Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 23, 1997
(the "Agreement"), by and among PRINTED PRODUCTS GROUP, INC.
d/b/a SOLION, a Delaware corporation (the "Company"), XXXXXX
XXXXX, the sole shareholder of the Company (the "Shareholder"),
PHYSICIAN COMPUTER NETWORK, INC., a New Jersey corporation
("PCN"), and SOLION CORP., a Delaware corporation that is a
wholly-owned subsidiary of PCN ("Merger Sub").
WHEREAS, the Boards of Directors of PCN, Merger Sub and the
Company have each determined that it is in the best interests of
their respective stockholders for Merger Sub to merge with and
into the Company upon the terms and subject to the conditions set
forth herein, and have approved the merger;
WHEREAS, PCN, Merger Sub, the Shareholder and the Company
desire to make certain representations, warranties, covenants and
agreements in connection with the merger and also to prescribe
various conditions to the merger;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending
to be legally bound hereby, PCN, Merger Sub, the Shareholder and
the Company hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined
in Section 1.2) and subject to the terms and conditions contained
herein, the Company shall be merged with and into Merger Sub (the
"Merger") (Merger Sub and the Company are sometimes referred to
herein as the "Constituent Corporations"), in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"),
and the separate existence of the Company shall thereupon cease,
and Merger Sub shall be the surviving corporation of the Merger
(the "Surviving Corporation"). At and after the Effective Time,
the Surviving Corporation shall possess all the rights,
privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions,
disabilities and duties of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of
the Constituent Corporations, and all property, real, personal
and mixed, and all debts due to either of the Constituent
Corporations on whatever account, as well as for stock
subscriptions and all other things in action or belonging to each
of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter
as effectually the property of the Surviving Corporation as they
were of the Constituent Corporations; and the title to any real
estate vested by deed or otherwise, in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of
the Constituent Corporations shall be preserved unimpaired; and
all debts, liabilities and duties of the Constituent Corporations
shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts and
liabilities had been incurred by it. At PCN's election, any
direct wholly-owned Subsidiary (as defined in Section 1.7(c)
hereof) of PCN incorporated under the laws of the state of
Delaware may be substituted for Merger Sub as a constituent
corporation in the Merger, in which event, the parties shall
execute an appropriate amendment to this Agreement in form and
substance reasonably satisfactory to PCN and the Company in order
to reflect such substitution.
Section 1.2 Effective Time of the Merger. Subject to the
provisions of this Agreement, a certificate of merger in
substantially the form attached hereto as Exhibit A (the
"Certificate of Merger") shall be duly prepared, executed and
acknowledged by the Surviving Corporation and thereafter deliv-
ered to the Secretary of State of the State of Delaware, for
filing as provided in the DGCL, as soon as practicable on or
after the Closing Date (as defined in Section 1.3). The Merger
shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (the
"Effective Time" and the date on which the Effective Time occurs
is referred to herein as the "Effective Date").
Section 1.3 Closing. The closing of the Merger (the
"Closing") will take place as soon as practicable (but in no
event later than the second Business Day (as defined below))
after the latest to occur of the conditions set forth in Article
VI having been fulfilled or having been waived in accordance with
this Agreement (the "Closing Date"), at the offices of Xxxxxx
Xxxxxx Butowsky Xxxxxxx Shalov & Xxxx, 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, unless another date or place is agreed to
in writing by the parties hereto. For purposes of this
Agreement, "Business Day" means any day other than: (i) a
Saturday or Sunday; and (ii) a day on which banks in the state of
New York are required or permitted to be closed.
Section 1.4 Certificate of Incorporation. The Certificate
of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of
the Surviving Corporation, until duly amended in accordance with
the terms thereof and the DGCL, except for the changes thereto
specified in the Certificate of Merger.
Section 1.5 By-Laws. The By-Laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the articles of
incorporation of the Surviving Corporation and of the DGCL.
Section 1.6 Directors and Officers. The directors and
officers of Merger Sub at the Effective Time shall, from and
after the Effective Time, be the directors and officers of the
Surviving Corporation until the successors of all such persons
shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with
the Surviving Corporation's Certificate of Incorporation and
by-laws.
Section 1.7 Conversion of Shares. At the Effective Time,
by virtue of the Merger and without any action on the part of the
holder of any shares of the Common Stock (as defined below) or of
any capital stock of Merger Sub:
(a) Each share of the capital stock of Merger Sub
which is issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(b) Each share of the Company's common stock, par
value $.01 per share (the "Common Stock"), which is issued and
outstanding immediately prior to the Effective Time shall be
converted into the right to receive (the "Merger Consideration"),
namely: (x) the Common Stock Cash Consideration (as defined in
Section 1.8 below), without interest; and (y) that number (the
"Conversion Number") of shares of duly authorized, validly
issued, fully paid and non-assessable shares of PCN's common
stock, $.01 per share (the "PCN Stock"), computed in accordance
with Section 1.9. All shares of Common Stock, and each holder of
a certificate representing such shares of Common Stock, shall
cease to have any rights with respect thereto, except the right
to receive the Merger Consideration to be issued or paid in
consideration therefor upon surrender of such certificate in
accordance with Section 1.11, without interest.
(c) All shares of the Common Stock and all other
shares of capital stock of the Company that are owned by the
Company as treasury stock and any shares of the Common Stock or
other shares of capital stock of the Company owned by the Company
or any wholly-owned Subsidiary of the Company, shall be canceled.
As used in this Agreement, a "Subsidiary" of any party means any
corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any
Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) 50% or more of the
securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned
or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its
Subsidiaries.
Section 1.8 Common Stock Cash Consideration. As used
herein, the "Common Stock Cash Consideration" means the amount
equal to: (a) $3,125,000; divided by (b) the Common Share Number
(as defined below). As used herein, the "Common Share Number"
means the number of shares of Common Stock issued and outstanding
immediately prior to the Effective Time.
Section 1.9 Conversion Number. As used herein, the
Conversion Number means the amount equal to: (a) the PCN Share
Number (as defined below); divided by (b) the Common Share
Number. As used herein, the "PCN Share Number" means that number
of shares of PCN Stock which, on the third Business Day prior to
the Effective Time (the "Trigger Date"), has an aggregate Market
Price (as hereinafter defined) of $3,125,000. As used herein,
the "Market Price" of each share of PCN Stock means the average
of the closing sale price of a share of PCN Stock as reported on
the NASDAQ Stock Market during the thirty (30) trading days
immediately preceding the date of the determination.
Section 1.10 Exchange of Certificates.
(a) Exchange Procedures. At the Closing, the
Shareholder shall deliver to PCN for cancellation all
certificates which immediately prior to the Effective Time
represented outstanding shares of Common Stock (the
"Certificates"), together with appropriate stock powers duly
executed by the Shareholder. Upon surrender of a Certificate for
cancellation to PCN, the Shareholder shall be entitled to receive
in exchange therefor, and upon deliver of such Certificates PCN
shall deliver to the Shareholder, the Merger Consideration which
such holder has the right to receive pursuant to Section 1.7, and
the Certificate so surrendered shall forthwith be canceled.
Until surrendered as contemplated by this Section 1.10, each
Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the
Merger Consideration.
(b) No Further Ownership Rights in Common Stock. All
shares of the PCN Stock issued, together with the Cash
Consideration paid, upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any
cash paid pursuant to Section 1.10(c)) shall be deemed to have
been issued (and paid) in full satisfaction of all rights
pertaining to such shares of Common Stock and there shall be no
further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Common Stock which
were outstanding immediately prior to the Effective Time.
(c) No Fractional Shares. No certificate or scrip
representing fractional shares of PCN Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional
share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of PCN. Notwithstanding any other
provision of this Agreement, each holder of shares of Common
Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of PCN Stock
(after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest)
in an amount equal to such fractional part of a share of PCN
Stock multiplied by the Market Price of a share of PCN Stock on
the Effective Date.
Section 1.11 Taking Necessary Action; Further Action.
PCN, Merger Sub, the Shareholder and the Company, respectively,
shall take all such action as may be necessary or appropriate in
order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges,
powers and franchises of either of the Constituent Corporations,
the officers and directors of such corporations are fully
authorized in the name of their corporation or otherwise to take,
and shall take, all such action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PCN AND MERGER SUB
PCN and Merger Sub hereby represent and warrant to the
Company as follows:
Section 2.1 Organization, Standing and Power. Each of
PCN and Merger Sub: (i) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation; (ii) has all requisite corporate power and
corporate authority to own, lease and operate its properties and
to carry on its business as now being conducted; and (iii) is
duly qualified or licensed to do business and in good standing in
each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure so to be in good standing,
qualified or licensed does not, individually or in the aggregate,
have a Material Adverse Effect (as defined in Section 8.3). Each
of PCN and Merger Sub has previously made available to the
Company complete and correct copies of its presently effective
Articles of Incorporation and By-Laws.
Section 2.2 Authority Relative to This Agreement. (a) PCN
and Merger Sub have all necessary corporate power and corporate
authority to execute and deliver this Agreement and each PCN
Document (as hereinafter defined) to which PCN and/or Merger Sub,
as the case may be, is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement by PCN and Merger Sub and of each PCN Document by
PCN and/or Merger Sub, as the case may be, and the consummation
by PCN and Merger Sub of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate
action on the part of PCN and Merger Sub. This Agreement has
been, and each PCN Document will be, duly executed and delivered
by PCN and/or Merger Sub, as the case may be, and, assuming this
Agreement constitutes the valid and binding agreement of the
Company, constitutes the legal, valid and binding obligation of
PCN and/or Merger Sub, as the case may be, enforceable against
PCN and/or Merger Sub, as the case may be, in accordance with its
terms. As used herein, PCN Document means each or any instrument
executed and delivered by PCN or Merger Sub in connection with
the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by
PCN and Merger Sub does not, and the consummation of the
transactions contemplated hereby by PCN and Merger Sub will not:
(i) conflict with, or result in any violation or breach of any
provision of, the Articles of Incorporation or By-Laws of PCN or
Merger Sub; or (ii) except as to which requisite waivers or
consents have been obtained and assuming the consents, approvals,
authorizations or permits and filings or notifications referred
to in Section 2.2(c) are duly and timely obtained or made, result
in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets or property, or
any right of first refusal with respect to any asset or property
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss, creation or right of first
refusal, a "Violation"), of any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation,
instrument, concession, franchise, license, judgment, order,
decree, or, to PCN's knowledge, any statute, law, ordinance, rule
or regulation applicable to PCN and Merger Sub or their
respective properties or assets.
(c) No consent, approval, order or authorization of,
or registration, declaration or filing with, or permit from any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
"Governmental Entity") is required by or with respect to PCN or
Merger Sub to validly execute and deliver this Agreement or to
effect the Merger, except for: (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware;
(iii) such filings and approvals as may be required by applicable
"blue sky" or takeover laws; and (iv) filing with the NASDAQ
Stock Market for the listing of the shares of PCN Stock issuable
upon exchange of the Common Stock.
