law.
Each of ENVOY and Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation.
ENVOY is duly licensed or qualified to do business as a foreign corporation and
is in good standing under the laws of any other state of the United States in
which the character of the properties owned or leased by it therein or in which
the transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on the
business, results of operations or financial condition of ENVOY (an "ENVOY
Material Adverse Effect"). ENVOY has all requisite corporate power and authority
to own, operate and lease its properties and carry on its business as now
conducted. Neither ENVOY nor any of its properties or assets is in violation of
any order of any court, governmental authority or arbitration board or tribunal,
or any law, ordinance, governmental rule or regulation to which ENVOY is
subject, where such violation would have an ENVOY Material Adverse Effect. ENVOY
has all licenses, permits and other authorizations and has taken all actions
required by applicable law or governmental regulations in connection with its
business as now conducted, except where the failure to obtain any such item or
to take any such action would not have an ENVOY Material Adverse Effect.
5.2 Authorization, Validity and Effect of Agreements. Each of ENVOY and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby. The
consummation by each of ENVOY and Merger Sub of the transactions contemplated
hereby has been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of each of ENVOY and
Merger Sub, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
5.3 Capitalization. The authorized capital stock of ENVOY consists of
(i) 48,000,000 shares of Common Stock, no par value per share ("ENVOY Common
Stock") of which 16,575,822 shares are issued and outstanding as of December 31,
1997; and (ii) 12,000,000 shares of preferred stock, no par value per share
("ENVOY Preferred Stock"), of which (a) 4,800,000 shares have been designated
Series A Preferred Stock issuable only upon the exercise of stock purchase
rights pursuant to ENVOY's Shareholder Rights Plan and (b) 3,730,233 shares have
been designated as Series B Convertible Preferred Stock, all of which have been
authorized and are currently issued and outstanding. ENVOY has no outstanding
bonds, debentures, notes or other obligations the holders
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of which have the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the shareholders of ENVOY on any
matter. All issued and outstanding shares of ENVOY Common Stock and ENVOY
Preferred Stock are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Other than as provided for in the ENVOY
Disclosure Letter, there are no options, warrants, calls, subscriptions,
convertible or redeemable securities, or other rights, agreements or commitments
which obligate ENVOY to issue, redeem, transfer or sell any shares of capital
stock of ENVOY.
5.4 Merger Sub. Merger Sub has been formed to effect the transactions
contemplated by this Agreement. The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, no par value. Each of the outstanding
shares of capital stock of Merger Sub is duly authorized, validly issued, fully
paid and nonassessable, and is owned by ENVOY free and clear of all liens,
pledges, security interests, claims or other encumbrances. Merger Sub has not
engaged in any activities other than in connection with the transactions
contemplated by this Agreement.
5.5 No Violation. Neither the execution and delivery by ENVOY and
Merger Sub of this Agreement, nor the consummation by ENVOY and Merger Sub of
the transactions contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the Charter or
Bylaws of ENVOY or Merger Sub; (ii) conflict with, result in a breach of any
provision of or the modification or termination of, constitute a default under,
or result in the creation or imposition of any lien, security interest, charge,
or encumbrance upon any of the assets of ENVOY or Merger Sub pursuant to any
material commitment, lease, contract, or other material agreement or instrument
to which ENVOY or Merger Sub is a party; or (iii) violate any order, arbitration
award, judgment, writ, injunction, decree, statute, rule, or regulation
applicable to ENVOY or Merger Sub.
5.6 SEC Documents. Prior to the date hereof, ENVOY has delivered to the
Shareholders copies of all filings made by ENVOY with the Securities and
Exchange Commission since December 31, 1996 (the "ENVOY Reports"). The ENVOY
Reports (i) were prepared in all material respects in accordance with the
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder, and (ii) as of their respective dates, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets included in or incorporated by reference
into the ENVOY Reports (including the related notes and schedules) fairly
presents the consolidated financial position of ENVOY as of its date and each of
the consolidated statements of income, retained earnings and cash flows included
in or incorporated by reference into the ENVOY Reports (including any related
notes and schedules) fairly presents the results of operations, retained
earnings or cash flows of ENVOY for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments which
would not be material in amount or effect) in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein, and such financial statements have
been
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prepared from the books and records of ENVOY. These representations shall be
deemed to be made with respect to ENVOY Reports filed subsequent to the date
hereof at the time of their filing.
5.7 Litigation. Except as set forth in the ENVOY Disclosure Letter,
there are no actions, suits or proceedings pending against ENVOY or, to the
actual knowledge of the executive officers of ENVOY, overtly threatened in
writing against ENVOY, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that are reasonably likely
to have an ENVOY Material Adverse Effect. There are no judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against ENVOY, its subsidiaries or
their respective properties or business which would have an ENVOY Material
Adverse Effect.
