EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
Dated as of December 31, 1996
Among
PHYSICIAN SUPPORT SYSTEMS, INC.,
PSS REVENUE PRODUCTION MANAGEMENT, INC.
and
REVENUE PRODUCTION MANAGEMENT, INC.
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TABLE OF CONTENTS
Introduction..............................................................1
ARTICLE I
The Merger
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SECTION 1.1. The Merger................................................1
SECTION 1.2. Closing...................................................1
SECTION 1.3. Effective Time............................................1
SECTION 1.4. Effects of the Merger.....................................2
SECTION 1.5. Certificate of Incorporation and By-Laws..................2
SECTION 1.6. Directors.................................................2
SECTION 1.7. Officers..................................................2
SECTION 1.8. Tax-Free Reorganization...................................2
SECTION 1.9. Accounting Treatment......................................2
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
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SECTION 2.1. Effect on Capital Stock......................................3
(a) Capital Stock of Merger Subsidiary................................3
(b) Cancellation of Treasury Stock and Parent-Owned Stock.............3
(c) Conversion of Company Common Stock................................3
(d) Adjustment of Exchange Ratio......................................3
SECTION 2.2. Exchange of Certificates.....................................3
(a) Parent To Provide Merger Consideration............................3
(b) Exchange Procedure................................................3
(c) Distributions with Respect to Unexchanged Shares..................4
(d) No Further Ownership Rights in Common Stock.......................4
(e) No Liability......................................................5
(f) No Fractional Shares..............................................5
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ARTICLE III
Representations and Warranties
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SECTION 3.1. Representations and Warranties of the Company................5
(a) Organization, Standing and Power..................................5
(b) Authority; Binding Agreements.....................................5
(c) Capitalization; Equity Interests..................................6
(d) Conflicts; Consents...............................................6
(e) Financial Information.............................................7
(f) Absence of Changes................................................8
(g) Assets, Property and Related Matters; Real Property...............9
(h) Patents, Trademarks and Similar Rights...........................10
(i) Insurance........................................................10
(j) Agreements, Etc..................................................10
(k) Litigation, Etc..................................................11
(l) Compliance; Governmental Authorizations .........................11
(m) Labor Relations; Employees ......................................11
(n) Accounts Receivable .............................................13
(o) Customers .......................................................13
(p) Accounts Payable ................................................13
(q) Related Party Transactions ......................................13
(r) Billing and Collection Practices ................................14
(s) Tax Matters .....................................................14
(t) Disclosure ......................................................15
(u) Bank Accounts; Powers-of-Attorney ...............................16
(v) Accounting Matters ..............................................16
(w) Brokers .........................................................16
SECTION 3.2. Representations and Warranties by Merger Subsidiary
and Parent..................................................16
(a) Organization, Standing and Power ................................16
(b) Authority; Binding Agreements ...................................16
(c) Conflicts; Consents .............................................17
(d) Capitalization ..................................................17
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities .18
(f) Absence of Certain Changes or Events ............................18
(g) Litigation, Etc. ................................................18
(h) Compliance; Govenmental Authorizations ..........................19
(i) Accounting Matters ..............................................19
(j) Billing and Collection Practices ................................19
(k) Brokers .........................................................19
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ARTICLE IV
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Additional Agreements
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SECTION 4.1. Expenses ...................................................20
SECTION 4.2. Conduct of Business ........................................20
SECTION 4.3. Affiliates .................................................20
SECTION 4.4. Agreements of Parent Affiliates ............................20
SECTION 4.5. Nasdaq .....................................................20
SECTION 4.6. Intentionally Omitted ......................................20
SECTION 4.7. Further Assurances .........................................20
SECTION 4.8. No Shopping ................................................21
SECTION 4.9. Access and Information .....................................21
SECTION 4.10.Announcements ..............................................21
SECTION 4.11.Confidentiality ............................................21
SECTION 4.12.Release of Personal Guarantees .............................22
ARTICLE V
Conditions Precedent
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SECTION 5.1. Conditions to Each Party's Obligation To Effect the Merger..22
(a) No Injunctions or Restraints ........................................22
(b) Indemnification Agreement ...........................................22
SECTION 5.2. Conditions to Obligations of Parent and Merger Subsidiary...22
(a) Representations and Warranties ......................................22
(b) Performance of Obligations of the Company ...........................22
(c) Consents, Amendments and Terminations ...............................23
(d) Opinion of Counsel ..................................................23
(e) Due Diligence .......................................................23
(f) Employment Agreements ...............................................23
(g) Non-Competition Agreements ..........................................23
(h) Affiliates ..........................................................23
(i) Investment Letter ...................................................23
(j) Resignation Letters .................................................23
(k) Other Documents .....................................................23
SECTION 5.3. Conditions to Obligation of the Company.....................23
(a) Representations and Warranties ......................................23
(b) Performance of Obligations of the Parent and Merger Subsidiary. .....24
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(c) Registration Rights Agreement .......................................24
(d) Opinion..............................................................24
(e) Other Documents .....................................................24
ARTICLE VI
Miscellaneous
SECTION 6.1. Entire Agreement...........................................24
SECTION 6.2. Descriptive Headings; Certain Interpretations..............24
SECTION 6.3. Notices....................................................24
SECTION 6.4. Counterparts...............................................25
SECTION 6.5. Survival...................................................25
SECTION 6.6. Benefits of Agreement......................................26
SECTION 6.7. Amendments and Waivers.....................................26
SECTION 6.8. Assignment.................................................26
SECTION 6.9. Enforceability.............................................26
SECTION 6.10. Governing Law..............................................26
Exhibits
A Form of Indemnification Agreement
B Form of Opinion of Counsel of the Company
C-1 Form of ▇▇▇▇▇▇▇▇▇ Employment Agreement
C-2 Form of ▇▇▇▇▇▇ Employment Agreement
C-3 Form of ▇▇▇▇▇▇ Employment Agreement
D Form of Non-Competition Agreement
E Form of Affiliate Agreement
F Form of Investment Letter
G Form of Registration Rights Agreement
H Form of Opinion of Counsel of Parent and Merger Subsidiary
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Agreement and Plan of Merger dated as of December 31, 1996
among Physician Support Systems, Inc., a Delaware corporation
("Parent"), PSS Revenue Production Management, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent
("Merger Subsidiary"), and Revenue Production Management, Inc.,
an Illinois corporation (the "Company").
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Introduction
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The Board of Directors of each of Parent, Merger Subsidiary and the
Company, and the stockholders of the Company, each have unanimously approved the
merger of Merger Subsidiary into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement. As a result of the
Merger, each issued and outstanding share of the Common Stock, par value $1.00
per share (the "Company Common Stock"), of the Company not owned directly or
indirectly by Parent or the Company will be converted into the right to receive
the consideration provided in this Agreement.
The parties to this Agreement intend that the Merger qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
Parent, Merger Subsidiary and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
The parties agree as follows:
ARTICLE I
The Merger
SECTION 1.1. The Merger. Upon the terms and subject to the
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conditions set forth in this Agreement, and in accordance with the Illinois
Business Corporation Act of 1983, as amended ("Illinois Law") and the Delaware
General Corporation Law ("Delaware Law"), Merger Subsidiary shall be merged with
and into the Company at the Effective Time of the Merger (defined below in
Section 1.3). Following the Merger, the separate corporate existence of Merger
Subsidiary shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Merger Subsidiary in accordance with Illinois Law
and Delaware Law.
SECTION 1.2. Closing. The closing of the Merger (the "Closing") will
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take place at 10:00 a.m. on a date to be specified by the parties, which
(subject to satisfaction or waiver of the conditions set forth in Sections 5.2
and 5.3) shall be no later than the second business day after satisfaction or
waiver of the conditions set forth in Section 5.1, at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless
another date or place is agreed to in writing by the parties hereto (such date
upon which the Closing occurs, the "Closing Date").
SECTION 1.3. Effective Time. As soon as practicable following the
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satisfaction or waiver of the conditions set forth in Article V, the parties
shall file an articles of merger or other appropriate documents in the office of
the Illinois Secretary of State (the
"Articles of Merger") and a certificate of merger or other appropriate documents
in the office of the Delaware Secretary of State (the "Certificate of Merger")
executed in accordance with the relevant provisions of Illinois Law and Delaware
Law, respectively, and shall make all other filings or recordings required under
Illinois Law and Delaware Law. The Merger shall become effective at such time as
the Articles of Merger is duly filed with the Illinois Secretary of State and
the Certificate of Merger is duly filed with the Delaware Secretary of State
(the time the Merger becomes effective, the "Effective Time of the Merger").
