1
EXHIBIT 2.3
_________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 30th day of September, 1996
by and among
MEDICAL MANAGER CORPORATION
NMS ACQUISITION I CORP.(a subsidiary of
MEDICAL MANAGER CORPORATION)
NATIONAL MEDICAL SYSTEMS, INC.
and
the STOCKHOLDERS named herein
_________________________________________________________________
2
TABLE OF CONTENTS
Page
----
1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Delivery and Filing of Articles of Merger.
1.2 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Certificate of Incorporation, By-laws and Board of Directors of Surviving Corporation. . . 5
1.4 Certain Information With Respect to the Capital Stock of the COMPANY, PC and NEWCO. . . . 5
1.5 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. CONVERSION OF STOCK
2.1 Manner of Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. DELIVERY OF MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CLOSING
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
5.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Capital Stock of the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Transactions in Capital Stock, Reorganization Accounting. . . . . . . . . . . . . . . . . 10
5.5 No Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 Predecessor Status; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Spin-off by the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 Accounts and Notes Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Intellectual Property; Permits and Intangibles. . . . . . . . . . . . . . . . . . . . . . . 13
5.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.14 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Significant Customers; Material Contracts and Commitments. . . . . . . . . . . . . . . . . 15
3
5.16 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.18 Compensation; Employment Agreements; Organized Labor Matters. . . . . . . . . . . . . . . 17
5.19 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.20 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.21 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.23 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.24 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.25 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.26 Deposit Accounts; Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.27 Relations with Governments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.28 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.29 Authority; Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.30 Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.31 No Intention to Dispose of COMPANY Stock. . . . . . . . . . . . . . . . . . . . . . . . . 27
6. REPRESENTATIONS AND WARRANTIES OF PC and NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Capital Stock of the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.7 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.9 Validity of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.10 PC Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 No Side Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Business; Real Property;
Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. COVENANTS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Access and Cooperation; Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Conduct of Business Pending Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 No Shop. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Notice to Bargaining Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ii
4
7.7 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.8 Amendment of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.9 Cooperation in Preparation of Registration Statement. . . . . . . . . . . . . . . . . . . 39
7.10 Final Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12 No Indebtedness [NMS & SMI Only]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY . . . . . . . . . . . . . . . . . . . . 41
8.1 Representations and Warranties; Performance of Obligations. . . . . . . . . . . . . . . . . 41
8.2 Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.7 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.8 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.9 Closing of IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.10 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.11 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.12 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PC AND NEWCO
9.1 Representations and Warranties; Performance of Obligations. . . . . . . . . . . . . . . . 43
9.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 STOCKHOLDERS' Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.7 Termination of Related Party Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.8 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.9 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.10 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.11 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.12 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.13 Closing of the IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.14 FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
iii
5
10. COVENANTS OF PC AFTER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1 Release From Guarantees; Repayment of Certain Obligations. . . . . . . . . . . . . . . . . 45
10.2 Preservation of Tax and
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3 Preparation and Filing of Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.4 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.5 Preservation of Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 46
11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.1 General Indemnification by the STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . 47
11.2 Indemnification by PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.3 Third Person Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.4 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5 Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.2 Liabilities in Event of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
iv
6
13. NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.1 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.2 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.3 Reasonable Restraint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.4 Severability; Reformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.5 Independent Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.6 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.1 STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.2 PC AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14.3 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.4 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15.1 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
16. FEDERAL SECURITIES ACT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
16.1 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
16.2 Economic Risk; Sophistication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
17. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
17.1 Piggyback Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
17.2 Demand Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17.3 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
17.4 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
17.5 Availability of Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.5 Brokers and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
v
7
18.9 Survival of Representations
and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18.10 Exercise of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18.11 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.12 Reformation and Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.13 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.14 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18.15 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Annexes
Annex I - Form of Articles of Merger
Annex II - Form of Certificate of Incorporation and By-laws of PC and NEWCO
Annex III - Consideration to be paid to the Stockholders
Annex IV - Stockholders and Stock Ownership of the COMPANY
Annex V - Stockholders and Stock Ownership of PC
Annex VI - Form of Opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP
Annex VII - Form of Opinion of Counsel to the COMPANY and the Stockholders
Annex VIII - Form of Employment Agreement
vi
8
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 30th day of September, 1996, by and among MEDICAL MANAGER
CORPORATION, a Delaware corporation ("PC"), NMS ACQUISITION I CORP., a Delaware
corporation ("NEWCO"), National Medical Systems, Inc., a Florida corporation
(the "COMPANY"), XXXX X. XXXX, XXXXXXX X. XXXXX, XXXXX XXXXX, XXXXXXX SPITO,
XXXXXXX X. HOGLARD, DILA HOGLARD, RAINTREE HEALTH CARE INVESTMENTS, LP, XXXXX
XXXXXX, XXXXXXX XXXXXX, XXXXXXXX XXXXXX AND XXXXXX XXXXXXXX (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing
under the laws of the State of Delaware, having been incorporated on
July 18, 1996, solely for the purpose of completing the transactions
set forth herein, and is a wholly-owned subsidiary of PC, a
corporation organized and existing under the laws of the State of
Delaware;
WHEREAS, the respective Boards of Directors of NEWCO and the
COMPANY (which together are hereinafter collectively referred to as
"Constituent Corporations") deem it advisable and in the best
interests of the Constituent Corporations and their respective
stockholders that NEWCO merge with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the States
of Delaware and Florida;
WHEREAS, PC is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each
of which is entitled "Agreement and Plan of Reorganization," with each
of RTI Business Systems, Inc., a New York corporation, and Systems
Plus, Inc., a California corporation, and Systems Plus Distribution,
Inc., a California corporation and Personalized Programming, Inc. a
Florida corporation, and Systems Management, Inc., an Indiana
corporation, and their respective stockholders in order to acquire
additional medical software development and distribution companies
(the COMPANY, together with each of the entities with which PC has
entered into the Other
9
Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of PC
Stock (as each is hereinafter defined) constitute the "PC Plan of
Organization";
WHEREAS, the Boards of Directors of PC and each of the Founding
Companies have approved and adopted the PC Plan of Organization as an
integrated plan to transfer the capital stock of the Founding
Companies to PC and the cash raised in the IPO of PC Stock to PC as a
transfer of property under Section 351 of the Internal Revenue Code of
1986, as amended;
WHEREAS, in consideration of the agreements of the Other
Founding Companies pursuant to the Other Agreements, the Board of
Directors of the COMPANY has approved this Agreement as part of the PC
Plan of Organization in order to transfer the capital stock of the
COMPANY to PC;
WHEREAS, unless the context otherwise requires, capitalized
terms used in this Agreement or in any schedule attached hereto and
not otherwise defined shall have the following meanings for all
purposes of this Agreement:
"Acquired Party" has the meaning set forth in Section 5.22(i).
"Acquisition Companies" shall mean NEWCO and each of the other
Delaware companies wholly-owned by PC prior to the Funding and Consummation
Date.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger, substantially in the form of Annex I attached
hereto, or with such other changes therein as may be required by applicable
state laws.
"Balance Sheet Date" shall mean June 30, 1996.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
2
10
"Code" has the meaning set forth in the fifth recital of this
Agreement.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Effective Time of the Merger" shall mean the time as of which the
Merger becomes effective, which the parties hereto contemplate to occur on the
Funding and Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Funding and Consummation Date" has the meaning set forth in Section
4.
"Intellectual Property" shall mean all trademarks, service marks,
trade dress, trade names, patents and copyrights and any registration or
application for any of the foregoing, and any trade secret, invention, process,
know-how, computer software, technology systems, product design or product
packaging.
"IPO" means the initial public offering of PC Stock pursuant to the
Registration Statement.
"IPO Price" means the price at which the PC Stock is sold to the
public in the IPO.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant
to this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of
3
11
this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of
NEWCO.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Founding Companies" means all of the Founding Companies other
than the COMPANY.
"PC" has the meaning set forth in the first paragraph of this
Agreement.
"PC Charter Documents" has the meaning set forth in Section 6.1.
"PC Stock" means the common stock, par value $.01 per share, of PC.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by PC and the Underwriters
of the public offering price of the shares of PC Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on or immediately prior to
the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement of
PC on Form S-1 covering the IPO.
"Relevant Group" has the meaning set forth in Section 5.22(i).
"Returns" has the meaning set forth at the end of Section 5.22.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective
4
12
representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of
this Agreement.
"Surviving Corporation" shall mean the COMPANY as the surviving party
in the Merger.
"Tax" has the meaning set forth at the end of Section 5.22.
"Taxing Authority" has the meaning set forth at the end of Section
5.22.
"Transfer Taxes" has the meaning set forth in Section 18.6.
"Underwriters" means the prospective underwriters in the IPO, as
identified in the Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause Articles of Merger to be signed, verified and delivered
to the Secretary of State of the State of Delaware and, as required, a similar
filing to be made with the relevant authorities in the jurisdiction in which
the COMPANY is organized, on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the
Merger, NEWCO shall be merged with and into the COMPANY in accordance with the
Articles of Merger, the separate existence of NEWCO shall cease, and the
COMPANY shall be the surviving party in the Merger. The COMPANY is sometimes
hereinafter referred to as the "Surviving Corporation." The Merger will be
effected in a single transaction.
5
13
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate or Articles of Incorporation of the COMPANY
then in effect shall be the Certificate or Articles of Incorporation
of the Surviving Corporation until changed as provided by law;
(ii) the By-laws of the COMPANY then in effect shall become the
By-laws of the Surviving Corporation until amended as provided by law;
(iii) the Board of Directors of the Surviving Corporation
initially shall consist of the following persons:
Xxxx X. Xxxx
Xxxxx Xxxxx
The Board of Directors of the Surviving Corporation shall hold office
subject to the provisions of the laws of the State of Florida and of
the Certificate or Articles of Incorporation and By-laws of the
Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the
Surviving Corporation in the same capacity or capacities, and
effective upon the Effective Time of the Merger, Xxxx X. Xxxx shall be
appointed as a vice president of the Surviving Corporation and Xxxxxxx
X. Xxxxx shall be appointed as an Assistant Secretary of the Surviving
Corporation, each of such officers to serve, subject to the provisions
of the Certificate or Articles of Incorporation and By-laws of the
Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, PC AND NEWCO. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
COMPANY, PC and NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
6
14
outstanding capital stock of the COMPANY is as set forth on Schedule 1.4
hereto;
(ii) immediately prior to the Funding and Consummation Date, the
authorized capital stock of PC will consist of 50,000,000 shares of PC
Stock, of which the number of issued and outstanding shares will be
set forth in the Registration Statement, and 500,000 shares of
preferred stock, $.01 par value, of which no shares will be issued and
outstanding; and
(iii) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 3,000 shares of NEWCO Stock, of which ten
(10) shares are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the
effect of the Merger shall be as provided in the applicable provisions of the
General Corporation Law of the State of Delaware (the "Delaware GCL") and the
law of the State of Florida. Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the COMPANY shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of NEWCO shall be
merged with and into the COMPANY, and the COMPANY, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time of the
Merger, the separate existence of NEWCO shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all Taxes,
including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
COMPANY and NEWCO shall be taken and deemed to be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all property,
rights and privileges, powers and franchises and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the COMPANY and NEWCO; and the title to any real estate, or
interest therein, whether by deed or otherwise, vested in the COMPANY and NEWCO
under the laws of each state of incorporation, shall not revert or be in any
way impaired by reason of the
7
15
Merger. Except as otherwise provided herein, the Surviving Corporation shall
thenceforth be responsible and liable for all the liabilities and obligations
of the COMPANY and NEWCO and any claim existing, or action or proceeding
pending, by or against the COMPANY or NEWCO may be prosecuted as if the Merger
had not taken place, or the Surviving Corporation may be substituted in its
place. Neither the rights of creditors nor any liens upon the property of the
COMPANY or NEWCO shall be impaired by the Merger, and all debts, liabilities
and duties of the COMPANY and NEWCO shall attach to the Surviving Corporation,
and may be enforced against such Surviving Corporation to the same extent as if
said debts, liabilities and duties had been incurred or contracted by the
Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO
Stock, issued and outstanding immediately prior to the Effective Time of the
Merger, respectively, into shares of (x) PC Stock and (y) common stock of the
Surviving Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of
the Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (1) that number of shares
of PC Stock set forth on Annex III hereto and (2) the right to receive
the amount of cash set forth on Annex III hereto. Such amounts of cash
and shares as set forth on Annex III hereto as of the date hereof are
final and shall not change hereafter regardless of the number of
shares sold in the IPO or the offering price of such shares;
(ii) all shares of COMPANY Stock that are held by the
COMPANY as treasury stock shall be canceled and retired and no shares
of PC Stock or other consideration shall be delivered or paid in
exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall,
8
16
by virtue of the Merger and without any action on the part of PC,
automatically be converted into one fully paid and non-assessable
share of common stock of the Surviving Corporation, which shall
constitute all of the issued and outstanding shares of common stock of
the Surviving Corporation immediately after the Effective Time of the
Merger.