5.8 Absence of Certain Changes. Since September 30, 1997, there has not
been (i) any material adverse change in the financial condition, results of
operations, business, prospects, assets or liabilities (contingent or otherwise,
whether due or to become due, known or unknown), of ENVOY, except for changes in
the ordinary course of business consistent with historical experience resulting
from the seasonal nature of ENVOY's business or (ii) any extraordinary dividend
declared or paid or distribution made on the capital stock of ENVOY or any
capital stock thereof redeemed or repurchased.
5.9 No Brokers. Except as set forth in the ENVOY Disclosure Letter,
ENVOY has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of ARM, the Shareholders,
Merger Sub or ENVOY to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby. ENVOY is
not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
5.10 ARM Capital Stock Ownership. Neither ENVOY nor Merger Sub owns any
shares of capital stock of ARM or other securities convertible into capital
stock of ARM.
5.11 ENVOY Common Stock. The issuance and delivery by ENVOY of shares
of ENVOY Common Stock in connection with the Merger and this Agreement have been
duly and validly authorized by all necessary corporate action on the part of
ENVOY. The shares of ENVOY Common Stock to be issued in connection with the
Merger, the Acquisition and this Agreement, when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable
and free of preemptive rights.
5.12 Pooling of Interests. ENVOY has not taken or failed to take any
action which, to the actual knowledge of the executive officers of ENVOY, would
prevent the accounting for the Merger as a pooling of interests in accordance
with Accounting Principles Board Opinion No. 16, the interpretative releases
issued pursuant thereto, and the pronouncements of the SEC.
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5.13. Consents and Approvals. ENVOY and Merger Sub have obtained all
consents, approvals, authorizations or orders of third parties, including
governmental authorities, necessary for the authorization, execution and
performance of this Agreement by ENVOY and Merger Sub.
ARTICLE 6.
COVENANTS
6.1 Covenants of ENVOY, ARM and Shareholders. During the period from
the date hereof and continuing until the Effective Time (except as expressly
contemplated or permitted hereby, or to the extent that the other parties shall
otherwise consent in writing) each of ENVOY, ARM and the Shareholders covenants
with the others that, insofar as the obligations relate to it:
(a) Except as and to the extent required by law, ENVOY, ARM
and the Shareholders hereby agree not to disclose or use, and each
shall cause its representatives not to disclose or use, any
confidential information with respect to the other party hereto
furnished, or to be furnished, by such other party or their
representatives in connection herewith at any time or in any manner
other than in connection with its evaluation of the Merger. Except as
required by law, and as set forth in this subparagraph (a), neither ARM
nor any of their representatives shall make any public statements
regarding the Merger or this Agreement without the prior approval of
ENVOY. ENVOY may make such statements, disclosures and filings as it is
advised by its counsel are necessary or appropriate for a public
company. The parties hereby confirm the terms of the Nondisclosure
Agreement dated August 26, 1997 between ENVOY and ARM, agree that its
terms and conditions continue in effect and that such agreement shall
remain in full force and effect in the event the Merger is not
effective for any reason.
(b) ENVOY, ARM and the Shareholders shall cooperate and
promptly prepare and file notifications as required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 ("HSR").
6.2 Covenants of the Shareholders and ARM. The Shareholders and ARM
covenant and agree that between the date hereof and continuing until the
Effective Time (except as otherwise expressly contemplated or permitted hereby,
or to the extent that ENVOY shall otherwise consent in writing):
(a) ARM shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore
conducted and shall use all reasonable efforts to preserve intact its
present business organizations, maintain its rights and franchises and
preserve its relationships with customers, suppliers and others having
business deals with it to the end that ARM's good will and ongoing
business shall not be impaired in any material respect at the Effective
Time.
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(b) From the date hereof to the Effective Time, ARM shall
allow all designated officers, attorneys, accountants and other
representatives of ENVOY access at all reasonable times during regular
business hours to the records and files, correspondence, audits and
properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to
the business and affairs, of ARM.
(c) Prior to the Effective Time, each of ARM and the
Shareholders agrees that it shall, and shall direct and use its best
efforts to cause its officers, employees, advisors, accountants and
attorneys (the "Representatives") not to solicit or entertain offers in
any manner, encourage, discuss, accept or consider any proposal from a
third party or its representative, engage in any written or verbal
discussions or negotiations concerning or enter into any agreements,
understandings or contracts relating to any merger, consolidation,
liquidation, dissolution, acquisition, business combination or purchase
of all or any significant asset of (other than sales of inventory in
the ordinary course), or any equity interest in, directly or
indirectly, ARM, or providing for or requiring ARM to abandon,
terminate or fail to consummate the Merger. ARM and the Shareholders
acknowledge and agree that ENVOY has refrained from pursuing and
considering other acquisition arrangements with the consequence that
the opportunities and benefits of them are foregone or delayed and that
ENVOY has expended significant time and effort to evaluate the Merger
and, in conjunction therewith, ARM and the Shareholders acknowledge
that ENVOY has incurred significant expense and fees through
preparation, travel and fees of financial, legal and accounting
advisors.
