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Exhibit 2.4
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AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 30th day of September, 1996
by and among
MEDICAL MANAGER CORPORATION
RTI ACQUISITION I CORP. (a subsidiary of
MEDICAL MANAGER CORPORATION)
RTI BUSINESS SYSTEMS, INC.
and
the STOCKHOLDERS named herein
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TABLE OF CONTENTS
Page
1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Delivery and Filing of Articles of Merger.
1.2 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Certificate of Incorporation, By-laws and Board of Directors of Surviving Corporation. . . . 5
1.4 Certain Information With Respect to the Capital Stock of the COMPANY, PC and NEWCO. . . . . 5
1.5 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. CONVERSION OF STOCK
2.1 Manner of Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. DELIVERY OF MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CLOSING
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
5.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Capital Stock of the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Transactions in Capital Stock, Reorganization Accounting. . . . . . . . . . . . . . . . . 10
5.5 No Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 Predecessor Status; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Spin-off by the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 Accounts and Notes Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Intellectual Property; Permits and Intangibles. . . . . . . . . . . . . . . . . . . . . . . 13
5.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.14 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Significant Customers; Material Contracts and Commitments. . . . . . . . . . . . . . . . . 15
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5.16 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.18 Compensation; Employment Agreements; Organized Labor Matters. . . . . . . . . . . . . . . 17
5.19 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.20 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.21 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.23 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.24 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.25 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.26 Deposit Accounts; Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.27 Relations with Governments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.28 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.29 Authority; Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.30 Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.31 No Intention to Dispose of COMPANY Stock. . . . . . . . . . . . . . . . . . . . . . . . . 27
6. REPRESENTATIONS AND WARRANTIES OF PC and NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Capital Stock of the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.7 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.9 Validity of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.10 PC Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 No Side Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Business; Real Property;
Material Agreements. 31
6.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. COVENANTS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Access and Cooperation; Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Conduct of Business Pending Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 No Shop. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Notice to Bargaining Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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7.7 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.8 Amendment of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.9 Cooperation in Preparation of Registration Statement. . . . . . . . . . . . . . . . . . . 39
7.10 Final Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12 No Indebtedness [NMS & SMI Only]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY . . . . . . . . . . . . . . . . . . 41
8.1 Representations and Warranties; Performance of Obligations. 41
8.2 Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.7 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.8 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.9 Closing of IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.10 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.11 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.12 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PC AND NEWCO
9.1 Representations and Warranties; Performance of Obligations. . . . . . . . . . . . . . . . 43
9.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 STOCKHOLDERS' Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.7 Termination of Related Party Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.8 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.9 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.10 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.11 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.12 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.13 Closing of the IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.14 FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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10. COVENANTS OF PC AFTER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1 Release From Guarantees; Repayment of Certain Obligations. . . . . . . . . . . . . . . . . 45
10.2 Preservation of Tax and
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3 Preparation and Filing of Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.4 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.5 Preservation of Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 47
11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.1 General Indemnification by the STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . 47
11.2 Indemnification by PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.3 Third Person Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.4 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5 Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.2 Liabilities in Event of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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13. NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.1 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.2 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.3 Reasonable Restraint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.4 Severability; Reformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.5 Independent Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.6 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14.1 STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14.2 PC AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14.3 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.4 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
15.1 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
16. FEDERAL SECURITIES ACT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
16.1 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
16.2 Economic Risk; Sophistication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17.1 Piggyback Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17.2 Demand Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
17.3 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
17.4 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
17.5 Availability of Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.5 Brokers and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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18.9 Survival of Representations
and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.10 Exercise of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.11 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.12 Reformation and Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
18.13 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
18.14 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
18.15 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Annexes
Annex I - Form of Articles of Merger
Annex II - Form of Certificate of Incorporation and By-laws of PC and NEWCO
Annex III - Consideration to be paid to the Stockholders
Annex IV - STOCKHOLDERS and Stock Ownership of the COMPANY
Annex V - STOCKHOLDERS and Stock Ownership of PC
Annex VI - Form of Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Annex VII - Form of Opinion of Counsel to the COMPANY and the STOCKHOLDERS
Annex VIII - Form of Employment Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 30th day of September, 1996, by and among MEDICAL MANAGER
CORPORATION, a Delaware corporation ("PC"), RTI ACQUISITION I CORP., a Delaware
corporation ("NEWCO"), RTI BUSINESS SYSTEMS, INC., a New York corporation (the
"COMPANY"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "STOCKHOLDERS"). The
STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing
under the laws of the State of Delaware, having been incorporated on
July 26, 1996, solely for the purpose of completing the transactions
set forth herein, and is a wholly-owned subsidiary of PC, a
corporation organized and existing under the laws of the State of
Delaware;
WHEREAS, the respective Boards of Directors of NEWCO and the
COMPANY (which together are hereinafter collectively referred to as
"Constituent Corporations") deem it advisable and in the best
interests of the Constituent Corporations and their respective
stockholders that NEWCO merge with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the States
of Delaware and New York;
WHEREAS, PC is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each
of which is entitled "Agreement and Plan of Reorganization," with each
of Personalized Programming, Inc., a Florida corporation, and Systems
Management, Inc., an Indiana corporation, and Systems Plus, Inc., a
California corporation, and Systems Plus Distribution, Inc., a
California corporation, and National Medical Systems, Inc., a Florida
Corporation, and their respective stockholders in order to acquire
additional medical software development and distribution companies
(the COMPANY, together with each of the entities with which PC has
entered into the Other Agreements, are collectively referred to herein
as the "Founding Companies");
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WHEREAS, this Agreement, the Other Agreements and the IPO of PC
Stock (as each is hereinafter defined) constitute the "PC Plan of
Organization";
WHEREAS, the Boards of Directors of PC and each of the Founding
Companies have approved and adopted the PC Plan of Organization as an
integrated plan to transfer the capital stock of the Founding
Companies to PC and the cash raised in the IPO of PC Stock to PC as a
transfer of property under Section 351 of the Internal Revenue Code of
1986, as amended;
WHEREAS, in consideration of the agreements of the Other
Founding Companies pursuant to the Other Agreements, the Board of
Directors of the COMPANY has approved this Agreement as part of the PC
Plan of Organization in order to transfer the capital stock of the
COMPANY to PC;
WHEREAS, unless the context otherwise requires, capitalized
terms used in this Agreement or in any schedule attached hereto and
not otherwise defined shall have the following meanings for all
purposes of this Agreement:
"Acquired Party" has the meaning set forth in Section 5.22(i).
"Acquisition Companies" shall mean NEWCO and each of the other
Delaware companies wholly-owned by PC prior to the Funding and Consummation
Date.
"Articles of Merger" shall mean those Articles or Certificates of
Merger with respect to the Merger, substantially in the form of Annex I attached
hereto, or with such other changes therein as may be required by applicable
state laws.
"Balance Sheet Date" shall mean June 30, 1996.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the fifth recital of this
Agreement.
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"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Effective Time of the Merger" shall mean the time as of which the
Merger becomes effective, which the parties hereto contemplate to occur on
the Funding and Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Funding and Consummation Date" has the meaning set forth in Section
4.
"Intellectual Property" shall mean all trademarks, service marks,
trade dress, trade names, patents and copyrights and any registration or
application for any of the foregoing, and any trade secret, invention, process,
know- how, computer software, technology systems, product design or product
packaging.
"IPO" means the initial public offering of PC Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant
to this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per
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share, of NEWCO.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Founding Companies" means all of the Founding Companies other
than the COMPANY.
"PC" has the meaning set forth in the first paragraph of this
Agreement.
"PC Charter Documents" has the meaning set forth in Section 6.1.
"PC Stock" means the common stock, par value $.01 per share, of PC.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by PC and the Underwriters of
the public offering price of the shares of PC Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on or immediately prior to
the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement of
PC on Form S-1 covering the IPO.
"Relevant Group" has the meaning set forth in Section 5.22(i).
"Returns" has the meaning set forth at the end of Section 5.22.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange
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Commission.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" shall mean the COMPANY as the surviving party
in the Merger.
"Tax" has the meaning set forth at the end of Section 5.22.
"Taxing Authority" has the meaning set forth at the end of Section
5.22.
"Transfer Taxes" has the meaning set forth in Section 18.6.
"Underwriters" means the prospective underwriters in the IPO, as
identified in the Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause Articles of Merger to be signed, verified and delivered
to the Secretary of State of the State of Delaware and, as required, a similar
filing to be made with the relevant authorities in the jurisdiction in which
the COMPANY is organized, on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the
Merger, NEWCO shall be merged with and into the COMPANY in accordance with the
Articles of Merger, the separate existence of NEWCO shall cease, and the
COMPANY shall be the surviving party in the Merger. The COMPANY is sometimes
hereinafter referred to as the "Surviving Corporation." The Merger will be
effected in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the
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Merger:
(i) the Certificate or Articles of Incorporation of the COMPANY
then in effect shall be the Certificate or Articles of Incorporation
of the Surviving Corporation until changed as provided by law;
(ii) the By-laws of the COMPANY then in effect shall become the
By-laws of the Surviving Corporation until amended as provided by law;
(iii) the Board of Directors of the Surviving Corporation
initially shall consist of the following persons:
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
The Board of Directors of the Surviving Corporation shall hold office
subject to the provisions of the laws of the State of New York and of
the Certificate or Articles of Incorporation and By-laws of the
Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the
Surviving Corporation in the same capacity or capacities, and
effective upon the Effective Time of the Merger, ▇▇▇▇ ▇. ▇▇▇▇ shall be
appointed as a vice president of the Surviving Corporation and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ shall be appointed as an Assistant Secretary of the Surviving
Corporation, each of such officers to serve, subject to the provisions
of the Certificate or Articles of Incorporation and By-laws of the
Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, PC AND NEWCO. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
COMPANY, PC and NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the COMPANY is as set forth on Schedule
1.4 hereto;
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(ii) immediately prior to the Funding and Consummation Date, the
authorized capital stock of PC will consist of 50,000,000 shares of PC
Stock, of which the number of issued and outstanding shares will be
set forth in the Registration Statement, and 500,000 shares of
preferred stock, $.01 par value, of which no shares will be issued and
outstanding; and
(iii) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 3,000 shares of NEWCO Stock, of which ten
(10) shares are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the
effect of the Merger shall be as provided in the applicable provisions of the
General Corporation Law of the State of Delaware (the "Delaware GCL") and the
law of the State of New York. Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the COMPANY shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of NEWCO shall be
merged with and into the COMPANY, and the COMPANY, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time of the
Merger, the separate existence of NEWCO shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all Taxes,
including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
COMPANY and NEWCO shall be taken and deemed to be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all property,
rights and privileges, powers and franchises and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the COMPANY and NEWCO; and the title to any real estate, or
interest therein, whether by deed or otherwise, vested in the COMPANY and NEWCO
under the laws of each state of incorporation, shall not revert or be in any
way impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the COMPANY and NEWCO and any
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claim existing, or action or proceeding pending, by or against the COMPANY or
NEWCO may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in its place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or NEWCO shall be impaired by
the Merger, and all debts, liabilities and duties of the COMPANY and NEWCO
shall attach to the Surviving Corporation, and may be enforced against such
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by the Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO
Stock, issued and outstanding immediately prior to the Effective Time of the
Merger, respectively, into shares of (x) PC Stock and (y) common stock of the
Surviving Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of
the Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (1) that number of shares
of PC Stock set forth on Annex III hereto and (2) the right to receive
the amount of cash set forth on Annex III hereto. Such amounts of cash
and shares as set forth on Annex III hereto as of the date hereof are
final and shall not change hereafter regardless of the number of
shares sold in the IPO or the offering price of such shares;
(ii) all shares of COMPANY Stock that are held by the
COMPANY as treasury stock shall be canceled and retired and no shares
of PC Stock or other consideration shall be delivered or paid in
exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue
of the Merger and without any action on the part of PC, automatically
be converted into one fully paid and non-assessable share of common
stock of the Surviving
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Corporation, which shall constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation immediately after
the Effective Time of the Merger.