All PC Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding PC
Stock by reason of the provisions of the Certificate of Incorporation of PC or
as otherwise provided by the Delaware GCL. All voting rights of such PC Stock
received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and
the STOCKHOLDERS shall not be deprived nor restricted in exercising those
rights. At the Effective Time of the Merger, PC shall have no class of capital
stock issued and outstanding other than the PC Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 At the Effective Time of the Merger and on the Funding and
Consummation Date the STOCKHOLDERS shall, upon surrender of certificates
representing all outstanding shares of COMPANY Stock, receive (i) the
respective number of shares of PC Stock set forth on Annex III and (ii) the
amount of cash set forth on Annex III hereto, said cash to be payable by wire
transfer.
3.2 The STOCKHOLDERS shall deliver to PC at the Closing the
certificates representing COMPANY Stock, duly endorsed in blank by the
STOCKHOLDERS, or accompanied by duly executed stock powers, with, if required
by PC, signatures guaranteed by a national or state chartered bank or other
financial institution, and with all necessary Transfer Tax and other revenue
stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The
STOCKHOLDERS agree promptly to use reasonable best efforts to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. CLOSING
9
17
At or prior to the Pricing, the parties shall use all reasonable best
efforts to take all actions necessary to prepare to (i) effect the Merger
(including, if permitted by applicable state law, the advance filing with the
appropriate state authorities of the Articles of Merger, which shall become
effective only at the Effective Time of the Merger) and (ii) effect the
conversion and delivery of shares referred to in Section 3 hereof; provided,
that such actions shall not include the actual completion of the Merger for
purposes of this Agreement or the conversion and delivery of the shares and
payment therefor referred to in Section 3 hereof, each of which actions shall
only be taken upon the Funding and Consummation Date as herein provided. In the
event that there is no Funding and Consummation Date and this Agreement
terminates, PC hereby covenants and agrees to do all things required by
Delaware law and all things which counsel for the COMPANY advises PC are
required by applicable laws of the State of Florida in order to rescind any
merger or other actions effected by the advance filing of the Articles of
Merger as described in this Section. The taking of the actions described in
clauses (i) and (ii) above (the "Closing") shall take place on the closing date
(the "Closing Date") at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. On the Funding and Consummation Date (x) the
Articles of Merger shall be or shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Funding and Consummation Date, shall become effective and the Merger shall
thereby be effected, (y) all transactions contemplated by this Agreement,
including the conversion and delivery of shares, the delivery of wire transfers
in amounts equal to the cash portions of the consideration which the
STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof and (z) the closing with respect to the IPO shall occur and be
deemed to be completed. The date on which the actions described in the
preceding clauses (x), (y) and (z) occurs shall be referred to as the "Funding
and Consummation Date." This Agreement shall in any event terminate if the
Funding and Consummation Date has not occurred within 15 business days of the
Closing Date, provided that, PC, Newco, the COMPANY and the STOCKHOLDERS shall
act in good faith to consummate the IPO. Time is of the essence.
10
18
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of COMPANY and STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally
represent and warrant that all of the following representations and warranties
in this Section 5(A) are true at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of the Closing and the Funding and
Consummation Date, and that such representations and warranties shall survive
the Funding and Consummation Date for a period of twelve (12) months (the last
day of such period being the "Expiration Date"), except that (i) the
representations and warranties set forth in Section 5.22 hereof shall survive
until such time as the statute of limitations period has run for all tax periods
(and any portions thereof) ended on or prior to the Funding and Consummation
Date, which shall be deemed to be the Expiration Date for Section 5.22, and (ii)
solely for purposes of Section 11.1(iii) hereof, and solely to the extent that,
in connection with the IPO, PC actually incurs liability under the 1933 Act, the
1934 Act, or any other Federal or state securities laws, the representations and
warranties set forth herein shall survive until the expiration of any applicable
statute of limitations period, which shall be deemed to be the Expiration Date
for such purposes. For purposes of this Section 5, the term the "COMPANY" shall
mean and refer to the COMPANY and each of its subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, properties, assets or financial condition (as used herein with
respect to the COMPANY, or with respect to any other person, a "Material
Adverse Effect") on the COMPANY. Schedule 5.1 contains a list of all
jurisdictions in which the COMPANY is authorized or qualified to do business.
True, complete and correct copies of the Certificate or Articles of
Incorporation and By-laws, each as
11
19
amended to date, of the COMPANY (the "Charter Documents") are all attached
hereto as Schedule 5.1. The minute books and stock records of the COMPANY, as
heretofore made available to PC, are correct and complete in all material
respects. The most recent minutes of the COMPANY, which are dated no earlier
than ten (10) business days prior to the date hereof, affirm and ratify all
prior acts of the COMPANY and of its officers and directors on behalf of the
COMPANY.
5.2 AUTHORIZATION. (i) The representatives of the COMPANY executing
this Agreement have the authority to enter into and bind the COMPANY to the
terms of this Agreement and (ii) the COMPANY has the full corporate right,
power and authority to enter into this Agreement and the Merger, subject to any
required approval of the shareholders and the Board of Directors of the COMPANY
described on Schedule 5.2, certified copies of which are attached thereto.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the COMPANY is as set forth in Section 1.4(i). All of the issued and
outstanding shares of capital stock of the COMPANY are owned by the
STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set
forth on Schedule 5.3, are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the issued and outstanding shares of capital stock
of the COMPANY have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the STOCKHOLDERS and
were offered, issued, sold and delivered by the COMPANY in compliance in all
material respects with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation
of the preemptive rights of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK, REORGANIZATION ACCOUNTING. Except
as set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock
since January 1, 1994. Except as set forth on Schedule 5.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which
obligates the COMPANY to issue any of its authorized but unissued capital stock
or its treasury stock; (ii) the COMPANY has no obligation (contingent or
otherwise) to purchase, redeem or otherwise
12
20
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof; and (iii) neither the
voting stock structure of the COMPANY nor the relative ownership of shares
among any of its respective stockholders has been altered or changed in
contemplation of the Merger. Schedule 5.4 also includes complete and accurate
copies of all stock option or stock purchase plans, including a list of all
outstanding options, warrants or other rights to acquire shares of the
COMPANY's stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of
the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of
each of the COMPANY's subsidiaries and sets forth the number and class of the
authorized capital stock of each of the COMPANY's subsidiaries and the number
of shares of each of the COMPANY's subsidiaries that are issued and
outstanding, all of which shares (except as set forth on Schedule 5.6) are
owned by the COMPANY, free and clear of all liens, security interests, pledges,
voting trusts, equities, restrictions, encumbrances and claims of every kind.
Except as set forth on Schedule 5.6, the COMPANY does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a list of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise)
or from whom the COMPANY previously acquired material assets. Except as
disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the COMPANY or any other person or entity that directly, or indirectly through
one or more
13
21
intermediaries, controls, or is controlled by, or is under common control with,
the COMPANY ("Affiliates") since January 1, 1994.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are
copies of the following financial statements (the "COMPANY Financial
Statements") of the COMPANY: the COMPANY's audited Consolidated Balance Sheet
as of June 30, 1996 and December 31, 1995 and 1994 and Consolidated Statements
of Income, Cash Flows and Retained Earnings for the six months ended June 30,
1996 and for each of the years in the three-year period ended December 31, 1995
(June 30, 1996 being hereinafter referred to as the "Balance Sheet Date"). Such
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Consolidated Balance Sheets as of June 30, 1996 and December
31, 1995 and 1994 present fairly in all material respects the financial
position of the COMPANY as of the dates indicated thereon, and such
Consolidated Statements of Income, Cash Flows and Retained Earnings present
fairly in all material respects the results of operations and cash flows for
the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to PC an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet
Date of (i) all liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date and (ii) any material
liabilities of the COMPANY (including all liabilities in excess of $10,000
which are not reflected on the balance sheet as of the Balance Sheet Date) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements to which the COMPANY is a party.
Except as set forth on Schedule 5.10, since the Balance Sheet Date, the COMPANY
has not incurred any material liabilities of any kind, character and
description, whether accrued, absolute, secured or unsecured, contingent or
otherwise, other than liabilities incurred in the ordinary course of business.
The COMPANY has also set forth on Schedule 5.10, in the case of those
contingent liabilities related to pending or threatened litigation, or other
liabilities which are not fixed or otherwise accrued or reserved, a good faith
and reasonable estimate of the maximum amount which may be payable. For each
such contingent liability or liability
14
22
for which the amount is not fixed or is contested, the COMPANY has provided to
PC the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating
thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the
claim, suit or proceeding.
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a reasonable best estimate of the maximum amount, if any,
which is likely to become payable with respect to each such liability.
If no estimate is provided, the best estimate shall for purposes of
this Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to PC
an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of the COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Within ten (10) days prior to Closing, the COMPANY shall provide
PC with an accurate list of all receivables obtained subsequent to the Balance
Sheet Date that are outstanding as of the date of the delivery of such list.
For each of the aforementioned accounts and notes receivable reports, the
COMPANY shall provide PC with an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories. Except to the extent reflected
on Schedule 5.11, such accounts and notes are collectible in the amounts shown
on Schedule 5.11, and the COMPANY has not received any written notice of any
15
23
contest, claim or right of set-off with respect to the amount or validity of
any such account receivable and has no other reason to believe that such
amounts are not fully collectible.
5.12 Intellectual Property; Permits and Intangibles.
(a) The COMPANY owns all Intellectual Property the absence of any of
which is reasonably likely to have a Material Adverse Effect on its business,
and the COMPANY has delivered to PC an accurate list (which is set forth on
Schedule 5.12) of all Intellectual Property owned or used by the COMPANY. Each
item of Intellectual Property owned or used by the COMPANY is valid and in full
force and effect. Except as set forth on Schedule 5.12, all right, title and
interest in and to each item of Intellectual Property is owned by the COMPANY
and is not subject to any license, royalty arrangement or pending or threatened
claim or dispute. None of the Intellectual Property owned or, to the COMPANY's
knowledge, none of the Intellectual Property used by the COMPANY nor any
product sold by the COMPANY, infringes any Intellectual Property right of any
other entity and no Intellectual Property owned by the COMPANY is infringed
upon by any other entity.
(b) The COMPANY holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect on its business, and the COMPANY has delivered to PC an accurate
list (which is set forth on Schedule 5.12) of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including motor vehicle titles and current registrations), fuel permits,
licenses, franchises and certificates. To the knowledge of the COMPANY, the
licenses, franchises, permits and other governmental authorizations listed on
Schedule 5.12 are valid, and the COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing, in each case, except where such non-compliance or
violation would not have a Material Adverse Effect on the COMPANY.