(d) ARM will make all normal and customary repairs,
replacements, and improvements to its facilities, will not dispose of
any material assets other than in the ordinary course of business
without the prior written consent of ENVOY, and without limiting the
generality of the foregoing or the covenants set forth in 6.2(a), ARM
will not, without the prior written consent of ENVOY:
(i) change its articles of incorporation or code of
regulations, or merge and consolidate with or into any entity
or obligate itself to do so;
(ii) declare, set aside or pay any cash dividend or
other distribution on or in respect of its capital stock, or
any redemption, retirement or purchase with respect to its
capital stock or issue any additional shares of its capital
stock;
(iii) discharge or satisfy any lien, charge,
encumbrance or indebtedness outside the ordinary course of
business, except those required to be discharged or satisfied;
(iv) authorize, guarantee or incur indebtedness
except in the ordinary course of business;
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(v) make any capital expenditures or capital
additions or betterments, or commitments therefor;
(vi) loan funds to any person (other than reasonable
travel advances in the ordinary course of business);
(vii) institute, settle or agree to settle any
litigation, action or proceeding before any court or
governmental body;
(viii) mortgage, pledge or subject to any other
encumbrance any of its property or assets, tangible or
intangible other than purchase money indebtedness incurred in
the ordinary course of business subject to any limitations
contained in this Section 6.2(b) and liens for taxes not yet
due and payable;
(ix) authorize any compensation increases of any kind
whatsoever for any employee, provided ARM shall pay owing or
accrued deferred compensation;
(x) engage in any transaction that is not in the
ordinary course of business; or
(xi) enter into any material contract, including
leases and real estate agreements, other than contracts with
customers and dealers in the ordinary course of business.
Notwithstanding the foregoing, ENVOY and ARM shall from time to time
consult with each other regarding the business plans of ARM.
(e) Without the prior written consent of ENVOY, neither ARM
nor the Shareholders shall take any action which would cause or tend to
cause the conditions upon the obligations of the parties hereto to
effect the transactions contemplated hereby not to be fulfilled;
including without limitation, taking, causing to be taken, or
permitting or suffering to be taken or to exist any action, condition
or thing which would cause the representations and warranties made by
ARM herein not to be true, correct and accurate as of the Closing Date.
(f) ARM shall promptly provide to ENVOY unaudited monthly and
quarterly financial statements of ARM.
(g) From and after the date hereof, neither ARM nor the
Shareholders shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes; (ii) knowingly take any
action, or knowingly fail to take any action, that would jeopardize
qualification of the Merger as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code; or
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(iii) enter into any contract, agreement, commitment or arrangement
with respect to either of the foregoing.
(h) Shareholder Representative:
(i) ENVOY shall be entitled to rely upon any
communication or writings given or executed by the Shareholder
Representative (as defined in Section 8.3(a) hereto). All
notices to be sent to a Shareholder pursuant to this Agreement
may be addressed to the Shareholder Representative and any
notice so sent shall be deemed notice to the Shareholders
hereunder. Each Shareholder hereby consents and agrees that
the Shareholder Representative is authorized to accept notice
on behalf of the Shareholders pursuant hereto.
(ii) The Shareholder Representative is hereby
appointed and constituted the true and lawful attorney-in-fact
of each Shareholder, with full power in his or her name and on
his or her behalf to act according to the terms of this
Agreement in the absolute discretion of the Shareholder
Representative; and in general to do all things and to perform
all acts in connection therewith, including, without
limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this
Agreement. This power of attorney and all authority hereby
conferred is granted subject to the interest of the
Shareholders hereunder and in consideration of the mutual
covenants and agreements made herein, and shall be irrevocable
and shall not be terminated by any act of the Shareholders, by
operation of law, whether by the Shareholder's death or any
other event.
(i) Prior to the Closing Date, ARM shall terminate all Plans
which are qualified plans under Section 401(a) of the Code.
(j) Prior to the Closing Date, ARM and the Shareholders shall
obtain a release of any guarantees on any ARM obligations or
liabilities, and ENVOY shall use its reasonable best efforts to assist
the Shareholders in obtaining such release.