SECTION 1.4. Effects of the Merger. The Merger
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shall have the effects set forth in the Illinois Law and the Delaware Law.
SECTION 1.5. Certificate of Incorporation and By-Laws. (a) The
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Certificate of Incorporation of the Company as in effect at the Effective Time
of the Merger shall be the Certificate of Incorporation of the Surviving
Corporation, until changed or amended.
(b) The By-Laws of the Company as in effect at the Effective Time of
the Merger shall be the By-Laws of the Surviving Corporation, until changed or
amended.
SECTION 1.6. Directors. Following the Effective Time of the Merger,
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the directors of the Surviving Corporation shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, until
the earlier of their resignation or removal or until their successors are duly
elected and qualified. As long as ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ are
employees of the Surviving Corporation and wish to serve as directors on the
Surviving Corporation's Board of Directors, Parent shall take such action as
shall be necessary so that such persons are elected to, and not removed from,
such Board of Directors; provided that, after the first anniversary of the
Effective Time of the Merger, Parent (in its sole discretion) may cause one of
such persons to be removed from such Board of Directors.
SECTION 1.7. Officers. The officers of Company at the Effective Time
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of the Merger shall be officers of the Surviving Corporation, until the earlier
of their resignation or removal or until their successors are duly elected and
qualified. In addition, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ shall each hold the office of Senior Vice President of the Surviving
Corporation and ▇▇. ▇▇▇▇▇▇ shall also hold the office of Chief Financial Officer
and Assistant Secretary of the Surviving Corporation.
SECTION 1.8. Tax-Free Reorganization. The Merger is intended to be a
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reorganization within the meaning of Section 368 of the Code, and this Agreement
is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368 of the Code.
SECTION 1.9. Accounting Treatment. The business combination to be
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effect by the Merger is intended to be treated for accounting purposes as a
"pooling of interests."
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ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.1. Effect on Capital Stock. As of the Effective Time of
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the Merger, by virtue of the Merger and without any action on the part of the
holder of any shares of Company Common Stock or any shares of capital stock of
Merger Subsidiary:
(a) Capital Stock of Merger Subsidiary. Each issued and outstanding
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share of the capital stock of Merger Subsidiary shall be converted into and
become one fully paid and nonassessable share of Common Stock, par value $1.00
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
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of Company Common Stock that is owned by the Company or by any subsidiary
(defined in Section 3.1(c)) of the Company and each share of Company Common
Stock that is owned by Parent, Merger Subsidiary or any other subsidiary of
Parent shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2(f),
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each issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.1(b)) shall be converted into the right
to receive (the "Merger Consideration") 315.0485 fully paid and nonassessable
shares of Common Stock, par value $.001 per share (the "Parent Common Stock"),
of Parent (rounded to the nearest ten-thousandth of a share) (the "Exchange
Ratio"). As of the Effective Time of the Merger, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued in exchange therefor upon surrender of such certificate in
accordance with Section 2.2(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(c), in each case, without
interest.
(d) Adjustment of Exchange Ratio. If after the date hereof and prior
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to the Effective Time of the Merger, Parent shall have declared a stock split
(including a reverse split) of Parent Common Stock or a dividend payable in
Parent Common Stock, or any other distribution of securities or extraordinary
dividend (in cash or otherwise) to holders of Parent Common Stock with respect
to their Parent Common Stock (including such a distribution or dividend made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction), then the Exchange Ratio referred to in
Section 2.1(c) shall be appropriately adjusted to reflect such stock split or
dividend or other distribution of securities.
SECTION 2.2. Exchange of Certificates. (a) Parent To Provide Merger
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Consideration. Parent shall take all necessary steps to have available promptly
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after the Effective Time of the Merger the certificates representing the shares
of Parent Common Stock issuable in exchange for the outstanding shares of
Company Common Stock pursuant to Section 2.1 and, from time to time, cash for
payment in lieu of fractional shares pursuant to Section 2.2(h).
(b) Exchange Procedure. At or prior to the Effective Time of the
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Merger, Parent shall make available to each holder of record of a certificate or
certificates which immediately
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prior to the Effective Time of the Merger represented outstanding shares of
Company Common Stock (the "Certificates") whose shares were converted into the
right to receive the Merger Consideration relating to the shares represented by
such Certificate or Certificates pursuant to Section 2.1, (i) a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to Parent and shall be in a form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration relating
to the shares represented by such Certificate or Certificates. Upon surrender of
a Certificate for cancellation to Parent or to such agent or agents as may be
appointed by the Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by Parent or
such agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration relating to the shares represented by
such Certificate or Certificates into which the shares of Company Common Stock
shall have been converted pursuant to Section 2.1, cash in lieu of fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(f) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(c), and the Certificate so surrendered shall be
canceled. In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, payment may be made to
a person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable. At
any time after the Effective Time of the Merger, each Certificate shall be
deemed to represent only the right to receive upon surrender the Merger
Consideration relating to the shares represented by such Certificate or
Certificates into which the shares of Company Common Stock shall have been
converted pursuant to Section 2.1, cash in lieu of any fractional shares of
Parent Common Stock as contemplated by Section 2.2(f) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(c), in
each case, without interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
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other distributions with respect to Parent Common Stock with a record date after
the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock, and
no cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(f), in each case until the surrender of such Certificate
in accordance with this Article II. Subject to the effect of applicable escheat
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(f)
and the amount of dividends or other distributions with a record date after the
Effective Time of the Merger theretofore paid with respect to such whole shares
of Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time of
the Merger but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Common Stock. All Merger
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Consideration paid upon the surrender of Certificates in accordance with the
terms of this Article II (including any cash paid pursuant to Section 2.2(f))
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock represented by such Certificates,
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and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time of the Merger. If,
after the Effective Time of the Merger, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) No Liability. If any Certificates shall not have been surrendered
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prior to six months after the Effective Time of the Merger, the Merger
Consideration (and any cash payable pursuant to Section 2.2(c) or 2.2(f))
payable in respect of such Certificates shall be held by Parent, after which
time any holders of such Certificates shall look only to Parent for such Merger
Consideration (and such cash) in respect of such Certificates. None of Parent,
Merger Subsidiary or the Company shall be liable to any person in respect of any
Merger Consideration (or any cash payable pursuant to Section 2.2(c) or 2.2(f))
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) No Fractional Shares. No certificates or scrip representing
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fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Parent Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Parent Common Stock multiplied by $16.85.
ARTICLE III
Representations and Warranties
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SECTION 3.1. Representations and Warranties of the Company The Company
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represents and warrants to Parent and Merger Subsidiary as follows:
(a) Organization, Standing and Power. The Company (i) is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Illinois and (ii) has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which such qualification is necessary because of the
property owned, leased or operated by it or because of the nature of its
business as now being conducted. The Company has delivered to Parent complete
and correct copies of its Certificate of Incorporation and By-Laws and all
amendments thereto to the date hereof and has made available to Parent its
minute books and stock records. Section 3.1(a) of the disclosure schedule
delivered by the Company to Parent and Merger Subsidiary prior to the execution
of this Agreement (the "Disclose Schedule") contains (i) a true and correct list
of the jurisdictions in which the Company is qualified to do business as a
foreign corporation and (ii) a true and correct list of the directors and
officers of the Company as of the date of this Agreement and at all times since
the last annual meeting of the board of directors and the shareholders of the
Company held on February 10, 1996.