16
24
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied in all material respects with and is in compliance in
all material respects with all Federal, state, local and foreign statutes
(civil and criminal), laws, ordinances, regulations, rules, notices, permits,
judgments, orders and decrees applicable to it or any of its properties,
assets, operations and businesses relating to environmental protection
(collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law); (ii) the COMPANY has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and Hazardous Substances and has reported, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (iii) there have been
no releases or threats of releases (as defined in Environmental Laws) at, from,
in or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location
to which the COMPANY has transported or disposed of Hazardous Wastes and
Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any Federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against the COMPANY, PC or NEWCO for any clean-up cost, remedial work,
damage to natural resources or personal injury, including, but not limited to,
any claim under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; and (v) the COMPANY has no contingent
liability in connection with any release of any Hazardous Waste or Hazardous
Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to PC an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property
included (or that will be included) in "depreciable plant, property and
equipment" (or similarly named line item)on the balance sheet of the COMPANY as
of the Balance Sheet Date, (y) all other personal property owned by the COMPANY
with a value individually in excess of $10,000 (i) as of the
17
25
Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all
leases and agreements in respect of personal property, including, in the case
of each of (x), (y) and (z), (1) true, complete and correct copies of all such
leases, (2) a listing of the capital costs of all such assets which are subject
to capital leases and (3) an indication as to which assets are currently owned,
or, to the COMPANY's knowledge, were formerly owned, by STOCKHOLDERS or
affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule
5.14, (i) all personal property with a value individually in excess of $10,000
used by the COMPANY in its business is either owned by the COMPANY or leased by
the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the
personal property listed on Schedule 5.14 is in good working order and
condition, ordinary wear and tear excepted, and (iii) all leases and agreements
included on Schedule 5.14 are in full force and effect and constitute valid and
binding agreements of the COMPANY, and to the COMPANY's knowledge, of the
parties (and their successors) thereto in accordance with their respective
terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to PC an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, or persons or entities that are sources
of a significant number of customers (e.g., certain physician practices, HMO's,
etc.), it being understood and agreed that a "significant customer," for
purposes of this Section 5.15, means a customer (or persons or entity)
representing 5% or more of the COMPANY's annual revenues as of the end of its
last fiscal year. Except to the extent set forth on Schedule 5.15, none of the
COMPANY's significant customers (or persons or entities that are sources of a
significant number of customers) have canceled or substantially reduced or, to
the knowledge of the COMPANY, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances, loan
18
26
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements), other than
agreements listed on Schedule 5.10, 5.14, 5.16, 5.18 or 5.19,(a) in existence
as of the Balance Sheet Date and (b) entered into since the Balance Sheet Date,
and in each case has delivered true, complete and correct copies of such
agreements to PC. The COMPANY has complied in all material respects with all
commitments and obligations pertaining to it, is not in default under any
contracts or agreements listed on Schedule 5.15, and no notice of default under
any such contract or agreement has been received. The COMPANY has also
indicated on Schedule 5.15 a summary description of all plans or projects
involving the opening of new operations, expansion of existing operations or
the acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $50,000 by the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real
property owned or leased by the COMPANY (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including that reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedule 5.10 or 5.15 as securing
specified liabilities (with respect to which no material default by
the COMPANY exists);
(ii) liens for current taxes not yet due and payable and
assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions
to title shown of record in the office of the County Clerks in which
the properties, assets and leasehold estates are located which do not
materially adversely affect the current use of the property.
Schedule 5.16 contains true, complete and correct copies of all
19
27
title reports and title insurance policies received or owned by the COMPANY
with respect to real property owned by the COMPANY.
Schedule 5.16 also contains an accurate list of, and true, complete
and correct copies of, all leases and agreements in respect of real property
leased by the COMPANY, which leases and agreements are attached to Schedule
5.16, and an indication as to which such properties, if any, are currently
owned, or, to the COMPANY's knowledge, were formerly owned, by STOCKHOLDERS or
affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule
5.16, all of such leases included on Schedule 5.16 are in full force and effect
and constitute valid and binding agreements of the COMPANY, and to the
COMPANY's knowledge, of the parties (and their successors) thereto in
accordance with their respective terms.
5.17 INSURANCE. The COMPANY has delivered to PC, as set forth on and
attached to Schedule 5.17, (i) an accurate list as of the Balance Sheet Date of
all insurance policies currently carried by the COMPANY, (ii) an accurate list
of all insurance loss runs or workers' compensation claims received for the
past three (3) policy years and (iii) true, complete and correct copies of all
insurance policies currently in effect. Such insurance policies evidence all of
the insurance that the COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. Such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Funding and Consummation Date. No insurance
carried by the COMPANY has ever been canceled by the insurer and the COMPANY
has never been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
The COMPANY has delivered to PC an accurate list (which is set forth on
Schedule 5.18) showing all officers, directors and key employees of the
COMPANY, listing all employment agreements with such officers, directors and
key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
COMPANY has provided to PC true, complete and correct copies of any employment
agreements for persons listed on Schedule 5.18. Since the Balance Sheet Date,
there have been no increases in the compensation payable or
20
28
any special bonuses to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not
bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union, (ii) no employees
of the COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) no campaign to establish such representation is in
progress and (iv) there is no pending or, to the COMPANY's knowledge,
threatened labor dispute involving the COMPANY and any group of its employees
nor has the COMPANY experienced any labor interruptions over the past three
years. The COMPANY believes its relationships with its employees to be good.
5.19 EMPLOYEE PLANS. Attached hereto as Schedule 5.19 are complete
and accurate copies, as of the Balance Sheet Date, of all employee benefit
plans, all employee welfare benefit plans, all employee pension benefit plans,
all multi-employer plans and all multi-employer welfare arrangements (as
defined in Sections 3(3), (1), (2), (37) and (40), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), which
are currently maintained and/or sponsored by the COMPANY, or any benefit plans
or arrangements, formal or informal, that are not subject to ERISA, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements, or to which
the COMPANY currently contributes, or has an obligation to contribute in the
future (including, without limitation, benefit plans or arrangements that are
not subject to ERISA, such as employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements),
together with copies of any trusts related thereto and a classification of
employees covered thereby (collectively, the "Plans").
5.20 COMPLIANCE WITH ERISA. Except for the Plans, the COMPANY does
not maintain or sponsor, and is not a contributing employer to, a pension,
profit-sharing, deferred compensation, stock option, employee stock purchase or
other employee benefit plan, employee welfare benefit plan, or any other
compensation or benefit arrangement, formal or informal, with their respective
21
29
employees, whether or not subject to ERISA. Except as set forth on Schedule
5.20, (i) all Plans are in substantial compliance with all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable laws, and have been administered, operated and managed in all
material respects in accordance with the governing documents; (ii) all Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of
the Code are so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of the current plan determination
letters, or, in the case of master or prototype plans, opinion letters, most
recent actuarial valuation reports, if any, most recent Form 5500, or, as
applicable, Form 5500-C/R filed with respect to each such Qualified Plan or
employee welfare benefit plan and most recent trustee or custodian report, are
included as part of Schedule 5.20; (iii) to the extent that any Qualified Plans
have not been amended to comply with applicable law, the remedial amendment
period permitting retroactive amendment of such Qualified Plans has not expired
and will not expire within 120 days after the Funding and Consummation Date;
(iv) all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
Reports, audits or tax returns) have been timely filed or distributed, or
failure to timely file or deliver will not result in a Material Adverse Effect
to the COMPANY; (v) none of the STOCKHOLDERS, any Plan, or the COMPANY has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA that could result in a material tax or penalty
to the COMPANY; (vi) no Plan has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; (vii) no
circumstances exist pursuant to which the COMPANY could have any direct or
indirect liability whatsoever (including being subject to any statutory lien to
secure payment of any such liability), to the Pension Benefit Guaranty
Corporation (the "PBGC") under Title IV of ERISA or to the Internal Revenue
Service for any excise tax or penalty that could result in any material
liability to the COMPANY with respect to any plan now or hereafter maintained
or contributed to by the COMPANY or any member of a "controlled group" (as
defined in Section 4001(a)(14) of ERISA) that includes the COMPANY; (viii)
neither the COMPANY nor any member of a "controlled group" (as defined above)
that includes the COMPANY
22
30
currently has (or at the Funding and Consummation Date will have) any
obligation whatsoever to contribute to any "single employer pension plan" (as
defined in ERISA Section 4001(a)(15)) or any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(3)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan; (ix) there have been no
terminations or partial terminations of, or discontinuance of contributions to,
any Qualified Plan without notice to and approval by the Internal Revenue
Service; (x) no Plan that is subject to the provisions of Title IV of ERISA has
been terminated within the three year period immediately preceding the date of
this Agreement; (xi) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported within the three year period immediately preceding the date
of this Agreement; (xii) with respect to Plans which qualify as "group health
plans" under Section 4980B of the Internal Revenue Code and Section 607(1) of
ERISA and related regulations (relating to the benefit continuation rights
imposed by "COBRA"), the COMPANY and the STOCKHOLDERS have complied (and on the
Funding and Consummation Date will have complied) in all material respects with
all reporting, disclosure, notice, election and other benefit continuation
requirements imposed thereunder as and when applicable to such plans, and the
COMPANY has not incurred (and will not incur) any material direct or indirect
liability and is not (and will not be) subject to any material loss,
assessment, excise tax penalty, loss of Federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the COMPANY or the STOCKHOLDERS, at any time prior to the Funding and
Consummation Date, to comply with any such Federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Funding and Consummation Date directly or indirectly against the
COMPANY or the STOCKHOLDERS with respect to such group health plans; and (xiii)
other than claims in the ordinary course of business there is no pending
litigation, arbitration, or disputed claim, settlement or adjudication
proceeding, and to the best of the COMPANY's and STOCKHOLDERS' knowledge, there
is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding or any governmental or other proceeding or
23
31
investigation with respect to any Plan, or with respect to any fiduciary,
administrator or sponsor thereof (in their capacities as such), or any party in
interest thereof.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 5.21, the COMPANY is not in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10, there are no claims, actions,
suits or proceedings, pending or, to the knowledge of the COMPANY or the
STOCKHOLDERS, threatened against or affecting the COMPANY, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
it which would have a Material Adverse Effect, and no notice of any such claim,
action, suit or proceeding, whether pending or threatened, has been received.
The COMPANY has conducted and is conducting its business in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing, which violation would be reasonably likely to have a
Material Adverse Effect.
5.22 TAXES. Except as set forth on Schedule 5.22:
(i) All Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or
similar group of which the COMPANY is or was a member (a "Relevant
Group") with any Taxing Authority have been duly filed, and each such
Return correctly and completely reflects the Tax liability and all
other information required to be reported thereon. All Taxes (whether
or not shown on any Return) owed by the COMPANY, any subsidiary and
any member of a Relevant Group (individually, the "Acquired Party" and
collectively, the "Acquired Parties") have been paid.
(ii) To the knowledge of the COMPANY and the STOCKHOLDERS, the
provisions for Taxes due by the COMPANY
24
32
and any subsidiaries (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
in the COMPANY Financial Statements are sufficient for all unpaid
Taxes, being current taxes not yet due and payable, of such Acquired
Party.
(iii) No Acquired Party is a party to any agreement extending
the time within which to file any Return. No claim has ever been made
by any Taxing Authority in a jurisdiction in which an Acquired Party
does not file Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or
other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period.
There is no dispute or claim concerning any Tax liability of any
Acquired Party either (i) claimed or raised by any Taxing Authority or
(ii) otherwise known to any Acquired Party. No issues have been raised
in any examination by any Taxing Authority with respect to any
Acquired Party which, by application of similar principles, reasonably
could be expected to result in a proposed deficiency for any other
period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with
respect to any Acquired Party for all taxable periods ended on or
after January 1, 1990, indicates those Returns, if any, that have been
audited, and indicates those Returns that currently are the subject of
audit. Each Acquired Party has delivered to PC complete and correct
copies of all federal, state, local and foreign income Tax Returns
filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1990.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
25
33
(vii) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(ix) None of the assets of any Acquired Party constitutes
tax-exempt bond financed property or tax-exempt use property, within
the meaning of Section 168 of the Code. No Acquired Party is a party
to any "safe harbor lease" that is subject to the provisions of
Section 168(f)(8) of the Internal Revenue Code as in effect prior to
the Tax Reform Act of 1986, or to any "long-term contract" within the
meaning of Section 460 of the Code.
(x) No Acquired Party is a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of
any state statutes, and none of the assets of any Acquired Party is
subject to an election under Section 341(f) of the Code or comparable
provisions of any state statutes.
