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EXHIBIT 2.2
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AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 30th day of September, 1996
by and among
MEDICAL MANAGER CORPORATION
SPI ACQUISITION I CORP. (a subsidiary of
MEDICAL MANAGER CORPORATION)
SPDI ACQUISITION I (a subsidiary of
MEDICAL MANAGER CORPORATION)
SYSTEMS PLUS, INC.
SYSTEMS PLUS DISTRIBUTION, INC.
and
the STOCKHOLDER named herein
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TABLE OF CONTENTS
Page
1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2 EFFECTIVE TIME OF THE MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
THE SURVIVING CORPORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF EACH
COMPANY, PC AND EACH NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 EFFECT OF MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 MANNER OF CONVERSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. DELIVERY OF MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. REPRESENTATIONS AND WARRANTIES OF EACH COMPANY AND THE STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . 11
5.1 DUE ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 CAPITAL STOCK OF EACH COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 TRANSACTIONS IN CAPITAL STOCK, REORGANIZATION ACCOUNTING. . . . . . . . . . . . . . . . . 13
5.5 NO BONUS SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 PREDECESSOR STATUS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 SPIN-OFF BY THE COMPANIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 ACCOUNTS AND NOTES RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.12 Intellectual Property; Permits and Intangibles. . . . . . . . . . . . . . . . . . . . . . . 16
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5.13 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14 PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. . . . . . . . . . . . . . . . . 18
5.16 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.17 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. . . . . . . . . . . . . . . 21
5.19 EMPLOYEE PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.20 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.21 CONFORMITY WITH LAW; LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.22 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.23 NO VIOLATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.24 GOVERNMENT CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.25 ABSENCE OF CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.27 RELATIONS WITH GOVERNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.28 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.29 AUTHORITY; OWNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.30 PREEMPTIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.31 NO INTENTION TO DISPOSE OF PC STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6. REPRESENTATIONS AND WARRANTIES OF PC AND THE NEWCOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1 DUE ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 CAPITAL STOCK OF THE PC AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4 TRANSACTIONS IN CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.5 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 CONFORMITY WITH LAW; LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 NO VIOLATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.9 VALIDITY OF OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.10 PC STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11 NO SIDE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.12 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 38
6.13 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7. COVENANTS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.3 PROHIBITED ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.4 NO SHOP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.5 NOTICE TO BARGAINING AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.6 AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.7 NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.8 AMENDMENT OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . 48
7.10 FINAL FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.11 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND THE COMPANIES . . . . . . . . . . . . . . . . . . 50
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. . . . . . . . . . . . . . . . 50
8.2 SATISFACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.4 OPINION OF COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.5 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.6 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.7 GOOD STANDING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.8 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.9 CLOSING OF IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.10 SECRETARY'S CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.11 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.12 TAX TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PC AND THE NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. . . . . . . . . . . . . . . . . 53
9.2 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.3 SECRETARY'S CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4 NO MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.5 STOCKHOLDER'S RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.6 SATISFACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.8 OPINION OF COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.10 GOOD STANDING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.11 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.12 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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9.13 CLOSING OF THE IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.14 FIRPTA CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10. COVENANTS OF PC AFTER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. . . . . . . . . . . . . . . . . 55
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 PREPARATION AND FILING OF TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.4 DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 57
11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . 57
11.2 INDEMNIFICATION BY PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.3 THIRD PERSON CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.4 EXCLUSIVE REMEDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.5 LIMITATIONS ON INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.2 LIABILITIES IN EVENT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13. NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.1 PROHIBITED ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.2 DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.3 REASONABLE RESTRAINT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.4 SEVERABILITY; REFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.5 INDEPENDENT COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.6 MATERIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
14.1 STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
14.2 PC AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
14.3 DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.4 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
16. FEDERAL SECURITIES ACT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.1 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
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16.2 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
17. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
17.1 PIGGYBACK REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
17.2 DEMAND REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
17.3 REGISTRATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
17.4 UNDERWRITING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
17.5 AVAILABILITY OF RULE 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.1 COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.2 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.3 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.4 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
18.5 BROKERS AND AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
18.6 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
18.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
18.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . 76
18.10 EXERCISE OF RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18.11 TIME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18.12 REFORMATION AND SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18.13 REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.14 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.15 AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
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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 STOCKHOLDER
Annex IV - Stockholder and Stock Ownership of the COMPANIES
Annex V - Stockholders and Stock Ownership of PC
Annex VI - Form of Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Annex VII - Form of Opinion of Counsel to the COMPANIES and the
STOCKHOLDER
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"), SPI ACQUISITION I CORP., a Delaware
corporation ("ACQUISITION"), SPDI ACQUISITION I CORP., a Delaware corporation
("ACQUISITION I") (collectively, ACQUISITION and ACQUISITION I are referred to
herein as "NEWCOS" and individually are each referred to as a "NEWCO"), SYSTEMS
PLUS, INC., a California corporation ("SPI"), and SYSTEMS PLUS DISTRIBUTION,
referred to herein as the "COMPANIES" and individually are each referred to as
a "COMPANY"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "STOCKHOLDER"). The STOCKHOLDER is
the sole stockholder of each COMPANY.