6.3 Covenants of ENVOY. ENVOY covenants and agrees that between the
date hereof and continuing until the Effective Time (except as expressly
contemplated or permitted hereby, or to the extent that ARM shall otherwise
consent in writing):
(a) ENVOY shall promptly prepare and submit to the Nasdaq
National Market a listing application covering the shares of ENVOY
Common Stock issuable in the Merger, and shall use its best efforts to
obtain, prior to the Effective Time, approval for the listing of such
ENVOY Common Stock, subject to official notice of issuance.
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(b) ENVOY shall promptly send to ARM copies of all filings
with the Securities and Exchange Commission.
(c) Without the prior written consent of ARM, ENVOY shall not
take any action which would cause or tend to cause the conditions upon
the obligations of the parties hereto to effect the transactions
contemplated hereby not to be fulfilled; including without limitation,
taking, causing to be taken, or permitting or suffering to be taken or
to exist any action, condition or thing which would cause the
representations and warranties made by ENVOY herein not to be true,
correct and accurate as of the Closing Date.
(d) From and after the date hereof and until the Effective
Time, ENVOY shall not (i) knowingly take any action, or knowingly fail
to take any action, that would jeopardize the treatment of the Merger
as a "pooling of interests" for accounting purposes; (ii) knowingly
take any action, or knowingly fail to take any action, that would
jeopardize qualification of the Merger as a reorganization within the
meaning of Section 368(a)(2)(E) of the Code; or (iii) enter into any
contract, agreement, commitment or arrangement with respect to either
of the foregoing.
(e) ENVOY shall report post-Merger combined results in a
Current Report on Form 8-K no later than 30 days after the end of the
first calendar month in which combined operating results of ARM and
ENVOY are included.
ARTICLE 7.
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of ENVOY, ARM and the Shareholders to effect the Merger
and Acquisition shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(a) No action or proceeding shall have been instituted before
a court or other governmental body by any governmental agency or public
authority to restrain or prohibit the transactions contemplated by this
Agreement or to obtain an amount of damages or other material relief in
connection with the execution of the Agreement or the related
agreements or the consummation of the Merger; and no governmental
agency shall have given notice to any party hereto to the effect that
consummation of the transactions contemplated by this Agreement would
constitute a violation of any law or that it intends to commence
proceedings to restrain consummation of the Merger.
(b) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or
other regulatory body, any lenders, lessors or other third parties,
required in connection with the execution, delivery and performance of
this Agreement shall have been obtained or made (including the
expiration or termination of the waiting period for the HSR
filings),except for filings in connection with the Merger and any
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other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a
material adverse effect on the business of ENVOY and ARM taken as a
whole, following the Effective Time.
(c) ENVOY shall have received copies of all resolutions
adopted by the Board of Directors and Shareholders of ARM in connection
with this Agreement and the transactions contemplated hereby. ARM and
the Shareholders shall have received from ENVOY and Merger Sub copies
of all resolutions adopted by the Board of Directors of each respective
company and the shareholder of Merger Sub in connection with this
Agreement and the transactions contemplated hereby.
(d) ENVOY and the Shareholders shall have entered into a
Registration Rights Agreement in substantially the form attached hereto
as Exhibit 7.1.
(e) ENVOY and ARM shall have received an opinion of Bass,
▇▇▇▇▇ & ▇▇▇▇ PLC, generally to the effect that (i) the Merger qualifies
as a reorganization under Section 368(a)(2)(E) of the Code, (ii) no
material gain or loss will be recognized by ENVOY or ARM as a result of
the Merger, (iii) the Shareholders who receive solely ENVOY Common
Stock and cash in lieu of a fractional share will recognize no gain or
loss for federal income tax purposes with respect to the ENVOY Common
Stock received in the Merger.
7.2 Conditions to Obligation of ARM and the Shareholders to Effect the
Merger. The obligation of ARM and the Shareholders to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) ENVOY shall have performed its agreements contained in
this Agreement required to be performed on or prior to the Closing Date
and the representations and warranties of ENVOY and Merger Sub
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and ARM and
the Shareholders shall have received a certificate of the President or
the Chief Financial Officer of ENVOY, dated the Closing Date,
certifying to such effect.
(b) ARM and the Shareholders shall have received a written
opinion, dated as of the Closing Date, from the legal counsel of ENVOY,
in form and substance satisfactory to it, as to certain matters agreed
upon by legal counsel of ENVOY and ARM.
7.3 Conditions to Obligation of ENVOY and Merger Sub to Effect the
Merger. The obligations of ENVOY and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Each of ARM and the Shareholders shall have performed its
agreements contained in this Agreement required to be performed on or
prior to the Closing Date, and
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the representations and warranties of ARM and the Shareholders
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and ENVOY
shall have received a certificate of the Chief Executive Officer of ARM
and the Shareholders, dated the Closing Date, certifying to such
effect.