All PC Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding PC
Stock by reason of the provisions of the Certificate of Incorporation of PC or
as otherwise provided by the Delaware GCL. All voting rights of such PC Stock
received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and
the STOCKHOLDERS shall not be deprived nor restricted in exercising those
rights. At the Effective Time of the Merger, PC shall have no class of capital
stock issued and outstanding other than the PC Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 At the Effective Time of the Merger and on the Funding and
Consummation Date the STOCKHOLDERS shall, upon surrender of certificates
representing all outstanding shares of COMPANY Stock, receive (i) the
respective number of shares of PC Stock set forth on Annex III and (ii) the
amount of cash set forth on Annex III hereto, said cash to be payable by wire
transfer.
3.2 The STOCKHOLDERS shall deliver to PC at the Closing the
certificates representing COMPANY Stock, duly endorsed in blank by the
STOCKHOLDERS, or accompanied by duly executed stock powers, with, if required
by PC, signatures guaranteed by a national or state chartered bank or other
financial institution, and with all necessary Transfer Tax and other revenue
stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The
STOCKHOLDERS agree promptly to use reasonable best efforts to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. CLOSING
At or prior to the Pricing, the parties shall use all reasonable best
efforts to take all actions necessary to prepare
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to (i) effect the Merger (including, if permitted by applicable state law, the
advance filing with the appropriate state authorities of the Articles of
Merger, which shall become effective only at the Effective Time of the Merger)
and (ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, that such actions shall not include the actual completion of
the Merger for purposes of this Agreement or the conversion and delivery of the
shares and payment therefor referred to in Section 3 hereof, each of which
actions shall only be taken upon the Funding and Consummation Date as herein
provided. In the event that there is no Funding and Consummation Date and this
Agreement terminates, PC hereby covenants and agrees to do all things required
by Delaware law and all things which counsel for the COMPANY advises PC are
required by applicable laws of the State of New York in order to rescind any
merger or other actions effected by the advance filing of the Articles of
Merger as described in this Section. The taking of the actions described in
clauses (i) and (ii) above (the "Closing") shall take place on the closing date
(the "Closing Date") at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. On the Funding and Consummation Date (x) the
Articles of Merger shall be or shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Funding and Consummation Date, shall become effective and the Merger shall
thereby be effected, (y) all transactions contemplated by this Agreement,
including the conversion and delivery of shares, the delivery of wire transfers
in amounts equal to the cash portions of the consideration which the
STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof and (z) the closing with respect to the IPO shall occur and be
deemed to be completed. The date on which the actions described in the
preceding clauses (x), (y) and (z) occurs shall be referred to as the "Funding
and Consummation Date." This Agreement shall in any event terminate if the
Funding and Consummation Date has not occurred within 15 business days of the
Closing Date, provided that, PC, Newco, the COMPANY and the STOCKHOLDERS shall
act in good faith to consummate the IPO. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of COMPANY and
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STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally
represent and warrant that all of the following representations and warranties
in this Section 5(A) are true at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of the Closing and the Funding
and Consummation Date, and that such representations and warranties shall
survive the Funding and Consummation Date for a period of twelve (12) months
(the last day of such period being the "Expiration Date"), except that (i) the
representations and warranties set forth in Section 5.22 hereof shall survive
until such time as the statute of limitations period has run for all tax
periods (and any portions thereof) ended on or prior to the Funding and
Consummation Date, which shall be deemed to be the Expiration Date for Section
5.22, and (ii) solely for purposes of Section 11.1(iii) hereof, and solely to
the extent that, in connection with the IPO, PC actually incurs liability under
the 1933 Act, the 1934 Act, or any other Federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable statute of limitations period, which shall be
deemed to be the Expiration Date for such purposes. For purposes of this Section
5, the term the "COMPANY" shall mean and refer to the COMPANY and each of its
subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, properties, assets or financial condition (as used herein with
respect to the COMPANY, or with respect to any other person, a "Material
Adverse Effect") on the COMPANY. Schedule 5.1 contains a list of all
jurisdictions in which the COMPANY is authorized or qualified to do business.
True, complete and correct copies of the Certificate or Articles of
Incorporation and By-laws, each as amended to date, of the COMPANY (the
"Charter Documents") are all attached hereto as Schedule 5.1. The minute books
and stock records of the COMPANY, as heretofore made available to PC, are
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correct and complete in all material respects. The most recent minutes of the
COMPANY, which are dated no earlier than ten (10) business days prior to the
date hereof, affirm and ratify all prior acts of the COMPANY and of its
officers and directors on behalf of the COMPANY.
5.2 AUTHORIZATION. (i) The representatives of the COMPANY executing
this Agreement have the authority to enter into and bind the COMPANY to the
terms of this Agreement and (ii) the COMPANY has the full corporate right,
power and authority to enter into this Agreement and the Merger, subject to any
required approval of the shareholders and the Board of Directors of the COMPANY
described on Schedule 5.2, certified copies of which are attached thereto.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the COMPANY is as set forth in Section 1.4(i). All of the issued and
outstanding shares of capital stock of the COMPANY are owned by the
STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set
forth on Schedule 5.3, are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the issued and outstanding shares of capital stock
of the COMPANY have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the STOCKHOLDERS and
were offered, issued, sold and delivered by the COMPANY in compliance in all
material respects with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation
of the preemptive rights of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK, REORGANIZATION ACCOUNTING. Except
as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock
since January 1, 1994. Except as set forth on Schedule 5.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which
obligates the COMPANY to issue any of its authorized but unissued capital stock
or its treasury stock; (ii) the COMPANY has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure
of the COMPANY nor
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the relative ownership of shares among any of its respective stockholders has
been altered or changed in contemplation of the Merger. Schedule 5.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list of all outstanding options, warrants or other rights to
acquire shares of the COMPANY's stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of
the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. The COMPANY has no subsidiaries. Except as set
forth on Schedule 5.6, the COMPANY does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity nor is the COMPANY, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a list of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise)
or from whom the COMPANY previously acquired material assets. Except as
disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the COMPANY or any other person or entity that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1994.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are
copies of the following financial statements (the "COMPANY Financial
Statements") of the COMPANY: the COMPANY's audited Consolidated Balance Sheet
as of June 30, 1996 and December 31, 1995 and 1994 and Consolidated Statements
of Income, Cash Flows and Retained Earnings for the six months ended June 30,
1996 and for each of the years in the three-year period ended December 31, 1995
(June 30, 1996 being hereinafter referred
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to as the "Balance Sheet Date"). Such Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as noted thereon or
on Schedule 5.9). Except as set forth on Schedule 5.9, such Consolidated
Balance Sheets as of June 30, 1996 and December 31, 1995 and 1994 present
fairly in all material respects the financial position of the COMPANY as of the
dates indicated thereon, and such Consolidated Statements of Income, Cash Flows
and Retained Earnings present fairly in all material respects the results of
operations and cash flows for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to PC an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet
Date of (i) all liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date and (ii) any material
liabilities of the COMPANY (including all liabilities in excess of $10,000
which are not reflected on the balance sheet as of the Balance Sheet Date) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements to which the COMPANY is a party.
Except as set forth on Schedule 5.10, since the Balance Sheet Date, the COMPANY
has not incurred any material liabilities of any kind, character and
description, whether accrued, absolute, secured or unsecured, contingent or
otherwise, other than liabilities incurred in the ordinary course of business.
The COMPANY has also set forth on Schedule 5.10, in the case of those
contingent liabilities related to pending or threatened litigation, or other
liabilities which are not fixed or otherwise accrued or reserved, a good faith
and reasonable estimate of the maximum amount which may be payable. For each
such contingent liability or liability for which the amount is not fixed or is
contested, the COMPANY has provided to PC the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
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(c) name of claimant and all other parties to the claim, suit
or proceeding.
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a reasonable best estimate of the maximum amount, if any,
which is likely to become payable with respect to each such liability.
If no estimate is provided, the best estimate shall for purposes of
this Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to PC
an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of the COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Within ten (10) days prior to Closing, the COMPANY shall provide
PC with an accurate list of all receivables obtained subsequent to the Balance
Sheet Date that are outstanding as of the date of the delivery of such list.
For each of the aforementioned accounts and notes receivable reports, the
COMPANY shall provide PC with an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories. Except to the extent reflected
on Schedule 5.11, such accounts and notes are collectible in the amounts shown
on Schedule 5.11, and the COMPANY has not received any written notice of any
contest, claim or right of set-off with respect to the amount or validity of
any such account receivable and has no other reason to believe that such
amounts are not fully collectible.
5.12 Intellectual Property; Permits and Intangibles.
(a) The COMPANY owns all Intellectual Property the absence of any of
which is reasonably likely to have a Material Adverse Effect on its business,
and the COMPANY has delivered to PC an accurate list (which is set forth on
Schedule 5.12) of all Intellectual Property owned or used by the COMPANY. Each
item of Intellectual Property owned or used by the COMPANY is valid and in full
force and effect. Except as set forth on Schedule 5.12,
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all right, title and interest in and to each item of Intellectual Property is
owned by the COMPANY and is not subject to any license, royalty arrangement or
pending or threatened claim or dispute. None of the Intellectual Property owned
or, to the COMPANY's knowledge, none of the Intellectual Property used by the
COMPANY nor any product sold by the COMPANY, infringes any Intellectual
Property right of any other entity and no Intellectual Property owned by the
COMPANY is infringed upon by any other entity.