(xi) No Acquired Party is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for
federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any Acquired Party that could
give rise to an adjustment under Section 481 of the Code for periods
after the Funding and Consummation Date.
(xiii) No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and
legally binding agreement with a Taxing Authority relating to Taxes.
(xiv) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax
Returns all positions taken therein that could
26
34
give rise to a substantial understatement of federal income Tax within
the meaning of Section 6662(d) of the Code.
(xv) No Acquired Party has any liability for Taxes of any person
other than such Acquired Party (i) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract or
(iv) otherwise.
(xvi) There currently are no limitations on the utilization of
the net operating losses, built-in losses, capital losses, Tax credits
or other similar items of any Acquired Party (collectively, the "Tax
Losses") under (i) Section 382 of the Code, (ii) Section 383 of the
Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code, (v)
Section 1.1502-15 and Section 1.1502-15A of the Treasury regulations,
(vi) Section 1.1502-21 and Section 1.1502-21A of the Treasury
regulations or (vii) Sections 1.1502-91 through 1.1502-99 of the
Treasury regulations, in each case as in effect both prior to and
following the Tax Reform Act of 1986.
(xvii) At the Balance Sheet Date, the Acquired Parties had
aggregate Tax Losses for federal income Tax purposes as described on
Schedule 5.22(xvii) attached hereto.
(xviii) The COMPANY is not an investment company as defined in
Section 351(e)(1) of the Code.
(xix) The fair market value of the assets of the COMPANY exceeds
the sum of its liabilities, plus the amount of liabilities, if any, to
which the assets are subject.
(xx) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 351(e)(2) of
the Code.
For purposes of this Section 5.22, the following definitions
shall apply:
"Returns" means any returns, reports or statements (including
any information returns) required to be filed for
27
35
purposes of a particular Tax with any Taxing Authority or governmental agency.
"Tax" or "Taxes" means all Federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, deed, stamp, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatsoever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY and the
STOCKHOLDERS, any other party thereto, is in default under any lease,
instrument, agreement, license or permit set forth on Schedule 5.12, 5.14,
5.15, 5.16, 5.18 or 5.19 or any other material agreement to which it is a party
or by which its properties are bound (the "Material Documents"); and, except as
set forth on Schedule 5.23, (a) the rights and benefits of the COMPANY under
the Material Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
by the COMPANY and the STOCKHOLDERS of their obligations hereunder and the
consummation by the COMPANY and the STOCKHOLDERS of the transactions
contemplated hereby will not result in any material violation or breach of, or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.23, none
of the Material Documents requires notice to, or the consent or approval of,
any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.23, none of the Material Documents
expressly
28
36
prohibits or materially restricts the COMPANY from freely providing services to
any other customer or potential customer or the COMPANY, PC, NEWCO or any Other
Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.15, the
COMPANY is not a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business
of the COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant or issuance of any options, warrants, calls, conversion rights
or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
COMPANY;
(v) any increase in the compensation, bonus, sales commissions
or fee arrangements payable or to become payable by the COMPANY to any
of its officers, directors, STOCKHOLDERS, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, materially adversely
affecting the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the COMPANY to
any person, including, without limitation, the
29
37
STOCKHOLDERS and their affiliates;
(viii) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to the COMPANY,
including, without limitation, any material indebtedness or obligation
of any STOCKHOLDERS or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential right to purchase or acquire any interest in any of the
material assets, property or rights of the COMPANY or requiring
consent of any party to the transfer and assignment of any such
material assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY,
provided that, the COMPANY may negotiate and adjust bills in the
course of good faith disputes with customers in a manner consistent
with past practice, provided, further, that such adjustments shall not
be deemed to be included on Schedule 5.11 unless specifically listed
thereon;
(xii) any breach, or any amendment other than an amendment in
the ordinary course of business, or termination of any material
contract, agreement, license or permit to which the COMPANY is a
party;
(xiii) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date;
(xiv) any other distribution of property or assets by the
COMPANY outside the ordinary course of business;
(xv) any other transaction by the COMPANY outside the ordinary
course of its business; or
(xvi) any other activity prohibited by Section 7.3 that
30
38
is not specifically included in this Section 5.25.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered
to PC an accurate schedule (which is set forth on Schedule 5.26) as of the date
of this Agreement of:
(i) the name of each financial institution in which the COMPANY
has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY
and a description of the terms of such power of attorney.
5.27 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action which
would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.28 DISCLOSURE. (a) This Agreement, the schedules hereto, and the
certificates and other documents furnished by the COMPANY to PC pursuant hereto
and for inclusion in the Registration Statement(which, for purposes of this
Agreement, shall include the completed Directors and Officers Questionnaires
and Registration Statement Questionnaires), taken as a whole, do not, and as to
any representation or warranty made to the knowledge of the COMPANY or the
STOCKHOLDERS, such representation and warranty, to the COMPANY's knowledge,
does not, as of their respective dates contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein and therein not misleading.
(b) The COMPANY and the STOCKHOLDERS acknowledge and
agree (i) that there exists no firm commitment, binding
31
39
agreement, or promise or other assurance of any kind, whether express or
implied, oral or written, that a Registration Statement will become effective
or that the IPO pursuant thereto will occur at a particular price or within a
particular range of prices or occur at all; and (ii) that neither PC or any of
its officers, directors, agents or representatives shall have any liability to
the COMPANY, the STOCKHOLDERS or any other person affiliated or associated with
the COMPANY for any failure of the Registration Statement to become effective,
the IPO to occur at a particular price or within a particular range of prices
or to occur at all provided that PC acts in good faith, and uses its best
efforts to cause its directors and officers to act in good faith to consummate
the transactions contemplated herein.
(B) Representations and Warranties of STOCKHOLDERS.
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at
the time of the Closing and on the Funding and Consummation Date, and
that the representations and warranties set forth in Sections 5.29 and
5.30 shall survive until the tenth anniversary of the Funding and
Consummation Date, which shall be deemed to the Expiration Date for
purposes of Sections 5.29 and 5.30.
5.29 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by such STOCKHOLDER, and, except as set forth on the
Schedule 5.29, such COMPANY Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind.
32
40
5.30 PREEMPTIVE RIGHTS. As of the date hereof, such STOCKHOLDER does
not have any preemptive or other right to acquire shares of PC Stock (other
than rights of any STOCKHOLDER to acquire PC Stock pursuant to (i) this
Agreement or (ii) any option granted by PC) and, except for the rights set
forth on Schedule 5.4, such STOCKHOLDER does not have, and hereby waives, any
such preemptive or other right to acquire shares of COMPANY stock.
5.31 NO INTENTION TO DISPOSE OF COMPANY STOCK. There is no current
plan or intention by any STOCKHOLDER to sell, exchange or otherwise dispose of
shares of PC Stock received in the Merger.
6. REPRESENTATIONS AND WARRANTIES OF PC AND NEWCO
PC and NEWCO jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of the Closing and the Funding and Consummation Date, and that such
representations and warranties shall survive the Funding and Consummation Date
for a period of twelve (12) months (the last day of such period being the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 6.13 hereof shall survive until such time as the limitations period
has run for all tax periods (and any portions thereof) ended on or prior to the
Funding and Consummation Date, which shall be deemed to be the Expiration Date
for Section 6.13 and (ii) solely for purposes of Section 11.2(iv) hereof, and
solely to the extent that in connection with the IPO PC actually incurs
liability under the 1933 Act, the 1934 Act or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. PC and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted except where the failure to be so
33
41
authorized or qualified would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of Incorporation and By-laws,
each as amended to date, of PC and NEWCO (the "PC Charter Documents") are all
attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The respective representatives of PC and
NEWCO executing this Agreement have the authority to enter into and bind PC and
NEWCO to the terms of this Agreement and (ii) PC and NEWCO have the full
corporate right, power and authority to enter into this Agreement and the
Merger.
6.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of PC
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding shares of the capital stock of NEWCO are owned by PC
and all of the issued and outstanding shares of the capital stock of PC are
owned by the persons set forth on Annex V hereof, in each case, free and clear
of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of PC and NEWCO have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by PC and the persons set forth on Annex V,
respectively, and were offered, issued, sold and delivered by PC and NEWCO in
compliance in all material respects with all applicable state and Federal laws
concerning the issuance of securities. None of such shares were issued in
violation of the preemptive rights of any past or present stockholder of PC or
NEWCO. No preemptive or other right to acquire shares of PC or NEWCO stock has
been granted to any person other than the rights granted pursuant to this
Agreement and the transactions contemplated herein, the Other Agreements and
the transactions contemplated therein or as set forth in the Registration
Statement.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements
and as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates PC or NEWCO to issue any
of its authorized but unissued capital stock or treasury stock; and (ii)
neither PC nor NEWCO has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution
34
42
in respect thereof. Schedule 6.4 also includes complete and accurate copies of
all stock option or stock purchase plans of PC and NEWCO, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of their respective capital stock.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. PC has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither PC nor
NEWCO owns, of record or beneficially, or controls, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is PC or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or
other non-corporate entity.
6.6 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule
6.6, PC and NEWCO have no material liabilities, contingent or otherwise, except
as set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.7 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 6.7, neither PC nor NEWCO is in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them, which violation would have a Material Adverse
Effect; and except to the extent set forth in Schedule 6.7, there are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
PC or NEWCO, threatened, against or affecting PC or NEWCO, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them, and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. PC and NEWCO have conducted and are
conducting their respective businesses in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, vari-
35
43
ances, rules and regulations and are not in violation of any of the foregoing,
which violation might have a Material Adverse Effect.
6.8 NO VIOLATIONS. Neither PC nor NEWCO is in violation of any PC
Charter Document. None of PC, NEWCO or, to the knowledge of PC and NEWCO, any
other party thereto is in default under any lease, instrument, agreement,
license or permit to which PC or NEWCO is a party, or by which PC or NEWCO, or
any of their respective properties, are bound (collectively, the "PC
Documents"); and (a) the rights and benefits of PC and NEWCO under the PC
Documents will not be adversely affected by the transactions contemplated
hereby; and (b) the execution of this Agreement and the performance of PC's and
NEWCO's obligations hereunder and the consummation by them of the transactions
contemplated hereby will not result in any material violation or breach of, or
constitute a default under, any of the terms or provisions of the PC Documents
or the PC Charter Documents. Except as set forth on Schedule 6.8, none of the
PC Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect,
and the consummation of the transactions contemplated hereby will not give rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit of PC or NEWCO.
6.9 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by PC and NEWCO and the performance by them of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of PC and NEWCO, and this Agreement has been duly and
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of PC and NEWCO.
6.10 PC STOCK. At the time of issuance thereof, the PC Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of PC, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all respects to the PC Stock issued and outstanding as of
the date hereof by reason of the provisions of the Delaware GCL. The shares of
PC Stock to be issued to the
36
44
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.11 NO SIDE AGREEMENTS. Neither PC nor NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or PC other than the Other Agreements
and the agreements contemplated by each of the Other Agreements, including the
employment agreements referred to therein. PC has provided to the COMPANY any
of such documents which have been requested by the COMPANY or the STOCKHOLDERS.
6.12 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. PC was formed in
July 1996, and has conducted limited operations since that time. Neither PC nor
NEWCO has conducted any business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO. Neither PC
nor NEWCO owns or has at any time owned any real property or any material
personal property or is a party to any other agreement, except as listed on
Schedule 6.12 and except that PC is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement.
6.13 TAXES. NEWCO is a newly formed entity which has no tax or
operational history. Except as set forth on Schedule 6.13:
(i) All Returns required to have been filed by or with respect
to PC and any affiliated, combined, consolidated, unitary or similar
group of which PC is or was a member (a "PC Relevant Group") with any
Taxing Authority have been duly filed, and each such Return correctly
and completely reflects the Tax liability and all other information
required to be reported thereon. All Taxes (whether or not shown on
any Return) owed by the PC Relevant Group have been paid.
(ii) The provisions for Taxes due by PC and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the PC Financial
Statements are sufficient for all unpaid Taxes, being current taxes
not yet due and
37
45
payable, of the PC Relevant Group.