(b) ENVOY shall be satisfied that the Merger will qualify for
accounting by ENVOY as a pooling of interests under generally accepted
accounting principles and under applicable rules and regulations of the
Securities and Exchange Commission. In connection therewith, ENVOY
shall have received, on or before the Closing Date, a letter from each
of Ernst & Young LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (or any other accountants
of ENVOY's choosing) dated as of the Closing Date to the effect that
the transactions contemplated by this Agreement may be treated by ENVOY
as a "pooling of interests" for accounting purposes.
(c) From December 31, 1997 through the Effective Time, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of ARM.
(d) ENVOY shall have received a written opinion, dated as of
the Closing Date, from the legal counsel of ARM, in form and substance
satisfactory to it, as to certain matters agreed upon by legal counsel
of ENVOY and ARM.
(e) ENVOY shall have received a written opinion from ENVOY's
financial advisor that the Merger is fair, from a financial point of
view, to ENVOY.
ARTICLE 8.
INDEMNIFICATION
8.1 General Indemnification by the Shareholders. Each of the
Shareholders, jointly and severally, covenants and agrees to indemnify, defend,
protect and hold harmless ENVOY, Merger Sub and the Surviving Corporation and
their respective officers, directors, employees, shareholders, assigns,
successors and affiliates (individually, an "Indemnified Party" and
collectively, "Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative proceedings
(including informal proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments, deficiencies,
penalties, fines, interest (including interest from the date of such
damages) and costs and expenses (including without limitation
reasonable attorneys' fees and disbursements of every kind, nature and
description) (collectively, "Damages") suffered, sustained, incurred or
paid by the ENVOY Indemnified Parties in connection with, resulting
from or arising out of, directly or indirectly:
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(i) any breach of any representation or warranty of
any of the Shareholders or ARM set forth in this Agreement or
any schedule or certificate, delivered by or on behalf of any
of the Shareholders or ARM in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement
by any of the Shareholders or, prior to the Effective Time,
ARM, under this Agreement; or
(iii) the business, operations or assets of ARM prior
to the Closing Date or the actions or omissions of ARM
directors, officers, shareholders, employees or agents prior
to the Closing Date, other than Damages arising from matters
expressly disclosed in the ARM Disclosure Letter, this
Agreement or the schedules to this Agreement.
(b) any and all Damages incident to any of the
foregoing or to the enforcement of this Section 8.1.
8.2 Expiration and Limitation. Notwithstanding the above:
(a) the indemnification obligations under this Article 8, or
under any certificate or writing furnished in connection herewith,
shall terminate at the date that is the later of clause (i) or (ii) of
this Section 8.2(a):
(i) the 30th day following receipt of the independent
audit of financial statements containing combined operations
of ENVOY and ARM for the period ending December 31, 1998; or
(ii) the final resolution of claims or demands
pending as of the relevant dates described in clause (i) of
this Section 8.2(a) (such claims referred to as "Pending
Claims").
(b) the aggregate amount of the Shareholders' liability under
this Article 8 shall not exceed the Merger Consideration valued by
multiplying the number of shares of Common Stock issued to the
Shareholders by the closing price of ENVOY Common Stock on the Nasdaq
National Market on the date of the Effective Time (the "Closing
Price"); and Claims (as hereinafter defined) shall be paid by the
Shareholder in shares of ENVOY Common Stock, valued at the Closing
Price (so long as the Shareholders own shares of ENVOY Common Stock
received in the Merger); and
In the event the Shareholders no longer own sufficient shares of ENVOY
Common Stock received in the Merger, the Shareholders must pay to ENVOY
in cash an amount equal to the value of the number of shares determined
by the paragraph immediately above plus an amount
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equal to that received above the Closing Price in the sale of such
shares that would have been used to satisfy the Claim.
(c) there shall be no liability for indemnification under
Section 8.1 unless, and solely to the extent that, the aggregate amount
of Damages exceeds $100,000, provided, however, that at such time as
the aggregate amount of Damages exceeds $100,000, the Shareholders
shall be liable for the full amount of Damages.