(b) Authority; Binding Agreements. The execution and delivery of this
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Agreement and the consummation of the Merger and the other transactions
contemplated hereby
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have been duly and validly authorized by all necessary corporate action of the
Company. The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the Merger and the other transactions
contemplated hereby and the Company has duly executed and delivered this
Agreement. The stockholders of the Company have unanimously approved this
Agreement, the Merger and the other transactions contemplated hereby in
accordance with the requirements of the Illinois Law and the Certificate of
Incorporation and By-Laws of the Company. This Agreement is the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
(c) Capitalization; Equity Interests. The authorized capital stock of
--------------------------------
the Company consists of 100,000 shares of Company Common Stock. At the time of
execution of this Agreement, 1,000 shares of Company Common Stock were issued
and outstanding. Section 3.1(c) of the Disclosure Schedule contains a true and
correct list of all of the owners (of record and beneficially) of the issued and
outstanding shares of Company Common Stock specifying the number of such shares
owned by, and the address of, each such person. Except as set forth above, at
the time of execution of this Agreement, no shares of capital stock or other
voting securities of the Company are issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are not any bonds, debentures, notes or other
indebtedness or securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of the Company may vote. There are not any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which the Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or obligating the Company to issue,
grant, extend or enter into any such security, option, warrant, call right,
commitment, agreement, arrangement or undertaking. There are no outstanding
rights, commitments, agreements, arrangements or undertakings of any kind
obligating the Company to repurchase, redeem or otherwise acquire any shares of
capital stock of other voting securities of the Company or any securities of the
type described in the two immediately preceding sentences. The Company does not
have any subsidiaries and, except as set forth in Section 3.1(c) of the
Disclosure Schedule, does not own or hold any equity or other security interests
in any other entity. For purposes of this Agreement, a "subsidiary" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which ) is
owned directly or indirectly by such first person; and a "person" means an
individual, corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity (governmental or otherwise).
(d) Conflicts; Consents. The execution and delivery of this Agreement,
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the consummation of the Merger and the other transactions contemplated hereby
and the compliance by the Company with the provisions hereof do not and will not
(i) conflict with or result in a breach of the charter, by-laws or other
constitutive documents of the Company, (ii) conflict with or result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the provisions of any note, bond, lease, mortgage, indenture, or any
material license, franchise, permit, agreement or other instrument or obligation
to which the Company is a party, or by which the Company or any of the Company's
properties or assets, may be bound
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or affected, except for such conflicts, breaches or defaults as are set forth in
Section 3.1(d) of the Disclosure Schedule, (iii) violate any law, statute, rule
or regulation or order, writ, injunction or decree applicable to the Company or
any of the Company's properties or assets, except for any such violations that
are immaterial to the Company or any of the Company's properties or assets or
(iv) result in the creation or imposition of any security interest, lien or
other encumbrance upon any property or assets used or held by the Company. No
consent or approval by, or any notification of or filing with, any person is
required in connection with the execution, delivery and performance by the
Company of this Agreement or the consummation of the Merger and the other
transactions contemplated hereby except for (i) the filing with the Securities
and Exchange Commission (the "SEC") such reports under Sections 13 and 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement and the Merger and the other
transactions contemplated hereby, (ii) such filings as may be required under
state securities or "blue sky" laws in connection with the issuance of the
Parent Common Stock in connection with the Merger, (iii) the filing of the
Articles of Merger with the Illinois Secretary of State and the Certificate of
Merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as are set forth in Section 3.1(d) of
the Disclosure Schedule.
(e) Financial Information. (i) The following financial statements are
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contained in Section 3.1(e) of the Disclosure Schedule:
(a) the balance sheets of the Company at December 31, 1994 and 1995 and
the related statements of income and retained earnings and cash flows for
the two years ended December 31, 1995, compiled by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ &
Associates, LLP, the Company's accountants;
(b) the balance sheet of the Company at June 30, 1996 and the related
statements of income and retained earnings and cash flows for the six
months ended June 30, 1996, compiled by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Associates, LLP,
the Company's accountants;
(c) the monthly balance sheets of the Company as of the end of each
month commencing January 1, 1996 through the month end prior to the date of
this Agreement and the related statement of income for each such month,
certified by the chief executive officer and the chief financial officer of
the Company,
(d) a monthly schedule of expenses by category of non-continuing
extraordinary expenses commencing January 1, 1996 through the month end
prior to the date of this Agreement, and
(e) an Estimated Closing Date Balance Sheet of the Company as of
December 31, 1996, setting forth the Company's best estimate of the
Company's balance sheet as of such date.
Except as indicated in Section 3.1(e) of the Disclosure Schedule, all such
financial statements have been prepared in conformity with United States
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods and are true, accurate and complete. The balance sheets of
the Company as at the dates set forth present fairly the financial position of
the Company as at the dates thereof, and the related statements of income and
retained earnings and cash flows of the Company for each of the respective
specified periods then ended present
-7-
fairly the results of operations of the Company for each of the respective
periods then ended. For the purposes of this Agreement, all financial statements
referred to in this paragraph shall include any notes and schedules to such
financial statements.
(ii) There were no liabilities or obligations (whether absolute,
accrued, contingent or otherwise, and whether due or to become due) in respect
of the Company which were required to be, in accordance with GAAP, and were not
shown or provided for on the balance sheets of the Company to which such
liabilities or obligations related. All reserves established by the Company are
reflected on the balance sheets of the Company and are adequate and there are no
loss contingencies that are required to be accrued by Statement of Financial
Accounting Standard No. 5 of the Financial Accounting Standards Board which are
not provided for on such balance sheet.
(f) Absence of Changes. Except as set forth in Section 3.1(f) of the
------------------
Disclosure Schedule, since August 1, 1996 in connection with transactions
between the Company and the law firm of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, an Illinois
partnership ("G&C"), and since December 31, 1995 in all other instances, the
Company has been operated in the ordinary course consistent with past practice
and there has not been:
(i) any material adverse change in its condition (financial or
otherwise), assets, liabilities, operations, customer contracts or other
customer arrangements, management personnel, ▇▇▇▇▇▇▇▇, revenues, earnings,
business or prospects;
(ii) any obligation or liability (whether absolute, accrued, contingent
or otherwise, and whether due or to become due) incurred by the Company,
other than obligations under customer contracts, current obligations and
liabilities incurred in the ordinary course of business and consistent with
past practice;
(iii) any payment, discharge or satisfaction of any claim or obligation
of the Company, except in the ordinary course of business and consistent
with past practice;
(iv) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or
any direct or indirect redemption, purchase or other acquisition of any such
shares;
(v) any issuance or sale, or any contract entered into for the issuance
or sale, of any shares of capital stock or securities convertible into or
exercisable for shares of capital stock of the Company;
(vi) any sale, assignment, pledge, encumbrance, transfer or other
disposition of any tangible asset of the Company, except as contemplated by
this Agreement, or any sale, assignment, transfer or other disposition of
any patents, trademarks, service marks, trade names, copyrights, licenses,
franchises, know-how or any other intangible assets;
(vii) any creation of any claim or other encumbrance on any property of
the Company;
(viii) any write-down of the value of any asset or inventory of the
Company or any write-off as uncollectible of any accounts or notes
receivable or any portion thereof;
-8-
(ix) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company;
(x) any capital expenditure or commitment or addition to property,
plant or equipment of the Company;
(xi) any general increase in the compensation of employees of the
Company (including any increase pursuant to any bonus, pension, profit-
sharing or other benefit or compensation plan, policy or arrangement or
commitment), or any increase in any such compensation or bonus payable to
any officer, shareholder, director, consultant or agent of the Company
having an annual salary or remuneration in excess of $40,000;
(xii) any material damage, destruction or loss (whether or not covered
by insurance) affecting any asset or property of the Company;
(xiii) any change in the independent public accountants of the Company
or in the accounting methods or accounting practices followed by the Company
or any change in depreciation or amortization policies or rates;
(xiv) any agreement or action not otherwise referred to in items (i)
through (xiii) above entered into or taken that is material to the Company;
or
(xv) any agreement, whether in writing or otherwise, to take any of the
actions specified in the foregoing items (i) through (xiv).
(g) Assets, Property and Related Matters; Real Property. (i) The
---------------------------------------------------
Company has good title to, or a valid leasehold interest in, as applicable, all
of the assets reflected on the financial statements contained in Section 3.1(e)
of the Disclosure Schedule, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind. Such assets (A) are in good operating
condition and repair, subject to ordinary wear and tear and (B) constitute all
of the properties, interests, assets and rights held for use or used in
connection with the business and operations of the Company and constitute all
those necessary to continue to operate the business of the Company consistent
with current and historical practice. All items of personal property owned by
the Company with an original cost or book value in excess of $5,000 are listed
in Section 3.1(g)(i) of the Disclosure Schedule.