WHEREAS, ACQUISITION and ACQUISITION I are corporations duly
organized and existing under the laws of the State of Delaware, having
been incorporated on July 16, 1996, and September 12, 1996,
respectively, solely for the purpose of completing the transactions
set forth herein, and each 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 each NEWCO and
each 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 the NEWCOS merge with and into the COMPANIES
pursuant to this Agreement and the applicable provisions of the laws
of the States of Delaware and California;
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 RTI Business Systems,
Inc., a New York corporation, and National Medical Systems, Inc., a
Florida corporation, and their respective stockholders in
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order to acquire additional medical software development and
distribution companies (the COMPANIES, together with each of the
entities with which PC has entered into the Other Agreements, are
collectively referred to herein as the "Founding Companies");
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 each COMPANY has approved this Agreement as part of the
PC Plan of Organization in order to transfer the capital stock of each
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 the NEWCOS 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 forms attached as Annex
I hereto, or with such other changes therein as may be required by applicable
state laws.
"Balance Sheet Date" shall mean June 30, 1996.
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"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.
"COMPANY" and "COMPANIES" have the meanings set forth in the first
paragraph of this Agreement.
"COMPANY Stock" means, collectively, the SPI STOCK and the SPDI STOCK.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Effective Time of the Mergers" shall mean the time as of which the
Mergers become 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.
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"Mergers" means, collectively the mergers of the NEWCOS with and into
the COMPANIES pursuant to this Agreement and the applicable provisions of the
laws of the State of Delaware and other applicable state laws.
"NEWCO" and "NEWCOS" has the meaning set forth in the first paragraph
of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of
each 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 COMPANIES.
"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).
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"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 Commission.
"SPDI STOCK" means the common stock of SPDI.
"SPI STOCK" means the common stock of SPI.
"STOCKHOLDER" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" shall mean each COMPANY as the surviving party
in its respective 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
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COMPANIES are organized, on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGERS. At the Effective Time of the
Mergers, the NEWCOS shall be merged with and into the COMPANIES in accordance
with the Articles of Merger, the separate existence of each NEWCO shall cease,
and each COMPANY shall be the surviving party in each respective Merger. In
this respect, each such COMPANY is sometimes hereinafter referred to as the
"Surviving Corporation" (and, in this respect, the COMPANIES, collectively, are
sometimes hereinafter referred to as the "Surviving Corporations"). The
Mergers will be effected simultaneously and the Merger of each NEWCO into each
COMPANY will occur in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS
OF THE SURVIVING CORPORATIONS. At the Effective Time of the Mergers:
(i) the Certificate or Articles of Incorporation of each
COMPANY then in effect shall be the Certificate or Articles of
Incorporation of the resultant Surviving Corporation until changed as
provided by law;
(ii) the By-laws of each COMPANY then in effect shall become
the By-laws of the resultant Surviving Corporation until amended as
provided by law;
(iii) the Board of Directors of each Surviving Corporation
initially shall consist of the following persons:
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
The Board of Directors of each Surviving Corporation shall hold office
subject to the provisions of the laws of the State of California and
of the Certificate or Articles of Incorporation and By-laws of each
Surviving Corporation; and
(iv) the officers of each COMPANY immediately prior to the
Effective Time of the Mergers shall continue as the officers of the
resultant Surviving Corporation in the same capacity or capacities,
and effective upon the Effective
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Time of the Mergers, ▇▇▇▇ ▇. ▇▇▇▇ shall be appointed as a vice
president of each Surviving Corporation and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be
appointed as an Assistant Secretary of each Surviving Corporation,
each of such officers to serve, subject to the provisions of the
Certificate or Articles of Incorporation and By-laws of each Surviving
Corporation, until his or her successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF EACH
COMPANY, PC AND EACH NEWCO. The respective designations and numbers of
outstanding shares and voting rights of each class of outstanding capital stock
of each COMPANY, PC and each 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 each COMPANY is as set forth on Schedule
1.4 hereto;
(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 each NEWCO consists of 3,000 shares of NEWCO Stock, of which
ten (10) shares are issued and outstanding.
1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the
effect of the Mergers 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 California. Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of each COMPANY shall continue unaffected and unimpaired by the
Mergers and the corporate franchises, existence and rights of each NEWCO shall
be merged with and into its respective COMPANY, and each COMPANY, as a
Surviving Corporation, shall be fully vested therewith. At the Effective Time
of the Mergers, the separate existence of each
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NEWCO shall cease and, in accordance with the terms of this Agreement, each
respective 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 each COMPANY and each NEWCO shall be
taken and deemed to be transferred to, and vested in, each respective 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 each respective Surviving Corporation
as they were of each COMPANY and each NEWCO; and the title to any real estate,
or interest therein, whether by deed or otherwise, vested in each COMPANY and
each NEWCO under the laws of each state of incorporation, shall not revert or
be in any way impaired by reason of the Mergers. Except as otherwise provided
herein, each Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the respective COMPANY and NEWCO
which are so merged, and any claim existing, or action or proceeding pending,
by or against such COMPANY or such NEWCO may be prosecuted as if the Mergers
had not taken place, or the respective Surviving Corporation may be substituted
in its place. Neither the rights of creditors nor any liens upon the property
of each COMPANY or each NEWCO shall be impaired by the Mergers, and all debts,
liabilities and duties of each COMPANY and each NEWCO shall attach to the
respective 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 such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of
(i) the COMPANY Stock and (ii) the NEWCO Stock (of each NEWCO) issued and
outstanding immediately prior to the Effective Time of the Mergers,
respectively, into shares of (x) PC Stock and (y) common stock of the Surviving
Corporations, respectively, shall be as follows:
As of the Effective Time of the Merger:
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(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 SPI or
SPDI 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) with respect to each NEWCO, each share of NEWCO Stock
issued and outstanding immediately prior to the Effective Time of the
Mergers shall, by virtue of the Mergers 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 respective Surviving
Corporation into which such NEWCO was merged, which shall constitute
all of the issued and outstanding shares of common stock of such
Surviving Corporation immediately after the Effective Time of the
Mergers.