8.3 Indemnification Procedures. All claims or demands for
indemnification under this Article 8 ("Claims") shall be asserted and resolved
as follows:
(a) In the event that any Indemnified Party has a Claim
against any party obligated to provide indemnification pursuant to
Section 8.1 hereof (the "Indemnifying Party") which does not involve a
Claim being asserted against or sought to be collected by a third
party, the Indemnified Party shall with reasonable promptness notify
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or his designated successor as the representative
of the Shareholders (the "Shareholder Representative") of such Claim,
specifying the nature of such Claim and the amount or the estimated
amount thereof to the extent then feasible (the "Claim Notice"). If the
Shareholder Representative does not notify the Indemnified Party within
fifteen (15) days after the date of delivery of the Claim Notice that
the Indemnifying Party disputes such Claim, with a detailed statement
of the basis of such position, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder. In
case an objection is made in writing in accordance with this Section
8.3(a), the Indemnified Party shall respond in a written statement to
the objection within fifteen (15) days and, for sixty (60) days
thereafter, attempt in good faith to agree upon the rights of the
respective parties with respect to each of such Claims (and, if the
parties should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties).
(b) (i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is
asserted against an Indemnified Party by a third party (a
"Third Party Claim"), the Indemnified Party shall deliver a
Claim Notice to the Shareholder Representative. The
Shareholder Representative shall have fifteen (15) days from
date of delivery of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (A) whether the Indemnifying
Party disputes liability to the Indemnified Party hereunder
with respect to the Third Party Claim, and, if so, the basis
for such a dispute, and (B) if such party does not dispute
liability, whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to defend
against the Third Party Claim, provided that the Indemnified
Party is hereby authorized (but not obligated), prior to and
during the Notice Period, to file any motion, answer or other
pleading and to take any other action which the Indemnified
Party shall deem necessary or appropriate to protect the
Indemnified Party's interests.
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(ii) In the event that the Shareholder Representative
notifies the Indemnified Party within the Notice Period that
the Indemnifying Party does not dispute the Indemnifying
Party's obligation to indemnify with respect to the Third
Party Claim, the Indemnifying Party shall defend the
Indemnified Party against such Third Party Claim by
appropriate proceedings, provided that, unless the Indemnified
Party otherwise agrees in writing, the Indemnifying Party may
not settle any Third Party Claim (in whole or in part) if such
settlement does not include a complete and unconditional
release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense
or settlement, the Indemnified Party may do so at its sole
cost and expense. If the Indemnifying Party elects not to
defend the Indemnified Party against a Third Party Claim,
whether by failure of such party to give the Indemnified Party
timely notice as provided herein or otherwise, then the
Indemnified Party, without waiving any rights against such
party, may settle or defend against such Third Party Claim in
the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party
the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified
Party with respect thereto, including interest from the date
such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of
the Indemnified Party, notice of which shall be given in
writing to the Shareholder Representative, any Third Party
Claim seeks material prospective relief which could have an
adverse effect on any Indemnified Party or the Surviving
Corporation or any subsidiary, the Indemnified Party shall
have the right to control or assume (as the case may be) the
defense of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses
of defense shall be included as part of the indemnification
obligations of the Indemnifying Party hereunder. If the
Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but
not control, the defense of such Third Party Claim at the sole
cost and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified
Party from making a Claim, and an Indemnified Party may make a Claim
hereunder, for potential or contingent Damages provided the Claim
Notice sets forth the specific basis for any such potential or
contingent claim or demand to the extent then feasible and the
Indemnified Party has reasonable grounds to believe that such Claim may
be made.
(d) Subject to the provisions of Section 8.2, the Indemnified
Party's failure to give reasonably prompt notice as required by this
Section 8.3 of any actual, threatened or possible claim or demand which
may give rise to a right of indemnification hereunder shall not relieve
the Indemnifying Party of any liability which the Indemnifying Party
may have to the Indemnified Party unless the failure to give such
notice materially and adversely prejudiced the Indemnifying Party.
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(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the
amount of any indemnification obligation under this Article 8, provided
that no Indemnified Party shall be obligated to continue pursuing any
payment pursuant to the terms of any insurance policy.
8.4 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants made by ARM, the Shareholders, ENVOY
and Merger Sub or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of ARM and the Shareholders will survive the
Closing and will remain in effect until, and will expire upon, the termination
of the indemnification obligations as provided in Section 8.2.
8.5 Remedies Cumulative. The remedies set forth in this Article 8 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
ARTICLE 9.