(ii) Section 3.1(g)(ii) of the Disclosure Schedule sets forth a list
and brief description of all real property and of all personal property with an
original cost or book value in excess of $5,000 owned or leased by the Company
together with a brief description of (A) all buildings and other structures and
material improvements located on such real property, (B) the use to which such
property is being employed or, if not in use, for which it was intended, (C) the
name of the lessor and requirement of consent of the lessor to assignment and
(D) the termination date or notice requirement with respect to termination,
annual rental and renewal or purchase options under such leases. The Company
does not own any real property. With respect to property leased by the Company,
(I) the Company is the owner and holder of all the leasehold interests and
estates purported to be granted by such leases, (II) all leases to which the
Company is a party are in full force and effect and constitute valid and binding
obligations of the Company and, to the knowledge of the Company, of the other
parties thereto, enforceable in accordance with their terms and (III) the
Company has made available to Parent true and complete copies of
-9-
all leases referred to in Section 3.1(g)(ii) of the Disclosure Schedule. There
exists no default, or any event which upon notice or the passage of time, or
both, would give rise to any default, in the performance by the Company or by
any lessor under any lease. The Company has not, and to the knowledge of the
Company, no other person has, granted any oral or written right to anyone other
than the Company to lease, sublease or otherwise occupy any of the properties
described in Section 3.1(g)(ii) of the Disclosure Schedule through the end of
the applicable lease periods.
(iii) The real estate listed in Section 3.1(g)(ii) of the Disclosure
Schedule and all appurtenances and improvements, as used, constructed or
maintained by the Company at any time, conform in all material respects to
applicable Federal, state, local and foreign laws and regulations. To the
knowledge of the Company, the use of the buildings and structures located on
such real property or any appurtenances or equipment does not violate any
restrictive covenants or encroach on any property owned by others. No
condemnation proceeding is pending or, to the knowledge of the Company,
threatened which would preclude or impair the use of any such property by the
Company for the uses for which they are intended.
(h) Patents, Trademarks and Similar Rights. The Company owns or
--------------------------------------
licenses all patents, trademarks, service marks, trade names and copyrights, in
each case registered or unregistered, inventions, software (including
documentation and object and source code listings), know-how, trade secrets and
other intellectual property rights (collectively, the "Intellectual Property")
used in its business as presently conducted. Section 3.1(h) of the Disclosure
Schedule contains a list of all Intellectual Property owned and used by the
Company and any Intellectual Property which is licensed for use by others. To
the knowledge of the Company, no Intellectual Property infringes any rights
owned or held by any other person. There is no pending or, to the knowledge of
the Company, threatened claim or litigation against the Company contesting its
right exclusively to use any Intellectual Property. To the knowledge of the
Company, no person is infringing the rights of the Company in any Intellectual
Property. To the knowledge of the Company, no product or service sold by the
Company violates or infringes any intellectual property right owned or held by
any other person. To the knowledge of the Company, in the case of commercially
available "shrink-wrap" software programs (such as Lotus 1-2-3), neither the
Company nor any of its employees has made or is using any unauthorized copies of
any such software programs at any Company location.
(i) Insurance. Section 3.1(i) of the Disclosure Schedule contains a
---------
true and complete list of all policies of casualty, liability, theft, fidelity,
life and other forms of insurance held by the Company. True and complete copies
of such policies have been delivered to Parent. All insurance policies are in
the name of the Company, outstanding and in full force and effect, all premiums
with respect to such policies are currently paid and such policies will not be
affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement. The Company has not received notice of cancellation or
termination of any such policy, nor has it been denied or had revoked or
rescinded any policy of insurance, nor borrowed against any such policies. No
claim under any such policy is pending, other than claims made in the ordinary
course of business.
(j) Agreements, Etc. Section 3.1(j) of the Disclosure Schedule
---------------
contains a true and complete list and brief description of all written or oral
contracts, agreements and other instruments to which the Company is a party (i)
relating to indebtedness for money borrowed or capital leases, (ii) of duration
of six months or more from the date hereof and not cancelable without penalty on
30 days or less notice, (iii) relating to commitments in excess of $10,000, (iv)
relating to the employment or compensation of any director, officer, employee,
consultant or
-10-
other agent of the Company, (v) relating to the sale or other disposition of any
assets, properties or rights, (vi) relating to the lease or similar arrangement
of any machinery, equipment, motor vehicles, furniture, fixture or similar
property, (vii) between the Company and any shareholder of the Company or
affiliates of any shareholder of the Company, (viii) that restricts the
operation of the Company anywhere in the world or (ix) that is otherwise
material to the Company or entered into other than in the ordinary course of
business. The Company is not in default under any such agreement or instrument
where such default could, singly or in the aggregate with defaults under other
agreements or instruments, have a material adverse effect on the business,
operations or condition of the Company, and, to the knowledge of the Company,
all such agreements or instruments are in full force and effect. The Company has
furnished to Parent true and complete copies of all documents described in
Section 3.1(j) of the Disclosure Schedule.
(k) Litigation, Etc. Except as set forth in Section 3.1(k) of the
---------------
Disclosure Schedule, there have not been for the past five years, nor are there,
any suits, actions, claims, investigations or legal or administrative or
arbitration proceedings in respect of the Company, pending or, to the knowledge
of the Company, threatened, whether at law or in equity, or before or by any
Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. There have not been for
the past five years, nor are there, any judgments, decrees, injunctions or
orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against the Company or any of its assets or
properties.
(l) Compliance; Governmental Authorizations. (i) The Company has
---------------------------------------
complied and is in compliance in all material respects with all Federal, state,
local and foreign laws, ordinances, regulations, interpretations and orders
(including those relating to disposal of materials, environmental protection and
occupational safety and health) applicable to the Company. The Company has all
Federal, state, local and foreign governmental licenses and permits necessary to
conduct its business as presently being conducted, which licenses and permits
are set forth in Section 3.1(l) of the Disclosure Schedule. Such licenses and
permits are in full force and effect, no violations are or have been recorded in
respect of any thereof, no proceeding is pending or, to the knowledge of the
Company, threatened, to revoke or limit any thereof, and the Company does not
know of any basis for any such proceeding.
(ii) There are no conditions relating to the Company or relating to the
Company's ownership, use or maintenance of any real property previously owned or
operated by the Company or any of its present or past affiliates, and the
Company does not know or have reason to know of any such condition in respect of
such real property not related to the ownership, use or maintenance, that could
lead to any liability for violation of any Federal, state, county or local laws,
regulations, orders or judgments relating to pollution or protection of the
environment or any other applicable environmental, health or safety statutes,
ordinances, orders, rules, regulations or requirements. The Company has
received, handled, used, stored, treated, shipped and disposed of all hazardous
or toxic materials, substances and wastes (whether or not on its properties or
properties owned or operated by others) in compliance in all material respects
with all applicable environmental, health or safety statutes, ordinances,
orders, rules, regulations or requirements.
(m) Labor Relations; Employees. (i) Within the last five years,
--------------------------
the Company has not experienced any labor disputes with, or any work stoppages
by, a group of employees due to labor disagreements and, to the knowledge of the
Company, there is no such dispute or work stoppage threatened against the
Company. No employee of the Company is represented by any
-11-
union or collective bargaining agent and, to the knowledge of the Company, there
has been no union organizational effort in respect of any employees of the
Company within the past five years.
(ii) Section 3.1(m)(ii) of the Disclosure Schedule contains a list and
a brief, general description of each pension, retirement, savings, deferred
compensation, and profit-sharing plan and each stock option, stock appreciation,
stock purchase, performance share, bonus or other incentive plan, severance
plan, health, group insurance or other welfare plan, or other similar plan and
any "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), under which the Company has
any current or future obligation or liability or under which any employee or
former employee (or beneficiary of any employee or former employee) of the
Company has or may have any current or future right to benefits (the term "plan"
shall include any contract, agreement, policy or understanding, each such plan
being hereinafter referred to individually as a "Plan"). The Company has
delivered to Parent true and complete copies of (A) each Plan, (B) the summary
plan description for each Plan and (C) the latest annual report, if any, which
has been filed with the IRS for each Plan. Each Plan intended to be tax
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986
(the "Code") has been determined by the IRS to be tax qualified under Sections
401(a) and 501(a) of the Code and, since such determination, no amendment to or
failure to amend any such Plan adversely affects its tax qualified status. There
has been no prohibited transaction within the meaning of Section 4975 of the
Code and Section 406 of Title I of ERISA with respect to any Plan.
(iii) No Plan is subject to the provisions of Section 412 of the Code
or Part 3 of Subtitle B of Title I of ERISA. No Plan is subject to Title IV of
ERISA. During the past five years, neither the Company nor any business or
entity controlling, controlled by, or under common control with the Company
contributed to or was obliged to contribute to an employee pension plan that was
subject to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or arbitrations (other than
routine claims for benefits) pending, or, to the knowledge of the Company,
threatened, with respect to any Plan or the assets of any Plan, and the Company
has no knowledge of any facts which could give rise to any such actions, claims,
lawsuits or arbitrations (other than routine claims for benefits). The Company
has satisfied all funding, compliance and reporting requirements for all Plans.