(b) The COMPANY holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect on its business, and the COMPANY has delivered to PC an accurate
list (which is set forth on Schedule 5.12) of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including motor vehicle titles and current registrations), fuel permits,
licenses, franchises and certificates. To the knowledge of the COMPANY, the
licenses, franchises, permits and other governmental authorizations listed on
Schedule 5.12 are valid, and the COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing, in each case, except where such non-compliance or
violation would not have a Material Adverse Effect on the COMPANY.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied in all material respects with and is in compliance in
all material respects with all Federal, state, local and foreign statutes
(civil and criminal), laws, ordinances, regulations, rules, notices, permits,
judgments, orders and decrees applicable to it or any of its properties,
assets, operations and businesses relating to environmental protection
(collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable
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Environmental Law); (ii) the COMPANY has obtained and adhered to all necessary
permits and other approvals necessary to treat, transport, store, dispose of
and otherwise handle Hazardous Wastes and Hazardous Substances and has
reported, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined
in Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed
of Hazardous Wastes and Hazardous Substances or arranged for the transportation
of Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, PC or NEWCO for any clean-up
cost, remedial work, damage to natural resources or personal injury, including,
but not limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; and (v) the COMPANY has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to PC an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property
included (or that will be included) in "depreciable plant, property and
equipment" (or similarly named line item)on the balance sheet of the COMPANY as
of the Balance Sheet Date, (y) all other personal property owned by the COMPANY
with a value individually in excess of $10,000 (i) as of the Balance Sheet Date
and (ii) acquired since the Balance Sheet Date and (z) all leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases, (2)
a listing of the capital costs of all such assets which are subject to capital
leases and (3) an indication as to which assets are currently owned, or, to the
COMPANY's knowledge, were formerly owned, by STOCKHOLDERS or affiliates of the
COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.14, (i) all personal
property with a value individually in excess of $10,000 used by the COMPANY in
its business is either owned by the COMPANY or leased by the COMPANY pursuant
to a lease included on
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Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted, and (iii)
all leases and agreements included on Schedule 5.14 are in full force and
effect and constitute valid and binding agreements of the COMPANY, and to the
COMPANY's knowledge, of the parties (and their successors) thereto in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to PC an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, or persons or entities that are sources
of a significant number of customers (e.g., certain physician practices, HMO's,
etc.), it being understood and agreed that a "significant customer," for
purposes of this Section 5.15, means a customer (or persons or entity)
representing 5% or more of the COMPANY's annual revenues as of the end of its
last fiscal year. Except to the extent set forth on Schedule 5.15, none of the
COMPANY's significant customers (or persons or entities that are sources of a
significant number of customers) have canceled or substantially reduced or, to
the knowledge of the COMPANY, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances, loan agreements, indemnity
or guaranty agreements, bonds, mortgages, options to purchase land, liens,
pledges or other security agreements), other than agreements listed on Schedule
5.10, 5.14, 5.16, 5.18 or 5.19,(a) in existence as of the Balance Sheet Date
and (b) entered into since the Balance Sheet Date, and in each case has
delivered true, complete and correct copies of such agreements to PC. The
COMPANY has complied in all material respects with all commitments and
obligations pertaining to it, is not in default under any contracts or
agreements listed on Schedule 5.15, and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.15 a summary description of all plans or projects
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involving the opening of new operations, expansion of existing operations or
the acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $50,000 by the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real
property owned or leased by the COMPANY (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including that reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedule 5.10 or 5.15 as securing
specified liabilities (with respect to which no material default by
the COMPANY exists);
(ii) liens for current taxes not yet due and payable and
assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions
to title shown of record in the office of the County Clerks in which
the properties, assets and leasehold estates are located which do not
materially adversely affect the current use of the property.
Schedule 5.16 contains true, complete and correct copies of all title reports
and title insurance policies received or owned by the COMPANY with respect to
real property owned by the COMPANY.
Schedule 5.16 also contains an accurate list of, and true, complete
and correct copies of, all leases and agreements in respect of real property
leased by the COMPANY, which leases and agreements are attached to Schedule
5.16, and an indication as to which such properties, if any, are currently
owned, or, to the COMPANY's knowledge, were formerly owned, by STOCKHOLDERS or
affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule
5.16, all of such leases included on Schedule 5.16 are in full force and effect
and constitute valid and binding
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agreements of the COMPANY, and to the COMPANY's knowledge, of the parties (and
their successors) thereto in accordance with their respective terms.
5.17 INSURANCE. The COMPANY has delivered to PC, as set forth on and
attached to Schedule 5.17, (i) an accurate list as of the Balance Sheet Date of
all insurance policies currently carried by the COMPANY, (ii) an accurate list
of all insurance loss runs or workers' compensation claims received for the
past three (3) policy years and (iii) true, complete and correct copies of all
insurance policies currently in effect. Such insurance policies evidence all of
the insurance that the COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. Such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Funding and Consummation Date. No insurance
carried by the COMPANY has ever been canceled by the insurer and the COMPANY
has never been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
The COMPANY has delivered to PC an accurate list (which is set forth on
Schedule 5.18) showing all officers, directors and key employees of the
COMPANY, listing all employment agreements with such officers, directors and
key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
COMPANY has provided to PC true, complete and correct copies of any employment
agreements for persons listed on Schedule 5.18. Since the Balance Sheet Date,
there have been no increases in the compensation payable or any special bonuses
to any officer, director, key employee or other employee, except ordinary
salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not
bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union, (ii) no employees
of the COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) no campaign to establish such representation is in
progress and (iv) there is no pending or, to the COMPANY's knowledge,
threatened labor dispute involving the COMPANY and any
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group of its employees nor has the COMPANY experienced any labor interruptions
over the past three years. The COMPANY believes its relationships with its
employees to be good.
5.19 EMPLOYEE PLANS. Attached hereto as Schedule 5.19 are complete
and accurate copies, as of the Balance Sheet Date, of all employee benefit
plans, all employee welfare benefit plans, all employee pension benefit plans,
all multi-employer plans and all multi-employer welfare arrangements (as
defined in Sections 3(3), (1), (2), (37) and (40), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), which
are currently maintained and/or sponsored by the COMPANY, or any benefit plans
or arrangements, formal or informal, that are not subject to ERISA, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements, or to which
the COMPANY currently contributes, or has an obligation to contribute in the
future (including, without limitation, benefit plans or arrangements that are
not subject to ERISA, such as employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements),
together with copies of any trusts related thereto and a classification of
employees covered thereby (collectively, the "Plans").
5.20 COMPLIANCE WITH ERISA. Except for the Plans, the COMPANY does
not maintain or sponsor, and is not a contributing employer to, a pension,
profit-sharing, deferred compensation, stock option, employee stock purchase or
other employee benefit plan, employee welfare benefit plan, or any other
compensation or benefit arrangement, formal or informal, with their respective
employees, whether or not subject to ERISA. Except as set forth on Schedule
5.20, (i) all Plans are in substantial compliance with all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable laws, and have been administered, operated and managed in all
material respects in accordance with the governing documents; (ii) all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of
the Code are so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of the current plan determination
letters, or, in the case of master or prototype plans, opinion letters, most
recent actuarial valuation reports, if any, most recent Form 5500, or,
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as applicable, Form 5500-C/R filed with respect to each such Qualified Plan or
employee welfare benefit plan and most recent trustee or custodian report, are
included as part of Schedule 5.20; (iii) to the extent that any Qualified Plans
have not been amended to comply with applicable law, the remedial amendment
period permitting retroactive amendment of such Qualified Plans has not expired
and will not expire within 120 days after the Funding and Consummation Date;
(iv) all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
Reports, audits or tax returns) have been timely filed or distributed, or
failure to timely file or deliver will not result in a Material Adverse Effect
to the COMPANY; (v) none of the STOCKHOLDERS, any Plan, or the COMPANY has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA that could result in a material tax or penalty
to the COMPANY; (vi) no Plan has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; (vii) no
circumstances exist pursuant to which the COMPANY could have any direct or
indirect liability whatsoever (including being subject to any statutory lien to
secure payment of any such liability), to the Pension Benefit Guaranty
Corporation (the "PBGC") under Title IV of ERISA or to the Internal Revenue
Service for any excise tax or penalty that could result in any material
liability to the COMPANY with respect to any plan now or hereafter maintained
or contributed to by the COMPANY or any member of a "controlled group" (as
defined in Section 4001(a)(14) of ERISA) that includes the COMPANY; (viii)
neither the COMPANY nor any member of a "controlled group" (as defined above)
that includes the COMPANY currently has (or at the Funding and Consummation
Date will have) any obligation whatsoever to contribute to any "single employer
pension plan" (as defined in ERISA Section 4001(a)(15)) or any "multi-employer
pension plan" (as defined in ERISA Section 4001(a)(3)), nor has any withdrawal
liability whatsoever (whether or not yet assessed) arising under or capable of
assertion under Title IV of ERISA (including, but not limited to, Sections
4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan; (ix) there
have been no terminations or partial terminations of, or discontinuance of
contributions to, any Qualified Plan without notice to and approval by the
Internal Revenue Service; (x) no Plan that is subject to the provisions of
Title IV of ERISA has
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been terminated within the three year period immediately preceding the date of
this Agreement; (xi) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported within the three year period immediately preceding the date of
this Agreement; (xii) with respect to Plans which qualify as "group health
plans" under Section 4980B of the Internal Revenue Code and Section 607(1) of
ERISA and related regulations (relating to the benefit continuation rights
imposed by "COBRA"), the COMPANY and the STOCKHOLDERS have complied (and on the
Funding and Consummation Date will have complied) in all material respects with
all reporting, disclosure, notice, election and other benefit continuation
requirements imposed thereunder as and when applicable to such plans, and the
COMPANY has not incurred (and will not incur) any material direct or indirect
liability and is not (and will not be) subject to any material loss, assessment,
excise tax penalty, loss of Federal income tax deduction or other sanction,
arising on account of or in respect of any direct or indirect failure by the
COMPANY or the STOCKHOLDERS, at any time prior to the Funding and Consummation
Date, to comply with any such Federal or state benefit continuation requirement,
which is capable of being assessed or asserted before or after the Funding and
Consummation Date directly or indirectly against the COMPANY or the STOCKHOLDERS
with respect to such group health plans; and (xiii) other than claims in the
ordinary course of business there is no pending litigation, arbitration, or
disputed claim, settlement or adjudication proceeding, and to the best of the
COMPANY's and STOCKHOLDERS' knowledge, there is no threatened litigation,
arbitration or disputed claim, settlement or adjudication proceeding or any
governmental or other proceeding or investigation with respect to any Plan, or
with respect to any fiduciary, administrator or sponsor thereof (in their
capacities as such), or any party in interest thereof.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 5.21, the COMPANY is not in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10, there are no claims, actions,
suits or proceedings, pending or,
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to the knowledge of the COMPANY or the STOCKHOLDERS, threatened against or
affecting the COMPANY, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over it which would have a Material
Adverse Effect, and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY has conducted and
is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing, which
violation would be reasonably likely to have a Material Adverse Effect.
5.22 TAXES. Except as set forth on Schedule 5.22:
(i) All Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or
similar group of which the COMPANY is or was a member (a "Relevant
Group") with any Taxing Authority have been duly filed, and each such
Return correctly and completely reflects the Tax liability and all
other information required to be reported thereon. All Taxes (whether
or not shown on any Return) owed by the COMPANY, any subsidiary and
any member of a Relevant Group (individually, the "Acquired Party" and
collectively, the "Acquired Parties") have been paid.
(ii) To the knowledge of the COMPANY and the STOCKHOLDERS, the
provisions for Taxes due by the COMPANY and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the COMPANY
Financial Statements are sufficient for all unpaid Taxes, being
current taxes not yet due and payable, of such Acquired Party.
(iii) No Acquired Party is a party to any agreement extending
the time within which to file any Return. No claim has ever been made
by any Taxing Authority in a jurisdiction in which an Acquired Party
does not file Returns that it is or may be subject to taxation by that
jurisdiction.