All PC Stock received by the STOCKHOLDER 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 STOCKHOLDER shall be fully exercisable by the STOCKHOLDER and
the STOCKHOLDER shall not be deprived nor restricted in exercising those
rights. At the Effective Time of the Mergers, PC shall have no class of
capital stock issued and outstanding other than the PC Stock.
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3. DELIVERY OF MERGER CONSIDERATION
3.1 At the Effective Time of the Mergers and on the Funding and
Consummation Date the STOCKHOLDER 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 STOCKHOLDER shall deliver to PC at the Closing the
certificates representing the COMPANY Stock, duly endorsed in blank by the
STOCKHOLDER, 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 STOCKHOLDER'S expense, affixed and canceled. The
STOCKHOLDER agrees 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 to (i) effect the Mergers
(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 Mergers) 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 Mergers 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 COMPANIES advises PC are
required by applicable laws of the State of California in order to rescind any
merger or other actions effected by the advance filing of the Articles of
Merger as described in this Section.
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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 Mergers 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 STOCKHOLDER shall be entitled to
receive pursuant to the Mergers 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,
the NEWCOS, the COMPANIES and the STOCKHOLDER shall act in good faith to
consummate the IPO. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF EACH COMPANY AND THE STOCKHOLDER
(A) Representations and Warranties of Each COMPANY and the
STOCKHOLDER.
Each COMPANY and the STOCKHOLDER 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 portion 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
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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" or "each COMPANY" shall mean and refer to
each COMPANY and each of its subsidiaries, if any.
5.1 DUE ORGANIZATION. Each 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 each COMPANY, or with respect to any other person, a "Material
Adverse Effect") on such COMPANY. Schedule 5.1 contains a list of all
jurisdictions in which each 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 each COMPANY (the
"Charter Documents") are all attached hereto as Schedule 5.1. The minute books
and stock records of each COMPANY, as heretofore made available to PC, are
correct and complete in all material respects. The most recent minutes of each
COMPANY, which are dated no earlier than ten (10) business days prior to the
date hereof, affirm and ratify all prior acts of such COMPANY and of its
officers and directors on behalf of such COMPANY.
5.2 AUTHORIZATION. (i) The representatives of each COMPANY
executing this Agreement have the authority to enter into and bind such COMPANY
to the terms of this Agreement and (ii) each COMPANY has the full corporate
right, power and authority to enter into this Agreement and the Merger to which
it will be a party, subject to any required approval of the shareholder and the
Board of Directors of such COMPANY described on Schedule 5.2, certified copies
of which are attached thereto.
5.3 CAPITAL STOCK OF EACH COMPANY. The authorized capital
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stock of each COMPANY is as set forth in Section 1.4(i). All of the issued and
outstanding shares of capital stock of each COMPANY are owned by the
STOCKHOLDER 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 each COMPANY have been duly authorized and validly issued, are fully
paid and nonassessable, are owned of record and beneficially by the STOCKHOLDER
and were offered, issued, sold and delivered by such 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, neither of the COMPANIES has 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 either COMPANY to issue any of its authorized but unissued
capital stock or its treasury stock; (ii) neither COMPANY 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; and (iii) neither the voting stock structure
of either COMPANY nor the relative ownership of shares among any of its
respective stockholders has been altered or changed in contemplation of the
Mergers. 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 stock of either COMPANY.
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. Neither of the COMPANIES has any subsidiaries.
Except as set forth on Schedule 5.6, neither COMPANY owns, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into
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capital stock or any other equity interest in any corporation, association or
business entity nor is either 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 each COMPANY, including the names
of any entities acquired by either COMPANY (by stock purchase, merger or
otherwise) or from whom either COMPANY previously acquired material assets.
Except as disclosed on Schedule 5.7, neither COMPANY has been a subsidiary or
division of another corporation or a part of an acquisition which was later
rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule
5.8, there has not been any sale, spin-off or split-up of material assets of
either 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 COMPANIES ("Affiliates") since January 1, 1994.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are
copies of the following financial statements (the "COMPANIES' Financial
Statements") of the COMPANIES: the COMPANIES' audited Combined Balance Sheets
as of June 30, 1996 and December 31, 1995 and 1994 and Combined 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 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 Combined Balance Sheets as of June 30, 1996 and
December 31, 1995 and 1994 present fairly in all material respects the
financial position of the COMPANIES as of the dates indicated thereon, and such
Combined 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. Each COMPANY has delivered to PC
an accurate list (which is set forth on Schedule
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5.10) as of the Balance Sheet Date of (i) all liabilities of such COMPANY
which are not reflected on the balance sheet of such COMPANY at the Balance
Sheet Date and (ii) any material liabilities of such 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 such COMPANY is a party. Except as set forth on Schedule
5.10, since the Balance Sheet Date, neither COMPANY has 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. Each 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, each 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
(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
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be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANIES have delivered
to PC an accurate list (which is set forth on Schedule 5.11) of the accounts
and notes receivable of the COMPANIES, 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
STOCKHOLDER. Within ten (10) days prior to Closing, the COMPANIES 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 COMPANIES 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 neither COMPANY has 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 COMPANIES owns all Intellectual Property the absence of any
of which is reasonably likely to have a Material Adverse Effect on their
business, and the COMPANIES have delivered to PC an accurate list (which is set
forth on Schedule 5.12) of all Intellectual Property owned or used by the
COMPANIES. Each item of Intellectual Property owned or used by the COMPANIES
is valid and in full force and effect. Except as set forth on Schedule 5.12,
all right, title and interest in and to each item of Intellectual Property is
owned by the COMPANIES 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 COMPANIES' knowledge, none of the Intellectual Property used
by the COMPANIES nor any product sold by the COMPANIES, infringes any
Intellectual Property right of any other entity and no Intellectual Property
owned by the COMPANIES is infringed upon by any other entity.
(b) The COMPANIES hold all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect on their business, and the
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COMPANIES have 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 COMPANIES, the licenses, franchises, permits and other
governmental authorizations listed on Schedule 5.12 are valid, and the
COMPANIES have 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 COMPANIES have conducted and are conducting
their business in compliance with the requirements, standards, criteria and
conditions set forth in applicable permits, licenses, orders, approvals,
variances, rules and regulations and are 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 either COMPANY.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13,
(i) the COMPANIES have complied in all material respects with and are 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 them or any of their
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 Environmental
Law); (ii) the COMPANIES have 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 have reported, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by either 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 either COMPANY except as permitted
by Environmental Laws; (iv) neither COMPANY knows of any on-site or off-site
location to which either COMPANY has transported or disposed of Hazardous
Wastes and Hazardous
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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 either COMPANY, PC or the NEWCOS 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) neither COMPANY has any contingent
liability in connection with any release of any Hazardous Waste or Hazardous
Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANIES have 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
COMPANIES as of the Balance Sheet Date, (y) all other personal property owned
by the COMPANIES 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 COMPANIES' knowledge, were formerly owned, by the STOCKHOLDER or
affiliates of the COMPANIES or the STOCKHOLDER. Except as set forth on
Schedule 5.14, (i) all personal property with a value individually in excess of
$10,000 used by either COMPANY in its business is either owned by such COMPANY
or leased by such COMPANY pursuant to a lease included on 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 party thereto, and to
such 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 COMPANIES have delivered to PC an accurate list (which is set forth on
Schedule 5.15) of (i) all significant
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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 either
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 either 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 such
COMPANY, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by such COMPANY.
The COMPANIES have listed on Schedule 5.15 all material
contracts, commitments and similar agreements to which either 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. Each 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 COMPANIES have also
indicated on Schedule 5.15 a summary description of all plans or projects
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 either COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real
property owned or leased by the COMPANIES (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date, and all other real property, if
any, used by either COMPANY in the conduct of its business. The COMPANIES have
good and insurable title to the real property owned by the COMPANIES,
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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
either 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 either COMPANY with respect
to real property owned by such 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 either 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 COMPANIES' knowledge, were formerly owned, by the STOCKHOLDER
or affiliates of the COMPANIES or the STOCKHOLDER. 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 agreements of the COMPANY party
thereto, and to such COMPANY's knowledge, of the parties (and their successors)
thereto in accordance with their respective terms.
5.17 INSURANCE. The COMPANIES have 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 COMPANIES, (ii) an
accurate list of all insurance loss runs or workers' compensation claims
received for the past
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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 COMPANIES are required to carry pursuant to all of
their 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 either COMPANY has ever been canceled by the insurer and neither
COMPANY has ever been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
The COMPANIES have delivered to PC an accurate list (which is set forth on
Schedule 5.18) showing all officers, directors and key employees of each
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
COMPANIES have 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) neither COMPANY is
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 either 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
COMPANIES' knowledge, threatened labor dispute involving either COMPANY and any
group of its employees nor has either COMPANY experienced any labor
interruptions over the past three years. Each 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,
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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
either 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 either 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, neither COMPANY
maintains or sponsors, and neither COMPANY is 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, 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
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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 either COMPANY; (v) none of the STOCKHOLDER, any Plan, or either 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 either 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 either 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 either COMPANY with respect to any plan now or hereafter
maintained or contributed to by either COMPANY or any member of a "controlled
group" (as defined in Section 4001(a)(14) of ERISA) that includes either
COMPANY; (viii) neither COMPANY nor any member of a "controlled group" (as
defined above) that includes either 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 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
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"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 COMPANIES and the STOCKHOLDER 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 neither COMPANY has 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 either COMPANY or the STOCKHOLDER, 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 either COMPANY or the STOCKHOLDER 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 COMPANIES' and the
STOCKHOLDER'S 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, neither COMPANY 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 it 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, to the knowledge of the COMPANIES or the
STOCKHOLDER, threatened against or affecting either 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
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threatened, has been received. Each of the COMPANIES 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 on
either COMPANY.
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 COMPANIES 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 COMPANIES, 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 COMPANIES and the STOCKHOLDER,
the provisions for Taxes due by the COMPANIES and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the COMPANIES'
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.
(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.
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(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. 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.
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(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) With respect to SPDI only, there currently are no
limitations on the utilization of the net operating losses, built-in
losses, 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
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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) With respect to SPDI only, at ______________, the
Acquired Parties had aggregate Tax Losses for federal income Tax
purposes as described on Schedule 5.22(xvii) attached hereto.
(xviii) Neither COMPANY is an investment company as defined in
Section 351(e)(1) of the Code.
(xix) The fair market value of the assets of each COMPANY
exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the assets are subject.
(xx) Neither COMPANY 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.
(xxi) With respect to SPI only, the COMPANY made a valid
election to be an S Corporation, as defined in Section 1361 of the
Code, for Federal, state and local tax purposes for its taxable year,
beginning on January __, 19__, and has been taxed as an S Corporation
for Federal, state and local tax purposes for such taxable year and
all subsequent years.
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
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any interest, penalties, additions to tax or additional amounts with respect
thereto.
"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. Neither COMPANY is in violation of any
Charter Document. Neither COMPANY nor, to the knowledge of the COMPANIES and
the STOCKHOLDER, 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 COMPANIES 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 COMPANIES and the STOCKHOLDER of their obligations hereunder and the
consummation by the COMPANIES and the STOCKHOLDER 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 either COMPANY from freely
providing services to any other customer or potential customer of the
COMPANIES, PC, the NEWCOS or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.15,
neither COMPANY is 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:
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(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
either COMPANY;
(ii) any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or
business of either COMPANY;
(iii) any change in the authorized capital of either 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 either COMPANY;
(v) any increase in the compensation, bonus, sales
commissions or fee arrangements payable or to become payable by either
COMPANY to any of its officers, directors, employees, consultants,
agents or the STOCKHOLDER, 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 either COMPANY;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of either COMPANY to
any person, including, without limitation, the STOCKHOLDER and his
affiliates;
(viii) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to either COMPANY,
including, without limitation, any material indebtedness or obligation
of the STOCKHOLDER or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential right to purchase or acquire any interest in
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any of the material assets, property or rights of either COMPANY or
requiring consent of any party to the transfer and assignment of any
such material assets, property or 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 either COMPANY's business;
(xi) any waiver of any material rights or claims of either
COMPANY, provided that, the COMPANIES 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 either 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 either
COMPANY outside the ordinary course of business;
(xv) any other transaction by either 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 COMPANIES have
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 either
COMPANY has accounts or safe deposit boxes;
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(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(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 either COMPANY
and a description of the terms of such power of attorney.
5.27 RELATIONS WITH GOVERNMENTS. Neither COMPANY has 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 each 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
COMPANIES or the STOCKHOLDER, such representation and warranty, to the
COMPANIES' 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 COMPANIES and the STOCKHOLDER 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 either COMPANY, the
STOCKHOLDER or any other person affiliated or associated with the COMPANIES for
any failure of
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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.
(B) Representations and Warranties of the STOCKHOLDER.
The STOCKHOLDER 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. The STOCKHOLDER has the full legal
right, power and authority to enter into this Agreement. The STOCKHOLDER owns
beneficially and of record all of the shares of each COMPANY's stock identified
on Annex IV as being owned by the 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, the STOCKHOLDER
does not have any preemptive or other right to acquire shares of PC Stock
(other than rights of the 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, the STOCKHOLDER does not have, and hereby waives, any
such preemptive or other right to acquire shares of stock in either COMPANY.
5.31 NO INTENTION TO DISPOSE OF PC STOCK. There is no current plan
or intention by the STOCKHOLDER to sell, exchange or otherwise dispose of
shares of PC Stock received in the Merger.
6. REPRESENTATIONS AND WARRANTIES OF PC AND THE NEWCOS
PC and the NEWCOS jointly and severally represent and
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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 each 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
the NEWCOS (the "PC Charter Documents") are all attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The respective representatives of PC and
the NEWCOS executing this Agreement have the authority to enter into and bind
PC and each NEWCO to the terms of this Agreement and (ii) PC and each NEWCO
have the full corporate right, power and authority to enter into this Agreement
and the Mergers.
6.3 CAPITAL STOCK OF THE PC AND NEWCO. The authorized capital
stock of PC and each NEWCO are as set forth in Sections 1.4(ii) and (iii),
respectively. All of the issued and outstanding shares of the capital stock of
each NEWCO are owned
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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 each 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 such 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
either NEWCO. No preemptive or other right to acquire shares of PC or either
NEWCO 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 either NEWCO to
issue any of its authorized but unissued capital stock or treasury stock; and
(ii) neither PC nor either 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 each 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. Neither NEWCO has any subsidiaries. PC has no
subsidiaries except for the NEWCOS 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 either 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 either
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NEWCO, directly or indirectly, a 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 the NEWCOS 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 either 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 any 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 the NEWCOS, threatened, against or affecting PC or either 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
the NEWCOS 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 either NEWCO is in violation
of any PC Charter Document. None of PC, the NEWCOS or, to the knowledge of PC
and the NEWCOS, any other party thereto is in default under any lease,
instrument, agreement, license or permit to which PC or either NEWCO is a
party, or by which PC or either NEWCO, or any of their respective properties,
are bound (collectively, the "PC Documents"); and (a) the rights and benefits
of PC and the NEWCOS 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 each NEWCO'S obligations hereunder and the
consummation by
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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 either NEWCO.
6.9 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by PC and the NEWCOS 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 each 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 each NEWCO.
6.10 PC STOCK. At the time of issuance thereof, the PC Stock to be
delivered to the STOCKHOLDER 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 STOCKHOLDER 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 either 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 COMPANIES any of such documents which have been requested by either COMPANY
or the STOCKHOLDER.
6.12 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. PC was formed
in July 1996, and has conducted limited operations since that time. Neither PC
nor either NEWCO has conducted any
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business since the date of its inception, except in connection with this
Agreement, the Other Agreements and the IPO. Neither PC nor either 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. The NEWCOS are newly formed entities which have 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 STOCKHOLDER, at his 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 either NEWCO is an investment company as
defined in Section 351(e)(1) of the Code.
(xviii) Neither PC nor either 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 COMPANIES, the COMPANIES will afford to the officers and authorized
representatives of PC and the Other Founding Companies access to all of the
COMPANIES' 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 COMPANIES as PC or the Other Founding Companies
may from time to time reasonably request. The COMPANIES will cooperate with PC
and the Other Founding Companies, their 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, the
NEWCOS, the STOCKHOLDER and the COMPANIES 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 COMPANIES access to all of PC's and each
NEWCO'S sites, properties, books and records and will furnish the COMPANIES
with such additional financial and operating data and other information as to
the business and properties of PC and the NEWCOS as the COMPANIES may from time
to time reasonably request. PC and the NEWCOS will cooperate with the
COMPANIES, their 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 COMPANIES, PC and the NEWCOS
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, each 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
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relations with such COMPANY;
(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, neither COMPANY
will, 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, except for distributions by SPI to the STOCKHOLDER of
his Accumulated Adjustment Account;
(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
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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 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 such 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 such COMPANY,
provided that such 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 such COMPANY is a party; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
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7.4 NO SHOP. None of the STOCKHOLDER, the COMPANIES or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the 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,
either COMPANY or a merger, consolidation or business combination of
either COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, each
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 STOCKHOLDER and the COMPANIES shall terminate
(i) any stockholder agreements, voting agreements, voting trusts, options,
warrants and employment agreements between either COMPANY and any employee
listed on Schedule 9.12 hereto and (ii) any existing agreement between either
COMPANY and the 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 STOCKHOLDER and the
COMPANIES 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 either COMPANY or the
STOCKHOLDER contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of the STOCKHOLDER or
either COMPANY to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by such person
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hereunder. PC and the NEWCOS shall give prompt notice to the COMPANIES 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 PC or the
NEWCOS 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 either 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 either COMPANY or the STOCKHOLDER 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 COMPANIES consent to such amendment or supplement; and
provided further, that no amendment or supplement to a Schedule prepared by PC
or either 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
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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 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 COMPANIES 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 COMPANIES do not, the COMPANIES may terminate this
Agreement pursuant to Section 12.1(iv) hereof. In the event that the COMPANIES
seek 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 either 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 either COMPANY or the STOCKHOLDER on the one hand, or PC or
either 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 COMPANIES and the
STOCKHOLDER, 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 COMPANIES and the STOCKHOLDER. For purposes of any
vote that occurs pursuant to this Section 7.8, it is expressly acknowledged and
agreed that the COMPANIES together shall have one collective vote and shall be
considered as one Founding Company.
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7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The
COMPANIES and the STOCKHOLDER shall furnish or cause to be furnished to PC and
the Underwriters all of the information concerning the COMPANIES and the
STOCKHOLDER reasonably requested by PC or the Underwriters for inclusion in,
and will cooperate with PC and the Underwriters in the 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 the NEWCOS agree to use their best efforts to provide to
the STOCKHOLDER and the COMPANIES 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 STOCKHOLDER
and the COMPANIES sufficient time to review and comment upon such documents
prior to filing with the SEC. The COMPANIES and the STOCKHOLDER 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 either COMPANY or
the STOCKHOLDER and which was provided by or on behalf of the STOCKHOLDER or
either 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 either COMPANY or the STOCKHOLDER and was provided
by either COMPANY or the STOCKHOLDER or their respective agents or
representatives for inclusion in the Registration Statement, each COMPANY and
the STOCKHOLDER 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
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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 COMPANIES shall provide prior
to the Funding and Consummation Date, and PC shall have had sufficient time to
review, the unaudited combined balance sheets of the COMPANIES as of the end of
all fiscal quarters following the Balance Sheet Date, and the unaudited
combined statements of income, cash flows and retained earnings of the
COMPANIES for all fiscal quarters ended after the Balance Sheet Date,
disclosing no material adverse change in the financial condition of either
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 COMPANIES 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.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND THE
COMPANIES
The obligations of the STOCKHOLDER and the COMPANIES 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 COMPANIES and the STOCKHOLDER 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 the NEWCOS
contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All representations and warranties of PC and each 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
conditions of this Agreement to be complied with and performed by PC and either
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 STOCKHOLDER.
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 COMPANIES and their
counsel. The STOCKHOLDER and the COMPANIES 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 either COMPANY or the STOCKHOLDER 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
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omission of such a statement of a material fact that cannot be corrected in the
final prospectus relating thereto.
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 either NEWCO with and into the respective COMPANY in
which it is to be so merged 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 COMPANIES 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.
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 the NEWCOS each shall have
delivered to the COMPANIES 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 each 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 each 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 either NEWCO which would constitute a
Material Adverse Effect.
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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 COMPANIES 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 the NEWCOS,
certifying the truth and correctness of attached copies of PC's and each
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 each NEWCO approving
PC's and such 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 COMPANIES and the STOCKHOLDER shall be
reasonably satisfied that (i) none of PC, the NEWCOS 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 COMPANIES and the STOCKHOLDER has occurred between the date
of 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 THE NEWCOS
The obligations of PC and each 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 the
NEWCOS unless such parties have notified the COMPANIES and the STOCKHOLDER in
writing to the contrary, except that no such waiver shall be deemed to affect
the survival of the representations and warranties of either COMPANY and the
STOCKHOLDER contained in Section 5 hereof.
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9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All the representations and warranties of the STOCKHOLDER and each 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 STOCKHOLDER and each 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
STOCKHOLDER 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 either NEWCO with and into the respective COMPANY into
which it is to be so merged 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 each COMPANY, certifying the truth and correctness
of attached copies of such COMPANY'S Certificate or Articles of Incorporation
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the board of directors and the STOCKHOLDER approving such
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 either COMPANY which would constitute a Material
Adverse Effect.
9.5 STOCKHOLDER'S RELEASE. The STOCKHOLDER shall have delivered
to PC an instrument dated the Closing Date releasing each COMPANY from (i) any
and all claims of the STOCKHOLDER against either COMPANY and (ii) any and all
obligations of either COMPANY to the STOCKHOLDER, except for (x) items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDER, (y) continuing obligations to the STOCKHOLDER
relating to his employment by either COMPANY and (z) obligations arising under
this Agreement or the transactions
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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 either
COMPANY and the STOCKHOLDER 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 COMPANIES and the STOCKHOLDER, 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 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 Mergers.
9.10 GOOD STANDING CERTIFICATES. Each 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 such
COMPANY's state of incorporation and, unless waived by PC, in each state in
which such COMPANY is authorized to do business, showing such COMPANY is in
good standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for such 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
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substantially in the form of Annex VIII hereto. Any employment agreement in
effect as of the date hereof between either 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. The 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 STOCKHOLDER released from any and all
guarantees on any indebtedness that he personally guaranteed for the benefit of
either 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
the Funding and Consummation Date, PC agrees to indemnify the STOCKHOLDER
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 STOCKHOLDER; and
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(c) the disposition of any material part of the assets of
either 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) Each 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. The STOCKHOLDER shall pay or cause to
be paid all Tax liabilities shown by such Returns to be due. PC and the NEWCOS
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 STOCKHOLDER, 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 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 COMPANY, each NEWCO, PC and the STOCKHOLDER shall each
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and
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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 either COMPANY until such time as PC is able to replace such plan
with a plan that is applicable to the COMPANIES, 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 STOCKHOLDER, PC and each NEWCO each make the following covenants
that are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The STOCKHOLDER
covenants and agrees that he will indemnify, defend, protect and hold harmless
PC, the NEWCOS and the Surviving Corporations 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 reasonable expenses of investigation) incurred by PC,
either NEWCO, either COMPANY or either Surviving Corporation as a result of or
arising from (i) any breach of the representations and warranties of the
STOCKHOLDER or either 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 STOCKHOLDER or either 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 either COMPANY or the STOCKHOLDER, and provided to PC or its
counsel by either COMPANY or the STOCKHOLDER 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
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or alleged omission to state therein a material fact relating to either COMPANY
or the STOCKHOLDER 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 COMPANIES and the STOCKHOLDER, and provided, further, that
such indemnity shall not inure to the benefit of PC, the NEWCOS or the
Surviving Corporations 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 STOCKHOLDER 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.
11.2 INDEMNIFICATION BY PC. PC covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDER 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 STOCKHOLDER as a result of or arising from (i) any breach by PC or
either 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 either NEWCO under this
Agreement, (iii) any liability which the STOCKHOLDER may incur due to PC's or
either NEWCO's failure to be responsible for the liabilities and obligations of
the COMPANIES as provided in Section 1 hereof (except to the extent that PC or
the NEWCOS have claims against the STOCKHOLDER 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,
either NEWCO or any of the Other Founding Companies contained in
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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 either 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 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
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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
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
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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, the NEWCOS, the Surviving
Corporations 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 STOCKHOLDER until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDER shall exceed 1.0% of the sum of the cash paid to
STOCKHOLDER plus the value of the PC Stock delivered to STOCKHOLDER (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, the
NEWCOS, the Surviving Corporations 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 11.1(iv) and (v) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDER 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 STOCKHOLDER
shall not assert any claim (other than a Third Person claim) for
indemnification hereunder against PC or either NEWCO until such time as, and
solely to the extent that, the aggregate of all claims which the STOCKHOLDER
may have against PC or the NEWCOS shall exceed $100,000, provided, however,
that the STOCKHOLDER 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 the NEWCOS 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.
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Notwithstanding any other term of this Agreement (except the proviso
to this sentence), the STOCKHOLDER shall not be liable under this Section 11
for an amount which exceeds $20,000,000, provided that the 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 COMPANIES;
(ii) by the STOCKHOLDER or either 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
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 STOCKHOLDER or either 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
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13.1 PROHIBITED ACTIVITIES. The STOCKHOLDER will not, for a period
of five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for himself 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 either COMPANY or any of its subsidiaries or any of
the Other Founding Companies conducted business prior to the
effectiveness of the Mergers 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 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 either 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 the
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 either COMPANY to any person, firm, partnership, corporation or
business for any reason or purpose whatsoever except to the extent
that such COMPANY
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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 the 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, the STOCKHOLDER agrees that, in the event
of a breach by the 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
STOCKHOLDER in light of the activities and business of PC (including the
subsidiaries 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 the 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 the STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which the
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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. Each COMPANY and the STOCKHOLDER hereby agree
that this covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that
he has had in the past, currently has and in the future may have access to
certain confidential information relating to the COMPANIES, 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 COMPANIES, the
Other Founding Companies and/or PC's business. The STOCKHOLDER agrees that he
will not use or disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of the COMPANIES, the NEWCOS, 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 STOCKHOLDER 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 STOCKHOLDER 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 STOCKHOLDER 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
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a breach or threatened breach by the STOCKHOLDER or PC of the provisions of
this Section, PC shall be entitled to an injunction restraining the STOCKHOLDER
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 the NEWCOS recognize and acknowledge
that they had in the past and currently have access to certain confidential
information relating to the COMPANIES, such as operational policies, and
pricing and cost policies, that are valuable, special and unique assets of the
COMPANIES. PC and each 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 STOCKHOLDER and
to authorized representatives of the COMPANIES 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) 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 the NEWCOS 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 the NEWCOS shall, if possible, give prior
written notice thereof to the COMPANIES and the STOCKHOLDER and provide the
COMPANIES and the STOCKHOLDER 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 either NEWCO of the
provisions of this Section, the COMPANIES and the STOCKHOLDER shall be entitled
to an injunction restraining PC and the NEWCOS
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from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDER 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 each NEWCO shall return to the
COMPANIES within a reasonable time all documents (in both paper and electronic
form) containing confidential information about the COMPANIES, and shall use
reasonable efforts to compel the Other Founding Companies to do the same. In
such instance, PC will also furnish to the COMPANIES a written statement
certifying that all documents which contained confidential information about
the COMPANIES and which had been in PC's possession had been returned by PC to
the COMPANIES.
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 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 STOCKHOLDER 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, the STOCKHOLDER shall
not (i) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint
or otherwise dispose of (a) any shares of PC Stock received by the STOCKHOLDER
in the Mergers, 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
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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 STOCKHOLDER 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 STOCKHOLDER
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:
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
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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 STOCKHOLDER acknowledges that the shares of PC Stock to be
delivered to the STOCKHOLDER 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
STOCKHOLDER pursuant to this Agreement is being acquired solely for his own
account, 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 STOCKHOLDER covenants, warrants and
represents that none of the shares of PC Stock issued to the STOCKHOLDER will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after 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
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COUNSEL TO PC STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDER represents and
warrants that he is 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 has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
proposed investment in the PC Stock. The STOCKHOLDER represents and warrants
that he has 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 STOCKHOLDER has asked any and all
questions of the nature described in the preceding sentence, and all questions
have been answered to his 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 relating to rights offerings
made to the stockholders of PC, PC shall give the STOCKHOLDER prompt written
notice of its intent to do so. Upon the written request of the STOCKHOLDER
given within 30 days after receipt of such notice, PC shall cause to be
included in such registration all of the PC Stock which the 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
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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
STOCKHOLDER and the stockholders of the Other Founding Companies (collectively,
the STOCKHOLDER 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 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
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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 stockholders 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 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
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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 the STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any successor provision) promulgated under the
1933 Act are available to the STOCKHOLDER for such shares.
18. GENERAL
18.1 COOPERATION. The COMPANIES, the STOCKHOLDER, PC and the
NEWCOS 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 COMPANIES will
cooperate and use their reasonable efforts to have the present officers,
directors and employees of each COMPANY cooperate with 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 STOCKHOLDER.
18.3 ENTIRE AGREEMENT. This Agreement (including the
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Schedules, exhibits and annexes attached hereto) and the documents delivered
pursuant hereto constitute the entire agreement and understanding among the
STOCKHOLDER, the COMPANIES, the NEWCOS 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 STOCKHOLDER, the
COMPANIES, the NEWCOS 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, including (subject to
the next sentence) the fees and expenses of Coopers & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP and the costs of preparing the Registration Statement. The
COMPANIES 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 COMPANIES to be included in the
Registration Statement, which fees and expenses shall constitute a vendor debt
of the COMPANIES. The STOCKHOLDER shall pay and be fully responsible for all
professional fees and expenses, including but not limited to legal fees and
expenses, incurred by the COMPANIES and the STOCKHOLDER in connection with the
transactions contemplated herein, whether or not such transactions are actually
consummated. The STOCKHOLDER further
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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 Mergers, other than Transfer Taxes, if any, imposed by the
State of Delaware. The STOCKHOLDER shall file all necessary documentation and
Returns with respect to such Transfer Taxes. In addition, the STOCKHOLDER
acknowledges that he, and not either 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 the 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 either NEWCO, addressed to them at:
Medical Manager Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇, Chief Executive Officer
with copies to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If to the STOCKHOLDER, addressed to him at his
address set forth on Annex IV, with copies to such
counsel as is set forth with respect to the
STOCKHOLDER on such Annex IV;
(c) If to either COMPANY, addressed to it at:
Systems Plus, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and marked "Personal and Confidential"
with copies to:
Wise & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇, Esq.
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 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.
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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.
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, the NEWCOS, the COMPANIES and the STOCKHOLDER.
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 Mergers 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/ ▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: President
SPDI ACQUISITION I CORP
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Title: President
SPI ACQUISITION I CORP.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Title: President
SYSTEMS PLUS DISTRIBUTION, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: President
SYSTEMS PLUS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: President
STOCKHOLDER:
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
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