With respect to each Plan, the Company has paid all contributions (including
employee salary reduction contributions) and all insurance premiums that have
become due and any such expense accrued but not yet due has been properly
reflected in the financial information in Section 3.1(e) of the Disclosure
Schedule.
(v) Except as described in Section 3.1(m)(ii) of the Disclosure
Schedule, no Plan provides or is required to provide, now or in the future,
health, medical, dental, accident, disability, death or survivor benefits to or
in respect of any person beyond termination of employment, except to the extent
required under any state insurance law or under Part 6 of Subtitle B of Title I
of ERISA and under Section 4980(B) of the Code. No Plan covers any individual
other than an employee of the Company, other than dependents of employees under
health and child care policies listed in Section 3.1(m)(ii) of the Disclosure
Schedule and delivered to Parent.
(vi) The consummation of the transactions contemplated by this
Agreement will not (A) entitle any employee of the Company to severance pay or
termination benefits for which Parent or any of its affiliates may become
liable, (B) accelerate the time of payment or
-12-
vesting, or increase the amount of compensation due to any such employee or
former employee for which Parent or any of its affiliates may become liable or
(C) obligate Parent or any of its affiliates to pay or otherwise be liable for
any compensation, vacation days, pension contribution or other benefits to any
employee, consultant or agent of the Company for periods before the Closing Date
(other than any compensation, expense reimbursement, sick leave, vacation,
401(k) matching or company contribution, payments relating to automobile
allowances or vehicle leases or other similar employee benefit owed or accrued
by the Company in the ordinary course of business) or for personnel whom Parent
does not actually employ.
(vii) The Company has made no representations or warranties (whether
written or oral, express or implied) contractually or otherwise to any client or
customer of the Company that Company's employees rendering services to such
client or customer are not "leased employees" (within the meaning of Section
414(n) of the Code) or that such employees would not be required to participate
under any pension benefit plan (within the meaning of Section 3(2) of ERISA) (a
"Pension Benefit Plan") of such client or customer of the Company relating
either to (A) providing benefits to employees of the Company under a Pension
Benefit Plan of the Company or (B) making contributions to or reimbursing such
client or customer for any contributions made to a Pension Benefit Plan of such
client or customer on behalf of employees of the Company.
(n) Accounts Receivable. Section 3.1(n) of the Disclosure Schedule
-------------------
contains a true aged list of unpaid accounts and notes receivable owing to the
Company as of the month end prior to the date of this Agreement, all of which,
to the Company's knowledge, are collectible in the ordinary course of business.
(o) Customers. Section 3.1(o) of the Disclosure Schedule contains
---------
(i) a true and complete list of the customers of the Company for each of the
years ended December 31, 1994 and 1995 and the period beginning January 1, 1996
and ended the month end prior to the date of this Agreement and, as of the date
hereof, any additions or deletions of customers from the month end prior to the
date of this Agreement, (ii) a true and correct description of the effective
date and expiration date and history of renewals for and commission revenue
generated under contracts with each of the customers of the Company listed on
Section 3.1(o) of the Disclosure Schedule, (iii) a true and complete list of all
contracts pursuant to which the Company provides goods or services to its
customers (the "Client Contracts") and (iv) a true and correct description of
(A) the terms and conditions of each verbal Client Contract, (B) any and all
disputes or defaults arising under or with respect to the Client Contracts which
could reasonably be expected to result in a client's termination of its contract
with the Company or claim for damages, and (C) all loans or advances made by the
Company to or on behalf of its customers, which description includes the date of
such loan or advance and the principal balance outstanding as of the date of
this Agreement under each such loan or advance. To the Company's knowledge, the
Client Contracts are valid and enforceable in accordance with their respective
terms with respect to the Company, and are valid and enforceable in accordance
with their respective terms with respect to any other party thereto. To the
Company's knowledge no customer of the Company intends to terminate, fail to
renew or adversely modify any relationship with the Company.
(p) Accounts Payable. Section 3.1(p) of the Disclosure Schedule
----------------
contains a true and complete list of all accounts payable of the Company as of
the date hereof.
(q) Related Party Transactions. Except as set forth in Section 3.1(q)
--------------------------
of the Disclosure Schedule, no current or former partner, director, officer,
employee or shareholder of
-13-
the Company or any associate or affiliate (as defined in the rules promulgated
under the Exchange Act) thereof, or any relative with a relationship of not more
remote than first cousin of any of the foregoing, is presently, or during (x) in
the case of transactions between the Company and G&C, the period beginning on
August 1, 1996 and ending on the date hereof and (y) in all other cases, the
period beginning on January 1, 1996 and ending on the date hereof has been, (i)
a party to any transaction with the Company (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
payments to, any such director, officer, employee or shareholder or such
associate) or (ii) to the knowledge of the Company, the direct or indirect owner
of an interest in any corporation, firm, association or business organization
which is a present (or potential) competitor, supplier or customer of the
Company, nor does any such person receive income from any source other than the
Company which relates to the Company's business or should properly accrue to the
Company.
(r) Billing and Collection Practices. (i) The current practices and
--------------------------------
procedures of the Company with respect to (A) billing on behalf of customers,
(B) receiving and processing Medicare and Medicaid payments due to customers,
(C) holding and transfer of such payments and (D) the method of determining and
collecting the fees received by the Company for services provided by providers
and physicians participating in the Medicare or Medicaid programs are not in
violation in any material respect of the restriction on assignment as set forth
in 42 U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C.
Section 1396(a)(32), and the regulations promulgated thereunder or similar
provisions of any state Medicaid program.
(ii) The Company is not engaged in any activity, whether alone or in
concert with one or more of its clients, which would constitute a violation in
any material respect of any Federal laws or of the laws of any state where the
Company does business or otherwise applicable to the Company (including (A)
Federal antifraud and abuse or similar laws pertaining to Medicare, Medicaid, or
any other Federal health or insurance program, (B) state laws pertaining to
Medicaid or any other state health or insurance program, (C) state or Federal
laws pertaining to ▇▇▇▇▇▇▇▇ to insurance companies, health maintenance
organizations, and other managed care plans or to insurance fraud, and (D)
Federal and state laws relating to collection agencies and the performance of
collection services) prohibiting fraudulent, abusive or unlawful practices
connected in any way with the provision of health care services, the billing for
such services provided to a beneficiary of any state, Federal or health or
insurance program or credit collection services. Without limiting the generality
of the foregoing, the Company has not, directly or indirectly, paid, offered to
pay or agreed to pay, or solicited or received, any fee, commission, sum of
money, property or other remuneration to or from any person which the Company
knows or has reason to believe to have been illegal under 42 U.S.C. Section
1320a-7b(b) or any similar state law.