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(iv) Each Acquired Party has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or
other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period.
There is no dispute or claim concerning any Tax liability of any
Acquired Party either (i) claimed or raised by any Taxing Authority or
(ii) otherwise known to any Acquired Party. No issues have been raised
in any examination by any Taxing Authority with respect to any
Acquired Party which, by application of similar principles, reasonably
could be expected to result in a proposed deficiency for any other
period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with
respect to any Acquired Party for all taxable periods ended on or
after January 1, 1990, indicates those Returns, if any, that have been
audited, and indicates those Returns that currently are the subject of
audit. Each Acquired Party has delivered to PC complete and correct
copies of all federal, state, local and foreign income Tax Returns
filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1990.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(ix) None of the assets of any Acquired Party constitutes
tax-exempt bond financed property or tax-exempt use property, within
the meaning of Section 168 of the Code.
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No Acquired Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue
Code as in effect prior to the Tax Reform Act of 1986, or to any
"long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of
any state statutes, and none of the assets of any Acquired Party is
subject to an election under Section 341(f) of the Code or comparable
provisions of any state statutes.
(xi) No Acquired Party is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for
federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any Acquired Party that could
give rise to an adjustment under Section 481 of the Code for periods
after the Funding and Consummation Date.
(xiii) No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and
legally binding agreement with a Taxing Authority relating to Taxes.
(xiv) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662(d) of the Code.
(xv) No Acquired Party has any liability for Taxes of any person
other than such Acquired Party (i) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract or
(iv) otherwise.
(xvi) There currently are no limitations on the utilization of
the net operating losses, built-in losses,
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capital losses, Tax credits or other similar items of any Acquired
Party (collectively, the "Tax Losses") under (i) Section 382 of the
Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code,
(iv) Section 269 of the Code, (v) Section 1.1502-15 and Section
1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21 and
Section 1.1502-21A of the Treasury regulations or (vii) Sections
1.1502-91 through 1.1502-99 of the Treasury regulations, in each case
as in effect both prior to and following the Tax Reform Act of 1986.
(xvii) At ______________, the Acquired Parties had aggregate Tax
Losses for federal income Tax purposes as described on Schedule
5.22(xvii) attached hereto.
(xviii) The COMPANY is not an investment company as defined in
Section 351(e)(1) of the Code.
(xix) The fair market value of the assets of the COMPANY exceeds
the sum of its liabilities, plus the amount of liabilities, if any, to
which the assets are subject.
(xx) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 351(e)(2) of
the Code.
For purposes of this Section 5.22, the following definitions
shall apply:
"Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax
with any Taxing Authority or governmental agency.
"Tax" or "Taxes" means all Federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, deed, stamp, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatsoever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
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"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY and the
STOCKHOLDERS, any other party thereto, is in default under any lease,
instrument, agreement, license or permit set forth on Schedule 5.12, 5.14,
5.15, 5.16, 5.18 or 5.19 or any other material agreement to which it is a party
or by which its properties are bound (the "Material Documents"); and, except as
set forth on Schedule 5.23, (a) the rights and benefits of the COMPANY under
the Material Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
by the COMPANY and the STOCKHOLDERS of their obligations hereunder and the
consummation by the COMPANY and the STOCKHOLDERS of the transactions
contemplated hereby will not result in any material violation or breach of, or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.23, none
of the Material Documents requires notice to, or the consent or approval of,
any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.23, none of the Material Documents
expressly prohibits or materially restricts the COMPANY from freely providing
services to any other customer or potential customer or the COMPANY, PC, NEWCO
or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.15, the
COMPANY is not a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise),
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income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business
of the COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant or issuance of any options, warrants, calls, conversion rights
or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
COMPANY;
(v) any increase in the compensation, bonus, sales commissions
or fee arrangements payable or to become payable by the COMPANY to any
of its officers, directors, STOCKHOLDERS, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, materially adversely
affecting the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the COMPANY to
any person, including, without limitation, the STOCKHOLDERS and their
affiliates;
(viii) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to the COMPANY,
including, without limitation, any material indebtedness or obligation
of any STOCKHOLDERS or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential right to purchase or acquire any interest in any of the
material assets, property or rights of the COMPANY or requiring
consent of any party to the transfer and assignment of any such
material assets, property or
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rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY,
provided that, the COMPANY may negotiate and adjust bills in the
course of good faith disputes with customers in a manner consistent
with past practice, provided, further, that such adjustments shall not
be deemed to be included on Schedule 5.11 unless specifically listed
thereon;
(xii) any breach, or any amendment other than an amendment in
the ordinary course of business, or termination of any material
contract, agreement, license or permit to which the COMPANY is a
party;
(xiii) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date;
(xiv) any other distribution of property or assets by the
COMPANY outside the ordinary course of business;
(xv) any other transaction by the COMPANY outside the ordinary
course of its business; or
(xvi) any other activity prohibited by Section 7.3 that is not
specifically included in this Section 5.25.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered
to PC an accurate schedule (which is set forth on Schedule 5.26) as of the date
of this Agreement of:
(i) the name of each financial institution in which the COMPANY
has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
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(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY
and a description of the terms of such power of attorney.
5.27 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action which
would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.28 DISCLOSURE. (a) This Agreement, the schedules hereto, and the
certificates and other documents furnished by the COMPANY to PC pursuant hereto
and for inclusion in the Registration Statement(which, for purposes of this
Agreement, shall include the completed Directors and Officers Questionnaires
and Registration Statement Questionnaires), taken as a whole, do not, and as to
any representation or warranty made to the knowledge of the COMPANY or the
STOCKHOLDERS, such representation and warranty, to the COMPANY's knowledge,
does not, as of their respective dates contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein and therein not misleading.
(b) The COMPANY and the STOCKHOLDERS acknowledge and
agree (i) that there exists no firm commitment, binding agreement, or promise
or other assurance of any kind, whether express or implied, oral or written,
that a Registration Statement will become effective or that the IPO pursuant
thereto will occur at a particular price or within a particular range of prices
or occur at all; and (ii) that neither PC or any of its officers, directors,
agents or representatives shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all
provided that PC acts in good faith, and uses its best efforts to cause its
directors and officers to act in good faith to consummate the transactions
contemplated herein.
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(B) Representations and Warranties of STOCKHOLDERS.
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8 hereof, shall be true at the time of the
Closing and on the Funding and Consummation Date, and that the representations
and warranties set forth in Sections 5.29 and 5.30 shall survive until the tenth
anniversary of the Funding and Consummation Date, which shall be deemed to the
Expiration Date for purposes of Sections 5.29 and 5.30.
5.29 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by such STOCKHOLDER, and, except as set forth on the
Schedule 5.29, such COMPANY Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind.
5.30 PREEMPTIVE RIGHTS. As of the date hereof, such STOCKHOLDER does
not have any preemptive or other right to acquire shares of PC Stock (other
than rights of any STOCKHOLDER to acquire PC Stock pursuant to (i) this
Agreement or (ii) any option granted by PC) and, except for the rights set
forth on Schedule 5.4, such STOCKHOLDER does not have, and hereby waives, any
such preemptive or other right to acquire shares of COMPANY stock.
5.31 NO INTENTION TO DISPOSE OF COMPANY STOCK. There is no current
plan or intention by any STOCKHOLDER to sell, exchange or otherwise dispose of
shares of PC Stock received in the Merger.
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6. REPRESENTATIONS AND WARRANTIES OF PC AND NEWCO
PC and NEWCO jointly and severally represent and warrant that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.8 hereof, shall be true
at the time of the Closing and the Funding and Consummation Date, and that such
representations and warranties shall survive the Funding and Consummation Date
for a period of twelve (12) months (the last day of such period being the
"Expiration Date"), except that (i) the warranties and representations set
forth in Section 6.13 hereof shall survive until such time as the limitations
period has run for all tax periods (and any portions thereof) ended on or prior
to the Funding and Consummation Date, which shall be deemed to be the Expiration
Date for Section 6.13 and (ii) solely for purposes of Section 11.2(iv) hereof,
and solely to the extent that in connection with the IPO PC actually incurs
liability under the 1933 Act, the 1934 Act or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. PC and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and By-laws, each as amended to date, of PC and
NEWCO (the "PC Charter Documents") are all attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The respective representatives of PC and
NEWCO executing this Agreement have the authority to enter into and bind PC and
NEWCO to the terms of this Agreement and (ii) PC and NEWCO have the full
corporate right, power and authority to enter into this Agreement and the
Merger.
6.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of PC
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding
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shares of the capital stock of NEWCO are owned by PC and all of the issued and
outstanding shares of the capital stock of PC are owned by the persons set
forth on Annex V hereof, in each case, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the issued and outstanding shares of the capital
stock of PC and NEWCO have been duly authorized and validly issued, are fully
paid and nonassessable, are owned of record and beneficially by PC and the
persons set forth on Annex V, respectively, and were offered, issued, sold and
delivered by PC and NEWCO in compliance in all material respects with all
applicable state and Federal laws concerning the issuance of securities. None
of such shares were issued in violation of the preemptive rights of any past or
present stockholder of PC or NEWCO. No preemptive or other right to acquire
shares of PC or NEWCO stock has been granted to any person other than the
rights granted pursuant to this Agreement and the transactions contemplated
herein, the Other Agreements and the transactions contemplated therein or as
set forth in the Registration Statement.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements
and as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates PC or NEWCO to issue any
of its authorized but unissued capital stock or treasury stock; and (ii)
neither PC nor NEWCO has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof.
Schedule 6.4 also includes complete and accurate copies of all stock option or
stock purchase plans of PC and NEWCO, including a list, accurate as of the date
hereof, of all outstanding options, warrants or other rights to acquire shares
of their respective capital stock.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. PC has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither PC nor
NEWCO owns, of record or beneficially, or controls, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is PC or NEWCO,
directly or indirectly, a
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participant in any joint venture, partnership or other non-corporate entity.
6.6 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule
6.6, PC and NEWCO have no material liabilities, contingent or otherwise, except
as set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.7 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 6.7, neither PC nor NEWCO is in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them, which violation would have a Material Adverse
Effect; and except to the extent set forth in Schedule 6.7, there are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
PC or NEWCO, threatened, against or affecting PC or NEWCO, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them, and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. PC and NEWCO have conducted and are
conducting their respective businesses in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing, which violation might have a Material Adverse Effect.
6.8 NO VIOLATIONS. Neither PC nor NEWCO is in violation of any PC
Charter Document. None of PC, NEWCO or, to the knowledge of PC and NEWCO, any
other party thereto is in default under any lease, instrument, agreement,
license or permit to which PC or NEWCO is a party, or by which PC or NEWCO, or
any of their respective properties, are bound (collectively, the "PC
Documents"); and (a) the rights and benefits of PC and NEWCO under the PC
Documents will not be adversely affected by the transactions contemplated
hereby; and (b) the execution of this Agreement and the performance of PC's and
NEWCO's obligations
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hereunder and the consummation by them of the transactions contemplated hereby
will not result in any material violation or breach of, or constitute a default
under, any of the terms or provisions of the PC Documents or the PC Charter
Documents. Except as set forth on Schedule 6.8, none of the PC Documents
requires notice to, or the consent or approval of, any governmental agency or
other third party with respect to any of the transactions contemplated hereby
in order to remain in full force and effect, and the consummation of the
transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit of PC
or NEWCO.
6.9 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by PC and NEWCO and the performance by them of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of PC and NEWCO, and this Agreement has been duly and
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of PC and NEWCO.
6.10 PC STOCK. At the time of issuance thereof, the PC Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of PC, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all respects to the PC Stock issued and outstanding as of
the date hereof by reason of the provisions of the Delaware GCL. The shares of
PC Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not
be registered under the 1933 Act, except as provided in Section 17 hereof.
6.11 NO SIDE AGREEMENTS. Neither PC nor NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or PC other than the Other Agreements
and the agreements contemplated by each of the Other Agreements, including the
employment agreements referred to therein. PC has provided to the COMPANY any
of such documents which have been requested by the COMPANY or the STOCKHOLDERS.
6.12 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. PC was formed in
July 1996, and has conducted limited operations
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since that time. Neither PC nor NEWCO has conducted any business since the date
of its inception, except in connection with this Agreement, the Other
Agreements and the IPO. Neither PC nor NEWCO owns or has at any time owned any
real property or any material personal property or is a party to any other
agreement, except as listed on Schedule 6.12 and except that PC is a party to
the Other Agreements and the agreements contemplated thereby and to such
agreements as will be filed as Exhibits to the Registration Statement.
6.13 TAXES. NEWCO is a newly formed entity which has no tax or
operational history. Except as set forth on Schedule 6.13:
(i) All Returns required to have been filed by or with respect
to PC and any affiliated, combined, consolidated, unitary or similar
group of which PC is or was a member (a "PC Relevant Group") with any
Taxing Authority have been duly filed, and each such Return correctly
and completely reflects the Tax liability and all other information
required to be reported thereon. All Taxes (whether or not shown on
any Return) owed by the PC Relevant Group have been paid.
(ii) The provisions for Taxes due by PC and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the PC Financial
Statements are sufficient for all unpaid Taxes, being current taxes
not yet due and payable, of the PC Relevant Group.
(iii) No corporation in the PC Relevant Group is a party to any
agreement extending the time within which to file any Return. No claim
has ever been made by any Taxing Authority in a jurisdiction in which
a corporation in the PC Relevant Group does not file Returns that it
is or may be subject to taxation by that jurisdiction.
(iv) Each corporation in the PC Relevant Group has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
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(v) No corporation in the PC Relevant Group expects any Taxing
Authority to assess any additional Taxes against or in respect of it
for any past period. There is no dispute or claim concerning any Tax
liability of any corporation in the PC Relevant Group either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to
any corporation in the PC Relevant Group. No issues have been raised
in any examination by any Taxing Authority with respect to any
corporation in the PC Relevant Group which, by application of similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Schedule 6.13(v)
attached hereto lists all federal, state, local and foreign income Tax
Returns filed by or with respect to any corporation in the PC Relevant
Group for all taxable periods, indicates those Returns, if any, that
have been audited, and indicates those Returns that currently are the
subject of audit. Each corporation in the PC Relevant Group will make
available to the STOCKHOLDERS, at their request, complete and correct
copies of all federal, state, local and foreign income Tax Returns
filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, PC.
(vi) No corporation in the PC Relevant Group has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
(vii) No corporation in the PC Relevant Group has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make
any payments, that are not deductible under Section 280G the Code.
(viii) No corporation in the PC Relevant Group is a party to any
Tax allocation or sharing agreement.
(ix) None of the assets of any corporation in the PC Relevant
Group constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. No
corporation in the PC Relevant Group is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code
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as in effect prior to the Tax Reform Act of 1986, or to any "long-term
contract" within the meaning of Section 460 of the Code.
(x) No corporation in the PC Relevant Group is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets of
any corporation in the PC Relevant Group is subject to an election
under Section 341(f) of the Code or comparable provisions of any state
statutes.
(xi) No corporation in the PC Relevant Group is a party to any
joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any corporation in the PC
Relevant Group that could give rise to an adjustment under Section 481
of the Code for periods after the Funding and Consummation Date.
(xiii) No corporation in the PC Relevant Group has received any
written ruling of a Taxing Authority related to Taxes or entered into
any written and legally binding agreement with a Taxing Authority
relating to Taxes.
(xiv) Each corporation in the PC Relevant Group has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Section 6662(d) of the Code.
(xv) No corporation in the PC Relevant Group has any liability
for Taxes of any person other than such corporation in the PC Relevant
Group (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xvi) There currently are no limitations on the
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utilization of the net operating losses, built-in losses, capital
losses, Tax credits or other similar items of any corporation in the
PC Relevant Group (collectively, the "Tax Losses") under (i) Section
382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of
the Code, (iv) Section 269 of the Code, (v) Section 1.1502- 15 and
Section 1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21
and Section 1.1502-21A of the Treasury regulations or (vii) Sections
1.1502-91 through 1.1502-99 of the Treasury regulations, in each case
as in effect both prior to and following the Tax Reform Act of 1986.
(xvii) Neither PC nor NEWCO is an investment company as defined
in Section 351(e)(1) of the Code.
(xviii) Neither PC nor NEWCO is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
351(e)(2) of the Code.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of
this Agreement and the Funding and Consummation Date, upon reasonable notice to
the COMPANY, the COMPANY will afford to the officers and authorized
representatives of PC and the Other Founding Companies access to all of the
COMPANY's sites, properties, books and records and will furnish PC with such
additional financial and operating data and other information as to the
business and properties of the COMPANY as PC or the Other Founding Companies
may from time to time reasonably request. The COMPANY will cooperate with PC
and the Other Founding Companies, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with the transactions contemplated by this Agreement. PC, NEWCO, the
STOCKHOLDERS and the COMPANY will treat all information obtained in connection
with the negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, PC will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees
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and agents to keep confidential any information obtained by such Other Founding
Company.
(b) Between the date of this Agreement and the Funding and
Consummation Date, upon reasonable notice to PC, PC will afford to the officers
and authorized representatives of the COMPANY access to all of PC's and NEWCO's
sites, properties, books and records and will furnish the COMPANY with such
additional financial and operating data and other information as to the
business and properties of PC and NEWCO as the COMPANY may from time to time
reasonably request. PC and NEWCO will cooperate with the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with the transactions
contemplated by this Agreement. The COMPANY, PC and NEWCO will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as
set forth on Schedule 7.2:
(i) carry on its business in the ordinary course as conducted
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform all of its current obligations as required under
agreements relating to or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its present key employees and
maintain its relationships with suppliers, customers and others having
material business relations with the COMPANY;
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(vi) maintain compliance, in all material respects, with all
permits, laws, rules and regulations, consent orders, and all other
orders of applicable courts, regulatory agencies and similar
governmental authorities;
(vii) maintain present debt and lease instruments in accordance
with their respective terms and not enter into new or amended debt or
lease instruments, without the knowledge and consent of PC (which
consent shall not be unreasonably withheld); and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents, except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Funding and Consummation Date, the COMPANY will
not, without the prior written consent of PC:
(i) make any change in its Articles or Certificate of
Incorporation or By-laws;
(ii) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating to its
securities of any kind other than in connection with the exercise of
options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditure, except if it is
in the ordinary course of business (consistent with past practice) and
involves an amount not in excess of $50,000;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or
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properties, whether now owned or hereafter acquired, except (1) with
respect to purchase money liens incurred in connection with the
acquisition of equipment with an aggregate cost not in excess of
$50,000 necessary or desirable for the conduct of the business of the
COMPANY, (2) (A) liens for taxes either not yet due or being contested
in good faith and by appropriate proceedings (and for which adequate
reserves have been established and are being maintained) or (B)
materialmen's, mechanics', workers', repairmen's, employees' or other
like liens arising in the ordinary course of business (the liens set
forth in clause (2) being referred to herein as "Statutory Liens"), or
(3) liens set forth on Schedule 5.10 or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business;
(vii) negotiate for the acquisition of any business or start-up
any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(ix) waive any material right or claim of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall not be deemed
to be included on Schedule 5.11 unless specifically listed thereon;
(x) breach or amend, other than an amendment in the ordinary
course of business, or terminate any material contract, agreement,
license, or permit to which the COMPANY is a party; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the
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date of this Agreement and ending with the earlier to occur of the Funding and
Consummation Date or the termination of this Agreement in accordance with its
terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussion pertaining to, or
(iii) furnish any information to any person other than PC or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the
COMPANY or a merger, consolidation or business combination of the
COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide PC on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate (i)
any stockholders' agreements, voting agreements, voting trusts, options,
warrants and employment agreements between the COMPANY and any employee listed
on Schedule 9.12 hereto and (ii) any existing agreement between the COMPANY and
any STOCKHOLDER, at or prior to the Funding and Consummation Date. Copies of
such termination agreements are attached to Schedule 7.6 or will be furnished
to PC at or prior to such date.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the
COMPANY shall give prompt notice to PC of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of the COMPANY or the STOCKHOLDERS contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. PC and NEWCO shall give prompt notice to
the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause
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any representation or warranty of PC or NEWCO contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of PC or NEWCO to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.8, (ii)
modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Funding
and Consummation Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth
or described on the Schedules, provided, however, that supplements and
amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall only have to be
delivered at the Closing Date, unless such Schedule is to be amended to reflect
an event occurring other than in the ordinary course of business.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by the COMPANY or the STOCKHOLDERS that constitutes or
reflects an event or occurrence that would be reasonably likely to have a
Material Adverse Effect may be made unless PC and a majority of the Founding
Companies other than the COMPANY consent to such amendment or supplement; and
provided further, that no amendment or supplement to a Schedule prepared by PC
or NEWCO that constitutes or reflects an event or occurrence would be
reasonably likely to have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the
Other Founding Companies or its stockholders seek to amend or supplement a
Schedule pursuant to Section 7.8 of one of the Other Agreements, and such
amendment or supplement constitutes or reflects an event
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or occurrence that would be reasonably likely to have a Material Adverse Effect
on such Other Founding Company or the sale of its stock by its stockholders to
PC, PC shall give the COMPANY notice promptly after it has knowledge thereof.