(iii) No corporation in the PC Relevant Group is a party to any
agreement extending the time within which to file any Return. No claim
has ever been made by any Taxing Authority in a jurisdiction in which
a corporation in the PC Relevant Group does not file Returns that it
is or may be subject to taxation by that jurisdiction.
(iv) Each corporation in the PC Relevant Group has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(v) No corporation in the PC Relevant Group expects any Taxing
Authority to assess any additional Taxes against or in respect of it
for any past period. There is no dispute or claim concerning any Tax
liability of any corporation in the PC Relevant Group either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to
any corporation in the PC Relevant Group. No issues have been raised
in any examination by any Taxing Authority with respect to any
corporation in the PC Relevant Group which, by application of similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Schedule 6.13(v)
attached hereto lists all federal, state, local and foreign income Tax
Returns filed by or with respect to any corporation in the PC Relevant
Group for all taxable periods, indicates those Returns, if any, that
have been audited, and indicates those Returns that currently are the
subject of audit. Each corporation in the PC Relevant Group will make
available to the STOCKHOLDERS, at their request, complete and correct
copies of all federal, state, local and foreign income Tax Returns
filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, PC.
(vi) No corporation in the PC Relevant Group has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
38
46
(vii) No corporation in the PC Relevant Group has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make
any payments, that are not deductible under Section 280G the Code.
(viii) No corporation in the PC Relevant Group is a party to any
Tax allocation or sharing agreement.
(ix) None of the assets of any corporation in the PC Relevant
Group constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. No
corporation in the PC Relevant Group is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of
1986, or to any "long-term contract" within the meaning of Section 460
of the Code.
(x) No corporation in the PC Relevant Group is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets of
any corporation in the PC Relevant Group is subject to an election
under Section 341(f) of the Code or comparable provisions of any state
statutes.
(xi) No corporation in the PC Relevant Group is a party to any
joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any corporation in the PC
Relevant Group that could give rise to an adjustment under Section 481
of the Code for periods after the Funding and Consummation Date.
(xiii) No corporation in the PC Relevant Group has received any
written ruling of a Taxing Authority related to Taxes or entered into
any written and legally binding agreement with a Taxing Authority
relating to Taxes.
(xiv) Each corporation in the PC Relevant Group has
39
47
disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code)
on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662(d) of the Code.
(xv) No corporation in the PC Relevant Group has any liability
for Taxes of any person other than such corporation in the PC Relevant
Group (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xvi) There currently are no limitations on the utilization of
the net operating losses, built-in losses, capital losses, Tax credits
or other similar items of any corporation in the PC Relevant Group
(collectively, the "Tax Losses") under (i) Section 382 of the Code,
(ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv)
Section 269 of the Code, (v) Section 1.1502-15 and Section 1.1502-15A
of the Treasury regulations, (vi) Section 1.1502-21 and Section
1.1502-21A of the Treasury regulations or (vii) Sections 1.1502-91
through 1.1502-99 of the Treasury regulations, in each case as in
effect both prior to and following the Tax Reform Act of 1986.
(xvii) Neither PC nor NEWCO is an investment company as defined
in Section 351(e)(1) of the Code.
(xviii) Neither PC nor NEWCO is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
351(e)(2) of the Code.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of
this Agreement and the Funding and Consummation Date, upon reasonable notice to
the COMPANY, the COMPANY will afford to the officers and authorized
representatives of PC and the Other Founding Companies access to all of the
COMPANY's sites, properties, books and records and will furnish PC with such
additional financial and operating data and
40
48
other information as to the business and properties of the COMPANY as PC or the
Other Founding Companies may from time to time reasonably request. The COMPANY
will cooperate with PC and the Other Founding Companies, its representatives,
auditors and counsel in the preparation of any documents or other material
which may be required in connection with the transactions contemplated by this
Agreement. PC, NEWCO, the STOCKHOLDERS and the COMPANY will treat all
information obtained in connection with the negotiation and performance of this
Agreement or the due diligence investigations conducted with respect to the
Other Founding Companies as confidential in accordance with the provisions of
Section 14 hereof. In addition, PC will cause each of the Other Founding
Companies to enter into a provision similar to this Section 7.1 requiring each
such Other Founding Company, its stockholders, directors, officers,
representatives, employees and agents to keep confidential any information
obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Funding and
Consummation Date, upon reasonable notice to PC, PC will afford to the officers
and authorized representatives of the COMPANY access to all of PC's and NEWCO's
sites, properties, books and records and will furnish the COMPANY with such
additional financial and operating data and other information as to the
business and properties of PC and NEWCO as the COMPANY may from time to time
reasonably request. PC and NEWCO will cooperate with the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with the transactions
contemplated by this Agreement. The COMPANY, PC and NEWCO will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as
set forth on Schedule 7.2:
(i) carry on its business in the ordinary course as conducted
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) maintain its properties and facilities, including
41
49
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform all of its current obligations as required under
agreements relating to or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its present key employees and
maintain its relationships with suppliers, customers and others having
material business relations with the COMPANY;
(vi) maintain compliance, in all material respects, with all
permits, laws, rules and regulations, consent orders, and all other
orders of applicable courts, regulatory agencies and similar
governmental authorities;
(vii) maintain present debt and lease instruments in accordance
with their respective terms and not enter into new or amended debt or
lease instruments, without the knowledge and consent of PC (which
consent shall not be unreasonably withheld); and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents, except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Funding and Consummation Date, the COMPANY will
not, without the prior written consent of PC:
(i) make any change in its Articles or Certificate of
Incorporation or By-laws;
(ii) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating
42
50
to its securities of any kind other than in connection with the
exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditure, except if it is
in the ordinary course of business (consistent with past practice) and
involves an amount not in excess of $50,000;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties, whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $50,000 necessary or desirable for the
conduct of the business of the COMPANY, (2) (A) liens for taxes either
not yet due or being contested in good faith and by appropriate
proceedings (and for which adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred
to herein as "Statutory Liens"), or (3) liens set forth on Schedule
5.10 or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business;
(vii) negotiate for the acquisition of any business or start-up
any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
43
51
(ix) waive any material right or claim of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall not be deemed
to be included on Schedule 5.11 unless specifically listed thereon;
(x) breach or amend, other than an amendment in the ordinary
course of business, or terminate any material contract, agreement,
license, or permit to which the COMPANY is a party; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of
this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussion pertaining to, or
(iii) furnish any information to any person other than PC or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the
COMPANY or a merger, consolidation or business combination of the
COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide PC on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate (i)
any stockholders' agreements, voting agreements, voting trusts, options,
warrants and employment agreements between the COMPANY and any employee listed
on
44
52
Schedule 9.12 hereto and (ii) any existing agreement between the COMPANY and
any STOCKHOLDER, at or prior to the Funding and Consummation Date. Copies of
such termination agreements are attached to Schedule 7.6 or will be furnished
to PC at or prior to such date.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the
COMPANY shall give prompt notice to PC of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of the COMPANY or the STOCKHOLDERS contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. PC and NEWCO shall give prompt notice to
the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty of PC or NEWCO contained herein to be untrue or inaccurate in any
material respect at or prior to the Closing and (ii) any material failure of PC
or NEWCO to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 7.7 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, which modification
may only be made pursuant to Section 7.8, (ii) modify the conditions set forth
in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Funding
and Consummation Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth
or described on the Schedules, provided, however, that supplements and
amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall only have to be
delivered at the Closing Date, unless such Schedule is to be amended to reflect
an event occurring other than in the ordinary course of business.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule
45
53
prepared by the COMPANY or the STOCKHOLDERS that constitutes or reflects an
event or occurrence that would be reasonably likely to have a Material Adverse
Effect may be made unless PC and a majority of the Founding Companies other
than the COMPANY consent to such amendment or supplement; and provided further,
that no amendment or supplement to a Schedule prepared by PC or NEWCO that
constitutes or reflects an event or occurrence would be reasonably likely to
have a Material Adverse Effect may be made unless a majority of the Founding
Companies consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto shall be deemed to be the Schedules as amended or supplemented pursuant
to this Section 7.8. In the event that one of the Other Founding Companies or
its stockholders seek to amend or supplement a Schedule pursuant to Section 7.8
of one of the Other Agreements, and such amendment or supplement constitutes or
reflects an event or occurrence that would be reasonably likely to have a
Material Adverse Effect on such Other Founding Company or the sale of its stock
by its stockholders to PC, PC shall give the COMPANY notice promptly after it
has knowledge thereof. If PC and a majority of the Founding Companies consent
to such amendment or supplement, which consent shall have been deemed given if
no response is received within 48 hours after notice of such amendment or
supplement (or sooner if required by the circumstances under which such consent
is requested), but the COMPANY does not, the COMPANY may terminate this
Agreement pursuant to Section 12.1(iv) hereof. In the event that the COMPANY
seeks to amend or supplement a Schedule pursuant to this Section 7.8 and PC and
a majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that PC or NEWCO seeks to amend
or supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party
if this Agreement shall be terminated pursuant to the provisions of this
Section 7.8, except that, notwithstanding anything to the contrary contained in
this Agreement, if the COMPANY or the STOCKHOLDERS on the one hand, or PC or
NEWCO on the other hand,
46
54
amends or supplements a Schedule which results in a termination of this
Agreement and such amendment or supplement arises out of or reflects facts or
circumstances which such party knew about at the time of execution of this
Agreement and knew would result in a termination of this Agreement or if such
amendment or supplement otherwise is proposed in bad faith, such party shall
pay or reimburse PC or the COMPANY and the STOCKHOLDERS, as the case may be,
for all of the legal, accounting and other out of pocket costs reasonably
incurred in connection with this Agreement and the IPO as it relates to the
COMPANY and the STOCKHOLDERS.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The
COMPANY and the STOCKHOLDERS shall furnish or cause to be furnished to PC and
the Underwriters all of the information concerning the COMPANY and the
STOCKHOLDERS reasonably requested by PC or the Underwriters for inclusion in,
and will cooperate with PC and the Underwriters in the preparation of, the
Registration Statement and the prospectus included therein (including audited
and unaudited financial statements, prepared in accordance with generally
accepted accounting principles, and in form otherwise reasonably requested by
PC or the Underwriters as suitable for inclusion in the Registration
Statement). PC and NEWCO agree to use their best efforts to provide to the
STOCKHOLDERS and the COMPANY copies of all drafts of the Registration Statement
circulated to the working group as a whole, including the prospectus included
therein and all amendments and exhibits thereto and any other documents and
correspondence received by or filed with the SEC, and, to the extent
practicable in light of the timetable for the IPO and the potential need to
respond promptly to SEC, NASD or NASDAQ comments, to give the STOCKHOLDERS and
the COMPANY sufficient time to review and comment upon such documents prior to
filing with the SEC. The COMPANY and the STOCKHOLDERS agree promptly to advise
PC if at any time during the 25 day period following the date of the final
prospectus with respect to the IPO (the "Final Prospectus") in which a
prospectus relating to the IPO is required to be delivered under the Securities
Act, any information contained in the prospectus concerning the COMPANY or the
STOCKHOLDERS and which was provided by or on behalf of the STOCKHOLDERS or the
COMPANY or their respective agents or representatives for inclusion in the
Registration Statement, contains any untrue statement of a material fact or
omits to
47
55
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and to provide the information needed to
correct such misstatement or omission. Insofar as the information requested
relates solely to the COMPANY or the STOCKHOLDERS and was provided by the
COMPANY or the STOCKHOLDERS or their respective agents or representatives for
inclusion in the Registration Statement, each of the COMPANY and the
STOCKHOLDERS represents and warrants that the Registration Statement at its
effective date, at the date of each of the Final Prospectus and each amendment
to the Registration Statement or supplement to the Final Prospectus, and at
each closing date with respect to the IPO under the Underwriting Agreement
(including with respect to any over-allotment option) will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to
the Funding and Consummation Date, and PC shall have had sufficient time to
review, the unaudited consolidated balance sheets of the COMPANY as of the end
of all fiscal quarters following the Balance Sheet Date, and the unaudited
consolidated statements of income, cash flows and retained earnings of the
COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing
no material adverse change in the financial condition of the COMPANY or the
results of its operations from the financial statements as of the Balance Sheet
Date. Such financial statements shall have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted therein). Except as noted in
such financial statements, all of such financial statements will present fairly
the results of operations of the COMPANY for the periods indicated thereon.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
convenient to carry out the transactions contemplated hereby.
7.12 NO INDEBTEDNESS. On or prior to the Funding and Consummation
Date, the STOCKHOLDERS shall have repaid all of the COMPANY's indebtedness
except for trade payables incurred in the ordinary course of business. In the
event that the STOCKHOLDERS have failed to repay such indebtedness on or prior
to the Funding and Consummation Date, the aggregate number of shares of PC Stock
received by the STOCKHOLDERS (as set forth on Annex III) shall be reduced by a
number of shares equal to the amount of such indebtedness divided by the IPO
Price.
7.13 INDEMNIFICATION BY THE STOCKHOLDERS. On or prior to the Funding
and Consummation Date, the STOCKHOLDERS shall pay to PC $3,200,000 which amount
represents the purchase price payable to acquire Medix. In the event that such
payment has not been made by the Funding and Consummation Date, the aggregate
number of shares of PC Stock received by the STOCKHOLDERS (as set forth on Annex
III) shall be reduced by a number of shares equal to 3,200,000 divided by the
IPO Price.
7.14 ADDITIONAL CONTRIBUTION OF CAPITAL. On or prior to the Funding
and Consummation Date, the STOCKHOLDERS shall cause an investment of not less
than $32,300,000 (the "Capital Contribution") to be contributed to the capital
account of the COMPANY. The Capital Contribution will be available in full to PC
and the COMPANY on the Funding and Consummation Date. Any investor purchasing
shares of COMPANY Stock pursuant to the Capital Contribution will be added to
Annex III, and will receive in the Merger upon conversion of such shares of
COMPANY Stock a portion of the aggregate number of shares of PC Stock set forth
on Annex III equal to such investor's percentage ownership of the COMPANY Stock
immediately prior to the Merger. In the event that all or part of the Capital
Contribution is not invested in the COMPANY and available to the COMPANY on the
Funding and Consummation Date, the aggregate number of shares of PC Stock
received by the STOCKHOLDERS (as set forth on Annex III) shall be reduced by a
number of shares equal to the shortfall divided by the IPO Price. The
$32,300,000 amount required hereunder is based upon an IPO Price of $15 and
shall be reduced or increased proportionately to the extent the IPO Price is
below or above $15, respectively. In addition, for purposes of determining if
such $32,300,000 Capital Contribution has been met, the STOCKHOLDERS may count
discount and placement fees of up to 12% actually incurred on any sale of equity
pursuant hereto up to a maximum of $3,876,000 for all sales of equity pursuant
hereto.
7.15 CONVERSION OF OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. On
or prior to the Closing Date, the holders of all outstanding options or
warrants to purchase shares of the COMPANY's common stock shall have exercised
such options or warrants, and the holders of all outstanding shares of the
COMPANY's preferred stock and all holders of any other type of securities
convertible into or exercisable or exchangeable for shares of the COMPANY's
common stock shall have converted, exercised or exchanged such securities into
or for shares of the COMPANY's common stock.
48
56
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
COMPANY
The obligations of the STOCKHOLDERS and the COMPANY with respect to
actions to be taken on each of the Closing Date and the Funding and
Consummation Date are subject to the satisfaction or waiver on or prior to the
Closing Date and the Funding and Consummation Date of all of the following
conditions. As of the Closing Date or the Funding and Consummation Date, as the
case may be, all conditions not satisfied shall be deemed to have been waived
by the COMPANY and the STOCKHOLDERS unless such parties have notified PC in
writing to the contrary, except that no such waiver shall be deemed to affect
the survival of the representations and warranties of PC and NEWCO contained in
Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of PC and NEWCO contained in this Agreement
shall be true and correct in all material respects as of the Closing Date and
the Funding and Consummation Date as though such representations and warranties
had been made as of that time; all of the terms, covenants and conditions of
this Agreement to be complied with and performed by PC and NEWCO on or before
the Closing Date and the Funding and Consummation Date shall have been duly
complied with and performed in all material respects; and a certificate to the
foregoing effect dated the Closing Date and the Funding and Consummation Date
and signed by the President or any Vice President of PC shall have been
delivered to the STOCKHOLDERS.
8.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall be satisfactory to the COMPANY and its
counsel. The STOCKHOLDERS and the COMPANY shall be satisfied that the
Registration Statement and the prospectus forming a part thereof, including any
amendments thereof or supplement thereto, shall not contain any untrue
statement of a material fact, or omit to state therein
49
57
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that the condition contained in
this sentence shall be deemed satisfied if the COMPANY or STOCKHOLDERS shall
have failed to inform PC in writing prior to the Funding and Consummation Date
of the existence of an untrue statement of a material fact or the omission of
such a statement of a material fact.
8.3 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted to restrain or
prohibit the merger of NEWCO with and into the COMPANY or the Mergers
contemplated by the other Agreements or the offering and sale by PC of PC Stock
pursuant to the Registration Statement.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion
from counsel for PC, dated the Closing Date, in the form annexed hereto as
Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings therefor shall have been instituted or shall be pending or
contemplated under the 1933 Act and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, shares of PC Stock at a price to the
public of not less than $10.00 per share.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit the Merger or the Mergers contemplated by the other Agreements.
8.7 GOOD STANDING CERTIFICATES. PC and NEWCO each shall have
delivered to the COMPANY a certificate, dated as of a date no earlier than five
days prior to the Closing Date, duly issued by the Delaware Secretary of State
and in each state in which PC or NEWCO is authorized to do business, showing
that each of PC and NEWCO is in good standing and authorized to do business and
that all state franchise and/or income tax returns and taxes for PC and NEWCO,
respectively, for all periods prior to the Closing have been filed and paid.
50
58
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to PC or NEWCO which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the PC Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and the Funding and
Consummation Date and signed by the Secretary of PC and of NEWCO, certifying
the truth and correctness of attached copies of PC's and NEWCO's respective
Certificates of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the boards of directors and,
if required, the stockholders of PC and NEWCO approving PC's and NEWCO's
entering into this Agreement and the consummation of the transactions
contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
9.12 shall have entered into an employment agreement substantially in the form
of Annex VIII hereto.
8.12 TAX TREATMENT. The COMPANY and the STOCKHOLDERS shall be
reasonably satisfied that (i) none of PC, NEWCO or any Other Founding Company
(or its STOCKHOLDERS) has breached any representation or warranty set forth in
this Agreement or in the Other Agreements, and (ii) no event outside the
control of the COMPANY and the STOCKHOLDERS has occurred between the date of
this Agreement and the Funding and Consummation Date, in each case so as to
jeopardize the treatment of the transactions contemplated by the PC Plan of
Organization as a transfer of property described in Section 351 of the Code.
8.13 CONVERSION OF OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. On
or prior to the Closing, the holders of all outstanding options or warrants to
purchase shares of the COMPANY's common stock shall have exercised such options
or warrants, and the holders of all outstanding shares of the COMPANY'S
preferred stock and all holders of any other type of securities convertible
into or exercisable or exchangeable for shares of the COMPANY's common stock
shall have converted, exercised or exchanged such securities into or for shares
of the COMPANY's common stock.
51
59
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PC AND NEWCO
The obligations of PC and NEWCO with respect to actions to be taken on
each of the Closing Date and the Funding and Consummation Date are subject to
the satisfaction or waiver on or prior to the Closing Date and the Funding and
Consummation Date of all of the following conditions. As of the Closing Date or
the Funding and Consummation Date, as the case may be, all conditions not
satisfied shall be deemed to have been waived by PC and NEWCO unless such
parties have notified the COMPANY and the STOCKHOLDERS in writing to the
contrary, except that no such waiver shall be deemed to affect the survival of
the representations and warranties of the COMPANY and the STOCKHOLDERS
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
the representations and warranties of the STOCKHOLDERS and the COMPANY
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date and the Funding and Consummation Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the STOCKHOLDERS and the COMPANY on or before the
Closing Date or the Funding and Consummation Date, as the case may be, shall
have been duly performed or complied with in all material respects; and the
STOCKHOLDERS shall have delivered to PC a certificate dated the Closing Date
and the Funding and Consummation Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted to restrain or
prohibit the merger of NEWCO with and into the COMPANY or the offering and sale
by PC of PC Stock pursuant to the Registration Statement.
9.3 SECRETARY'S CERTIFICATE. PC shall have received a certificate,
dated the Closing Date and the Funding and Consummation Date and signed by the
Secretary of the COMPANY, certifying the truth and correctness of attached
copies of the COMPANY's Certificate or Articles of Incorporation (including
amendments thereto), By-Laws (including amendments thereto), and resolutions of
the board of directors and the STOCKHOLDERS approving the COMPANY's entering
into this Agreement and the consummation of the transactions contemplated
hereby.
52
60
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect.
9.5 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to
PC an instrument dated the Closing Date releasing the COMPANY from (i) any and
all claims of the STOCKHOLDERS against the COMPANY and (ii) any and all
obligations of the COMPANY to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.6 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall be satisfactory
to PC and its counsel.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7 and consented to by PC, all existing agreements between the
COMPANY and the STOCKHOLDERS shall have been canceled effective prior to or as
of the Funding and Consummation Date.
9.8 OPINION OF COUNSEL. PC shall have received an opinion from
counsel to the COMPANY and the STOCKHOLDERS, dated the Closing Date, in the
form annexed hereto as Annex VII, which form shall be deemed to include any
additional opinions covering matters customary under the circumstances and
based upon reasonable requests by the Underwriters, which opinion may be relied
upon by counsel to PC in connection with any opinion requested of it by the
Underwriters.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties listed on Schedule 5.23 shall have been
obtained; and no action or proceeding shall have been instituted or threatened
to restrain or prohibit the Merger.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to
PC a certificate, dated as of a date no earlier
53
61
than five days prior to the Closing Date, duly issued by the appropriate
governmental authority in the COMPANY's state of incorporation and, unless
waived by PC, in each state in which the COMPANY is authorized to do business,
showing the COMPANY is in good standing and authorized to do business and that
all state franchise and/or income tax returns and taxes for the COMPANY for all
periods prior to the Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
9.12 shall have entered into an employment agreement substantially in the form
of Annex VIII hereto. Any employment agreement in effect as of the date hereof
between the COMPANY and any person listed on Schedule 9.12 shall have been
terminated on or prior to the Funding and Consummation Date.
9.13 CLOSING OF THE IPO. The closing of the sale of PC Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to PC
a certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF PC AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. PC
shall use its best efforts to have the STOCKHOLDERS released from any and all
guarantees on any indebtedness that they personally guaranteed for the benefit
of the COMPANY, with all such guarantees on indebtedness being assumed by PC.
In the event that PC cannot obtain such releases from the lenders of any such
guaranteed indebtedness on or prior to 120 days subsequent to the Funding and
Consummation Date, PC shall pay off or otherwise refinance or retire such
indebtedness and, in the event that PC cannot obtain releases on or prior to
the Funding and Consummation Date, PC agrees to indemnify the STOCKHOLDERS
against any and all claims made by lenders under such guarantees which arise as
a result of PC's failure to cause such guarantees to be released on or prior to
the Funding and Consummation Date.
54
62
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, PC shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the reorganization, including:
(a) the retirement or reacquisition, directly or
indirectly, of all or part of the PC Stock issued in connection with
the transactions contemplated hereby;
(b) the entering into of financial arrangements for the
benefit of the STOCKHOLDERS; and
(c) the disposition of any material part of the assets of
the COMPANY within the two years following the Funding and
Consummation Date except in the ordinary course of business or to
eliminate duplicate services or excess capacity.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end on or
before the Funding and Consummation Date. Each STOCKHOLDER shall pay or cause
to be paid all Tax liabilities shown by such Returns to be due. PC and NEWCO
shall not file any amended Tax Returns for any taxable year or portion thereof
of the Surviving Corporation ending on or before the Funding and Consummation
Date without the prior written consent of the STOCKHOLDERS, which consent shall
not be unreasonably withheld.
(ii) PC shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after the
Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Return, amended
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work
55
63
papers, relevant documents relating to rulings or other determinations by
Taxing Authorities and relevant records concerning the ownership and Tax basis
of property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Returns pursuant to this
Agreement shall bear all costs of filing such Returns.
(iv) Each of the COMPANY, NEWCO, PC and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a transfer
of property under Section 351(a) of the Code.
10.4 DIRECTORS. The persons named in the Registration Statement shall
be appointed as directors of PC not later than ten (10) days following the
closing of the IPO.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing, PC
shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as PC is able to replace such plan with a
plan that is applicable to the COMPANY, provided that PC shall have no
obligation to provide replacement plans that have the same terms and provisions
as the existing plans, and provided, further, that any new health insurance
plan shall provide for coverage for preexisting conditions.
11. INDEMNIFICATION
The STOCKHOLDERS, PC and NEWCO each make the following covenants that
are applicable to them, respectively:
56
64
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless PC, NEWCO and the Surviving Corporation at all times,
from and after the date of this Agreement until the Expiration Date, from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and reasonable expenses of
investigation) incurred by PC, NEWCO, the COMPANY or the Surviving Corporation
as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
Schedules or certificates delivered in connection herewith, STOCKHOLDERS or the
COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934
Act or other Federal or state law or regulation, at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact relating to the COMPANY or the STOCKHOLDERS, and provided to
PC or its counsel by the COMPANY or the STOCKHOLDERS for inclusion in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make
the statements therein not misleading, (iv) any Tax imposed upon or relating to
any third party for a pre-Funding and Consummation Date period, including, in
each case, any such Tax for which an Acquired Party may be liable under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract or otherwise, or (v)
the matters described on Schedule 11.1(v), provided that any proposed amendment
to Schedule 11.1(v) made after the signing of this Agreement may only be made
with consent of the COMPANY and the STOCKHOLDERS, and provided, further, that
such indemnity shall not inure to the benefit of PC, NEWCO or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to PC's counsel and to PC for inclusion in the final prospectus,
and such information was not so included or properly delivered, and provided
further, that no STOCKHOLDER shall be liable for any indemnification obligation
pursuant to this
57
65
Section 11.1 to the extent attributable to a breach of any representation,
warranty or agreement made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY PC. PC covenants and agrees that it will indemnify,
defend, protect and hold harmless the STOCKHOLDERS at all times from and after
the date of this Agreement until the Expiration Date, from and against all
claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation) incurred
by the STOCKHOLDERS as a result of or arising from (i) any breach by PC or
NEWCO of its representations and warranties set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of PC or NEWCO under this
Agreement, (iii) any liability which the STOCKHOLDERS may incur due to PC's or
NEWCO's failure to be responsible for the liabilities and obligations of the
COMPANY as provided in Section 1 hereof (except to the extent that PC or NEWCO
has claims against the STOCKHOLDERS by reason of such liabilities); (iv) any
liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to PC, NEWCO
or any of the Other Founding Companies contained in any preliminary prospectus,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to PC or
NEWCO or any of the Other Founding Companies required to be stated therein or
necessary to make the statements therein not misleading, or (v) the matters
described on Schedule 11.2(v).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge
of any claim by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being
made against any party obligated to provide indemnification pursuant to Section
11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the
Indemnifying Party written notice of such claim or the commencement of such
action or proceeding. Such notice
58
66
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof, to the extent known. The Indemnifying Party shall have the
right to defend and settle, at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party, such consent
not to be unreasonably withheld or delayed. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest in
the opinion of such counsel that prevents counsel for the Indemnifying Party
from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the expenses of its
counsel. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person and the Indemnified Party shall
reimburse the Indemnifying Party for any additional costs of defense which it
subsequently incurs with
59
67
respect to such claim and all additional costs of settlement or judgment. If
the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense
through counsel of its choice, at the cost and expense of the Indemnifying
Party, and the Indemnified Party may settle such matter, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. All settlements hereunder shall effect a complete release
of the Indemnified Party, unless the Indemnified Party otherwise agrees in
writing, which agreement shall not be unreasonably withheld or delayed. The
parties hereto will make appropriate adjustments for insurance proceeds in
determining the amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any
party to this Agreement against another party, provided that nothing herein
shall be construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. PC, NEWCO, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 shall not assert any claim other than a Third Person claim for
indemnification hereunder against the STOCKHOLDERS until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDERS shall exceed 1.0% of the sum of the cash paid to
STOCKHOLDERS plus the value of the PC Stock delivered to STOCKHOLDERS (for
purposes of calculating the value of the PC Stock, such PC Stock is to be
valued at its initial public offering price as set forth in the Registration
Statement) (the "Indemnification Threshold"), provided, however, that PC,
NEWCO, the Surviving Corporation and the other persons or entities indemnified
pursuant to Section 11.1 or 11.2 may assert and shall be indemnified for any
claim under Sections 11.1(iv) and (v) at any time, regardless of whether the
aggregate of all claims which such persons may have against any STOCKHOLDER or
all STOCKHOLDERS exceeds the Indemnification Threshold, it being understood
that the amount of any such claim under Sections
60
68
11.1(iv) and (v) shall not be counted towards the Indemnification Threshold.
The STOCKHOLDERS shall not assert any claim (other than a Third Person claim)
for indemnification hereunder against PC or NEWCO until such time as, and
solely to the extent that, the aggregate of all claims which the STOCKHOLDERS
may have against PC or NEWCO shall exceed $100,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 may assert and shall be indemnified for any claim under Section
11.2(v) at any time, regardless of whether the aggregate of all claims which
such persons may have against PC or NEWCO exceeds $100,000, it being understood
that the amount of any such claim under Section 11.2(v) shall not be counted
towards such $100,000 amount.
No person shall be entitled to indemnification under this Section 11
if and to the extent that such person's claim for indemnification is directly
or indirectly related to a material breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement.
Notwithstanding any other term of this Agreement (except the proviso
to this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, such proceeds to be equal to the sum of the cash
paid to the STOCKHOLDER plus the value of the PC Stock delivered to the
STOCKHOLDER as calculated above, provided that a STOCKHOLDER's indemnification
obligations pursuant to Sections 11.1(iv) and (v) shall not be limited.
61
69
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior
to the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of PC and the
COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its
board of directors), on the one hand, or by PC (acting through its
board of directors), on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by December 31, 1996, unless the failure of such
transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be
performed by it prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or the COMPANY, on the one hand, or by
PC, on the other hand, if a material breach or default shall be made
by the other party in the observance or in the due and timely
performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been
made on or before the Funding and Consummation Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in
Section 7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDERS will not, for a period
of five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, company, partnership, corporation or
business
62
70
of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with PC or any of the subsidiaries thereof, within
100 miles of where the COMPANY or any of its subsidiaries or any of
the other Founding Companies conducted business prior to the
effectiveness of the Merger or proposed to conduct business as of such
time (the "Territory");
(ii) solicit any person who is, at that time, within the
Territory, an employee of PC (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
PC (including the subsidiaries thereof);
(iii) solicit any person or entity which is, at that time,
or which has been, within one (1) year prior to the Funding and
Consummation Date, a customer of PC (including the subsidiaries
thereof), of the COMPANY or of any of the Other Founding Companies
within the Territory for the purpose of soliciting or selling products
or services in direct competition with PC within the Territory;
(iv) solicit any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the medical
software development or distribution business, which candidate was
either called upon by PC (including the subsidiaries thereof) or for
which PC (or any subsidiary thereof) made an acquisition analysis
which was known (or should have been known) to the STOCKHOLDER, for
the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed,
of the COMPANY to any person, firm, partnership, corporation or
business for any reason or purpose whatsoever except to the extent
that the COMPANY has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an
63
71
investment not more than one percent (1%) of the capital stock of a competing
business whose stock is traded on a national securities exchange or
over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses
to PC as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to PC for which it would
have no other adequate remedy, each STOCKHOLDER agrees that, in the event of a
breach by such STOCKHOLDER, the foregoing covenant may be enforced by PC by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of PC (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of PC.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and this Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against PC (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by PC
of such covenants. It is specifically agreed that the period of five (5) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
64
72
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that
this covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that
they had in the past, currently have and in the future may have access to
certain confidential information relating to the COMPANY, the Other Founding
Companies and/or PC, such as operational policies, and pricing and cost
policies, that are valuable, special and unique assets of the COMPANY, the
Other Founding Companies and/or PC's business. The STOCKHOLDERS agree that they
will not use or disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of the COMPANY, NEWCO, the Other
Founding Companies and PC who need to know such information in connection with
the transactions contemplated hereby, who have been informed of the
confidential nature of such information and who have agreed to keep such
information confidential as provided hereby, and (b) following the Closing,
such information may be disclosed by the STOCKHOLDERS as is required in the
course of performing their duties for PC or the Surviving Corporation unless
(i) such information becomes known to the public generally through no breach by
the STOCKHOLDERS of this covenant, (ii) disclosure is required by law or the
order of any governmental authority under color of law or is necessary in order
to secure a consent or approval to consummate the transactions contemplated
hereby, provided, that prior to disclosing any information pursuant to this
clause (ii), the STOCKHOLDERS shall, if possible, give prior written notice
thereof to PC and provide PC with the opportunity to contest such disclosure,
or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party and the same prior disclosure set forth immediately above is given. In
the event of a breach or threatened breach by any of the STOCKHOLDERS or PC of
the provisions of this Section, PC shall be entitled to an injunction
restraining the STOCKHOLDERS from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting PC
from pursuing any other available remedy for such breach or
65
73
threatened breach, including the recovery of damages.
14.2 PC AND NEWCO. PC and NEWCO recognize and acknowledge that they
had in the past and currently have access to certain confidential information
relating to the COMPANY, such as operational policies, and pricing and cost
policies, that are valuable, special and unique assets of the COMPANY. PC and
NEWCO agree that, prior to the Closing, or if the Transactions contemplated by
this Agreement are not consummated, they will not use or disclose such
confidential information to their own benefit except in furtherance of the
Transactions contemplated by this Agreement or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to the STOCKHOLDERS and to
authorized representatives of the COMPANY who need to know such information in
connection with the transactions contemplated hereby, who have been informed of
the confidential nature of such information and who have agreed to keep such
information confidential as provided hereby, and (b) to the Other Founding
Companies and their representatives pursuant to Section 7.1(a), unless (i) such
information becomes known to the public generally through no breach by PC or
NEWCO of this covenant, (ii) disclosure is required by law or the order of any
governmental authority under color of law or is necessary in order to secure a
consent or approval to consummate the transactions contemplated hereby,
provided, that prior to disclosing any information pursuant to this clause
(ii), PC and NEWCO shall, if possible, give prior written notice thereof to the
COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with
the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party and the same prior disclosure
set forth immediately above is given. In the event of a breach or threatened
breach by PC or NEWCO of the provisions of this Section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining PC and NEWCO from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event that the transactions
contemplated herein are not consummated, PC and NEWCO shall return to the
COMPANY within a reasonable time all
66
74
documents (in both paper and electronic form) containing confidential
information about the COMPANY, and shall use reasonable efforts to compel the
Other Founding Companies to do the same. In such instance, PC will also furnish
to the COMPANY a written statement certifying that all documents which
contained confidential information about the COMPANY and which had been in PC's
possession had been returned by PC to the COMPANY.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may
be enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive notwithstanding either the termination of this Agreement or the
consummation of the transactions contemplated hereby on the Funding and
Consummation Date.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section
15.1 (or trusts for the benefit of the STOCKHOLDERS or family members, the
trustees of which so agree), for a period of two years from the Funding and
Consummation Date, except pursuant to Section 17 hereof, none of the
STOCKHOLDERS shall (i) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (a) any shares of PC Stock received
by the STOCKHOLDERS in the Merger, or (b) any interest (including, without
limitation, an option to buy or sell) in any such shares of PC Stock, in whole
or in part, and no such attempted transfer shall be treated as effective for
any purpose; or (ii) engage in any transaction, whether or not with respect to
any shares of PC Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning the shares of PC Stock acquired pursuant to
Section 2 hereof (including, by way of example and not limitation, engaging in
put, call, short-sale, straddle or similar market transactions).
67
75
Notwithstanding the foregoing, (i) if the "holding period" for restricted
securities set forth in Rule 144(d) under the 1933 Act (or any similar or
successor provision) is reduced below two years, the two-year restrictive period
set forth in this Section 15.1 will be deemed to be correspondingly reduced; and
(ii) the STOCKHOLDERS may encumber or pledge any of such shares of PC Stock
provided the pledgee or other beneficiary of such encumbrance or pledge agrees
to be bound by the provisions of this Section as if a STOCKHOLDER and party
hereto. The certificates evidencing the PC Stock delivered to the STOCKHOLDERS
pursuant to Section 3 of this Agreement will bear a legend substantially in the
form set forth below and containing such other information as PC may deem
necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [SECOND
ANNIVERSARY OF THE FUNDING AND CONSUMMATION DATE] (PROVIDED,
HOWEVER, THAT (I) IF THE "HOLDING PERIOD" FOR RESTRICTED
SECURITIES SET FORTH IN RULE 144(D) UNDER THE SECURITIES ACT OF
1933, AS AMENDED (OR ANY SIMILAR OR SUCCESSOR PROVISION), IS
REDUCED BELOW TWO YEARS, THE RESTRICTIVE PERIOD SET FORTH HEREIN
SHALL BE CORRESPONDINGLY REDUCED, AS CALCULATED FROM THE DATE
TWO YEARS PRIOR TO THE DATE SET FORTH HEREIN AND (II) SUCH
SHARES MAY BE ENCUMBERED OR PLEDGED PROVIDED THE PLEDGEE OR
OTHER BENEFICIARY OF SUCH ENCUMBRANCE OR PLEDGE AGREES TO BE
BOUND BY THE PROVISIONS OF THESE RESTRICTIONS TO THE SAME EXTENT
AS THE HOLDER HEREOF). UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
68
76
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE (AS IT MAY BE
REDUCED AS PROVIDED HEREIN).
16. FEDERAL SECURITIES ACT REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of PC Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the 1933 Act and therefore may not be resold unless
registered under the 1933 Act or resold pursuant to an exemption from the
registration requirements of the 1933 Act. The PC Stock to be acquired by the
STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own
respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution; provided, however that this covenant shall not prohibit
any disposition in accordance with the securities laws and this Agreement.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and
represent that none of the shares of PC Stock issued to the STOCKHOLDERS will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC and this Agreement.
All the PC Stock shall bear the following legend in addition to the legend
required under Section 15 of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND, IF REQUIRED BY PC, AN OPINION OF COUNSEL TO PC
STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDERS represent and
warrant that they are able to bear the economic risk of an investment in the PC
Stock acquired pursuant to this Agreement, can afford to sustain a total loss
of such investment
69
77
and have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed investment
in the PC Stock. The STOCKHOLDERS represent and warrant that they have had an
adequate opportunity to ask questions and receive answers from the officers of
PC concerning any and all matters relating to the transactions described herein
including, without limitation, the background and experience of the current and
proposed officers and directors of PC, the plans for the operations of the
business of PC, the business, operations and financial condition of the Other
Founding Companies, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions of the nature described in the
preceding sentence, and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Funding
and Consummation Date, whenever PC proposes to register any PC Stock for its
own or others' account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions
of additional businesses by PC, (ii) registrations relating to employee benefit
plans and (iii) registrations relating to rights offerings made to the
stockholders of PC, PC shall give each of the STOCKHOLDERS prompt written
notice of its intent to do so. Upon the written request of any of the
STOCKHOLDERS given within 30 days after receipt of such notice, PC shall cause
to be included in such registration all of the PC Stock which any such
STOCKHOLDER requests, provided that PC shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares would, in the opinion of tax counsel to PC or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as a tax-free reorganization. In addition, if PC is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than PC is greater than the number of such shares which can be offered without
adversely affecting the offering, PC may reduce pro rata the number of shares
offered for the accounts of such persons (based upon the number of shares
proposed to be sold by each such person) to a number deemed satisfactory by
such
70
78
managing underwriter, provided, that, for each such offering made by PC after
the IPO, such reduction shall be made first by reducing the number of shares to
be sold by persons other than PC, the STOCKHOLDERS and the stockholders of the
Other Founding Companies (collectively, the STOCKHOLDERS and the stockholders
of the other Founding Companies being referred to herein as the "Founding
Stockholders"), and thereafter, if a further reduction is required, by reducing
the number of shares to be sold by the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years
after the Funding and Consummation Date, the holders of a majority of the
shares of PC Stock issued to the stockholders of the Founding Companies
pursuant to this Agreement and the Other Agreements that have not been
previously registered or sold and that are not entitled to be sold under Rule
144(k) (or any successor provision) promulgated under the 1933 Act may request
in writing that PC file a registration statement under the 1933 Act covering
the registration of shares of PC Stock issued to such stockholders (including
any stock issued as (or issuable upon the conversion or exchange of any
convertible security, warrant, right or other security that is issued by PC as)
a dividend or other distribution with respect to, or in exchange for, or in
replacement of such PC Stock) then held by such stockholders (a "Demand
Registration"). Within ten (10) days of the receipt of such request, PC shall
give written notice of such request to all other of such stockholders and
shall, as soon as practicable but in no event later than 45 days after notice
from any such stockholder, file and thereafter use its best efforts to cause to
become effective a registration statement covering all such shares. PC shall be
obligated to effect only one Demand Registration for all stockholders of the
Founding Companies and will keep such Demand Registration current and effective
for not less than 120 days (or such shorter period as is required to sell all
of the shares registered thereon).
Notwithstanding the foregoing paragraph, following such a demand a
majority of PC's disinterested directors (i.e., directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for a 30 day period.
If at the time of any request by the stockholders of the Founding
Companies for a Demand Registration PC has plans to file
71
79
within 60 days after such request a registration statement covering the sale of
any of its securities in a public offering under the 1933 Act, no registration
of the PC Stock held by the stockholders of the Founding Companies shall be
initiated under this Section 17.2 until 90 days after the effective date of
such registration unless PC is no longer proceeding diligently to effect such
registration; provided that PC shall provide the stockholders of the Founding
Companies the right to participate in such public offering pursuant to, and
subject to, Section 17.1 hereof.
In addition, if the stockholders offering shares are advised in
writing in good faith by any managing underwriter of an underwritten offering
of the securities being offered pursuant to any registration statement under
this Section 17.2 that the number of shares to be sold by such stockholders is
greater than the number of such shares which can be offered without adversely
affecting the offering, the stockholders offering shares may reduce pro rata
the number of shares offered for the account of each stockholder (based upon
the number of shares proposed to be sold by each such stockholder) to a number
deemed satisfactory by such managing underwriter.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection
with the registrations under this Article 17 (including all registration,
filing, qualification, legal, printer and accounting fees, but excluding
underwriting commissions and discounts), shall be borne by PC. In connection
with registrations under Sections 17.1 and 17.2, PC shall (i) use its best
efforts to prepare and file with the SEC, as soon as reasonably practicable, a
registration statement with respect to the PC Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 120 days (or such shorter period during which holders shall have sold
all PC Stock which they requested to be registered); (ii) use its best efforts
to register and qualify the PC Stock covered by such registration statement
under applicable state securities laws as the holders shall reasonably request
for the distribution
72
80
of the PC Stock; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 and 17.2 covering an underwritten registered public
offering, PC and each participating holder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriters and companies of PC's size and investment
stature, including indemnification.
17.5 AVAILABILITY OF RULE 144. PC shall not be obligated to register
shares of PC Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any successor provision) promulgated under the
1933 Act are available to such STOCKHOLDER for such shares.
18. GENERAL
18.1 COOPERATION. The COMPANY, the STOCKHOLDERS, PC and NEWCO shall
each deliver or cause to be delivered to the other on the Funding and
Consummation Date, and at such other times and places as shall be reasonably
agreed to, such additional instruments as the other may reasonably request for
the purpose of carrying out this Agreement. The COMPANY will cooperate and use
its reasonable efforts to have the present officers, directors and employees of
the COMPANY cooperate with PC on and after the Funding and Consummation Date in
furnishing information, evidence, testimony and other assistance in connection
with any Tax Return filing obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Funding and Consummation Date.
18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of PC, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 ENTIRE AGREEMENT. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the
73
81
documents delivered pursuant hereto constitute the entire agreement and
understanding among the STOCKHOLDERS, the COMPANY, NEWCO and PC and supersede
any prior agreement and understanding relating to the subject matter of this
Agreement. This Agreement, upon execution, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and
may be modified or amended only by a written instrument executed by the
STOCKHOLDERS, the COMPANY, NEWCO and PC, acting through their respective
officers or trustees, duly authorized by their respective boards of directors.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commissions of brokers employed or alleged to
have been employed by such indemnifying party.
18.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, PC will pay the fees, expenses and disbursements of PC
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by PC under this Agreement, including (subject to
the next sentence) the fees and expenses of Coopers & Xxxxxxx LLP, Xxxxxx,
Xxxxx & Xxxxxxx LLP and the costs of preparing the Registration Statement. The
COMPANY shall pay and be fully responsible for the fees and expenses of Coopers
& Xxxxxxx LLP in connection with its audit and preparation of the historical
financial statements of the COMPANY to be included in the Registration
Statement, which fees and expenses shall constitute a vendor debt of the
COMPANY. The STOCKHOLDERS shall pay and be fully responsible for all
professional fees and expenses, including but not limited to legal fees and
expenses, incurred by the COMPANY and the STOCKHOLDERS in connection with the
transactions contemplated herein, whether or not such transactions are actually
consummated. Each STOCKHOLDER further shall pay all sales, use, transfer, real
property transfer,
74
82
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Merger, other than Transfer Taxes, if
any, imposed by the State of Delaware. Each STOCKHOLDER shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each STOCKHOLDER acknowledges that such STOCKHOLDER, and not the
COMPANY or PC, will pay all Taxes due upon receipt of the consideration payable
pursuant to Section 2 hereof, and will assume all Tax risks and liabilities of
such STOCKHOLDER in connection with the transactions contemplated hereby.
18.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to PC, or NEWCO, addressed to them at:
Medical Manager Corporation
0000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxx, Chief Executive Officer
with copies to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxx, Esq.
(b) If to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex IV, with copies to such
counsel as is set forth with respect to each
STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
0000 Xxxxx Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxx
75
83
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, except that matters herein within the
purview of the matters covered by the General Corporation Law of the State of
Delaware shall be governed by such General Corporation Law, in each case
without reference to conflicts of laws principles.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise
provided herein, the representations, warranties, covenants and agreements of
the parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties until the Expiration Date.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to
76
84
be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of PC, NEWCO, the COMPANY and the STOCKHOLDERS who
hold or will hold more than 50% of the PC Stock issued pursuant to this
Agreement. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving PC Stock in connection with the Merger and each future holder of such
PC Stock.
77
85
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MEDICAL MANAGER CORPORATION
By /s/ Xxxx X. Xxxx
-------------------------------
Name: Xxxx X. Xxxx
Title: Chief Executive Officer
NMS ACQUISITION I CORP.
By /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: President
NATIONAL MEDICAL SYSTEMS, INC.
By /s/ Xxxx X. Xxxx
-------------------------------
Name: Xxxx X. Xxxx
Title: President
STOCKHOLDERS:
By /s/ Xxxx X. Xxxx
-------------------------------
Name: Xxxx X. Xxxx
By /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
By /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
78
86
STOCKHOLDERS:
By /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
By /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
By /s/ Xxxx Xxxxxxx
-------------------------------
Name: Xxxx Xxxxxxx
By /s/ Xxxx Xxxx
-------------------------------
Name: Raintree Health Care
Investments, LP
By /s/ Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
By /s/ Xxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxx
By /s/ Xxxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxxx Xxxxxx
By /s/ Xxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxx
79