(s) Tax Matters. The Company is a "small business corporation" and has
-----------
maintained a valid election to be an "S" corporation under Subchapter S of the
Code, and the equivalent provisions of all applicable state income tax statutes
since January, 1994. All Federal, state, local and foreign tax returns and tax
reports for periods ending on or prior to the Closing Date by the Company have
been or will be filed, or a valid request for extension has been or will be
filed with respect thereto, on a timely basis (including any extensions) with
the appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are and will
be true, correct and complete in all material respects. All Federal, state,
local and foreign income, profits, franchise, sales, use, occupation, property,
excise, employment and other taxes (including interest, penalties and
withholdings of
-14-
tax) due from and payable by the Company on or prior to the Closing Date have
been fully paid on a timely basis. The Company is not currently the beneficiary
of any extension of time within which to file any tax return. No claim has ever
been made in writing by an authority in a jurisdiction where the Company does
not file tax returns that it is or may be subject to taxation by that
jurisdiction. The books and records maintained by the Company fully reflect
accrued liabilities for all taxes which have accrued but are not yet payable and
that the Company, an "S" corporation, is required to accrue. The Company files
its federal and state corporate income tax returns using the cash basis method
of accounting. All tax liabilities resulting from a change in method of
accounting of the Surviving Corporation after the Closing will become the
liability of Parent or the Surviving Corporation. The books and records
maintained by the Company are reported under the accrual basis method of
accounting. No issues have been raised in writing by the Internal Revenue
Service (the "IRS") or any other taxing authority in connection with any tax
return or report filed by the Company and there are no issues which, either
individually or in the aggregate, could result in any liability for tax
obligations of the Company relating to periods ending on or before December 31,
1995 in excess of the accrued liability for taxes shown on the financial
statements contained in Section 3.1(e)(i) of the Disclosure Schedule. No waivers
of statutes of limitations have been given or requested with respect to the
Company. No material differences exist between the amounts of the book basis and
the tax basis of assets that are not accounted for by an accrual on the books of
the Company for Federal income tax purposes. The Company is not required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company, and
the IRS has proposed no adjustment or change in accounting method. The Company
is not a party to any agreement, contract or arrangement that would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. All transactions or
methods of accounting that could give rise to an understatement of Federal
income tax (within the meaning of Section 6661 of the Code for tax returns filed
on or before December 31, 1990, and within the meaning of Section 6662 of the
Code for tax returns filed after December 31, 1990) have been adequately
disclosed on the tax returns in accordance with Section 6661(b)(2)(B) of the
Code for tax returns filed on or prior to December 31, 1990, and in accordance
with Section 6662(d)(2)(B) of the Code for tax returns filed after December 31,
1990. The Company is not and has not been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(ii) of the Code. The Company has complied
(and until the Closing will comply) in all material respects with all applicable
laws relating to the payment and withholding of taxes (including withholding and
reporting requirements under Section 1441 through 1464, 3401 through 3406, 6041
and 6049 of the Code and similar provisions under any other laws) and, within
the time and in the manner prescribed by law, has withheld from wages, fees and
other payments and paid over to the proper governmental or regulatory
authorities all amounts required. No indebtedness of the Company is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code. The
Company has not at any time consented to have the provisions of Section
341(f)(2) of the Code apply to it.
(t) Disclosure. Except as set forth in Section 3.1(t) of the
----------
Disclosure Schedule, there have been no events, transactions or information
relating to the Company which have come to the attention of the Company which
could reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), assets, liabilities, operations, customer contracts or
other customer arrangements, management personnel, ▇▇▇▇▇▇▇▇, revenues, earnings,
business or prospects of the Company, other than general events prevailing
throughout the medical billing and accounts receivable management services
industry which similarly affect firms that directly compete in such industry. To
the Company's knowledge, no representation or warranty of the Company
-15-
contained in this Agreement, and no statement contained in any certificate,
schedule, annex, list or other writing furnished to Parent, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
(u) Bank Accounts; Powers-of-Attorney. (i) Section 3.1(u) of the
---------------------------------
Disclosure Schedule contains a true and complete list of (A) all bank accounts
and safe deposit boxes of the Company and all persons who are signatories
thereunder or who have access thereto and (B) the names of all persons holding
general or special powers-of-attorney from the Company and a summary of the
terms thereof.
(ii) The Company has at all times held all customer funds in escrow or
custody accounts with the banking institutions listed in Section 3.1(u) of the
Disclosure Schedule and has maintained adequate accounting and security measures
to ensure the proper collection, maintenance and disbursement of such funds. To
the Company's knowledge, there have been no improper withdrawals or uses of
customer funds held in such accounts.
(v) Accounting Matters. To the Company's knowledge, (i) the Company is
------------------
autonomous and has not been a subsidiary of another enterprise within three
years of the date of this Agreement, (ii) the Company has not changed the equity
interest of its voting capital stock in contemplation of effecting the Merger
within three years of the date of this Agreement, and, in connection with the
foregoing, the Company has not during such period made distributions to
stockholders (other than distributions disclosed in the Disclosure Schedule),
and has not issued, exchanged or retired its voting capital stock in
contemplation of the Merger, and (iii) the Company has not within three years of
the date of this Agreement reacquired any shares of its voting capital stock.
(w) Brokers. Except as set forth in Section 3.1(w) of the Disclosure
-------
Schedule, no agent, broker, investment banker, person or firm acting on behalf
of the Company or under the authority of the Company is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
SECTION 3.2. Representations and Warranties by Merger Subsidiary and
-------------------------------------------------------
Parent. Merger Subsidiary and Parent jointly and severally represent and warrant
------
to the Company as follows:
(a) Organization, Standing and Power. Each of Merger Subsidiary and
--------------------------------
Parent (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and (ii) has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each of Parent and Merger
Subsidiary is duly qualified to do business and is in good standing in each
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by it or because of the nature of its business as now
being conducted. Parent has provided the Company with complete and correct
copies of its and Merger Subsidiary's Certificate of Incorporation and By-Laws.
(b) Authority; Binding Agreements. The execution and delivery of this
-----------------------------
Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent and Merger Subsidiary. Each of Parent and
Merger Subsidiary has all requisite corporate power and authority to enter into
this Agreement and to consummate the Merger and the other transactions
-16-
contemplated hereby and each of Parent and Merger Subsidiary has duly executed
and delivered this Agreement. This Agreement constitutes a valid and binding
obligation of each of Parent and Merger Subsidiary enforceable against such
party in accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equitable principles.
(c) Conflicts; Consents. The execution and delivery of this Agreement,
-------------------
the consummation of the Merger and the other transactions contemplated hereby
and compliance by Parent and Merger Subsidiary with the other provisions hereof
do not and will not (i) conflict with or result in a breach of the charter, by-
laws or other constitutive documents of Parent or Merger Subsidiary, (ii)
conflict with or result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the provisions of any note, bond,
lease, mortgage, indenture, or any material license, franchise, permit,
agreement or other instrument or obligation to which Parent or Merger Subsidiary
is a party, or by which Parent or Merger Subsidiary or Parent's or Merger
Subsidiary's properties or assets, may be bound or affected, except for such
conflict, breach or default as to which requisite waivers or consents shall be
obtained before the Closing, or (iii) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to Parent or Merger
Subsidiary or Parent's or Merger Subsidiary's properties or assets, except for
any such violations that are immaterial to Parent or Merger Subsidiary or any of
Parent's or Merger Subsidiary's properties or assets. No consent or approval by,
or any notification of or filing with, any person is required in connection with
the execution, delivery and performance by Parent or Merger Subsidiary of this
Agreement or the consummation of the Merger and the other transactions
contemplated hereby, except for (i) the filing with the SEC such reports under
Sections 13 and 16 of the Exchange Act, as may be required in connection with
this Agreement, the Merger and the other transactions contemplated hereby, (ii)
such filings as may be required under state securities or "blue sky" laws in
connection with the issuance of the Parent Common Stock in connection with the
Merger, and (iii) the filing of the Articles of Merger with the Illinois
Secretary of State and the Certificate of Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business.
(d) Capitalization. The authorized capital stock of Parent consists of
--------------
100,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock. At the close of business on December 27, 1996, (i) 8,841,053 shares of
Parent Common Stock were issued and outstanding, (ii) no shares of Parent Common
Stock were held by Parent in its treasury, (iii) 393,500 shares of Parent Common
Stock were reserved for issuance upon exercise of outstanding employee stock
options to purchase shares of Parent Common Stock and (iv) 546,250 shares of
Parent Common Stock were reserved for issuance upon exercise of employee stock
options that are not outstanding but may be issued in the future under Parent's
1996 Stock Option Plan. Except as set forth above, at the time of execution of
this Agreement, no shares of capital stock or other voting securities of Parent
are issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of Parent are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness or securities of Parent having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of Parent may vote. Except as set
forth above, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Parent or any of its
subsidiaries is a party or by which any of them is bound obligating Parent or
any of its subsidiaries to issue, deliver or sell, or cause to be
-17-
issued, delivered or sold, additional shares of capital stock or other voting
securities of Parent or of any of its subsidiaries or obligating Parent or any
of its subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding commitments, agreements, arrangements or undertakings
of any kind obligating Parent or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock or other voting securities of
Parent or any of its subsidiaries. As of the date of this Agreement, the
authorized capital stock of Merger Subsidiary consists of 1,000 shares of common
stock, par value $.01 per share, all of which have been validly issued, are
fully paid and nonassessable and are owned by Parent free and clear of any
liens.
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities.
---------------------------------------------------------------
Parent has filed all required reports, forms and other documents with the SEC
since the filing of Parent's Registration Statement on Form S-1 for the initial
public offering of Parent Common Stock on December 21, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
state therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments not material in scope or amount). Except as
set forth in the Parent Filed SEC Documents (defined in Section 3.2(f)), neither
Parent nor any of its subsidiaries has any material liabilities or obligations
required by generally accepted accounting principles to be recognized or
disclosed on a consolidated balance sheet of Parent and its consolidated
subsidiaries or in the notes thereto and which, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on
Parent and its subsidiaries taken as a whole.