If PC and a majority of the Founding Companies consent to such amendment or
supplement, which consent shall have been deemed given if no response is
received within 48 hours after notice of such amendment or supplement (or
sooner if required by the circumstances under which such consent is requested),
but the COMPANY does not, the COMPANY may terminate this Agreement pursuant to
Section 12.1(iv) hereof. In the event that the COMPANY seeks to amend or
supplement a Schedule pursuant to this Section 7.8 and PC and a majority of the
Other Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. In the event that PC or NEWCO seeks to amend or supplement a
Schedule pursuant to this Section 7.8 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. No party
to this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8, except that,
notwithstanding anything to the contrary contained in this Agreement, if the
COMPANY or the STOCKHOLDERS on the one hand, or PC or NEWCO on the other hand,
amends or supplements a Schedule which results in a termination of this
Agreement and such amendment or supplement arises out of or reflects facts or
circumstances which such party knew about at the time of execution of this
Agreement and knew would result in a termination of this Agreement or if such
amendment or supplement otherwise is proposed in bad faith, such party shall
pay or reimburse PC or the COMPANY and the STOCKHOLDERS, as the case may be,
for all of the legal, accounting and other out of pocket costs reasonably
incurred in connection with this Agreement and the IPO as it relates to the
COMPANY and the STOCKHOLDERS.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The
COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to PC and
the Underwriters all of the information concerning the COMPANY and the
STOCKHOLDERS reasonably requested by PC or the Underwriters for inclusion in,
and will cooperate with PC and the Underwriters in the
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preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, and in form otherwise reasonably
requested by PC or the Underwriters as suitable for inclusion in the
Registration Statement). PC and NEWCO agree to use their best efforts to
provide to the STOCKHOLDERS and the COMPANY copies of all drafts of the
Registration Statement circulated to the working group as a whole, including
the prospectus included therein and all amendments and exhibits thereto and any
other documents and correspondence received by or filed with the SEC, and, to
the extent practicable in light of the timetable for the IPO and the potential
need to respond promptly to SEC, NASD or NASDAQ comments, to give the
STOCKHOLDERS and the COMPANY sufficient time to review and comment upon such
documents prior to filing with the SEC. The COMPANY and the STOCKHOLDERS agree
promptly to advise PC if at any time during the 25 day period following the
date of the final prospectus with respect to the IPO (the "Final Prospectus")
in which a prospectus relating to the IPO is required to be delivered under the
Securities Act, any information contained in the prospectus concerning the
COMPANY or the STOCKHOLDERS and which was provided by or on behalf of the
STOCKHOLDERS or the COMPANY or their respective agents or representatives for
inclusion in the Registration Statement, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and to provide the
information needed to correct such misstatement or omission. Insofar as the
information requested relates solely to the COMPANY or the STOCKHOLDERS and was
provided by the COMPANY or the STOCKHOLDERS or their respective agents or
representatives for inclusion in the Registration Statement, each of the
COMPANY and the STOCKHOLDERS represents and warrants that the Registration
Statement at its effective date, at the date of each of the Final Prospectus
and each amendment to the Registration Statement or supplement to the Final
Prospectus, and at each closing date with respect to the IPO under the
Underwriting Agreement (including with respect to any over- allotment option)
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall
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provide prior to the Funding and Consummation Date, and PC shall have had
sufficient time to review, the unaudited consolidated balance sheets of the
COMPANY as of the end of all fiscal quarters following the Balance Sheet Date,
and the unaudited consolidated statements of income, cash flows and retained
earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet
Date, disclosing no material adverse change in the financial condition of the
COMPANY or the results of its operations from the financial statements as of
the Balance Sheet Date. Such financial statements shall have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as noted therein).
Except as noted in such financial statements, all of such financial statements
will present fairly the results of operations of the COMPANY for the periods
indicated thereon.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
convenient to carry out the transactions contemplated hereby.
7.12 Limitation on Indebtedness. As of the Funding and Consummation
Date, the amount outstanding under the COMPANY's line of credit (as evidenced
by that certain Demand Grid Note, dated October 27, 1995, between Marine
Midland Bank and the COMPANY (the "Note")), shall be no greater than $350,000.
In the event that the amount outstanding under the note exceeds $350,000 as of
the Funding and Consummation Date, the COMPANY and the STOCKHOLDERS, jointly
and severally, hereby agree to indemnify PC in the amount of such excess.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
COMPANY
The obligations of the STOCKHOLDERS and the COMPANY with respect to
actions to be taken on each of the Closing Date and the Funding and
Consummation Date are subject to the satisfaction or waiver on or prior to the
Closing Date and the Funding and Consummation Date of all of the following
conditions. As of the Closing Date or the Funding and Consummation Date, as the
case may be, all conditions not satisfied shall be deemed to have been waived
by the COMPANY and the STOCKHOLDERS unless such parties have notified PC in
writing to the contrary, except that no such waiver shall be deemed to affect
the survival of the representations and warranties of PC and NEWCO contained in
Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of PC and NEWCO contained in this Agreement
shall be true and correct in all material respects as of the Closing Date and
the Funding and Consummation Date as though such representations and warranties
had been made as of that time; all of the terms, covenants and
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conditions of this Agreement to be complied with and performed by PC and NEWCO
on or before the Closing Date and the Funding and Consummation Date shall have
been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Closing Date and the Funding and
Consummation Date and signed by the President or any Vice President of PC shall
have been delivered to the STOCKHOLDERS.
8.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall be satisfactory to the COMPANY and its
counsel. The STOCKHOLDERS and the COMPANY shall be satisfied that the
Registration Statement and the prospectus forming a part thereof, including any
amendments thereof or supplement thereto, shall not contain any untrue
statement of a material fact, or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided that the condition contained in this sentence shall be
deemed satisfied if the COMPANY or STOCKHOLDERS shall have failed to inform PC
in writing prior to the Funding and Consummation Date of the existence of an
untrue statement of a material fact or the omission of such a statement of a
material fact.
8.3 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted to restrain or
prohibit the merger of NEWCO with and into the COMPANY or the Mergers
contemplated by the other Agreements or the offering and sale by PC of PC Stock
pursuant to the Registration Statement.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion
from counsel for PC, dated the Closing Date, in the form annexed hereto as
Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings therefor shall have been instituted or shall be pending or
contemplated under the 1933 Act and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, shares of PC Stock at a price to the
public of not less than $10.00 per share.
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8.6 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit the Merger or the Mergers contemplated by the other Agreements.
8.7 GOOD STANDING CERTIFICATES. PC and NEWCO each shall have
delivered to the COMPANY a certificate, dated as of a date no earlier than five
days prior to the Closing Date, duly issued by the Delaware Secretary of State
and in each state in which PC or NEWCO is authorized to do business, showing
that each of PC and NEWCO is in good standing and authorized to do business and
that all state franchise and/or income tax returns and taxes for PC and NEWCO,
respectively, for all periods prior to the Closing have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to PC or NEWCO which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the PC Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and the Funding and
Consummation Date and signed by the Secretary of PC and of NEWCO, certifying
the truth and correctness of attached copies of PC's and NEWCO's respective
Certificates of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the boards of directors and,
if required, the stockholders of PC and NEWCO approving PC's and NEWCO's
entering into this Agreement and the consummation of the transactions
contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
9.12 shall have entered into an employment agreement substantially in the form
of Annex VIII hereto.
8.12 TAX TREATMENT. The COMPANY and the STOCKHOLDERS shall be
reasonably satisfied that (i) none of PC, NEWCO or any Other Founding Company
(or its STOCKHOLDERS) has breached any representation or warranty set forth in
this Agreement or in the Other Agreements, and (ii) no event outside the
control of the COMPANY and the STOCKHOLDERS has occurred between the date of
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this Agreement and the Funding and Consummation Date, in each case so as to
jeopardize the treatment of the transactions contemplated by the PC Plan of
Organization as a transfer of property described in Section 351 of the Code.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PC AND NEWCO
The obligations of PC and NEWCO with respect to actions to be taken on
each of the Closing Date and the Funding and Consummation Date are subject to
the satisfaction or waiver on or prior to the Closing Date and the Funding and
Consummation Date of all of the following conditions. As of the Closing Date or
the Funding and Consummation Date, as the case may be, all conditions not
satisfied shall be deemed to have been waived by PC and NEWCO unless such
parties have notified the COMPANY and the STOCKHOLDERS in writing to the
contrary, except that no such waiver shall be deemed to affect the survival of
the representations and warranties of the COMPANY and the STOCKHOLDERS
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
the representations and warranties of the STOCKHOLDERS and the COMPANY
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date and the Funding and Consummation Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the STOCKHOLDERS and the COMPANY on or before the
Closing Date or the Funding and Consummation Date, as the case may be, shall
have been duly performed or complied with in all material respects; and the
STOCKHOLDERS shall have delivered to PC a certificate dated the Closing Date
and the Funding and Consummation Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted to restrain or
prohibit the merger of NEWCO with and into the COMPANY or the offering and sale
by PC of PC Stock pursuant to the Registration Statement.
9.3 SECRETARY'S CERTIFICATE. PC shall have received a certificate,
dated the Closing Date and the Funding and Consummation Date and signed by the
Secretary of the COMPANY, certifying the truth and correctness of attached
copies of the
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COMPANY's Certificate or Articles of Incorporation (including amendments
thereto), By-Laws (including amendments thereto), and resolutions of the board
of directors and the STOCKHOLDERS approving the COMPANY's entering into this
Agreement and the consummation of the transactions contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect.
9.5 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to
PC an instrument dated the Closing Date releasing the COMPANY from (i) any and
all claims of the STOCKHOLDERS against the COMPANY and (ii) any and all
obligations of the COMPANY to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.6 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall be satisfactory
to PC and its counsel.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7 and consented to by PC, all existing agreements between the
COMPANY and the STOCKHOLDERS shall have been canceled effective prior to or as
of the Funding and Consummation Date.
9.8 OPINION OF COUNSEL. PC shall have received an opinion from
counsel to the COMPANY and the STOCKHOLDERS, dated the Closing Date, in the
form annexed hereto as Annex VII, which form shall be deemed to include any
additional opinions covering matters customary under the circumstances and
based upon reasonable requests by the Underwriters, which opinion may be relied
upon by counsel to PC in connection with any opinion requested of it by the
Underwriters.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third
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parties listed on Schedule 5.23 shall have been obtained; and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to
PC a certificate, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by PC, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
9.12 shall have entered into an employment agreement substantially in the form
of Annex VIII hereto. Any employment agreement in effect as of the date hereof
between the COMPANY and any person listed on Schedule 9.12 shall have been
terminated on or prior to the Funding and Consummation Date.
9.13 CLOSING OF THE IPO. The closing of the sale of PC Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to PC
a certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF PC AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. PC
shall use its best efforts to have the STOCKHOLDERS released from any and all
guarantees on any indebtedness that they personally guaranteed for the benefit
of the COMPANY, with all such guarantees on indebtedness being assumed by PC.
In the event that PC cannot obtain such releases from the lenders of any such
guaranteed indebtedness on or prior to 120 days subsequent to the Funding and
Consummation Date, PC shall pay off or otherwise refinance or retire such
indebtedness and, in the event that PC cannot obtain releases on or prior to
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the Funding and Consummation Date, PC agrees to indemnify the STOCKHOLDERS
against any and all claims made by lenders under such guarantees which arise as
a result of PC's failure to cause such guarantees to be released on or prior to
the Funding and Consummation Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, PC shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the reorganization, including:
(a) the retirement or reacquisition, directly or
indirectly, of all or part of the PC Stock issued in connection with
the transactions contemplated hereby;
(b) the entering into of financial arrangements for the
benefit of the STOCKHOLDERS; and
(c) the disposition of any material part of the assets of
the COMPANY within the two years following the Funding and
Consummation Date except in the ordinary course of business or to
eliminate duplicate services or excess capacity.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end on or
before the Funding and Consummation Date. Each STOCKHOLDER shall pay or cause
to be paid all Tax liabilities shown by such Returns to be due. PC and NEWCO
shall not file any amended Tax Returns for any taxable year or portion thereof
of the Surviving Corporation ending on or before the Funding and Consummation
Date without the prior written consent of the STOCKHOLDERS, which consent shall
not be unreasonably withheld.
(ii) PC shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after the
Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Return, amended
Return or
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claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all relevant
portions of relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(iv) Each of the COMPANY, NEWCO, PC and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a transfer
of property under Section 351(a) of the Code.
10.4 DIRECTORS. The persons named in the Registration Statement shall
be appointed as directors of PC not later than ten (10) days following the
closing of the IPO.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing, PC
shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as PC is able to replace such plan with a
plan that is applicable to the COMPANY, provided that PC shall have no
obligation to provide replacement plans that have the same terms and provisions
as the existing plans, and provided, further, that any new health insurance
plan shall provide for coverage for preexisting conditions.
11. INDEMNIFICATION
The STOCKHOLDERS, PC and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless PC, NEWCO and the Surviving Corporation at all times,
from and after the date of this Agreement until the Expiration Date, from and
against all claims, damages, actions, suits, proceedings, demands,
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assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and reasonable expenses of
investigation) incurred by PC, NEWCO, the COMPANY or the Surviving Corporation
as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of the STOCKHOLDERS or the COMPANY
under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the COMPANY or the STOCKHOLDERS, and provided to PC
or its counsel by the COMPANY or the STOCKHOLDERS for inclusion in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make
the statements therein not misleading, (iv) any Tax imposed upon or relating to
any third party for a pre-Funding and Consummation Date period, including, in
each case, any such Tax for which an Acquired Party may be liable under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract or otherwise, or (v)
the matters described on Schedule 11.1(v), provided that any proposed amendment
to Schedule 11.1(v) made after the signing of this Agreement may only be made
with consent of the COMPANY and the STOCKHOLDERS, and provided, further, that
such indemnity shall not inure to the benefit of PC, NEWCO or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to PC's counsel and to PC for inclusion in the final prospectus,
and such information was not so included or properly delivered, and provided
further, that no STOCKHOLDER shall be liable for any indemnification obligation
pursuant to this Section 11.1 to the extent attributable to a breach of any
representation, warranty or agreement made herein individually by any other
STOCKHOLDER.
11.2 INDEMNIFICATION BY PC. PC covenants and agrees
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that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by
PC or NEWCO of its representations and warranties set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of PC or NEWCO under this
Agreement, (iii) any liability which the STOCKHOLDERS may incur due to PC's or
NEWCO's failure to be responsible for the liabilities and obligations of the
COMPANY as provided in Section 1 hereof (except to the extent that PC or NEWCO
has claims against the STOCKHOLDERS by reason of such liabilities); (iv) any
liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to PC, NEWCO
or any of the Other Founding Companies contained in any preliminary prospectus,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to PC or
NEWCO or any of the Other Founding Companies required to be stated therein or
necessary to make the statements therein not misleading, or (v) the matters
described on Schedule 11.2(v).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge
of any claim by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being
made against any party obligated to provide indemnification pursuant to Section
11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the
Indemnifying Party written notice of such claim or the commencement of such
action or proceeding. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof, to the extent known. The
Indemnifying Party shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter so long
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as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party, such consent not to be
unreasonably withheld or delayed. If the Indemnifying Party undertakes to
defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest in
the opinion of such counsel that prevents counsel for the Indemnifying Party
from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the expenses of its
counsel. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person and the Indemnified Party shall
reimburse the Indemnifying Party for any additional costs of defense which it
subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such
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defense, the Indemnified Party may undertake such defense through counsel of
its choice, at the cost and expense of the Indemnifying Party, and the
Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing,
which agreement shall not be unreasonably withheld or delayed. The parties
hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any
party to this Agreement against another party, provided that nothing herein
shall be construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. PC, NEWCO, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 shall not assert any claim other than a Third Person claim for
indemnification hereunder against the STOCKHOLDERS until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDERS shall exceed 1.0% of the sum of the cash paid to
STOCKHOLDERS plus the value of the PC Stock delivered to STOCKHOLDERS (for
purposes of calculating the value of the PC Stock, such PC Stock is to be
valued at its initial public offering price as set forth in the Registration
Statement) (the "Indemnification Threshold"), provided, however, that PC,
NEWCO, the Surviving Corporation and the other persons or entities indemnified
pursuant to Section 11.1 or 11.2 may assert and shall be indemnified for any
claim under Sections
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11.1(iv) and (v) at any time, regardless of whether the aggregate of all claims
which such persons may have against any STOCKHOLDER or all STOCKHOLDERS exceeds
the Indemnification Threshold, it being understood that the amount of any such
claim under Sections 11.1(iv) and (v) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim (other
than a Third Person claim) for indemnification hereunder against PC or NEWCO
until such time as, and solely to the extent that, the aggregate of all claims
which the STOCKHOLDERS may have against PC or NEWCO shall exceed $100,000,
provided, however, that the STOCKHOLDERS and the other persons or entities
indemnified pursuant to Section 11.1 or 11.2 may assert and shall be
indemnified for any claim under Section 11.2(v) at any time, regardless of
whether the aggregate of all claims which such persons may have against PC or
NEWCO exceeds $100,000, it being understood that the amount of any such claim
under Section 11.2(v) shall not be counted towards such $100,000 amount.
No person shall be entitled to indemnification under this Section 11
if and to the extent that such person's claim for indemnification is directly
or indirectly related to a material breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement.
Notwithstanding any other term of this Agreement (except the proviso
to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, such proceeds to be equal to the sum of the cash
paid to the STOCKHOLDER plus the value of the PC Stock delivered to the
STOCKHOLDER as calculated above, provided that a STOCKHOLDER's indemnification
obligations pursuant to Sections 11.1(iv) and (v) shall not be limited.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior
to the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of PC and the
COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its
board of directors), on the one hand, or by PC (acting through its
board of directors), on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by December 31, 1996, unless the failure of such
transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its
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obligations under this Agreement to the extent required to be
performed by it prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or the COMPANY, on the one hand, or by
PC, on the other hand, if a material breach or default shall be made
by the other party in the observance or in the due and timely
performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been
made on or before the Funding and Consummation Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in
Section 7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDERS will not, for a period
of five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with PC or any of the subsidiaries thereof, within
100 miles of where the COMPANY or any of its subsidiaries or any of
the other Founding Companies conducted business prior to the
effectiveness of the Merger or proposed to conduct business as of such
time (the "Territory");
(ii) solicit any person who is, at that time, within the
Territory, an employee of PC (including the subsidiaries thereof) in a
sales representative or managerial capacity
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for the purpose or with the intent of enticing such employee away from
or out of the employ of PC (including the subsidiaries thereof);
(iii) solicit any person or entity which is, at that time, or
which has been, within one (1) year prior to the Funding and
Consummation Date, a customer of PC (including the subsidiaries
thereof), of the COMPANY or of any of the Other Founding Companies
within the Territory for the purpose of soliciting or selling products
or services in direct competition with PC within the Territory;
(iv) solicit any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the medical
software development or distribution business, which candidate was
either called upon by PC (including the subsidiaries thereof) or for
which PC (or any subsidiary thereof) made an acquisition analysis
which was known (or should have been known) to the STOCKHOLDER, for
the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed,
of the COMPANY to any person, firm, partnership, corporation or
business for any reason or purpose whatsoever except to the extent
that the COMPANY has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses
to PC as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to PC for which it would
have no other adequate remedy, each STOCKHOLDER agrees that, in the event of a
breach by such STOCKHOLDER, the foregoing covenant may be enforced by PC by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of PC (including the
subsidiaries
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thereof) on the date of the execution of this Agreement and the current plans
of PC.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and this Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against PC (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by PC
of such covenants. It is specifically agreed that the period of five (5) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that
this covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that
they had in the past, currently have and in the future may have access to
certain confidential information relating to the COMPANY, the Other Founding
Companies and/or PC, such as operational policies, and pricing and cost
policies, that are valuable, special and unique assets of the COMPANY, the
Other Founding Companies and/or PC's business. The STOCKHOLDERS agree that they
will not use or disclose such confidential information to any person, firm,
corporation, association or other entity for
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any purpose or reason whatsoever, except (a) to authorized representatives of
the COMPANY, NEWCO, the Other Founding Companies and PC who need to know such
information in connection with the transactions contemplated hereby, who have
been informed of the confidential nature of such information and who have
agreed to keep such information confidential as provided hereby, and (b)
following the Closing, such information may be disclosed by the STOCKHOLDERS as
is required in the course of performing their duties for PC or the Surviving
Corporation unless (i) such information becomes known to the public generally
through no breach by the STOCKHOLDERS of this covenant, (ii) disclosure is
required by law or the order of any governmental authority under color of law
or is necessary in order to secure a consent or approval to consummate the
transactions contemplated hereby, provided, that prior to disclosing any
information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible,
give prior written notice thereof to PC and provide PC with the opportunity to
contest such disclosure, or (iii) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party and the same prior disclosure set forth immediately above
is given. In the event of a breach or threatened breach by any of the
STOCKHOLDERS or PC of the provisions of this Section, PC shall be entitled to
an injunction restraining the STOCKHOLDERS from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting PC from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
14.2 PC AND NEWCO. PC and NEWCO recognize and acknowledge that they
had in the past and currently have access to certain confidential information
relating to the COMPANY, such as operational policies, and pricing and cost
policies, that are valuable, special and unique assets of the COMPANY. PC and
NEWCO agree that, prior to the Closing, or if the Transactions contemplated by
this Agreement are not consummated, they will not use or disclose such
confidential information to their own benefit except in furtherance of the
Transactions contemplated by this Agreement or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to the STOCKHOLDERS and to
authorized representatives of the COMPANY who need to know such information in
connection with the transactions contemplated
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hereby, who have been informed of the confidential nature of such information
and who have agreed to keep such information confidential as provided hereby,
and (b) to the Other Founding Companies and their representatives pursuant to
Section 7.1(a), unless (i) such information becomes known to the public
generally through no breach by PC or NEWCO of this covenant, (ii) disclosure is
required by law or the order of any governmental authority under color of law
or is necessary in order to secure a consent or approval to consummate the
transactions contemplated hereby, provided, that prior to disclosing any
information pursuant to this clause (ii), PC and NEWCO shall, if possible, give
prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide
the COMPANY and the STOCKHOLDERS with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party and the same prior disclosure set forth immediately above is
given. In the event of a breach or threatened breach by PC or NEWCO of the
provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining PC and NEWCO from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages. In the
event that the transactions contemplated herein are not consummated, PC and
NEWCO shall return to the COMPANY within a reasonable time all documents (in
both paper and electronic form) containing confidential information about the
COMPANY, and shall use reasonable efforts to compel the Other Founding
Companies to do the same. In such instance, PC will also furnish to the COMPANY
a written statement certifying that all documents which contained confidential
information about the COMPANY and which had been in PC's possession had been
returned by PC to the COMPANY.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may
be enforced against the other parties by
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injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive notwithstanding either the termination of this Agreement or the
consummation of the transactions contemplated hereby on the Funding and
Consummation Date.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of two years from the Funding and Consummation
Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS shall (i)
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or
otherwise dispose of (a) any shares of PC Stock received by the STOCKHOLDERS in
the Merger, or (b) any interest (including, without limitation, an option to buy
or sell) in any such shares of PC Stock, in whole or in part, and no such
attempted transfer shall be treated as effective for any purpose; or (ii) engage
in any transaction, whether or not with respect to any shares of PC Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
the shares of PC Stock acquired pursuant to Section 2 hereof (including, by way
of example and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). Notwithstanding the foregoing, (i) if the "holding
period" for restricted securities set forth in Rule 144(d) under the 1933 Act
(or any similar or successor provision) is reduced below two years, the two-
year restrictive period set forth in this Section 15.1 will be deemed to be
correspondingly reduced; and (ii) the STOCKHOLDERS may encumber or pledge any of
such shares of PC Stock provided the pledgee or other beneficiary of such
encumbrance or pledge agrees to be bound by the provisions of this Section as if
a STOCKHOLDER and party hereto. The certificates evidencing the PC Stock
delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement will bear
a legend substantially in the form set forth below and containing such other
information as PC may deem necessary or appropriate:
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [SECOND
ANNIVERSARY OF THE FUNDING AND CONSUMMATION DATE] (PROVIDED,
HOWEVER, THAT (I) IF THE "HOLDING PERIOD" FOR RESTRICTED
SECURITIES SET FORTH IN RULE 144(D) UNDER THE SECURITIES ACT OF
1933, AS AMENDED (OR ANY SIMILAR OR SUCCESSOR PROVISION), IS
REDUCED BELOW TWO YEARS, THE RESTRICTIVE PERIOD SET FORTH HEREIN
SHALL BE CORRESPONDINGLY REDUCED, AS CALCULATED FROM THE DATE
TWO YEARS PRIOR TO THE DATE SET FORTH HEREIN AND (II) SUCH
SHARES MAY BE ENCUMBERED OR PLEDGED PROVIDED THE PLEDGEE OR
OTHER BENEFICIARY OF SUCH ENCUMBRANCE OR PLEDGE AGREES TO BE
BOUND BY THE PROVISIONS OF THESE RESTRICTIONS TO THE SAME EXTENT
AS THE HOLDER HEREOF). UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER
THE DATE SPECIFIED ABOVE (AS IT MAY BE REDUCED AS PROVIDED
HEREIN).