NONCOMPETITION
9.1 Prohibited Activities. Each of the Shareholders agrees that such
Shareholder will not, for a period of five (5) years following the Closing Date,
for any reason whatsoever, directly or indirectly, for himself, herself or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(a) engage, as an officer, director, shareholder, owner,
partner, member, joint venturer, or in a managerial capacity, whether
as an employee, independent contractor, consultant or adviser, or as a
sales representative, in any business selling any products or services
in direct competition with ENVOY in the continental United States (the
"Territory");
(b) call upon any person who is, at that time, within the
Territory, an employee of ENVOY in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out
of the employ of ENVOY;
(c) call upon any person who is or entity that is, at that
time, or that has been, within one year prior to that time, a customer
of ENVOY within the Territory for the purpose of soliciting or selling
products or services in competition with ENVOY within the Territory; or
(d) call upon any prospective acquisition candidate that was,
to the Knowledge of the Shareholder, either called upon by ENVOY as a
prospective acquisition candidate or was the subject of an acquisition
analysis by ENVOY. The Shareholder, to the extent lacking the knowledge
described in the preceding sentence, shall immediately cease all
contact with
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such prospective acquisition candidate upon being informed that ENVOY
had called upon such candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit the Shareholders from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter market. For purposes of
this Article 9, the term "ENVOY" includes all subsidiaries of ENVOY (including
without limitation ARM and any companies ENVOY has resolved to acquire).
9.2 Confidentiality. Each Shareholder recognizes that by reason of his
or its ownership of ARM and/or his employment by ARM and/or ENVOY, he or she has
acquired confidential information and trade secrets concerning the operation of
ARM, the use or disclosure of which could cause ARM or its affiliates or
subsidiaries substantial loss and damages that could not be readily calculated
and for which no remedy at law would be adequate. Accordingly, each Shareholder
covenants and agrees with ARM and ENVOY that he will not at any time, except in
performance of such Shareholder's obligations to ARM or with the prior written
consent of ARM pursuant to authority granted by a resolution of the Board,
directly or indirectly, disclose any secret or confidential information that he
may learn or has learned by reason of his ownership of ARM or his employment by
ARM and/or ENVOY, or any of their subsidiaries and affiliates, or use any such
information in a manner detrimental to the interests of ARM or ENVOY, unless (i)
such information becomes known to the public generally through no fault of any
Shareholder, (ii) disclosure is required by law or the order of any governmental
authority under color of law, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, provided, that prior to disclosing any information
pursuant to clause (i), (ii) or (iii) above, the Shareholder (as applicable)
shall give prior written notice thereof to ENVOY and provide ENVOY with the
opportunity to contest such disclosure and shall cooperate with efforts to
prevent such disclosure. The term "confidential information" includes, without
limitation, information not previously disclosed to the public by ARM's or
ENVOY's management with respect to ARM's or ENVOY's, or any of their affiliates'
or subsidiaries', products, facilities, and methods, trade secrets and other
intellectual property, software, source code, systems, procedures, manuals,
confidential reports, product price lists, customer lists, financial information
(including the revenues, costs, or profits associated with any of ARM's
products), business plans, prospects, or opportunities but shall exclude any
information already in the public domain.
9.3 Damages. Because of the difficulty of measuring economic losses to
ENVOY as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to ENVOY for which it
would have no other adequate remedy, each Shareholder agrees that the foregoing
covenant may be enforced by ENVOY in the event of breach by such Shareholder, by
injunctions and restraining orders.
9.4 Reasonable Restraint. The parties agree that the foregoing
covenants in this Article 9 impose a reasonable restraint on each Shareholder in
light of the activities and business of ENVOY on the date of the execution of
this Agreement, assuming the completion of the transactions
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contemplated hereby, and the current plans of ENVOY; but it is also the intent
of ENVOY and each Shareholder that such covenants be construed and enforced in
accordance with the changing activities and business of ENVOY throughout the
term of this covenant. The parties further agree that so long as a Shareholder
is not an employee of ARM, in the event a Shareholder shall enter into a
business or pursue other activities not in competition with ENVOY or similar
activities or business in locations the operation of which, under such
circumstances, does not violate Section 9.1(a) or the terms of any employment
agreement with ENVOY, such Shareholder shall not be chargeable with a violation
of this Article 9 if ENVOY shall thereafter enter the same, similar or a
competitive (a) business, (b) course of activities or (c) location, as
applicable.
9.5 Severability; Reformation. The covenants in this Article 9 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
9.6 Independent Covenant. All of the covenants in this Article 9 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Shareholder
against ENVOY, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by ENVOY of such covenants. The parties
expressly acknowledge that the terms and conditions of this Article 9 are
independent of the terms and conditions of any other agreements including, but
not limited to, any employment agreements entered into in connection with this
Agreement. It is specifically agreed that the period of five (5) years stated at
the beginning of this Article 9 during which the agreements and covenants of
each of the Shareholders made in this Article 9 shall be effective, shall be
computed by excluding from such computation any time during which such
Shareholder is found by a court of competent jurisdiction to have been in
violation of any provision of this Article 9. The covenants contained in Article
9 shall not be affected by any breach of any other provision hereof by any party
hereto and shall have no effect if the transactions contemplated by this
Agreement are not consummated.