Section 2.3 Issuance of PCN Stock. All shares of PCN
Stock which are to be issued pursuant to the Merger will be, when
issued in accordance with the terms hereof, validly issued, fully
paid and non-assessable and not subject to preemptive rights.
PCN is not a party to, and is not aware of, any agreement,
document or arrangement which would restrict the transfer of the
PCN Stock, other than (a) those contained within the Registration
Rights Agreement and Pledge Agreement and (b) those imposed by
relevant state and federal securities laws.
Section 2.4 SEC Documents; Financial Statements.
(a) PCN has filed all forms, reports and documents required to be
filed by PCN with the SEC and has heretofore delivered to the
Company, in the form filed with the SEC, its Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (the "PCN
10-K"), its Quarterly Report on Form 10-Q for the periods ending
March 31, 1997 and June 30, 1997 (together, the "PCN 10-Qs") and
any Current Reports on Form 8-K filed by PCN with the SEC since
June 30, 1997 (the "PCN 8-K" and, together with the PCN 10-K and
the PCN 10-Qs, the "PCN SEC Documents"). As of their respective
dates: (i) the PCN SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC
thereunder applicable to such PCN SEC Documents; and (ii) none of
the PCN SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
(b) The financial statements of PCN included in the
PCN SEC Documents complied as to form in all material respects
with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position
of PCN and its consolidated Subsidiaries as at their respective
dates and the consolidated results of operations and the
consolidated cash flows of PCN for the periods then ended.
Section 2.5 Finders and Investment Bankers. No broker,
finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger
or any other transaction contemplated hereby on account of any
actions taken by PCN or Merger Sub.
Section 2.6 Disclosure. No representation or warranty by
PCN or Merger Sub in this Agreement and no statement contained in
any document or other writing furnished or to be furnished to the
Shareholder, the Company or any of its representatives pursuant
to the provisions hereof contains or will contain any untrue
statement of material fact or omits or will omit to state any
material fact necessary in order to make the statements made
herein or therein not misleading. All copies of all documents
delivered to the Company or any of its representatives pursuant
hereto are true, complete and accurate in all material respects.
There has been no event or transaction which has occurred or
information which has come to the attention of PCN (other than
events or information relating to economic conditions of general
public knowledge) which could reasonably be expected to have a
Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND THE COMPANY
The Shareholder and the Company hereby represent and warrant
to PCN and to Merger Sub as follows:
Section 3.1 Organization, Standing and Power. The
Company: (i) is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware;
(ii) has all requisite corporate power and corporate authority to
own, lease and operate its properties and to carry on its
business as now being conducted; and (iii) is duly qualified or
licensed to do business and in good standing in each jurisdiction
in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification
or licensing necessary, other than in such jurisdictions where
the failure so to be in good standing, qualified or licensed does
not, individually or in the aggregate, have a Material Adverse
Effect. Set forth on Schedule 3.1 hereto is a true and complete
list of the jurisdictions in which the Company is qualified or
licensed to do business. Also attached to Schedule 3.1 are
complete and correct copies of the presently effective
Certificate of Incorporation and By-Laws of the Company. The
Company does not have any Subsidiaries.
Section 3.2 Capital Structure. (a) The authorized
capital stock of the Company consists of 10,000 shares of Common
Stock.
(b) As of the date hereof 800 shares of Common Stock
are issued and outstanding, all of which are validly issued,
fully paid and non-assessable and not subject to preemptive
rights and all of which are owned, beneficially and of record, by
the Shareholder. There are no shares of the Company Common Stock
that are held by the Company in its treasury.
(c) All outstanding shares of the Common Stock are
owned by the Shareholder free and clear of all liens, charges,
encumbrances, claims and options of any nature (collectively,
"Liens"). Except for the Common Stock, and except as otherwise
set forth on Schedule 3.2(c) hereto, there are not outstanding
any: (i) shares of capital stock or other voting securities of
the Company; (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or other voting
securities of the Company; (iii) options, warrants, calls, rights
(including preemptive rights), commitments, agreements or
understandings to which the Company or the Shareholder is a party
or by which it is bound obligating the Company or the Shareholder
to issue, deliver, sell, purchase, redeem or acquire or cause to
be issued, delivered, sold, purchased, redeemed or acquired,
additional shares of capital stock or other voting securities of
the Company or obligating the Company or the Shareholder to
grant, extend or enter into any such option, warrant, call,
right, commitment, agreement or understanding; or (iv) stock
appreciation or other similar or related right which is measured
by, and no person has or has the right or interest to acquire any
equity interests in the Company or any interests measured by, the
value of the capital stock or the income, profits or other
results of the operations or conduct of the business of the
Company. There are no shareholder agreements, voting trusts or
other agreements or understandings to which the Company or the
Shareholder is a party or by which it or he is bound relating to
the voting of any shares of the capital stock of the Company.
Section 3.3 Authority Relative to This Agreement. (a)
The Company has all necessary corporate power and corporate
authority to execute and deliver this Agreement and each Company
Document (as hereinafter defined) and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and each Company Document by the Company and the
consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has
been and each Company Document will be duly executed and
delivered by the Company and the Shareholder, as applicable and,
assuming this Agreement constitutes the valid and binding
agreement of PCN and Merger Sub, constitutes the legal, valid and
binding obligation of each of the Company and the Shareholder
enforceable against each of the Company and the Shareholder in
accordance with its terms. As used herein, "Company Document"
means each or any instrument executed and delivered by any one or
both of the Shareholder and the Company in connection with the
transactions contemplated hereby.
(b) The execution and delivery of this Agreement by
the Company and the Shareholder does not, and the consummation of
the transactions contemplated hereby by the Company and the
Shareholder will not: (i) conflict with, or result in any
violation or breach of any provision of, the Certificate of
Incorporation or By-Laws of the Company; or (ii) except as to
which requisite waivers or consents have been obtained, result in
any Violation of any loan or credit agreement, note, mortgage,
indenture, real property lease, Benefit Plan (as defined in
Section 3.15) or other Material Contract (as defined in Section
3.19), judgment, order, decree, or, to the Shareholder' and
Company's knowledge, any statute, law, ordinance, rule or
regulation applicable to the Company or the Shareholder or their
respective properties or assets.
(c) Except for: (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware; (ii)
such filings and approvals as may be required by applicable "blue
sky" or takeover laws or as otherwise set forth on Schedule
3.3(c) hereto, no consent, approval, order or authorization of,
or registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to the Company
or the Shareholder to validly execute and deliver this Agreement
or to effect the Merger.
Section 3.4 Financial Statements. (a) The Company has
delivered to PCN correct and complete copies of the balance
sheets of the Company as at December 31, 1994 and the related
consolidated statements of operations, cash flows and changes in
shareholders' equity for the period then ended and the notes
thereto, and the report thereon by Xxxxxx & Associates, P.C., the
balance sheets of the Company as at 1995 and 1996, and the
related consolidated statements of operations, cash flows and
changes in shareholders' equity for the periods then ended and
the notes thereto, and the report thereon by Xxxxxx Xxxxxxxx LLC
(collectively, the "Audited Financial Statements") and the
unaudited financial statements of the Company for the fiscal
quarters ending March 31, 1997 and June 30, 1997 and for the
months of July and August 1997 (collectively, the "Unaudited
Financial Statements" and collectively with the Audited Financial
Statements, the "Financial Statements"). The Financial
Statements: (i) are in accordance with the books and records of
the Company; (ii) have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in
the notes thereto), subject, in the case of the Unaudited
Financial Statements, to year-end audit adjustments; and (iii)
fairly present in accordance with applicable requirements of GAAP
the balance sheets of the Company as at their respective dates
and the consolidated statements of operations, cash flows and
changes in shareholders' equity for the periods then ended,
subject in the case of the Unaudited Financial Statements to
normal recurring audit adjustments. The reserves provided for on
the Audited Financial Statements and, to the Company's knowledge,
the reserves provided for on the Unaudited Financial Statements,
with respect to contingent liabilities of the Company are
adequate to cover all costs, expenses, liabilities and damages
associated with such contingent liabilities.
(b) The books of accounts and other financial records
of the Company have been consistently maintained in all material
respects.
Section 3.5 No Undisclosed Material Liabilities. Since
December 31, 1996, the Company has not incurred any obligations
or liabilities of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise,
other than: (i) liabilities provided for in the Unaudited
Financial Statements (or disclosed in the notes thereto); (ii)
liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1996, none of
which were entered into for inadequate consideration; (iii)
liabilities under this Agreement; and (iv) liabilities disclosed
on Schedule 3.5 hereto.
Section 3.6 Absence of Certain Changes or Events. Except
as set forth on Schedule 3.6 hereto or in the Unaudited Financial
Statements, the Company has conducted its business only in the
ordinary course and in a manner consistent with past practice
and, since December 31, 1996, the Company has not: (i) suffered
any change in the business, results of operations, properties
(including any intangible properties), financial condition,
assets or liabilities of the Company; (ii) incurred damage to or
destruction of any of the Company's assets by casualty, whether
or not covered by insurance, in an amount in excess of $10,000 or
suffered or become subject to any pending or threatened condem-
nation of property; (iii) made any change in the nature of its
business; (iv) mortgaged, pledged, assigned, hypothecated or sub-
jected to any lien or any other encumbrance any of its assets;
(v) sold, transferred or leased any of its assets, except, in
each case, in the ordinary course of business and consistent with
past practice; (vi) sold, assigned, transferred, or granted any
rights under or with respect to, any of its licenses, agreements,
patents, inventions, trademarks, trade names, copyrights or
formulae or with respect to know-how or any other intangible
asset, in each case, other than in the ordinary course of
business consistent with past practice; (vii) amended or
terminated any of its Material Contracts other than in the
ordinary course of business consistent with past practice; (viii)
waived or released any other rights having a value in excess of
$10,000 in the aggregate; (ix) incurred or entered into any
agreement to incur indebtedness for borrowed money or guaranteed
any liability or obligation of any other person for borrowed
money; (x) suffered any labor dispute; (xi) made or granted any
increase in wage or salary to any employee or granted any
severance or termination pay to any officer, director or employee
(other than in the ordinary course of business consistent with
past practice or contractual obligations) or entered into any
employment agreement with any officer or employee; (xii) made any
increase in or commitment to increase any employment benefit or
adopted or made any commitments to adopt any additional employee
benefit plan; (xiii) made any change in any method of accounting
or accounting practice employed by the Company; (xiv) written
down the value of inventory or written off notes or accounts
receivable other than in the ordinary course of business; (xv)
declared, set aside or paid any dividends or distributions in
respect of the shares of its capital stock or any issuance, sale,
transfer by the Company, or commitment to issue, sell or transfer
any shares of its capital stock or any redemption, purchase or
other acquisition of any of its securities; or (xvi) received
notice of a default under any Material Contract (as defined in
Section 3.19).
Section 3.7 Real Estate. (a) The Company does not have any
interest in real property other than as a lessee of the property
demised under the Real Property Leases (as hereinafter defined)
and has never owned any real property.
(b) The leasehold estates listed on Schedule 3.7(b)
are all of the leasehold estates under which the Company is a
lessee, sublessee or sublessor of any real property or interest
therein (collectively, the "Real Property Leases") (the premises
demised under the Real Property Leases are, collectively,
referred to herein as the "Real Property"). No proceeding is
pending or, to the best knowledge of the Company, threatened, for
the taking or condemnation of all or any portion of the Real
Property. Except as disclosed on Schedule 3.7, the Company holds
valid title to the leasehold estates and the Real Property Leases
free and clear of any encroachment, sublease, right of occupancy
or use of any third party, mortgage, pledge, lien, security
interest, encumbrance, claim, charge, covenant, conditional
limitation or other restriction of any kind, except for: (i) real
property taxes, if any, affecting the properties of which the
premises demised under the Real Property Leases form a part, not
yet due and payable or for which adequate provision has been
made; (ii) landlord's liens, encumbrances, and other restrictions
set forth in the Real Property Leases or related documents or
imposed by applicable law; (iii) easements, rights-of-way,
restrictions, minor defects or irregularities in title, and other
encumbrances not interfering in any material respect with the
ordinary conduct of the business of the Company. Except as set
forth on Schedule 3.7(b), there is no brokerage commission or
finder's fee due from the Company and unpaid with regard to any
of the Real Property Leases, or which will become due any time in
the future with regard to any Real Property Lease.
(c) Except as set forth on Schedule 3.7(c), to the
knowledge of the Company, there are no: (i) unrecorded
agreements; (ii) rights of occupancy; or (iii) mortgages,
pledges, liens, security interests, encumbrances, claims, charges
which materially encumber any of the properties demised under any
of the Real Property Leases.
(d) Except as set forth on Schedule 3.7(d), there are
no easements, rights of way or licenses necessary for the
operations of the properties demised under the Real Property
Leases which are not in full force and effect.
(e) Except as set forth on Schedule 3.7(e), the
premises demised under the Real Property Leases and the building
systems such as heating, plumbing, ventilation, air conditioning
and electric used in the operation of the Real Property are
adequate in all material respects for the current operations of
the Company, and the Real Property and such building systems now
being used by the Company in its business and operations, whether
leased or owned, are in working order, repair and operating
condition (normal wear and tear excepted), and are, to the
knowledge of the Company, without any material structural
defects.
(f) The Company is not in material or monetary default
nor has it received any notice of any material or monetary
default, or failed to take any action that could result in a
material or monetary default, under any Real Property Lease. To
the Company's knowledge, no other party to any such lease is in
material or monetary default thereunder.
Section 3.8 Title to Property; Encumbrances. Except as set
forth on the Schedule 3.8 and as set forth in Section 3.9 with
respect to the Intellectual Property (as defined in Section 3.9),
the Company has good and valid title to, and owns outright, all
of the tangible and intangible personal properties shown as owned
by the Company on the Company's books and records, including,
without limitation, all of the properties and assets reflected on
the Financial Statements and all properties and assets purchased
by and delivered to it since June 30, 1997 (except for properties
and assets sold or disposed of since June 30, 1997, in the
ordinary course of business) free and clear of all mortgages,
claims, liens, charges, leases, subleases, encumbrances, security
interests, restrictions on use or transfer or other defects of
any kind or nature, whether or not recorded, except for
(collectively, "Permitted Liens" and, together with the Liens
referred to on Schedule 3.8, the "Existing Liens"): (i) liens for
taxes, assessments or other governmental charges or levies the
payment of which is not due; (ii) landlord's liens in favor of
the landlord of the premises demised under the Real Property
Leases and liens of carriers, warehousemen, mechanics,
materialmen, and other liens imposed by law incurred in the
ordinary course of business of the Company for amounts not yet
due or being contested in good faith by appropriate proceedings;
and (iii) liens incurred or deposits made in the ordinary course
of business of the Company in connection with workers'
compensation, unemployment insurance and other types of social
security. The tangible personal properties and assets owned or
leased by the Company are adequate and sufficient for the current
operations of the business of the Company and such properties now
being used by the Company and its business and operations,
whether leased or owned, are in good working order, except for
normal wear and tear.
Section 3.9 Intellectual Property. The Company owns,
licenses or has the right to use all franchises, patents,
trademarks, copyrights, service marks, tradenames, corporate
names, licenses, trade secrets and know-how and proprietary
computer software or hardware, proprietary technology, technical
information, discoveries, designs and other proprietary rights,
whether or not patentable (collectively, "Intellectual Property")
which are currently used in, its business. Except as disclosed
on Schedule 3.9, the Company holds all Intellectual Property free
and clear of all mortgages, claims, liens, charges, leases,
subleases, encumbrances, security interests, restrictions on use
or transfer or other defects of any kind or nature, whether or
not recorded, except for Permitted Liens. Schedule 3.9 sets
forth a true, correct and complete list and description of all
such Intellectual Property (other than licenses for standard
"off-the-shelf" software which can be readily acquired or
licensed for $10,000 or less) and indicates whether the Company
is a licensor or licensee thereof. Except as set forth on
Schedule 3.9, the Company has sole title to and ownership of or
has full, exclusive right to use, for the life of the proprietary
right, all Intellectual Property. Except where the failure to do
so would not have a Material Adverse Effect, all filings and
other actions necessary to acquire, maintain, register, renew and
perfect the rights of the Company to its or their Intellectual
Property rights have been duly made in all jurisdictions where
such rights are used by it or them. The use of the Intellectual
Property by the Company in the operation of its business does not
violate or infringe on the rights of any other person. The
Company has not received any notice of or alleging any violation
of the asserted rights of others with respect to the Intellectual
Property. The Company is not aware of any third party that is
infringing or violating any of the rights of the Company with
respect to the Intellectual Property.
Section 3.10 Litigation. Except as set forth on Schedule
3.10, there are no actions, proceedings, claims or investigations
pending or, to the Company's knowledge, threatened against the
Company or any properties or rights of the Company, before any
court, administrative, governmental or regulatory authority or
body, domestic or foreign. To the Company's knowledge, except as
disclosed on Schedule 3.10, no basis exists for the commencement
of any action, proceeding or investigation of the Company.
Except as set forth on Schedule 3.10, as of the date hereof,
neither the Company nor any of their property is subject to any
order, judgment, writs, injunction or decree.
Section 3.11 Compliance with Laws. Except as set forth on
Schedule 3.11 or with respect to Environmental Laws (as defined
in Section 3.12 hereto), the Company has complied and is in
compliance with all applicable laws, rules, regulations,
ordinances, orders, judgments and decrees (including, without
limitation, occupational safety and health, pension, fair
employment, equal opportunity or similar laws, rules and
regulations) of any Governmental Entity and all other regulatory
bodies which affect its business or assets, the failure to comply
with which has or would result in liability to the Company or the
Surviving Corporation of $5,000 or more with respect to each such
failure (a "Compliance Failure"), and there are no pending claims
which have been filed against the Company or any of its
affiliates alleging a violation of any such law, rule,
regulation, ordinance, order, judgment and decree. All
Compliance Failures, whether or not any such occurrence,
individually, results in liability to the Company or the
Surviving Corporation of $5,000 or less, collectively, will not
result in liability to the Company and the Surviving Corporation
for an amount of $20,000 or more in the aggregate.
Section 3.12 Environmental Laws. (a) The Company is in
compliance with all applicable Environmental Laws (as defined
below in this Section 3.12), and has obtained all necessary
licenses and permits required to be issued pursuant to any
Environmental Law, except where the failure to so comply or to
obtain such licenses or permits, individually or in the
aggregate, does not or will not result in liability to the
Company or the Surviving Corporation (a "Section 3.12
Occurrence") of $2,500 or more with respect to each Section 3.12
Occurrence. Except as disclosed on Schedule 3.12, neither the
Company nor the Shareholder has received notice of or
communication from any Governmental Entity with respect to: (i)
any Hazardous Substance (as defined below in this Section 3.12)
in relation to its operations, property, Former Properties (or
any of them) or acts; or (ii) any investigation, demand or
request pursuant to enforcing any Environmental Law relating to
it or its operations or the Former Properties (or any of them),
and, to the Company's knowledge, no such investigation is pending
or threatened. For purposes of this Agreement: (i)
"Environmental Law" means any present federal, state or local
law, statute, regulation or ordinance, binding interpretation,
binding policy, and any judicial or administrative order or
judgment thereunder and the common law, pertaining to health,
industrial hygiene, Hazardous Substances or the environment,
including, but not limited to, each of the following, as enacted
as of the date hereof: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601-9657;
the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
6901-6991; the Toxic Substance Control Act, 15 U.S.C. 2601-2629; the Water
Pollution Control Act (also known as the Clean Water Act), 33 U.S.C. 1251
et seq; the Clean Air Act, 42 U.S.C. 7401 et seq; the Federal Water
Pollution Control Act, 42 U.S.C. 1251, et seq; the Federal Safe Drinking
Water Act, 42 U.S.C. 300(f), et seq; the Federal Solid Waste Disposal Act,
42 U.S.C. 6901, et seq; the Atomic Energy Act, 42 U.S.C. 2011, et seq;
and the Hazardous Materials Transportation Act, 49 U.S.C. 1801
et seq; and (ii) "Hazardous Substances" means any material, waste
or substance which is included within the definition of
"hazardous substances," "hazardous materials," "toxic
substances," or "solid waste" in or pursuant to any Environmental
Law, or subject to regulation under any Environmental Law.
(b) To the Company's knowledge, there are presently no
underground storage tanks ("USTS") located on any of the Real
Property, nor were any such USTS removed at any time from the
Real Property unless such removal was completed in accordance
with Environmental Law and the requirements of each Governmental
Agency having jurisdiction over such removal. To the Company's
knowledge, none of the properties contain asbestos or Urea
Formaldehyde (or Urea Formaldehyde insulation).
(c) The Company is not now under any duty to self-report any
condition existing on any of the Real Property which constitutes or may
constitute a violation of any Environmental Law to any Governmental Agency.
(d) None of the Real Property are or were used by the
Company or, to its knowledge, by anyone else, for the manufacture
or storage of Hazardous Substances.
(e) All transportation or disposition, if any, of
Hazardous Substances from the Real Property, were performed in
compliance with applicable Environmental Laws.
(f) The Company has no knowledge of any pending or
threatened claim against the Company arising out of the
transportation or disposition of Hazardous Substances.
(g) All Section 3.12 Occurrences whether or not any
such occurrence, individually, results in liability to the
Company or the Surviving Corporation of $2,500 or less,
collectively, will not result in liability to the Company or the
Surviving Corporation of $15,000 or more in the aggregate.
Section 3.13 Permits. Schedule 3.13 sets forth a true
and correct list and description of each material consent,
permit, approval, authorization, license and order of or from a
Governmental Entity that is held or has been received by the
Company(collectively, the "Company Permits"). The Company
Permits constitute all of the consents, permits, approvals,
authorizations, licenses and orders necessary for the operations
of the Company and its business, except for those which, if not
obtained, would not, individually or in the aggregate, have a
Material Adverse Effect. Each Company Permit is valid and in
full force and effect as of the date hereof. There has not been
any attempt to revoke or in any way limit or impair any of such
Company Permits nor, to the Company's knowledge, is there any
reason for any such Company Permit not to be renewed. The
Company is in material compliance with, and is not in violation
of or in breach or default under, and has not received any notice
of any alleged violation of or material breach or default under
the terms of any Company Permit held or received by it.
Section 3.14 Tax Matters. (a) Except as set forth on
Schedule 3.14(a), all United States Federal, state, local and
foreign tax returns, including information returns, reports and
forms ("Tax Returns") that were required to be filed by, or with
respect to, the Company on or before the date hereof have been
filed on a timely basis in accordance with the laws, regulations
and administrative requirements of the appropriate Governmental
Entity. All such Tax Returns that have been filed were, when
filed, and continue to be, true, correct and complete in all
material respects.
(b) Schedule 3.14(b) lists all Tax Returns by or with
respect to the Company that are in the process of being audited
by any Governmental Entity. Schedule 3.14(b) describes all
adjustments to Tax Returns filed by, or on behalf of, the Company
that have been proposed by any representative of any Governmental
Entity, and the resulting Taxes (as defined below), if any,
proposed to be assessed. As used herein, the term "Taxes" means
all foreign, Federal, state, county, local and other taxes,
levies, impositions, deductions, charges and withholdings,
including, without limitation, income or franchise taxes or other
taxes imposed on or with respect to net income or capital, gross
receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, withholding, payroll, employment, excise or
property taxes, and shall include any interest, penalties or
additions thereto. All deficiencies proposed (plus interest,
penalties and additions to Tax that were or are proposed to be
assessed thereon, if any) with respect to the Company as a result
of any examinations have been paid or, as described on Schedule
3.14, are being contested in good faith by appropriate
proceedings. Except as set forth on Schedule 3.14(b), there are
no outstanding waivers or extensions of any statute of
limitations relating to the payment of Taxes for which the
Company may be liable and no Governmental Entity has either
formally or informally requested such a waiver or extension.
(c) All Taxes (whether or not shown on any return)
which were required to be paid by the Company on or before the
date hereof have been timely paid, except such Taxes, if any, as
are set forth on Schedule 3.14(c), that are being contested in
good faith. All Taxes that the Company was required by law to
withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the appropriate
Governmental Entity. There are no liens with respect to Taxes
upon any of the properties or assets, real or personal, tangible
or intangible, of the Company (except for Taxes not yet due).
Any liability existing on June 30, 1997 of the Company for Taxes
not yet due and payable has adequately been provided for on the
Financial Statements.
(d) Except as set forth on Schedule 3.14(d), the
Company has never been included in a consolidated or combined
income Tax Return.
(e) The Company is an "S Corporation" (within the
meaning of Section 1361(a)(1) of the Code) for federal income tax
purposes and, except as set forth on Schedule 3.14(e) hereto,
under the tax laws of each of the relevant states and
jurisdictions in which the Company is doing business, and where S
Corporation status is permitted, and has maintained that status
continuously since its inception. Neither the Company nor the
Shareholder has taken any action that caused a termination of the
Company's S Corporation status other than the transactions
contemplated by this Agreement.
(f) No property owned by the Company is property that
the Company is required to treat as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately before
the enactment of the Tax Reform Act of 1986, or is "tax-exempt
use property" within the meaning of Section 168(h)(1) of the
Code.
(g) The Company: (i) has not agreed to or been
required to make any adjustment pursuant to Section 481(a) of the
Code; (ii) has no knowledge that the Internal Revenue Service has
proposed any such adjustment or change in accounting method with
respect to it; (iii) do not have an application pending with any
taxing authority requesting permission for any change in
accounting method; and (iv) have reported all income and
deductions using a permissible method of accounting under Section
446 of the Code.
(h) The Company is not foreign person within the
meaning of Section 1445 of the Code.
(i) Except as disclosed on Schedule 3.14(i), the
Company does not have in effect any tax elections for Federal
income tax purposes under Section 108, 168, 338, 441, 471, 1017,
1033 or 4977 of the Code.
(j) There is no contract, agreement, plan or
arrangement covering any person that, individually or
collectively, as a consequence of the Merger, could give rise to
the payment of any amount that would not be deductible by the
Company by reason of Section 162(m) or 280G of the Code or as
excessive or unreasonable compensation.
(k) The Company is not a party (other than as an
investor) to any industrial development bond.
(l) Except as provided on Schedule 3.14(l), during the
previous two years the Company and any person related to the
Company with the meaning of Section 1031(f)(3) have not engaged
in any exchange under which the gain realized on such exchange
was not recognized due to Section 1031 of the Code.
(m) No written claim has ever been made by an
authority in a jurisdiction in which the Company does not file
Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(n) The Company is not and has not been a party to
any tax sharing or similar agreement or arrangement.
(o) The Company has not been a party to a transaction,
the income with respect to which was deferred under Treasury
Regulations issued under Section 1502 of the Code, which income
will be taken into account by the Company as a result of the
Merger.
(p) The Company has provided PCN with copies of:
(i) all Tax Returns of or with respect to the Company for all
periods with respect to which the statute of limitations on
assessment has not expired; (ii) any notices, protests, or
closing agreements relating to issues arising, or potentially
arising, in any audit, litigation or similar proceeding with
respect to the liability for Taxes of the Company; (iii) any
elections or disclosure of any controversial position filed by or
on behalf of the Company with any taxing authority (whether or
not filed with any Tax Return); and (iv) any letter rulings,
determination letters or similar documents issued by any taxing
authority with respect to the Company.
(q) The net operating loss carryovers and any credit
carryovers of the Company as of December 31, 1996 for Federal
income tax purposes and for state income tax purposes in each
state in which the Company file a state income tax return are set
forth on Schedule 3.14(q). Except to the extent attributable to
income generated in the ordinary course of business subsequent to
December 31, 1996, the Company has recognized income or gain
which has reduced the net operating loss carryovers or the credit
carryovers set forth on Schedule 3.14(q). Except as described on
Schedule 3.14(q), the Company does not have a net operating loss
carryover or a credit carryover which (i) in the case of a net
operating loss carryover, is subject to restriction under Section
382 of the Code (or any similar provision under state, local, or
foreign law), (ii) in the case of any credit carryover, is
subject to restriction under Section 383 of the Code (or any
similar provision under state, local or foreign law) or (iii)
arose in a separate return limitation year.
(r) Except as set forth on Schedule 3.14(s), no
contributions have been made to capital of the Company during the
five year period ending on the date hereof.
(s) The Company is not liable for the payment of any
Taxes imposed on the Company under Treasury Regulation Section
1.1502-6 (or any successor provision thereto or similar provision
under state, local or foreign law).
Section 3.15 Benefit Plans. (a) Schedule 3.15 contains a
true and complete list of each pension, retirement, savings,
profit sharing, stock bonus, stock ownership, deferred
compensation, bonus, incentive compensation, stock option,
restricted stock, stock purchase, stock appreciation right,
salary continuation, severance or termination pay, medical,
hospital, dental, cafeteria, flexible spending, dependent care,
life or other insurance, disability, fringe benefit, vacation
pay, sick pay, holiday, unemployment, employee loan, educational
assistance or other employee benefit plan or program, agreement
or arrangement, whether written or oral, covering current or
former employees, directors or agents of the Company and
maintained, sponsored or contributed to by the Company, or with
respect to which the Company may otherwise have any liability
(including, but not limited to, any "employee benefit plans", as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (all the foregoing
being herein called "Benefit Plans")). With respect to each
Benefit Plan, the Company has made available to PCN a true and
correct copy of (i) the three most recent annual reports (Form
5500) filed with the IRS, (ii)the plan document for such Benefit
Plan (or a written description of any unwritten Benefit Plan),
(iii) the most recent summary plan description, (iv) each trust
agreement, insurance contract, annuity contract or other funding
vehicle or investment contract, relating to such Benefit Plan,
(v) the most recent actuarial report or valuation, (vi) the
latest IRS determination letter and any other IRS ruling, and
(vii) the premium expenses and claims experience for each Benefit
Plan which is a welfare benefit plan for the three most recent
fiscal years and for the period from the end of the most recent
fiscal year to the last day of the month preceding the date
hereof. The Company currently has no commitment or plans to
create any additional Benefit Plans.
(b) Except as disclosed on Schedule 3.15(b), each
Benefit Plan is and has been in compliance, in form and
operation, in all respects, with all applicable laws and has been
administered in all respects in accordance with its terms and
ERISA, the Code or any other applicable statute, order or
governmental rule or regulation. Except as disclosed on Schedule
3.15(b), all required returns, reports and descriptions with
respect to the Benefit Plans have been appropriately filed and
distributed.
(c) Each of the Benefit Plans and related trusts that
is intended to be qualified under Section 401(a) and exempt from
tax under Section 501(a) of the Code has been determined by the
IRS to be qualified and exempt under the Code, and to the
Company's and the Shareholder's knowledge, nothing has occurred
since such determination to cause any of such Benefit Plans and
related trusts not to qualify under Section 401(a) or be exempt
under Section 501(a) of the Code except as disclosed on Schedule
3.15(c).
(d) Except as disclosed on Schedule 3.15(d), there has
been no prohibited transaction, within the meaning of Section 406
of ERISA or Section 4975 of the Code, with respect to the Benefit
Plans or any liability for taxes or breach of fiduciary duty.
There is no action, suit, grievance, arbitration, governmental
investigation or audit or other claim with respect to the
administration or investment of assets of the Benefit Plans
(other than routine claims for benefits made in the ordinary
course of plan administration) pending or threatened and no
circumstances exist which are likely to give rise to any such
action, suit, grievance, arbitration, governmental investigation
or audit or other claim.
(e) The Company does not currently and has not within
the past six years maintained, sponsored, or contributed to (or
is or been required to contribute to) any "defined benefit plan"
as defined in Section 3(35) of ERISA, any "multiemployer plan" as
defined in Section 3(37) of ERISA or any "multiple employer plan"
within the meaning of Sections 4063 or 4064 of ERISA. With
respect to any "employee benefit plan" (as defined in Section
3(3) of ERISA), whether or not terminated, currently or formerly
maintained or contributed to by the Company, or any entity which
was at any time treated as a single employer, determined under
Section 414(b), (c), (m) or (o) of the Code, with the Company or
its former Subsidiaries, no liability currently exists and no
event has occurred and no condition exists, which could subject
PCN, the Company, the Surviving Corporation or any of its
Subsidiaries directly or indirectly (through an indemnification
agreement or otherwise) to any liability, including, without
limitation, any liability under Title IV of ERISA or Section 412,
4971, 4975 or 4980B of the Code.
(f) With respect to the Benefit Plans, individually
and in the aggregate, there are no funded benefit obligations for
which contributions are due and have not been made or for which
contributions have not been properly accrued as required by GAAP,
and there are no unfunded benefit obligations which have not been
(i) accounted for by reserves (if required by GAAP) or (ii) if
required (and to the extent required, if any), properly disclosed
in accordance with GAAP, in the consolidated financial statements
of the Company.
(g) No Benefit Plan or other contract or agreement to
which the Company is a party provides life, health or other
welfare benefits to retirees or other terminated employees of the
Company or their dependents, other than continuation coverage
mandated by Section 4980B of the Code or any state law requiring
similar continuation coverage.
(h) The Audited Financial Statements reflect reserves
which are adequate to cover any reasonably expected liabilities
for unresolved or outstanding workers compensation claims or
claims under the Company's self-funded employee welfare plans.
Section 3.16 Employees; Labor Relations. (a) None of the
Company's employees is represented by any labor union. To the
Company's and the Shareholder's knowledge, there is no activity
involving any employees of the Company seeking to certify a
collective bargaining unit or engaging in any other
organizational activity. There are no pending or, to the
Company's and Shareholder's knowledge, threatened, lawsuits,
administrative proceedings, reviews, or investigations by any
person or Governmental Entity against the Company with respect to
any violation or alleged violation of any applicable Federal,
state or local laws, rules or regulations: (i) prohibiting
discrimination on any basis, including, without limitation, on
the basis of race, color, religion, sex, disability, national
origin or age; or (ii) relating to employment or labor,
including, without limitation, those related to immigration,
wages or hours.
(b) Schedule 3.16(b) contains a true and correct
schedule of: (i) the name, job title and current annual base
salary of all current officers and employees of the Company and
the amount of any bonuses the Company has promised to pay such
persons; and (ii) all employment, consulting, severance or
compensation agreements to which the Company is a party, true and
correct copies of which have been previously delivered to PCN.
Except for employees with employment agreements as set forth on
Schedule 3.16(b)or as provided by the laws of the jurisdiction in
which the employee is employed, all employees of the Company are
at-will employees and the Company has taken no action which could
result in any such employees not being considered at-will
employees.
(c) Except as set forth on Schedule 3.16(c), each
employee of the Company is a party to a confidentiality and non-disclosure
agreement substantially in the form of the agreement attached to Schedule
3.16(c) (the "Employee Confidentiality Agreement").
Section 3.17 Insurance. Schedule 3.17 sets forth a true,
complete and accurate list and summary description of all
insurance policies maintained by the Company which are currently
in effect or with respect to which there are unresolved pending
claims, which description includes, among other things, whether
the policy is an "occurrence" or "claims made" policy and whether
there is any deductible or self-insured retention with respect to
such policy. All such current policies are in full force and
effect on the date hereof. Such policies insure the Company
against such risks and are in such amounts as the Company
reasonably believes are necessary to conduct its business. The
Company is not in default with respect to any provisions or
requirements of any such policy nor have any of them failed to
give notice or present any claim thereunder in due and timely
fashion, except for defaults or failures which, individually or
in the aggregate, do not have a Material Adverse Effect. The
Company has not received any notice of cancellation or
termination in respect of any of the insurance policies listed on
Schedule 3.17.
Section 3.18 Accounts Receivable; Accounts Payable.
Schedule 3.18(a) sets forth an aged list of the accounts
receivable of the Company at August [31], 1997. All such
accounts receivable, and all accounts receivable subsequently
acquired by the Company, arose in the ordinary course of
business. The Company has no knowledge or any reason to believe
that, subject to the Company's allowance for doubtful accounts
and maintenance contract allowance as reflected in the Unaudited
Financial Statements, such accounts receivable are not
collectible at their aggregate recorded accounts in the ordinary
course of business.
(b) All payables of the Company which are reflected in
the Financial Statements, and all such payables which have arisen
since the date thereof, have arisen only from bona fide
transactions in the ordinary course of the Company's business and
in compliance with applicable laws.
Section 3.19 Contracts. (a) Except as set forth on
Schedule 3.19(a), the Company is not party to or bound by any:
(i) lease agreement (whether as lessor or lessee)
relating to real or personal property requiring payments of
more than $5,000 on an annualized basis or which cannot be
canceled or terminated (or will not, by its terms,
terminate) within one year of the date hereof;
(ii) license agreement, assignment or contract
(whether as licensor or licensee, assignor or assignee)
relating to trademarks, trade names, patents, or copyrights
(or applications therefor), software, unpatented designs or
processes, formulae, know-how or technical assistance, or
other proprietary rights, including, without limitation, the
Intellectual Property;
(iii) employment, consulting agreement, severance
agreements, other agreement regarding employees, directors
or agents, including any (x) agreement with any officer or
other employee of the Company the benefits of which are
contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement or (y)
agreement or plan, any of the benefits of or rights under
which will be increased, or the vesting or payment of the
benefits of or rights under which will be accelerated, by
the occurrence of any of the transactions contemplated by
this Agreement, in each case other than agreements entered
into at the request of PCN;
(iv) non-competition, non-disclosure, secrecy or
confidentiality agreement or similar agreement, including,
without limitation, any such agreement with any employee of
the Company, other than the Employee Confidentiality
Agreement (as defined in Section 3.17), agreements entered
into in the ordinary course of business consistent with past
practice, agreements with the Company related specifically
to the transactions contemplated by this Agreement and
agreement under which the Company is the disclosing party;
(v) agreement or other arrangement pursuant to
which the Company acts as a distributor, remarketer or
reseller of goods or services for another person or entity;
(vi) agreement with any value-added reseller,
business partner, distributor, dealer, sales agent or
representative with respect to the sale or licensing of the
Company's products or services;
(vii) agreement with any manufacturer, supplier
or customer with respect to discounts or allowances or
extended payment terms;
(viii) any original equipment manufacture
agreement;
(ix) joint venture or partnership agreement with
any other person;
(x) agreement for the borrowing or lending of money;
(xi) agreement guaranteeing, indemnifying or
otherwise becoming liable for the obligations or liabilities
of another;
(xii) agreement with any bank, financing company or similar
organization which acquires accounts receivable or contracts for the sale
of merchandise on credit;
(xiii) agreement granting to any person a lien,
security interest or mortgage on any asset of the Company,
including, without limitation, any factoring agreement or
agreement for the assignment of accounts receivable or
inventory;
(xiv) agreement for the construction or
modification of any building or structure or for the
incurrence of any other capital expenditures in excess of
$10,000;
(xv) advertising agreement;
(xvi) agreement which restricts the Company from
conducting any type of business anywhere in the world;
(xvii) long-term sale or private brand agreement;
(xviii) agreement entered into since January 1,
1995 regarding any acquisition or disposition of any assets
by or from the Company other than in the ordinary course of
business containing any currently operative provisions;
(xix) currently operative agreement regarding
the settlement of any litigation;
(xx) any agreement with any supplier which contains minimum
purchase obligations; or
(xxi) other material agreement affecting the
Company or its assets entered into out of the ordinary
course of business which are for an amount in excess of
$15,000 on an annualized basis or which have a remaining
term of one year or more.
Also set forth on Schedule 3.19(a) is a list of the 50
customers of the Company who or which generated the most revenues
for the Company during the twelve month period ended August 31,
1997 (collectively, "Material Customers"). Correct and complete
copies of all such agreements, licenses, leases, contracts,
arrangements and other instruments and written amendments thereto
(or, where they are oral, true and complete written summaries
thereof) referred to in this Section 3.19(a) and shown or
required to be shown on Schedule 3.19(a) (together with each
agreement with a Material Customer, collectively referred to
herein as the "Material Contracts"), have been made available to
PCN on or prior to the date hereof.
(b) Except as set forth on Schedule 3.19(b), each
of the Material Contracts is valid, in full force and effect and
enforceable in all material respects by the Company in accordance
with its terms (subject to the effects of insolvency and general
creditors' rights laws and to equitable principles of general
application).
(c) Except as set forth on Schedule 3.19(c), the
Company has fulfilled, or has taken all action reasonably
necessary to have been taken to date to enable it to fulfill when
due, all of its material or monetary obligations under the
Material Contracts. Except as indicated on Schedule 3.19(c),
there has not occurred any material or monetary default by the
Company or any event which, with the giving of notice or the
lapse of time or both, and/or the election of any person other
than the Company will become a material or monetary default, nor,
to the knowledge of the Company and the Shareholder, has there
occurred any material or monetary default by others or any event
which, with the lapse of time and/or the election of the Company,
will become a material or monetary default under any of the
Material Contracts. Except as set forth on Schedule 3.19(c),
neither the Company nor any other party is in arrears in respect
of the performance or satisfaction of any material term or condi-
tion to be performed or satisfied by it under any of the Material
Contracts and, to the best knowledge of the Company and the
Shareholder, no waiver or indulgence has been granted by any of
the parties thereto.
(d) Except as set forth on Schedule 3.19(d), the
Merger will not result in a breach or default by the Company
under any of the Material Contracts and the consent of the other
parties thereto will not be required with respect thereto.
(e) Except as disclosed on Schedule 3.19(e) or
with respect to the Company's agreements with the Material
Customers, all of the customer agreements between the Company and
its customers with respect to the purchase or licensing of the
Company's products or services are substantially in the form of
the agreements attached to the Schedule 3.19(e)(and contain no
material variation therefrom.
Section 3.20 Related Party Transactions. Except as set
forth on Schedule 3.20, neither the Company nor the Shareholder
has entered into any transaction which is still operative with
(i) an officer or director of the Company, (ii) a record or
beneficial owner of five percent or more of the voting securities
of the Company or (iii) an affiliate of any such officer,
director or beneficial owner other than payment of compensation
for services rendered to the Company.
Section 3.21 Customers and Suppliers. Schedule 3.21
contains: (a) the number of currently active customers who or
which, as the case may be, licensed or purchased any product from
the Company during the past twelve months; and (b) the number of
current customers who or which, as the case may be, receives any
services from the Company (collectively, "Customers"). Except as
set forth on Schedule 3.21, neither the Company nor the
Shareholder has received any notifications (whether written or
verbal) that: (i) any Material Customer or suppliers; or (ii)
other Customers who or which account for 10% or more in the
aggregate of the Company's current annualized revenues, will or
may cease to continue such relationship with the Company, or will
or may substantially reduce the extent of such relationship, at
any time prior to or after the Closing Date except normal
turnover of the customer base consistent with past experience.
The Company has no knowledge of any other material modification
or change in the Company's business relationship with such
Material Customers or suppliers and neither the Company nor the
Shareholder is engaged in any material dispute with any Material
Customers or suppliers. Except as set forth on Schedule 3.21,
the Company is not obligated to provide any goods or services to
any person or entity free of charge.
Section 3.22 Bank Accounts. Set forth on Schedule 3.22 is
a true and complete list of: (i) the name of each bank or other
financial institutions in which the Company has an account or
safe deposit box; (ii) the type and number of each such account
or safe deposit box; and (iii) the names of all persons
authorized to draw thereon or have access thereto.
Section 3.23 Accounting Controls. To the best knowledge
of the Company, the Company has not made, and does not have, any
unlawful payments problems of the type that could reasonably be
expected to have a Material Adverse Effect.
Section 3.24 Finders and Investment Bankers. Except as
set forth on Schedule 3.24, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any other transaction
contemplated hereby on account of any actions taken by the
Company or any of its shareholders.
Section 3.25 Entire Business. Except as set forth on
Schedule 3.25, (i) no portion of the business of the Company is
conducted by any person or entity other than the Company; and
(ii) all of the assets necessary for the conduct of the business
of the Company as presently conducted are owned, leased or
operated by the Company.
Section 3.26 Investment Intent. The Shareholder is
acquiring the PCN Stock issued to him as part of the Merger
Consideration solely for the purpose of investment for his own
account and not with a view to, or for sale in connection with,
the "distribution" (as such term is used in Section 2(11) of the
Securities Act) of any of the shares of PCN Stock in violation of
the Securities Act or any applicable state securities laws. The
Shareholder understands that the shares of PCN Stock issued to
him as part of the Merger Consideration have not been registered
under the Securities Act or any applicable state securities laws
and that he will not be legally entitled to offer for sale, sell
or otherwise transfer any such shares of PCN Stock unless they
have been registered under the Securities Act and applicable
state securities laws or unless an exemption from registration is
available for such offer, sale or other transfer under the
Securities Act and applicable state securities laws.
Section 3.27 Disclosure. No representation or warranty by
the Company or the Shareholder in this Agreement and no statement
contained in any document or other writing furnished or to be
furnished to PCN or its representatives pursuant to the
provisions hereof contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact
necessary in order to make the statements made herein or therein
not misleading. All copies of Material Contracts and all other
documents delivered to PCN or its representatives pursuant hereto
are true, complete and accurate in all material respects. There
has been no event or transaction (other than the transactions
contemplated hereby and the matters related thereto) which has
occurred or information which has come to the attention of the
Company or the Shareholder (other than events or information
relating to economic conditions of general public knowledge)
which could reasonably be expected to have a Material Adverse
Effect or which could reasonably be expected to prevent or impair
the ability of the Surviving Corporation, after the Effective
Time, to carry on the business of the Company in the same manner
as it is presently being conducted.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.1 Conduct of Business of the Company Pending
the Merger. During the period from the date of this Agreement to
the Effective Time, the Company and the Shareholder agree that
(except as contemplated or expressly permitted by this Agreement
or to the extent that PCN shall otherwise agree in writing):
(a) The business of the Company shall be conducted
only in the ordinary course of business and in a manner
consistent with past practice.
(b) The Company shall use its reasonable commercial
efforts to: (i) preserve intact the business organization of the
Company; (ii) keep available the services of its present
officers, employees and consultants; and (iii) preserve its
present relationships with Customers, suppliers and other persons
with which it has a significant business relationship.
(c) The Company shall not amend or propose to amend
its Certificate of Incorporation or By-Laws or equivalent
organizational documents.
(d) The Company shall not issue, deliver, sell or
pledge, or authorize or propose to issue, deliver, sell or
pledge, any shares of its capital stock of any class, or any
securities convertible into, or any rights, warrants or options
to acquire any such shares, or convertible securities or other
ownership interest.
(e) The Company shall not: (i) declare, propose to
declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock (other than: (a) wages paid,
consistent with past practice, to the Shareholder; and (b) the
payment to taxing authorities on or about September 15, 1997 of
the quarterly estimated tax payments due from the Shareholder
with respect to the income of the Company that is taxable to the
Shareholder because the Company has elected to be taxed under
sub-chapter s of the Internal Revenue Code of 1986, as amended,
such tax payments to be paid on a basis consistent with the past
practice of the Company and not to exceed $75,000 in the
aggregate); or (ii) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock.
(f) The Company shall not acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or
by any other manner, any business or any corporation, partner-
ship, association or other business organization or division
thereof or otherwise acquire or agree to acquire any material
amount of assets other than in the ordinary course of business.
(g) The Company shall not sell, lease, encumber or
otherwise dispose of, or agree to sell, lease (whether such lease
is an operating or capital lease), encumber or otherwise dispose
of any portion of its assets, other than in the ordinary course
consistent with past practice.
(h) The Company shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any
debt securities of the Company or guarantee any debt securities
of others or enter into any lease (whether such lease is an
operating or capital lease).
(i) The Company shall not: (i) except to the extent
required by applicable law or as required or permitted by the
terms of any currently effective employment agreement, increase
or agree to increase the compensation (whether cash or non-cash)
payable or to become payable to their officers or employees,
except for increases in salary or wages of employees made in the
ordinary course of business consistent with past practice; (ii)
increase or agree to increase the compensation payable or to
become payable to any executive officer of the Company or any of
its Subsidiaries who currently receives annual compensation in
excess of $30,000; (iii) other than in the ordinary course of
business, consistent with past practice, grant any severance or
termination pay to, or enter into any employment, consulting or
severance agreement with any executive officer, director,
employee or agent of the Company; (iv) enter into any collective
bargaining agreement; or (v) establish, adopt, enter into or
amend any Benefit Plan or establish or adopt any other employee
benefit plan for the benefit of any directors, officers or
employees.
(j) The Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution.
(k) The Company shall not enter into any settlement
agreement with respect to any grievances, litigation,
administrative charges, or any other litigation pending on the
date hereof or arising hereafter which are not either consistent
with past practice or which will have a Material Adverse Effect.
(l) The Company shall not terminate or amend or modify
in any material respect any of the Material Contracts.
(m) The Company and the Shareholder will promptly
notify PCN in the event that it fails to operate its business in
accordance with this Section 4.1.
Section 4.2 Acquisition Proposals. The Company will not,
nor will the Company or the Shareholder authorize or permit any
of their officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other
representative retained by the Company or the Shareholder to: (i)
initiate contact with, solicit or otherwise encourage any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as
hereinafter defined); or (ii) engage in negotiations concerning,
provide any nonpublic information to, or have any discussions
with, any person relating to any Acquisition Proposal. The
Company and the Shareholder will immediately cease and cause to
be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company and the Shareholder shall
immediately notify PCN of any negotiations, requests for
nonpublic information or discussions with respect to an
Acquisition Proposal and will keep PCN fully informed of the
status and terms of any such Acquisition Proposal, indication or
request. As used in this Agreement, "Acquisition Proposal" means
any proposal or offer for a merger, consolidation, share
exchange, recapitalization or other business combination
involving the Company or any proposal or offer to acquire an
equity interest in, all or (other than in the ordinary course of
business consistent with past practice) any portion of the assets
of the Company (including any capital stock or assets of any of
its Subsidiaries) other than the transactions contemplated by
this Agreement.
Section 4.3 Tax Returns. The Company will file all Tax
Returns required to be filed by it (including estimated Tax
Returns) and will pay (or the Shareholder will pay on its behalf)
all taxes due prior to the Effective Time.
Section 4.4 Financial Statements. As soon as available,
the Company shall deliver to PCN copies of unaudited financial
statements for each fiscal quarter and each month ending after
the date hereof.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Access to Information. From the date hereof to
the Effective Time, PCN and the Company shall each (and the
Shareholder shall cause the Company to) afford to the other, and
the officers, employees, accountants, counsel and other
representatives of the other, access at all reasonable times to
its officers, employees, agents, properties, offices, plants,
other facilities and to all books and records (including tax
returns), and shall furnish to the other party all financial,
operating and other data and information as the other party,
through its officers, employees or agents, may reasonably
request. Each of the Company and PCN agrees that it will not,
and will cause its respective representatives not to, use any
information obtained pursuant to this Section 5.1 for any purpose
unrelated to the consummation of the transaction contemplated by
this Agreement. The Confidentiality Agreement dated May 28,
1997, between PCN and the Company (the "Confidentiality
Agreement") shall apply with respect to information furnished by
the Company and the Company's representatives thereunder or
hereunder and any other activities contemplated thereby and to
information furnished by PCN or its Subsidiaries and PCN's
representatives thereunder or hereunder and any other activities
contemplated thereby. The parties agree that this Agreement and
the transactions contemplated hereby shall not constitute a
violation of the Confidentiality Agreement.
Section 5.2 Legal Conditions to Merger. Each of the
Company, the Shareholder and PCN will take all reasonable actions
necessary to comply promptly with all legal requirements which
may be imposed on it with respect to the Merger (including
furnishing all information required in connection with approvals
of or filings with any Governmental Entity) and will promptly
cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger.
Section 5.3 Termination of Asset Purchase Agreement. The
Company, the Shareholder, PCN and its wholly-owned subsidiary,
VERSYSS Incorporated ("Versyss"), agree that, effective at the
Closing, all remaining rights and obligations of Versyss and the
Company under and pursuant to that certain Asset Purchase
Agreement (the "Asset Agreement"), dated December 2, 1993, by and
between Versyss and the Company are terminated and the Asset
Agreement shall be of no further force or effect.
Section 5.4 Advice of Changes; Governmental Filings.
Each party shall confer on a regular and frequent basis with the
other, report on operational matters and promptly advise the
other orally and in writing of: (i) any event which occurs after
the date hereof that would under this Agreement have been
required to be disclosed on the date of the execution and
delivery of this Agreement had such event occurred on or prior to
the date hereof or would have resulted in a breach of any
representation, warranty, covenant or agreement contained herein;
and (ii) any change or event having, or which, insofar as can
reasonably be foreseen, could have, a Material Adverse Effect.
Section 5.5 No Action. Except as contemplated by this
Agreement, no party hereto will, nor will either such party
permit any of its Subsidiaries to, take or agree or commit to
take any action that is reasonably likely to make any of its
representations or warranties hereunder inaccurate in any
material respect at the date made (to the extent so limited) or
as of the Effective Time.
Section 5.6 Additional Agreements; Reasonable Efforts.
Subject to the terms and conditions of this Agreement, each of
the parties hereto agrees to use all reasonable business efforts
to take, or cause to be taken, all action and to do, or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including,
without limitation, using its reasonable best efforts to obtain
all necessary waivers, consents and approvals and to cause the
conditions set forth in Article VI to be satisfied as promptly as
practicable. Without limiting the foregoing, the parties hereto
will execute and deliver, or cause to be executed and delivered,
all such documents and instruments, in addition to those
specifically required by the provisions of this Agreement, in
form and substance reasonably satisfactory to the parties hereto,
as may be reasonably necessary or desirable to carry out and
implement the provisions of this Agreement.
ARTICLE VI
CONDITIONS OF MERGER
Section 6.1 Conditions to Obligation of Each Party to
Effect the Merger. The respective obligations of each party to
effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions:
(a) Approvals. Other than the filing provided for by
Section 1.2, all authorizations, consents, orders or approvals
of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity required in
connection with the consummation of the Merger, the failure to
obtain which has a Material Adverse Effect on PCN and its
Subsidiaries, taken as a whole (assuming the Merger had taken
place), shall have been filed, occurred or been obtained. PCN
shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue PCN Stock pursuant
to the Merger.
(b) No Injunction. No temporary restraining order,
preliminary or permanent injunction or other order issued by any
court of competent jurisdiction prohibiting the consummation of
the Merger shall be in effect; provided, however, that prior to
invoking this condition, each party shall use all reasonable
efforts to have any such decree, ruling, injunction or order
vacated, except as otherwise contemplated by this Agreement.
(c) Violation of Law. No statue, rule or regulation
shall have been adopted which will result in the consummation of
the Merger violating any applicable law.
Section 6.2 Additional Conditions to Obligations of PCN
and Merger Sub. The obligations of PCN and Merger Sub to effect
the Merger are also subject to the following conditions (any one
or more of which may be waived by PCN, but only in a writing
signed by PCN):
(a) Representations and Warranties. Each of the
representations and warranties of the Company and the Shareholder
contained in this Agreement or in any document or instrument
delivered by either one or both of the Company and the
Shareholder in connection herewith, shall be true and correct,
individually and in the aggregate, in all material respects
(except that any specific representation or warranty that is
qualified as to materiality must be true as written) on and as of
the Closing Date, except for changes contemplated by this
Agreement, with the same force and effect as if made on and as of
the Closing Date, except that any such representations or
warranties made as of a specified date shall have been true on
and as of such date.
(b) Agreements and Covenants. The Company and the
Shareholder shall have performed or complied in all material
respects with all of its agreements and covenants contained in
this Agreement to be performed or complied with by it at or prior
to the Closing Date (except that any specific agreement or
covenant that is qualified as to materiality must have been
performed as written).
(c) No Material Adverse Change. There shall have been
no change in the business, results of operations, properties
(including intangible properties), financial condition, assets or
liabilities of the Company since the date of this Agreement
which, individually or in the aggregate, has a Material Adverse
Effect.
(d) Third Party Consents. The Company shall have
obtained, and PCN shall have received copies of, all of the
approvals, waivers, consents and releases of third parties listed
on Schedule 6.2(a) under the caption "Required Consents," none of
which shall have been withdrawn, revoked or modified as of the
Closing Date.
(e) Pledge Agreement. In order to secure his
obligations to PCN under this Agreement and the Company Documents
to which he is a party, contemporaneously with the Effective
Time, the Shareholder shall have delivered to PCN: (i) a duly
executed copy of a pledge agreement (the "Pledge Agreement"), in
the form of Exhibit B hereto, pursuant to which, among other
things, the Shareholder will, for a period of one year, pledge to
PCN such number of the shares of PCN Stock issued to the
Shareholder as part of the Merger Consideration paid to the
Shareholder as, on the Trigger Date had a Market Price equal to
$1,000,000; and (ii) the certificates representing such shares of
PCN Stock, together stock powers duly executed in blank.
(f) Employment Agreement. The Shareholder shall have
executed and delivered to PCN an employment agreement with PCN in
the form attached hereto as Exhibit C (the "Employment
Agreement").
(g) Registration Rights Agreement. The Shareholder
shall have executed and delivered to PCN a registration rights
agreement with PCN in the form attached hereto as Exhibit D (the
"Registration Rights Agreement").
(h) Opinion of Counsel. PCN shall have received an
opinion of outside counsel to the Company in form and substance
reasonably satisfactory to PCN.
(i) Proceedings. All corporate proceedings taken by
the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably
satisfactory in all material respects to PCN and PCN's counsel,
and PCN and PCN's counsel shall have received all such
counterpart originals or certified or other copies of such
documents as they may reasonably request.
Section 6.3 Additional Conditions to Obligation of the
Company and the Shareholder. The obligation of the Company and
the Shareholder to effect the Merger are also subject to the
following conditions (any one or more of which may be waived by
the Company, but only in a writing signed by the Company):
(a) Representations and Warranties. Each of the
representations and warranties of PCN and Merger Sub contained in
this Agreement or in any document or instrument delivered by PCN
or Merger Sub in connection herewith, shall be true and correct,
individually and in the aggregate, in all material respects
(except that any specific representation or warranty that is
qualified as to materiality must be true as written) on and as of
the Closing Date, except for changes contemplated by this
Agreement, with the same force and effect as if made on and as of
the Closing, except that any such representations or warranties
made as of a specified date shall have been true on and as of
such date.
(b) Agreements and Covenants. PCN and the Merger Sub
shall have performed or complied in all material respects with
all of its agreements and covenants contained in this Agreement
to be performed or complied with by it at or prior to the Closing
Date (except that any specific agreement or covenant that is
qualified as to materiality must have been performed as written).
(c) No Material Adverse Change. There shall have been
no change in the business, results of operations, properties
(including intangible properties), financial condition, assets or
liabilities of PCN since the date of this Agreement which has a
Material Adverse Effect.
(d) Employment Agreement. PCN shall have executed and
delivered to the Shareholder the Employment Agreement.
(e) Registration Rights Agreement. PCN shall have
executed and delivered to the Shareholder the Registration Rights
Agreement.
(f) Termination of Personal Guarantees. The
Shareholder's personal guarantees of those obligations of the
Company described on Schedule 6.3(f) shall have been terminated.
(g) Opinion of Counsel. The Company shall have
received an opinion of counsel to PCN in form and substance
reasonably satisfactory to the Company.
(h) Proceedings. All corporate proceedings taken by
PCN in connection with the transactions contemplated hereby and
all documents incident thereto shall be reasonably satisfactory
in all material respects to the Company and the Company's
counsel, and the Company and the Company's counsel shall have
received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after adoption of this Agreement by the Shareholder of
the Company:
(a) By mutual consent of the Board of Directors of PCN
and the Board of Directors of the Company; or
(b) By either PCN or the Company, if the Merger shall
not have been consummated by October 15, 1997 (the "Termination
Date") (provided that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation hereunder has been the cause of
or resulted in the failure of the Merger to occur on or before
such date); or
(c) By either PCN or the Company if there has been a
material breach of any representation, warranty, covenant or
agreement on the part of the other party set forth in this
Agreement, which breach has not been cured within fifteen (15)
Business Days following receipt by the breaching party of notice
specifying such breach in reasonable detail; or
(d) By either PCN or the Company if a court of
competent jurisdiction or governmental regulatory or
administrative agency or commission having proper jurisdiction
and authority thereof shall have issued an order, decree or
ruling (which order, decree or ruling the parties hereto shall
use their best efforts to lift) prohibiting the transactions
contemplated by this Agreement and such order, decree or ruling
shall have become final and non-appealable.
Section 7.2 Amendment. This Agreement may be amended by
the parties hereto (in the case of PCN, Merger Sub or the
Company, by action taken by or on behalf of their respective
Boards of Directors) at any time prior to the Effective Time;
provided, however, that, after adoption of this Agreement by the
shareholders of the Company, no amendment may be made which would
under applicable law require further approval by such
shareholders unless such further approval is duly obtained. This
Agreement may not be amended except by an instrument in writing
signed on behalf of the parties hereto.
Section 7.3 Extension; Waiver. At any time prior to the
Effective Time, the Shareholder and PCN, Merger Sub or the
Company may, by action taken or authorized by their respective
Boards of Directors, to the extent legally allowed: (a) extend
the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with
any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of PCN. The Shareholder
covenants and agrees with PCN and the Merger Sub that the
Shareholder shall indemnify PCN, the Merger Sub (prior to the
Merger), the Surviving Corporation (following the Merger) and
their respective directors and officers, and each of their
respective successors and assigns (individually a "PCN
Indemnified Party") and hold them harmless from, against and in
respect of any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including, without limitation,
court costs and reasonable fees and disbursements of counsel
incurred by a PCN Indemnified Party in any action or proceeding
between the Shareholder and a PCN Indemnified Party or between a
PCN Indemnified Party and any third party or otherwise)
(collectively "PCN Losses") resulting from or arising out of:
(i) any breach of any of the representations,
warranties, covenants or agreements made by the Shareholder
or, prior to the Closing, by the Company, in this Agreement
or any Company Document;
(ii) any action, suit, proceeding, compromise,
settlement, assessment or judgment arising out of or
incident to any of the matters indemnified against in this
Section 8.1; or
(iii) any liability for Taxes (or interest and
penalties thereon) arising from or related to the pending
tax audit referred to on Schedule 3.14(b) hereof.
Section 8.2 Indemnification of the Shareholder and the
Company by PCN and Merger Sub. PCN and Merger Sub agree with the
Shareholder and, prior to the Closing, the Company, that PCN and,
prior to the Merger, Merger Sub, and after the Merger, the
Surviving Corporation, shall, jointly and severally, indemnify
the Shareholder and, prior to the Closing, the Company, and its
directors and officers and each of their successors and assigns
(individually a "Seller Indemnified Party") and hold them
harmless from, against and in respect of any and all costs,
losses, claims, liabilities, fines, penalties, damages and
expenses (including, without limitation, court costs and rea-
sonable fees and disbursements of counsel incurred by a Seller
Indemnified Party in any action or proceeding between PCN and a
Seller Indemnified Party or between a Seller Indemnified Party
and any third party or otherwise) (collectively "Seller Losses"
and, together with the PCN Losses, collectively, "Losses")
resulting from or arising out of:
(i) any breach of any of the representations,
warranties, covenants or agreements made by PCN or by the
Merger Sub in this Agreement or in any PCN Document; or
(ii) any action, suit, proceeding, compromise,
settlement, assessment or judgment arising out of or
incident to any of the matters indemnified against in this
Section 8.2.
Section 8.3 Limitations on Indemnity. (a) On and after
the Closing: (i) the Shareholder shall only be liable to the PCN
Indemnified Parties, and the PCN Indemnified Parties shall only
be entitled to indemnification from the Shareholder, for the
matters covered by Sections 8.1; and (ii) PCN and the Surviving
Corporation shall only be liable to the Seller Indemnified
Parties, and the Seller Indemnified Parties shall only be
entitled to indemnification from PCN and the Surviving
Corporation, for the matters covered by Section 8.2 hereof, in
both cases, only if, and only to the extent that, the aggregate
amount of Losses suffered by PCN Indemnified Parties or suffered
by Seller Indemnified Parties, as the case may be, exceeds
$100,000 (the "Minimum Indemnity Amount"), in which event each
such Indemnified Party shall thereafter be entitled, from time to
time, to seek indemnification in respect to all Losses in respect
of which it is entitled to be indemnified pursuant to such
provisions of Section 8.1 and 8.2, as the case may be, in excess
of the Minimum Indemnity Amount. The foregoing limitations shall
not affect the right of the Indemnified Party to make a claim for
indemnification in order to enable the Indemnified Party to
obtain credit against the $100,000 limitation contained in the
preceding sentence hereof for indemnification which would
otherwise be due but for such limitation; provided, however,
that, except as otherwise provided in Section 8.3(b), the
Indemnifying Party shall have no liability unless the claims of
the Indemnified Party exceed, in the aggregate, the Minimum
Indemnity Amount. Notwithstanding any provision hereof to the
contrary, no claim of any PCN Indemnified Party with respect to
the items enumerated in Section 8.3(b) shall count toward the
Minimum Indemnity Amount to the extent that any PCN Indemnified
Party has received payment in respect of such claim from an
Indemnifying Party pursuant to Section 8.3(b).
(b) Anything contained in this Section 8.3 to the
contrary notwithstanding, the limitation on indemnity contained
in Section 8.3(a) (including, without limitation, the Minimum
Indemnity Amount) shall not apply to any Loss:(i) for which any
PCN Indemnified Party is entitled to indemnification pursuant to
Section 8.1(iii) hereof; (ii) incurred by any PCN Indemnified
Party as a result of a breach by the Shareholder of the
representations and warranties contained in Section 3.2, 3.8 and
3.14 hereto; (iii) incurred by any PCN Indemnified Party as a
result of a breach by the Shareholder of any of the covenants or
agreements contained in this Agreement or in any Company
Document; or (iv) incurred by any Seller Indemnified Party as a
result of a breach by PCN or Merger Sub of any of the covenants
or agreements contained in this Agreement or in any PCN Document;
provided, however, that, except for claims arising under Section
8.1(iii), no Indemnified Party shall assert a claim for the
matters covered by this Section 8.3(b) unless and until the
amount of Losses suffered by such Indemnified Party, in the
aggregate, exceeds Twenty Five Thousand ($25,000) Dollars;
provided, further, however, that once the Indemnified Party's
Losses with respect to the matters covered by this Section 8.3(b)
exceed such Twenty Five Thousand ($25,000) Dollar threshold, the
Indemnifying Party shall be liable for all valid claims of the
Indemnified Party, including the initial claims aggregating
Twenty Five Thousand ($25,000) Dollars. No amounts paid pursuant
to the provisions of Section 8.1(iii) shall count towards or
against (i) the trigger of $25,000 set forth in this Section
8.3(b) or (ii) the $100,000 Minimum Indemnity Amount set forth in
Section 8.3 (a). Under no circumstances shall the total
liability of the Shareholder pursuant to this Article 8 exceed
Six Million Two Hundred Fifty Thousand ($6,250,000) Dollars.
(c) The provisions of this Article 8 shall not apply
to claims arising under the Employment Agreement or the
Registration Rights Agreement.
Section 8.4 Right to Defend, Etc. If the facts giving rise
to any such indemnification pursuant to this Article 8 shall
involve any actual claim or demand by any third party against a
PCN Indemnified Party or a Seller Indemnified Party, as the case
may be (an "Indemnified Party") the party required to indemnify
such Indemnified Party pursuant to Sections 8.1 or 8.2, as the
case may be (the "Indemnifying Party") shall be entitled to
written notice of and entitled (without prejudice to the right of
any Indemnified Party to participate at its own expense through
counsel of its own choosing) to defend or prosecute such claim at
its expense and through counsel of its own choosing if it gives
written notice of its intention to do so no later than the 15th
day following receipt of such written notice; provided, however,
that if the defendants in any action shall include both a
Indemnifying Party and an Indemnified Party and the Indemnified
Party shall have been advised by its counsel that the counsel
selected by the Indemnifying Party has a conflict of interest
because of the availability of different or additional defenses
to the Indemnified Party, the Indemnified Party shall have the
right to select separate counsel (the fees of which counsel shall
be reasonably satisfactory to the Indemnifying Party) to partici-
xxxx in the defense of such action on its behalf, at the expense
of the Indemnifying Party. The failure so to notify an
Indemnifying Party shall not relieve it of any liability which it
may have to any Indemnified Party except to the extent to which
such liability may have been mitigated as a result of the timely
receipt of such notice. The Indemnified Party shall cooperate
fully in the defense of such claim and shall make available to
the Indemnifying Party pertinent information under its control
relating thereto, but shall be entitled to be reimbursed, as
provided in this Article 8, for all out-of-pocket costs and
expenses payable to third parties incurred by it in connection
therewith, including, without limitation, reasonable fees and
disbursements of counsel. Subject to Section 8.3(b), if any
Indemnifying Party assumes the defense of any such claims, the
Indemnifying Party will hold the Indemnified Party harmless from
and against any and all damages arising out of any settlement
approved by such Indemnifying Party or any judgment in connection
with such claim or litigation. Payment by an Indemnifying Party
to an Indemnified Party shall be made within 10 days after
demand, unless there is a claim or demand by a third party in
which event payment shall be made within 10 days after final
judgment, settlement or comprise, as the case may be.
Section 8.5 Tax Effect. The amount of any indemnification
due to an Indemnified Party pursuant to this Article 8 shall be
calculated after taking into account the amount of all insurance,
cash or other direct financial benefits payable to such Indemni-
fied Party (including any such benefits payable by third parties)
and after taking into account the United States federal, state
and local and foreign national, provincial and local tax benefits
or detriments to the Indemnified Party, as the case may be,
calculated assuming the Indemnified Party were a taxpayer subject
to tax at the highest marginal rate in effect when the payment is
made, of the payments made in respect of such loss, claim,
demand, cost or expense giving rise to the indemnification and
the payments, including indemnification payments made in respect
thereto.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Survival of Representations, Warranties and
Agreements. All representations, warranties, covenants or
agreements made on or before the Closing Date and contained in
this Agreement or in any certificate, instrument or agreement
delivered in connection herewith shall not terminate, but shall
survive the Closing and continue in effect for a period of twelve
(12) months from the Closing Date; provided, however, that: (i)
the representations and warranties contained in Sections 3.2,
3.8, 3.14 and 3.15 hereto shall survive indefinitely. No claim
shall be asserted by an Indemnified Party for breach of any such
representation, warranty, covenant or agreement unless the
Indemnified Party shall have given written notice of such claim
(which notice shall describe such claim with reasonable
particularity based upon the then current knowledge of the
Indemnified Party) to the Indemnifying Party on or before the
expiration of the applicable survival period set forth in this
Section 9.1. in which event the survival period for such
representation, warranty, covenant or agreement, as the case may
be, shall continue in effect until such time as such claim shall
have been resolved; provided, however, that, once notice of any
such claim has been given hereunder, additional claims based
upon, or arising out of facts, circumstances, actions or
proceedings upon which the original claim arose may be made at
any time prior to the final resolution of such claim (by means of
a final, non-appealable judgment of a court of competent
jurisdiction, a binding arbitration decision or a settlement
approved by the parties involved) even if such resolution occurs
after the applicable expiration date for the assertion of such
claim, such date being deemed to have been extended to the date
of such final resolution; and provided, further, however, that,
any claim made by an Indemnified Party against an Indemnifying
Party (other than an "Excluded Claim") which is not finally
resolved (by means of a final, non-appealable judgment of a court
of competent jurisdiction, a binding arbitration decision or a
settlement approved by the parties involved) shall be deemed to
have been withdrawn on the last day of the 24th month following
the Closing Date unless proceedings in respect of such claim have
been commenced by the Indemnified Party and notice thereof served
on the Indemnifying Party prior to the last day of such 24 month
period. As used herein, an "Excluded Claim" shall mean any claim
for indemnification by an Indemnifying Party of an Indemnified
Party resulting from or related to a breach of a representation
or warranty by the Indemnifying Party which is either one or more
of a claim which: (i) is based upon or related to a claim
asserted by a third party (including, without limitation, a
governmental agency); and (ii) the Losses associated with which
can not reasonably be determined by the Indemnified Party with
particularity prior to the last day of such 24th month following
the Closing Date.
Section 9.2 Notices. All notices and other
communications given or made pursuant hereto shall be in writing
and shall be deemed to have been duly given or made upon receipt,
if made or given by hand delivery, telecopier or facsimile
transmission, or upon receipt by registered or certified mail
(postage prepaid, return receipt requested) at the following
addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to PCN or Merger Sub:
Physician Computer Network, Inc.
0000 Xxx Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: President
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
with copies to:
Xxxxxx Xxxxxx Butowsky
Xxxxxxx Shalov & Xxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx, Esq.
000-000-0000 (Telephone)
000-000-0000 (Telecopier)
(b) if to the Company:
Printed Products Group, Inc.
d/b/a SOLION
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
President and CEO
000-000-0000 (Telephone)
000-000-0000 (Telecopier)
if to the Shareholder:
Xx. Xxxxxx X. Xxxxx
000 Xxxxx Xxxx
Xxxxx, XX 00000
in either case, with copies to:
Xxxxxxx, Xxxxxx & Xxxxxxxx, P.C.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxxxx III, Esq.
000-000-0000
000-000-0000
Section 9.3 Interpretation; Certain Definitions. When a
reference is made in this agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the word
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation". As used herein, the term "Material Adverse Effect"
means with respect to PCN or the Company, as the case may be, any
effect on the business of PCN or the Company, as the case may be,
or any of its Subsidiaries that is or that a reasonable person
would believe will be materially adverse to the business, results
of operations, properties (including intangible properties),
financial condition, assets or liabilities of PCN or the Company,
as the case may be, and its Subsidiaries, taken as a whole. The
phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by
the party to whom such information is to be made available.
Section 9.4 Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when two or
more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. This Agreement (including
the documents and the instruments referred to herein) constitutes
the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof. This Agreement is not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder. The parties hereby acknowledge
that no party shall have the right to acquire or shall be deemed
to have acquired shares of common stock of the other party
pursuant to the Merger until consummation thereof.
Section 9.6 Governing Law. This Agreement shall be
governed by, and interpreted under, the laws of the State of
Delaware applicable to contracts made and to be performed therein
without regard to conflicts of law principles. The consummation
and effectiveness of the Merger shall be governed by, and
construed in accordance with, the DGCL.
Section 9.7 No Remedy in Certain Circumstances. Each
party agrees that, should any court or other competent authority
hold any provision of this Agreement or part hereof to be null,
void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations con-
tained or set forth herein shall not in any way be affected or
impaired thereby, unless the foregoing inconsistent action or the
failure to take an action makes the Agreement impossible to
perform in which case this Agreement shall terminate pursuant to
Article VII hereof. Except as otherwise expressly contemplated by
this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent
herewith or required hereby pursuant to an order or judgment of a
court or other competent authority, such party shall incur no
liability or obligation unless such party did not in good faith
seek to resist or object to the imposition or entering of such
order or judgment.
Section 9.8 Publicity. The parties will consult with
each other and will mutually agree upon any press release or
public announcement pertaining to the Merger and shall not issue
any such press release or make any such public announcement prior
to such consultation and agreement, except as may be required by
applicable law, in which case the party proposing to issue such
press release or make such public announcement shall use
reasonable efforts to consult in good faith with the other party
before issuing any such press release or making any such public
announcement.
Section 9.9 Assignment. Except as expressly provided in
this Agreement, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Section 9.10 Specific Performance. The parties
acknowledge that money damages are not an adequate remedy for
violations of this Agreement and that any party may, in its sole
discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection to the imposition
of such relief.
Section 9.11 Remedies Cumulative. All rights, powers and
remedies provided under this Agreement or otherwise available in
respect hereof at law or in equity shall be cumulative and not
alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later
exercise of any other such right, power or remedy by such party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Merger to be executed as of the date first
above written.
PHYSICIAN COMPUTER NETWORK, INC.
By: \s\ Xxxx X. Xxxxxxx
-------------------------------------
Xxxx X. Xxxxxxx, Secretary
SOLION CORP.
By: \s\ Xxxx X. Xxxxxxx
-------------------------------------
Xxxx X. Xxxxxxx, Secretary
PRINTED PRODUCTS GROUP, INC.
By: \s\ Xxxxxx Xxxxx
-------------------------------------
Title: President
\s\ Xxxxxx Xxxxx
-------------------------------------
XXXXXX XXXXX