16. FEDERAL SECURITIES ACT REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of PC Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the 1933 Act and therefore may not be resold unless
registered under the 1933 Act or resold pursuant to an exemption from the
registration requirements of the 1933 Act. The PC Stock to be acquired by the
STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own
respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution; provided, however that this covenant shall not prohibit
any disposition in accordance with the securities laws and this Agreement.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and
represent that none of the shares of PC Stock issued to the STOCKHOLDERS will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after
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full compliance with all of the applicable provisions of the 1933 Act and the
rules and regulations of the SEC and this Agreement. All the PC Stock shall
bear the following legend in addition to the legend required under Section 15
of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND, IF REQUIRED BY PC, AN OPINION OF COUNSEL TO PC
STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDERS represent and
warrant that they are able to bear the economic risk of an investment in the PC
Stock acquired pursuant to this Agreement, can afford to sustain a total loss
of such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment in the PC Stock. The STOCKHOLDERS represent and warrant
that they have had an adequate opportunity to ask questions and receive answers
from the officers of PC concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of PC, the plans
for the operations of the business of PC, the business, operations and
financial condition of the Other Founding Companies, and any plans for
additional acquisitions and the like. The STOCKHOLDERS have asked any and all
questions of the nature described in the preceding sentence, and all questions
have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Funding
and Consummation Date, whenever PC proposes to register any PC Stock for its
own or others' account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions
of additional businesses by PC, (ii) registrations relating to employee benefit
plans and (iii) registrations
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relating to rights offerings made to the stockholders of PC, PC shall give each
of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the
written request of any of the STOCKHOLDERS given within 30 days after receipt
of such notice, PC shall cause to be included in such registration all of the
PC Stock which any such STOCKHOLDER requests, provided that PC shall have the
right to reduce the number of shares included in such registration to the
extent that inclusion of such shares would, in the opinion of tax counsel to PC
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as a tax-free
reorganization. In addition, if PC is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 17.1 that the
number of shares to be sold by persons other than PC is greater than the number
of such shares which can be offered without adversely affecting the offering,
PC may reduce pro rata the number of shares offered for the accounts of such
persons (based upon the number of shares proposed to be sold by each such
person) to a number deemed satisfactory by such managing underwriter, provided,
that, for each such offering made by PC after the IPO, such reduction shall be
made first by reducing the number of shares to be sold by persons other than
PC, the STOCKHOLDERS and the stockholders of the Other Founding Companies
(collectively, the STOCKHOLDERS and the stockholders of the other Founding
Companies being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of
shares to be sold by the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years
after the Funding and Consummation Date, the holders of a majority of the
shares of PC Stock issued to the stockholders of the Founding Companies
pursuant to this Agreement and the Other Agreements that have not been
previously registered or sold and that are not entitled to be sold under Rule
144(k) (or any successor provision) promulgated under the 1933 Act may request
in writing that PC file a registration statement under the 1933 Act covering
the registration of shares of PC Stock issued to such stockholders (including
any stock issued as (or issuable upon the conversion or exchange of any
convertible security, warrant, right or other security that is issued by PC as)
a dividend or other distribution with respect to, or in
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exchange for, or in replacement of such PC Stock) then held by such
stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
such request, PC shall give written notice of such request to all other of such
stockholders and shall, as soon as practicable but in no event later than 45
days after notice from any such stockholder, file and thereafter use its best
efforts to cause to become effective a registration statement covering all such
shares. PC shall be obligated to effect only one Demand Registration for all
stockholders of the Founding Companies and will keep such Demand Registration
current and effective for not less than 120 days (or such shorter period as is
required to sell all of the shares registered thereon).
Notwithstanding the foregoing paragraph, following such a demand a
majority of PC's disinterested directors (i.e., directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for a 30 day period.
If at the time of any request by the stockholders of the Founding
Companies for a Demand Registration PC has plans to file within 60 days after
such request a registration statement covering the sale of any of its
securities in a public offering under the 1933 Act, no registration of the PC
Stock held by the stockholders of the Founding Companies shall be initiated
under this Section 17.2 until 90 days after the effective date of such
registration unless PC is no longer proceeding diligently to effect such
registration; provided that PC shall provide the stockholders of the Founding
Companies the right to participate in such public offering pursuant to, and
subject to, Section 17.1 hereof.
In addition, if the stockholders offering shares are advised in
writing in good faith by any managing underwriter of an underwritten offering
of the securities being offered pursuant to any registration statement under
this Section 17.2 that the number of shares to be sold by such stockholders
is greater than the number of such shares which can be offered without
adversely affecting the offering, the stockholder offering shares may reduce
pro rata the number of shares offered for the account of each stockholder
(based upon the number of shares proposed to be sold by each such stockholder)
to a number deemed satisfactory by such managing underwriter.
17.3 REGISTRATION PROCEDURES. All expenses incurred in
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connection with the registrations under this Article 17 (including all
registration, filing, qualification, legal, printer and accounting fees, but
excluding underwriting commissions and discounts), shall be borne by PC. In
connection with registrations under Sections 17.1 and 17.2, PC shall (i) use
its best efforts to prepare and file with the SEC, as soon as reasonably
practicable, a registration statement with respect to the PC Stock and use its
best efforts to cause such registration to promptly become and remain effective
for a period of at least 120 days (or such shorter period during which holders
shall have sold all PC Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the PC Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution of the PC Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 and 17.2 covering an underwritten registered public
offering, PC and each participating holder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriters and companies of PC's size and investment
stature, including indemnification.
17.5 AVAILABILITY OF RULE 144. PC shall not be obligated to register
shares of PC Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER for such shares.
18. GENERAL
18.1 COOPERATION. The COMPANY, the STOCKHOLDERS, PC and NEWCO shall
each deliver or cause to be delivered to the other on the Funding and
Consummation Date, and at such other times and places as shall be reasonably
agreed to, such additional instruments as the other may reasonably request for
the purpose of carrying out this Agreement. The COMPANY will cooperate and use
its reasonable efforts to have the present officers, directors and employees of
the COMPANY cooperate with
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PC on and after the Funding and Consummation Date in furnishing information,
evidence, testimony and other assistance in connection with any Tax Return
filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Funding
and Consummation Date.
18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of PC, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 ENTIRE AGREEMENT. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
STOCKHOLDERS, the COMPANY, NEWCO and PC and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and PC,
acting through their respective officers or trustees, duly authorized by their
respective boards of directors.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commissions of brokers employed or alleged to
have been employed by such indemnifying party.
18.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, PC will pay the fees, expenses and disbursements of PC
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by PC under this Agreement,
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including (subject to the next sentence) the fees and expenses of Coopers &
▇▇▇▇▇▇▇ LLP, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP and the costs of preparing the
Registration Statement. The COMPANY shall pay and be fully responsible for the
fees and expenses of Coopers & ▇▇▇▇▇▇▇ LLP in connection with its audit and
preparation of the historical financial statements of the COMPANY to be
included in the Registration Statement, which fees and expenses shall
constitute a vendor debt of the COMPANY. The STOCKHOLDERS shall pay and be
fully responsible for all professional fees and expenses, including but not
limited to legal fees and expenses, incurred by the COMPANY and the
STOCKHOLDERS in connection with the transactions contemplated herein, whether
or not such transactions are actually consummated. Each STOCKHOLDER further
shall pay all sales, use, transfer, real property transfer, recording, gains,
stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in
connection with the Merger, other than Transfer Taxes, if any, imposed by the
State of Delaware. Each STOCKHOLDER shall file all necessary documentation and
Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER
acknowledges that such STOCKHOLDER, and not the COMPANY or PC, will pay all
Taxes due upon receipt of the consideration payable pursuant to Section 2
hereof, and will assume all Tax risks and liabilities of such STOCKHOLDER in
connection with the transactions contemplated hereby.
18.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to PC, or NEWCO, addressed to them at:
Medical Manager Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇, Chief Executive Officer
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with copies to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex IV, with copies to such
counsel as is set forth with respect to each
STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
RTI Business Systems, Inc.
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
and marked "Personal and Confidential"
with copies to:
RTI Business Systems, Inc.
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and
▇'▇▇▇▇▇▇▇▇, Hablock, Graslei & ▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, except that matters herein within the
purview of the matters covered by the General Corporation Law of the State of
Delaware shall be
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governed by such General Corporation Law, in each case without reference to
conflicts of laws principles.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise
provided herein, the representations, warranties, covenants and agreements of
the parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties until the Expiration Date.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of PC, NEWCO, the COMPANY and the STOCKHOLDERS. Any
amendment or waiver effected in accordance with this Section 18.15 shall be
binding upon each of the parties hereto, any other person receiving PC Stock
in connection with the Merger and each future holder of such PC Stock.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MEDICAL MANAGER CORPORATION
By /s/ ▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
RTI ACQUISITION I CORP.
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Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
RTI BUSINESS SYSTEM, INC.
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
STOCKHOLDERS:
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