(f) Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Parent SEC Documents filed and publicly available prior to the date of this
Agreement (the "Parent Filed SEC Documents"), since the date of the most recent
financial statements contained in the Parent Filed SEC Documents, there has not
been any material adverse change in Parent and its subsidiaries taken as a
whole.
(g) Litigation, Etc. Except as disclosed in the Parent Filed SEC
---------------
Documents, there are no suits, actions, claims, investigations or legal or
administrative or arbitration proceedings in respect of Parent or any of its
subsidiaries, pending or, to the knowledge of Parent, threatened, whether at law
or in equity, or before or by any Federal, foreign, state or municipal or other
governmental department, commission, board, bureau, agency or instrumentality
that, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Parent and its subsidiaries taken as a whole.
-18-
(h) Compliance; Governmental Authorizations. Except as disclosed in
---------------------------------------
the Parent Filed SEC Documents, Parent has complied and is in compliance in all
material respects with all Federal, state, local and foreign laws, ordinances,
regulations, interpretations and order (including those relating to disposal of
materials, environmental protection and occupational safety and health)
applicable to Parent. Parent has all Federal, state, local and foreign
governmental licenses and permits necessary to conduct its business as presently
being conducted. Such licenses and permits are in full force and effect, no
violations are or have been recorded in respect of any thereof, no proceeding is
pending, or, to the knowledge of Parent, threatened, to revoke or limit any
thereof, and the Seller does not know of any basis for any such proceeding.
(i) Accounting Matters. To the knowledge of Parent after due inquiry,
------------------
neither Parent nor any of its affiliates has taken or agreed to take any action
that, without giving effect to any action taken or agreed to be taken by the
Company or any of its affiliates, would prevent Parent from accounting for the
business combination to be effected by the Merger as a "pooling of interests."
(j) Billing and Collection Practices. (i) The current practices and
--------------------------------
procedures of PSS with respect to (A) billing on behalf of customers, (B)
receiving and processing Medicare and Medicaid payments due to customers, (C)
holding and transfer of such payments and (D) the method of determining and
collecting the fees received by PSS for services provided by providers and
physicians participating in the Medicare or Medicaid programs are not in
violation in any material respect of the restriction on assignment as set forth
in 42 U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C.
Section 1396(a)(32), and the regulations promulgated thereunder or similar
provisions of any state Medicaid program.
(ii) PSS is not engaged in any activity, whether alone or in concert
with one or more of its clients, which would constitute a violation in any
material respect of any Federal laws or of the laws of any state where PSS does
business or otherwise applicable to PSS (including (A) Federal antifraud and
abuse or similar laws pertaining to Medicare, Medicaid, or any other Federal
health or insurance program, (B) state laws pertaining to Medicaid or any other
state health or insurance program, (C) state or Federal laws pertaining to
▇▇▇▇▇▇▇▇ to insurance companies, health maintenance organizations, and other
managed care plans or to insurance fraud, and (D) Federal and state laws
relating to collection agencies and the performance of collection services)
prohibiting fraudulent, abusive or unlawful practices connected in any way with
the provision of health care services, the billing for such services provided to
a beneficiary of any state, Federal or health or insurance program or credit
collection services. Without limiting the generality of the foregoing, PSS has
not, directly or indirectly, paid, offered to pay or agreed to pay, or solicited
or received, any fee, commission, sum of money, property or other remuneration
to or from any person which PSS knows or has reason to believe to have been
illegal under 42 U.S.C. Section 1320a-7b(b) or any similar state law.
(k) Brokers. No agent, broker, investment banker, person or firm
-------
acting on behalf of Parent or Merger Subsidiary or under the authority of Parent
or Merger Subsidiary is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly from any of the
parties hereto in connection with any of the transactions contemplated hereby.
-19-
ARTICLE IV
Additional Agreements
---------------------
SECTION 4.1. Expenses. Each of Parent and Merger Subsidiary shall pay
--------
its own fees, costs and expenses incurred in connection with this Agreement and
the Merger and the other transactions contemplated by this Agreement, including,
without limitation, the fees, costs and expenses of its financial advisors,
accountants and counsel. Parent shall pay the first $125,000 of the Company's
fees, costs and expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, the reasonable fees, costs and expenses of its financial
advisors, accountants and counsel. To the extent that the Company's fees, costs
and expenses exceed $125,000, such excess shall be for the account of, and paid
by, the stockholders of the Company.
SECTION 4.2. Conduct of Business. (a) From the date hereof until the
-------------------
Effective Time of the Merger, except as otherwise consented to by Parent in
writing, the Company shall operate its business only in the ordinary course of
business consistent with past practice.
(b) Without limiting the generality of the foregoing, the Company shall
not, without the prior written consent of Parent, directly or indirectly, cause
or permit any state of affairs, action or omission described in clauses (i)
through (xv) of Section 3.1(f).
SECTION 4.3. Affiliates. The Company shall list in Section 4.3 of the
----------
Disclosure Schedule all persons who are "affiliates" of the Company for purposes
of the SEC's Accounting Series Releases concerning "pooling of interests"
treatment for business combinations, which list shall include all of the
Company's directors, executive officers and stockholders.
SECTION 4.4. Agreements of Parent Affiliates. Prior to the Effective
-------------------------------
Time of the Merger, Parent will use its reasonable efforts to obtain the
execution of agreements with respect to the sale of Parent Common Stock with
each person who is an "affiliate" of Parent for purposes of compliance with
pooling restrictions.
SECTION 4.5. Nasdaq. Prior to the Effective Time of the Merger, Parent
------
shall use all reasonable efforts to have the Parent Common Stock to be issued in
the Merger approved for listing on the Nasdaq National Market, subject to
official notice of issuance.
SECTION 4.6. Intentionally Omitted.
SECTION 4.7. Further Assurances. Each of the parties hereto agrees to
------------------
use all commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable and to ensure that the conditions set forth in Article V hereof are
satisfied, insofar as such matters are within the control of any of them. In
case at any time after the Closing Date, any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties to
this Agreement shall take or cause to be taken all such necessary action,
including, the execution and delivery of such further instruments and documents,
as may be reasonably requested by any party for such purposes.
-20-
SECTION 4.8. No Shopping. From the date hereof until the date this
-----------
Agreement is terminated in accordance with Section 6.2, neither the Company nor
any partner, director, officer or shareholder of the Company will, directly or
indirectly, solicit or initiate, enter into or conduct, discussions concerning,
or exchange information (including by way of furnishing information concerning
the business of the Company) or enter into any negotiations concerning, or
respond to any inquiries or solicit, entertain or agree to any proposals for,
the acquisition of the assets of, or any substantial part thereof, or a merger
involving, the Company or the transfer of all or a substantial part of the
capital stock or partnership interest of the Company to any person other than
Parent. In addition, during such time period, the Company shall not authorize,
direct or knowingly permit any employee or agent to do any of the foregoing and
the Company shall notify Parent of the identity of any person who approaches the
Company with respect to any of the foregoing.
SECTION 4.9. Access and Information. From the date hereof until the
----------------------
first to occur of the Closing Date and the termination of this Agreement, the
Company shall permit Parent and its representatives to make such investigation
of the business, operations and properties of the Company as Parent deems
necessary or desirable in connection with the transactions contemplated hereby.
Such investigation shall include, without limitation, access to the respective
directors, officers, employees, agents and representatives (including legal
counsel and independent accountants) of and the properties, books, records and
commitments of the Company. The Company shall furnish Parent and its
representatives with such financial, operating and other data and information,
and copies of documents with respect to its business or any of the transactions
contemplated hereby, as Parent shall from time to time request. Such access and
investigation shall be made upon reasonable notice and at reasonable places and
times. Such access and information shall not in any way affect or diminish any
of the representations or warranties hereunder.
SECTION 4.10. Announcements. The parties hereto agree that they will
-------------
advise and confer with each other prior to the issuance of any reports,
statements or releases pertaining to this Agreement or the transactions
contemplated hereby.
SECTION 4.11. Confidentiality. (a) Until Closing, Parent, Merger
---------------
Subsidiary and the Company each agree that all financial or other information
about Parent, Merger Subsidiary or the Company, or other information of a
confidential or proprietary nature, disclosed to the other at any time in
connection with the proposed transaction shall be kept confidential by the party
receiving such information and shall not be disclosed to any person or used by
the receiving party (other than to its agents or employees or in connection with
the transactions contemplated by this Agreement) except: (i) with the prior
written consent of the disclosing party; (ii) as may be required by applicable
law, regulation, court process or by obligations pursuant to any listing
agreement with any national securities exchange (including the Nasdaq National
Market); (iii) such information which may have been acquired or obtained by such
party (other than through disclosure by the other party in connection with the
transaction contemplated by this Agreement); or (iv) such information which is
or becomes generally available to the public other than as a result of a
violation of this provision.
(b) In the event of a breach or threatened breach by any party of the
provisions of this Section, the non-breaching party shall be entitled to an
injunction restraining such party from such breach. Nothing contained in this
paragraph (b) or elsewhere in this Agreement shall be construed as prohibiting
the non-breaching party from pursuing any other remedies available at
-21-
law or equity for such breach or threatened breach of this Agreement nor
limiting the amount of damages recoverable in the event of a breach or
threatened breach by any party of the provisions of this Section.
SECTION 4.12. Release of Personal Guarantees. The Surviving
------------------------------
Corporation and Parent will use their respective reasonable efforts to obtain
releases of the obligations of, and the personal guarantees executed by, the
stockholders of the Company, which obligations and guarantees are set forth in
Section 4.12 of the Disclosure Schedule. The Surviving Corporation and Parent
agree to indemnify each stockholder of the Company and hold each of them
harmless from and against any loss or reasonable expense (including reasonable
fees and expenses of counsel) suffered or incurred by any of them resulting from
the obligations and guarantees set forth on Section 4.12 of the Disclosure
Schedule. To the extent such obligations or guarantees are called upon, the
Surviving Corporation and Parent will indemnify the stockholders of the Company
dollar for dollar for such amounts actually paid by such persons under such
obligations and guarantees and only for so long as such obligations and
guarantees remain in effect.
ARTICLE V
Conditions Precedent
--------------------
SECTION 5.1. Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; no proceeding or lawsuit shall
have been commenced by any governmental or regulatory agency for the purpose of
obtaining any such injunction, writ or preliminary restraining order and no
written notice shall have been received from any such agency indicating an
intent to restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement.
(b) Indemnification Agreement. The Indemnification Agreement, in the
-------------------------
form of Exhibit A, shall have been duly executed and delivered by the parties
thereto.
SECTION 5.2. Conditions to Obligations of Parent and Merger Subsidiary.
---------------------------------------------------------
The obligations of Parent and Merger Subsidiary to effect the Merger are further
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company set forth in the Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date, as though made on and as of the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at
-22-
or prior to the Closing Date, and Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect.
(c) Consents, Amendments and Terminations. Parent shall have received
-------------------------------------
duly executed and delivered copies of all waivers, consents, terminations and
approvals contemplated by Section 3.1(d) and Sections 3.1(d) and 3.1(j) of the
Disclosure Schedule, all in form and substance reasonably satisfactory to
Parent.
(d) Opinion of Counsel. Parent shall have received the opinion dated
------------------
the Closing Date of ▇▇▇▇▇▇▇ & Associates, Ltd., counsel to the Company,
substantially in the form of Exhibit B.
(e) Due Diligence. Parent and its representatives shall have completed a
-------------
due diligence review of the condition (financial or otherwise), assets,
liabilities, operations, customer contracts or other customer arrangements,
▇▇▇▇▇▇▇▇, revenues, earnings, business and prospects of, and any other matters
relating to, the Company, and the results of such due diligence shall be
satisfactory to Parent in its sole discretion.
(f) Employment Agreements. Each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
and ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have duly executed and delivered to Parent an
Employment Agreement, in substantially the form of Exhibits C-1 (the "▇▇▇▇▇▇▇▇▇
Employment Agreement"), C-2 (the "▇▇▇▇▇▇ Employment Agreement") and C-3 (the
"▇▇▇▇▇▇ Employment Agreement" and, together with the ▇▇▇▇▇▇▇▇▇ Employment
Agreement and the ▇▇▇▇▇▇ Employment Agreement, the "Employment Agreements"),
respectively.
(g) Non-Competition Agreements. Each of the stockholders of the Company
--------------------------
shall have executed and delivered to Parent a Non-Competition Agreement, in the
form of Exhibit D.
(h) Affiliates. Each person who is listed as an affiliate of the Company
----------
in Section 4.3 of the Disclosure Schedule shall have executed and delivered to
Parent an Affiliates Agreement, in the form of Exhibit E.
(i) Investment Letter. Each of the stockholders of the Company shall
-----------------
have executed and delivered to Parent an Investment Letter, in the form of
Exhibit F.
(j) Resignation Letters. Each director of the Company who is not to
-------------------
serve as a director of the Surviving Corporation pursuant to Section 1.6 shall
have tendered to Parent his resignation from such position, effective
immediately following the Closing Date.
(k) Other Documents. Parent and Merger Subsidiary shall have received
---------------
such other documents, certificates or instruments as they may reasonably
request.
SECTION 5.3. Conditions to Obligation of the Company. The obligations of
---------------------------------------
the Company to effect the Merger are further subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Parent and Merger Subsidiary set forth in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and
warranties of Parent and Merger Subsidiary set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date, and the Company shall have received a certificate
signed on behalf of each of Parent and Merger
-23-
Subsidiary by the chief executive officer (or the chief operating officer) and
the chief financial officer of such entity to such effect.
(b) Performance of Obligations of the Parent and Merger Subsidiary. Each
--------------------------------------------------------------
of Parent and Merger Subsidiary shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received a certificate signed on
behalf of each of Parent and Merger Subsidiary by the chief executive officer
(or the chief operating officer) and the chief financial officer of such entity
to such effect.
(c) Registration Rights Agreement. Parent shall have entered into the
-----------------------------
Registration Rights Agreement with the stockholders of the Company, in the form
of Exhibit G.
(d) Opinion. The Company shall have received an opinion dated the
-------
Closing Date from ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, counsel to Parent, in the form of
Exhibit H.
(e) Other Documents. The Company shall have received such other
---------------
documents, certificates or instruments as it may reasonably request.
ARTICLE VI
Miscellaneous
-------------
SECTION 6.1. Entire Agreement. This Agreement and the schedules and
----------------
exhibits hereto contain the entire agreement among the parties with respect to
the transactions contemplated by this Agreement and supersede all prior
agreements or understandings among the parties.
SECTION 6.2. Descriptive Headings; Certain Interpretations. (a)
---------------------------------------------
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
SECTION 6.3. Notices. All notices, requests and other communications to
-------
any party hereunder shall be in writing and sufficient if delivered personally
or sent by telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
-24-
If to Parent or Merger Subsidiary, to:
Physician Support Systems, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇
▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 717-653-0567
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company to:
Revenue Production Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & Associates, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
SECTION 6.4. Counterparts. This Agreement may be executed in any number
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of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 6.5. Survival. All representations and warranties, agreements
--------
and covenants contained herein or in any document delivered pursuant hereto or
in connection herewith (unless otherwise expressly provided herein or therein)
shall survive the Closing and shall remain in full force and effect until the
first anniversary of the Closing Date (the "Expiration Date").
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SECTION 6.6. Benefits of Agreement. All of the terms and provisions of
---------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement is for the
sole benefit of the parties hereto and not for the benefit of any third party,
except for the provisions of Article II.
SECTION 6.7. Amendments and Waivers. This Agreement may be amended by
----------------------
the parties at any time before or after any required approval of the
transactions contemplated by this Agreement by the shareholders of the Company;
provided, however, that, after any such approval, there shall not be made any
amendment that by law requires further approval by such shareholders without the
further approval of such shareholders. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto.
SECTION 6.8. Assignment. This Agreement and the rights and obligations
----------
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other parties hereto. Any instrument purporting
to make such assignment shall be void.
SECTION 6.9. Enforceability. It is the desire and intent of the parties
--------------
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered as of the day and year first above written.
Attest PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director Title: Senior Vice President and
Chief Financial Officer
Attest PSS REVENUE PRODUCTION MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director and Title: Vice President, Secretary
Assistant Secretary and Assistant Treasurer
Attest REVENUE PRODUCTION MANAGEMENT, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------- -----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary Title: President
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