9.7 Materiality. ARM and the Shareholders hereby agree that the
covenants set forth in this Article 9 are a material and substantial part of the
transactions contemplated by this Agreement, supported by adequate
consideration.
ARTICLE 10.
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, by the
mutual consent of ENVOY, ARM and the Shareholders.
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10.2 Termination by Either ENVOY or ARM. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of ENVOY or by action of the Board of Directors and Shareholders of ARM if (a)
the Merger shall not have been consummated by April 15, 1998, or (b) a United
States federal or state court of competent jurisdiction or United States federal
or state governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (b) shall have used all reasonable efforts to
remove such injunction, order or decree.
10.3 Termination by ARM and Shareholders. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time if (a) there has been a breach by ENVOY or Merger Sub of any representation
or warranty contained in this Agreement which would have or would be reasonably
likely to have an ENVOY Material Adverse Effect, (b) there has been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of ENVOY, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by ARM to ENVOY or (c) any
of the conditions in Sections 7.1 or 7.2 has not been satisfied as of the
Closing or if satisfaction of such a condition is or becomes impossible (other
than through the failure of ARM or the Shareholders to comply with its
obligations under this Agreement) and ARM and the Shareholders have not waived
such condition on or before Closing.
10.4 Termination by ENVOY. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action of
the Board of Directors of ENVOY, if (a) there has been a breach by ARM or the
Shareholders of any representation or warranty contained in this Agreement which
would have or would be reasonably likely to have an ARM Material Adverse Effect,
(b) there has been a material breach of any of the covenants or agreements set
forth in this Agreement on the part of ARM or the Shareholders, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by ENVOY to ARM, (c) the Merger will not qualify for
accounting by ENVOY as a pooling of interests under generally accepted
accounting principles and under applicable rules and regulations of the SEC, or
(d) any of the conditions in Sections 7.1 or 7.3 has not been satisfied as of
the Closing or if satisfaction of such a condition is or becomes impossible
(other than through the failure of ENVOY or Merger Sub to comply with their
respective obligations under this Agreement) and ENVOY and Merger Sub have not
waived such condition on or before Closing.
10.5 Effect of Termination and Abandonment. Upon termination of this
Agreement pursuant to this Section, this Agreement shall be void and of no other
effect, and there shall be no liability by reason of this Agreement or the
termination thereof on the part of any party hereto (other than for breach of a
covenant contained herein), or on the part of the respective directors,
officers, employees, agents or shareholders of any of them.
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10.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 11.
GENERAL PROVISIONS
11.1 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to ENVOY or Merger Sub: If to ARM or the Shareholders:
ENVOY Corporation Automated Revenue Management, Inc.
Two Lakeview Place 909 ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President of President
Strategic Development
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President and
General Counsel
with a copy to: with a copy to:
Bass, ▇▇▇▇▇ & ▇▇▇▇, PLC ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
2700 First American Center ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
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11.2 Assignment, Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
11.3 Entire Agreement. This Agreement, the Exhibits, the ARM Disclosure
Letter, the ENVOY Disclosure Letter, the Nondisclosure Agreement and any
documents delivered by the parties in connection herewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto.
11.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Board of Directors, at any time before or after
approval of matters presented in connection with the Merger by the shareholders
of ENVOY or ARM, but after any such approval, no amendment shall be made which
by law requires the further approval of shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
11.5 Governing Law. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the laws of the United
States and those of the State of Tennessee applicable to contracts made and to
be performed wholly within such state.
11.6 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
11.7 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
11.8 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations, partnerships and limited
liability companies.
11.9 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto
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of a breach of any provision hereunder shall not operate or be construed as a
waiver of any prior or subsequent breach of the same or any other provision
hereunder.
11.10 Incorporation of Exhibits. The ARM Disclosure Letter, the ENVOY
Disclosure Letter and the Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
11.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.12 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
11.13 Expenses. Each party to this Agreement shall bear its own
expenses in connection with the Merger and Acquisition and the transactions
contemplated hereby, except that (i) the Shareholders shall pay any investment
advisor fees incurred on behalf of ARM.
11.14 Press Releases. All press releases issued by ENVOY or ARM with
respect to these transactions shall be in form reasonably approved by ENVOY.
11.15 Knowledge. For purposes of this Agreement, the term "Knowledge"
shall be limited to the actual knowledge of the current directors, officers and
shareholders of ARM (the "Principals").
[the following page is the signature page]
42
48
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf as of the day and year first
written above.
ENVOY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President of
Strategic Development
ENVOY ACQUISITION SUBSIDIARY, INC
By:/s/ ▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇ ▇. ▇▇▇▇▇
President
AUTOMATED REVENUE
MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually